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, 2018
 
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period _____ to______
 
 
Commission file number 001-08675
 
UNITED STATES ANTIMONY CORPORATION
 
(Exact name of registrant as specified in its charter)
 
Montana
 
81-0305822
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
 
P.O. Box 643, Thompson Falls, Montana
 
  59873
(Address of principal executive offices)
 
(Zip code)
 
 
Registrant’s telephone number, including area code: (406) 827-3523
 
Indicate by check mark whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☑ No ☐
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer”, “small reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
 
Large Accelerated Filer ☐
Accelerated Filer ☐
Non-Accelerated Filer ☐
Smaller reporting company ☑
 
Emerging growth company ☐
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]
 
Indicate by check mark whether the registrant is a shell company as defined by Rule 12b-2 of the Exchange Act. Yes ☑ No ☐
 
At August 14, 2018, the registrant had outstanding 68,227,171 shares of par value $0.01 common stock.
 

 
 
 
UNITED STATES ANTIMONY CORPORATION
QUARTERLY REPORT ON FORM 10-Q
FOR THE PERIOD
ENDED JUNE 30, 2018
(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
14-18
 
 
Item 3: Quantitative and Qualitative Disclosure about Market Risk
18
 
 
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
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
 
 
ASSETS
 
 
 
(Unaudited)
 
 
 
 
 
 
June 30, 2018
 
 
December 31, 2017
 
Current assets:
 
 
 
 
 
 
Cash and cash equivalents
 $15,878 
 $27,987 
Certificates of deposit
  252,954 
  252,298 
Accounts receivable, net
  461,291 
  362,579 
Inventories
  712,696 
  914,709 
Other current assets
  - 
  4,697 
Total current assets
  1,442,819 
  1,562,270 
 
    
    
Properties, plants and equipment, net
  14,854,626 
  15,132,897 
Restricted cash for reclamation bonds
  63,345 
  63,345 
IVA receivable and other assets
  384,677 
  372,742 
Total assets
 $16,745,467 
 $17,131,254 
 
    
    
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
Current liabilities:
    
    
Checks issued and payable
 $110,578 
 $28,248 
Accounts payable
  2,367,656 
  2,276,357 
Due to factor
  5,440 
  10,880 
Accrued payroll, taxes and interest
  211,703 
  185,283 
Other accrued liabilities
  205,412 
  168,578 
Payables to related parties
  22,678 
  22,668 
Deferred revenue
  32,400 
  60,049 
Notes payable to bank
  191,009 
  192,565 
Income taxes payable (Note 11)
  430,358 
  443,110 
Long-term debt, current portion, net of discount
  632,655 
  546,988 
Total current liabilities
  4,209,889 
  3,934,726 
 
    
    
Long-term debt, net of discount and current portion
  1,084,827 
  1,239,126 
Hillgrove advances payable
  1,134,221 
  1,134,221 
Common stock payable to directors for services
  87,500 
  175,000 
Asset retirement obligations and accrued reclamation costs
  274,646 
  271,572 
Total liabilities
  6,791,083 
  6,754,645 
Commitments and contingencies (Note 7 and 11)
    
    
 
    
    
Stockholders' equity:
    
    
Preferred stock $0.01 par value, 10,000,000 shares authorized:
    
    
Series A: -0- shares issued and outstanding
  - 
  - 
Series B: 750,000 shares issued and outstanding
    
    
(liquidation preference $909,375 and $907,500
    
    
 respectively)
  7,500 
  7,500 
Series C: 177,904 shares issued and outstanding
    
    
(liquidation preference $97,847 both years)
  1,779 
  1,779 
Series D: 1,751,005 shares issued and outstanding
    
    
(liquidation preference $5,014,692 and $4,920,178
    
    
 respectively)
  17,509 
  17,509 
Common stock, $0.01 par value, 90,000,000 shares authorized;
    
    
68,227,171 and 67,488,063 shares issued and outstanding, respectively
  682,271 
  674,881 
Additional paid-in capital
  36,406,874 
  36,239,264 
Accumulated deficit
  (27,161,549)
  (26,564,324)
Total stockholders' equity
  9,954,384 
  10,376,609 
Total liabilities and stockholders' equity
 $16,745,467 
 $17,131,254 
 
    
    
 
The accompanying notes are an integral part of the consolidated financial statements.
 
 
1
 
 
 
United States Antimony Corporation and Subsidiaries
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated Statements of Operations (Unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
For the three months ended
 
 
For the six months ended
 
 
 
June 30, 2018
 
 
June 30, 2017
 
 
June 30, 2018
 
 
June 30, 2017
 
 
 
 
 
 
 
 
 
 
 
 
 
 
REVENUES
 $2,256,347 
 $2,838,480 
 $4,689,276 
 $5,457,811 
 
    
    
    
    
COST OF REVENUES
  2,114,999 
  2,535,587 
  4,603,016 
  5,065,374 
 
    
    
    
    
GROSS PROFIT
  141,348 
  302,893 
  86,260 
  392,437 
 
    
    
    
    
OPERATING EXPENSES:
    
    
    
    
     General and administrative
  186,411 
  138,995 
  337,242 
  343,559 
     Salaries and benefits
  96,427 
  97,487 
  187,873 
  191,001 
     Professional fees
  18,563 
  34,582 
  120,967 
  137,920 
TOTAL OPERATING EXPENSES
  301,401 
  271,064 
  646,082 
  672,480 
 
    
    
    
    
INCOME (LOSS) FROM OPERATIONS
  (160,053)
  31,829 
  (559,822)
  (280,043)
 
    
    
    
    
OTHER INCOME (EXPENSE):
    
    
    
    
Interest income
  268 
  267 
  830 
  838 
Interest expense
  (24,814)
  (27,154)
  (48,647)
  (54,804)
Foreign exchange gain (loss)
  62,752 
  (10,191)
  12,752 
  (51,642)
Factoring expense
  (938)
  (11,706)
  (2,338)
  (22,607)
TOTAL OTHER INCOME (EXPENSE)
  37,268 
  (48,784)
  (37,403)
  (128,215)
 
    
    
    
    
NET INCOME (LOSS)
  (122,785)
  (16,955)
  (597,225)
  (408,258)
     Preferred dividends
  (12,162)
  (12,162)
  (24,325)
  (24,325)
 
    
    
    
    
   Net income (loss) available to common stockholders
 $(134,947)
 $(29,117)
 $(621,550)
 $(432,583)
 
    
    
    
    
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
  67,959,175 
  67,488,153 
  67,724,965 
  67,336,651 
Diluted
  67,959,175 
  67,488,153 
  67,724,965 
  67,336,651 
 
    
    
    
    
 
    
    
    
    
 
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, 2018
 
 
June 30, 2017
 
Cash Flows From Operating Activities:
 
 
 
 
 
 
Net income (loss)
 $(597,225)
 $(408,258)
Adjustments to reconcile net income (loss) to net cash
    
    
provided (used) by operating activities:
    
    
Depreciation and amortization
  452,659 
  430,050 
Amortization of debt discount
  42,240 
  46,828 
Accretion of asset retirement obligation
  3,074 
  2,895 
Common stock payable for directors' fees
  87,500 
  87,500 
Foreign exchange loss (gain)
  (12,752)
  51,642 
Other non cash items
  (656)
  (677)
Change in:
    
    
Accounts receivable, net
  (98,712)
  10,835 
Inventories
  202,013 
  49,196 
Other current assets
  4,697 
  (7,647)
Other assets
  (11,935)
  (83,437)
Accounts payable
  91,299 
  67,164 
Accrued payroll, taxes and interest
  26,420 
  (40,362)
Deferred revenues
  (27,649)
  - 
Other accrued liabilities
  36,834 
  31,691 
Payables to related parties
  10 
  2,234 
Net cash provided by operating activities
  197,817 
  239,654 
 
    
    
Cash Flows From Investing Activities:
    
    
Purchases of properties, plants and equipment
  (174,388)
  (151,244)
Net cash used by investing activities
  (174,388)
  (151,244)
 
    
    
Cash Flows From Financing Activities:
    
    
Change in checks issued and payable
  82,330 
  (12,776)
Net proceeds from factor
  (5,440)
  20,471 
Advances from related party
  75,000 
  - 
Payment on advances from related party
  (75,000)
  - 
Proceeds from notes payable to bank
  - 
  24,827 
Principal paid notes payable to bank, net
  (1,556)
  - 
Principal payments on long-term debt
  (110,872)
  (106,439)
Net cash provided (used) by financing activities
  (35,538)
  (73,917)
 
    
    
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
  (12,109)
  14,493 
Cash and cash equivalents and restricted cash at beginning of period
  91,332 
  73,331 
Cash and cash equivalents and restricted cash at end of period
 $79,223 
 $87,824 
 
    
    
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
    
    
Noncash investing and financing activities:
    
    
Common stock payable issued to directors
 $175,000 
 $168,750 
 
The accompanying notes are an integral part of the consolidated financial statements.
 
3
 
 
PART I - FINANCIAL INFORMATION, CONTINUED:
 
United States Antimony Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
 
1. 
Basis of Presentation
 
The unaudited consolidated financial statements have been prepared by the Company in accordance with accounting principles generally accepted in the United States of America for interim financial information, as well as the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of the Company’s management, all adjustments (consisting of only normal recurring accruals) considered necessary for a fair presentation of the interim financial statements have been included. Operating results for the three and six month periods ended June 30, 2018 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2018.
 
For further information refer to the financial statements and footnotes thereto in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017.
 
Going Concern Consideration
 
At June 30, 2018, the Company’s consolidated financial statements show negative working capital of approximately $2.8 million and accumulated deficit of approximately $27.2 million.  In addition, the Company had recurring net losses.  These factors indicate that there may be doubt regarding the ability to continue as a going concern for the next twelve months. 
 
The continuing losses are principally a result of the Company’s antimony operations and in particular to the production costs incurred in Mexico.
 
Regarding the antimony division, prices improved during 2017 with an average sale price of $4.01 per pound. Through June 30, 2018, the average sale price for antimony is approximately $4.28 per pound. Additionally, in November 2017, the Company renegotiated its domestic sodium antimonite supply agreement resulting in a lower cost per antimony per pound of approximately $0.44. During the first six months of 2018, we endured supply interruptions from our North American supplier, and they have notified us that, due to a lack of raw material, they will be suspending shipments to us from September 17, 2018 to November 5, 2018. We anticipate that normal supply quantities will resume for the remainder of 2018 after November 5. We have been able to continue with operations due to our Mexican raw material, and we will be directing our resources to increasing that supply source. The new supply agreement with our North American supplier has helped us with our cash flow in 2018 from our antimony division.
 
In 2017, we reduced costs for labor at the Mexico locations which has resulted in a lower overall production costs in Mexico which has continued into 2018. In the fourth quarter 2017, we adjusted operating approaches at Madero that has resulted decreased operating costs for fuel, natural gas, electricity, and reagents for 2018. Although total production activity in Mexico decreased in 2017 due to the lack of Hillgrove concentrates, the Company’s 2018 plan involves ramping up production at its own antimony properties in Mexico. We are anticipating agreements that will provide us with operating capital to achieve this (See Note 14). In addition, a new leach circuit expected to come on line during 2018 in Mexico will result in more extraction of precious metals. The portion of the precious metals recovery system at the Madero smelter is complete and the cyanide leach circuit being built at the Puerto Blanco plant is expected to be completed this fall.
 
In 2017, management implemented wage and other cost reductions at the corporate level that has kept administrative costs stable in 2018. The Company expects to continue paying a low cost for propane in Montana through 2018, which in years past has been a major operating cost.
 
 
4
 
 
United States Antimony Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
 
1. 
Basis of Presentation, Continued:
 
Over the past several years, the Company has been able to make required principal payments on its debt from cash generated from operations without the need for additional borrowings or selling shares of its common stock. The Company plans to continue keeping current on its debt payments in 2018 through cash flows from operations while using the additional operating capital to continue with the expansion of our Mexican operation and to improve our working capital. Management believes that the actions taken to increase production and reduce costs, along with the expected additional operating capital, will enable the Company meet its obligations for the next twelve months.
 
2. 
Developments in Accounting Pronouncements
 
Accounting Standard Updates Adopted
 
In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-09 Revenue Recognition, replacing guidance currently codified in Subtopic 605-10 Revenue Recognition-Overall. The new ASU establishes a new five step principles-based framework in an effort to significantly enhance comparability of revenue recognition practices across entities, industries, jurisdictions, and capital markets. In August 2015, the FASB issued ASU No. 2015-14 Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date. ASU No. 2015-14 deferred the effective date of ASU No. 2014-09 until annual and interim reporting periods beginning after December 15, 2017. We adopted ASU No. 2014-09 as of January 1, 2018 using the modified-retrospective transition approach. There was no impact of adoption of the update to our consolidated financial statements for the three and six months ended June 30, 2018.
 
We performed an assessment of the impact of implementation of ASU No. 2014-09, and concluded it does not change the timing of revenue recognition or amounts of revenue recognized compared to how we recognize revenue under our current policies. Adoption of ASU No. 2014-09 involves additional disclosures, where applicable, on (i) contracts with customers, (ii) significant judgments and changes in judgments in determining the timing of satisfaction of performance obligations and the transaction price, and (iii) assets recognized for costs to obtain or fulfill contracts. See Note 4 for information on our sales of products.
 
In August 2016, the FASB issued ASU No. 2016-15 Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. The update provides guidance on classification for cash receipts and payments related to eight specific issues. The update is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years, with early adoption permitted. We adopted this update as of January 1, 2018.
 
In November 2016, the FASB issued ASU No. 2016-18 Statement of Cash Flows (Topic 230): Restricted Cash. The update requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. The update is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years, with early adoption permitted. We adopted this update as of January 1, 2018. Cash, cash equivalents, and restricted cash on the consolidated statements of cash flows includes restricted cash of $63,345 as of June 30, 2018 and December 31, 2017 and $63,274 as of June 30, 2017 and December 31, 2016, as well as amounts previously reported for cash and cash equivalents.
 
 
5
 
 
United States Antimony Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
 
2. 
Developments in Accounting Pronouncements, Continued:
 
Accounting Standards Updates to Become Effective in Future Periods
 
In February 2016, the FASB issued ASU No. 2016-02 Leases (Topic 842). The update modifies the classification criteria and requires lessees to recognize the assets and liabilities on the balance sheet for most leases. The update is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. We are currently reviewing our leases and compiling the information required to implement the new guidance. We are currently evaluating the potential impact of implementing this update on our consolidated financial statements.
 
3. 
Income (Loss) Per Common Share
 
Basic earnings per share is calculated by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share is calculated based on the weighted average number of common shares outstanding during the period plus the effect of potentially dilutive common stock equivalents, including warrants to purchase the Company's common stock and convertible preferred stock. Management has determined that the calculation of diluted earnings per share for the quarter and six month periods ended June 30, 2018 and June 30, 2017, is not applicable since any additions to outstanding shares related to common stock equivalents would be anti-dilutive.
 
As of June 30, 2018 and 2017, the potentially dilutive common stock equivalents not included in the calculation of diluted earnings per share as their effect would have been anti-dilutive are as follows:
 
 
 
June 30, 2018
 
 
June 30, 2017
 
Warrants
  250,000 
  250,000 
Convertible preferred stock
  1,751,005 
  1,751,005 
Total possible dilution
  2,001,005 
  2,001,005 
 
4. 
Revenue Recognition
 
Our products consist of the following:
 
Antimony: includes antimony oxide, sodium antimonate, and antimony metal
 
Zeolite: includes course and fine zeolite crushed in various sizes.
● 
Precious Metals: includes refined gold and silver
 
For our antimony and zeolite products, revenue is recognized upon the completion of the performance obligation which is met when the transaction price can be reasonably estimated and revenue is recognized generally at the time when risk is transferred. We have determined the performance obligation is met and title is transferred either upon shipment from our warehouse locations or upon receipt by the customer as specified in individual sales orders. The performance obligation is met because at that time, 1) legal title is transferred to the customer, 2) the customer has accepted the product and obtained the ability to realize all of the benefits from the product, 3) the customer has the significant risks and rewards of ownership to it, 4) it is very unlikely product will be rejected by the customer upon physical receipt, and 5) we have the right to payment for the product. Shipping costs related to the sales of antimony and zeolite products are recorded to cost of sales as incurred. For zeolite products, royalty expense due a third party by the Company is also recorded to cost of sales upon sale in accordance with terms of underlying royalty agreements.
 
 
6
 
 
United States Antimony Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
 
4. 
Revenue Recognition, Continued
 
For sales of precious metals, the performance obligation is met, the transaction price is known, and revenue is recognized at the time of transfer of control of the agreed-upon metal quantities to the customer. Refining and shipping costs related to sales of precious metals are recorded to cost of sales as incurred.
 
Sales of products for the three and six month periods ended June 30, 2018 and 2017 were as follows:
 
 
 
Three Months Ended
 
 
Six Months Ended
 
 
 
June 30,
 
 
June 30,
 
 
 
2018
 
 
2017
 
 
2018
 
 
2017
 
Antimony
 $1,492,520 
 $2,077,300 
 $3,174,333 
 $4,063,808 
Zeolite
  682,534 
  616,414 
  1,373,240 
  1,228,426 
Precious metals
  81,293 
  144,766 
  141,703 
  165,577 
 
 $2,256,347 
 $2,838,480 
 $4,689,276 
 $5,457,811 
 
The following is sales information by geographic area based on the location of customers for the three and six month periods ended June 30, 2018 and 2017:
 
 
 
Three Months Ended
 
 
Six Months Ended
 
 
 
June 30,
 
 
June 30,
 
 
 
2018
 
 
2017
 
 
2018
 
 
2017
 
United States
 $1,878,244 
 $2,653,227 
 $4,125,935 
 $4,950,282 
Canada
  378,103 
  185,253 
  563,341 
  507,529 
 
 $2,256,347 
 $2,838,480 
 $4,689,276 
 $5,457,811 
 
Sales of products to significant customers were as follows for the three and six month periods ended June 30, 2018 and 2017:
 
 
 
 For the Three Months Ended
 
 
 For the Six Months Ended
 
 
 
June 30, 2018
 
 
June 30, 2017
 
 
June 30, 2018
 
 
June 30, 2017
 
Mexichem Speciality Compounds
 $669,103 
 $769,998 
 $1,397,681 
 $1,556,423 
East Penn Manufacturing Inc.
  - 
  363,979 
  - 
  512,621 
Kohler Corporation
  334,778 
  501,320 
  651,550 
  946,498 
Ampacet Corporation
  146,118 
  - 
  330,260 
  - 
ZEO, Inc.
  185,730 
  - 
  306,701 
  - 
 
 $1,335,729 
 $1,635,297 
 $2,686,192 
 $3,015,542 
% of Total Revenues
  59.20%
  57.60%
  57.30%
  55.30%
 
 
7
 
 
United States Antimony Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
 
4. 
Revenue Recognition, Continued:
 
Accounts receivable from largest customers were as follows for June 30, 2018 and December 31, 2017:
 
 
 
June 30, 2018
 
 
December 31, 2017
 
Nutreco Canada, Inc.
 $- 
 $25,657 
Ralco Mix Products
  - 
  16,000 
Mexichem Speciality Compounds
  148,211 
  - 
Axens North America, Inc.
  38,404 
  - 
Teck American, Inc.
  82,733 
  241,627 
 
 $269,348 
 $283,284 
% of Total Receivables
  58.40%
  78.10%
 
Our trade accounts receivable balance related to contracts with customers was $461,291 at June 30, 2018 and $362,579 at December 31, 2017. Our products do not involve any warranty agreements and product returns are not typical.
 
We have determined our contracts do not include a significant financing component. For antimony and zeolite sales contracts, we may factor certain receivables and receive final payment within 30 days of the performance obligation being met. For antimony and zeolite receivables not factored, we typically receive payment within 10 days. For precious metals sales, a provisional payment of 75% is typically received within 45 days of the date the product is delivered to the customer. After an exchange of assays, a final payment is normally received within 90 days of product delivery.
 
5. 
Inventories
 
Inventories at June 30, 2018 and December 31, 2017 consisted primarily of finished antimony products, antimony metal, antimony ore, and finished zeolite products that are stated at the lower of first-in, first-out cost or estimated net realizable value. Finished antimony products, antimony metal and finished zeolite products costs include raw materials, direct labor and processing facility overhead costs and freight. Inventory at June 30, 2018 and December 31, 2017 is as follows:
 
 
 
June 30,
 
 
December 31,
 
 
 
2018
 
 
2017
 
Sodium antimonate
 $56,091 
 $- 
Antimony oxide
  225,099 
  408,217 
Antimony with precious metal content
  23,474 
  35,554 
Antimony ore
  165,280 
  187,133 
     Total antimony
  469,944 
  630,904 
Zeolite
  242,752 
  283,805 
 
 $712,696 
 $914,709 
 
 
 
8
 
 
United States Antimony Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
 
6. 
Accounts Receivable and Due to Factor
 
The Company factors designated trade receivables pursuant to a factoring agreement with LSQ Funding Group L.C., an unrelated factor (the “Factor”).  The agreement specifies that eligible trade receivables are factored with recourse. We submit selected trade receivables to the factor, and receive 83% of the face value of the receivable by wire transfer. The Factor withholds 15% as retainage, and 2% as a servicing fee. Upon payment by the customer, we receive the remainder of the amount due from the factor. The 2% servicing fee is recorded on the consolidated statement of operations in the period of sale to the factor. John Lawrence, CEO, is a personal guarantor of the amount due to Factor. 
 
Trade receivables assigned to the Factor are carried at the original invoice amount less an estimate made for doubtful accounts.  Under the terms of the recourse provision, the Company is required to reimburse the Factor, upon demand, for factored receivables that are not paid on time.  Accordingly, these receivables are accounted for as a secured financing arrangement and not as a sale of financial assets.  The allowance for doubtful accounts (if any) is based on management’s regular evaluation of individual customer’s receivables and consideration of a customer’s financial condition and credit history.  Trade receivables are written off when deemed uncollectible.  Recoveries of trade receivables previously written off are recorded when received.  Interest is not charged on past due accounts.
 
We present the receivables, net of allowances, as current assets and we present the amount potentially due to the Factor as a secured financing in current liabilities.
 
Accounts Receivble
 
June 30,
2018
 
 
December 31,
2017
 
Accounts receivable - non factored
 $455,851 
 $351,699 
Accounts receivable - factored with recourse
  5,440 
  10,880 
      Accounts receivable - net
 $461,291 
 $362,579 
 
7. 
Commitments and Contingencies
 
In June of 2013, the Company entered into a lease to mine antimony ore from concessions located in the Wadley Mining district in Mexico. The lease calls for a term of one year and, and as of June 30, 2018, requires payments of $10,000 plus a tax of $1,700, per month. The lease is renewable each year with a 15 day notice to the lessor, and agreement of terms. The next lease is scheduled for renewal in June 2019.
 
8. 
Notes Payable to Bank
 
At June 30, 2018 and December 31, 2017, the Company had the following notes payable to bank:
 
 
 
June 30,
 
 
December 31,
 
 
 
2018
 
 
2017
 
Promissory note payable to First Security Bank of Missoula,
 
 
 
 
 
 
bearing interest at 3.150%, payable on demand, collateralized
 
 
 
 
 
 
by a lien on Certificate of Deposit
 $99,999 
 $98,863 
 
    
    
Promissory note payable to First Security Bank of Missoula,
    
    
bearing interest at 3.150%, payable on demand, collateralized
    
    
by a lien on Certificate of Deposit
  91,010 
  93,702 
Total notes payable to the bank
 $191,009 
 $192,565 

 
9
 
 
United States Antimony Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited), Continued:
 
8. 
Notes Payable to Bank, Continued:
 
These notes are personally guaranteed by John C. Lawrence the Company’s Chief Executive Officer and Chairman of the Board of Directors. The maximum amount available for borrowing under each note is $99,999.
 
9.
Debt
 
Long-Term debt at June 30, 2018 and December 31, 2017, is as follows:
 
June 30,
 
 
December 31,
 
 
 
2018
 
 
2017
 
Note payable to First Security Bank, bearing interest at 6%;
 
 
 
 
 
 
payable in monthly installments of $917; maturing
 
 
 
 
 
 
September 2018; collateralized by equipment.
 $2,725 
 $8,054 
Note payable to Cat Financial Services, bearing interest at 6%;
    
    
payable in monthly installments of $1,300; maturing
    
    
August 2019; collateralized by equipment.
  21,243 
  27,096 
Note payable to Cat Financial Services, bearing interest at 6%;
    
    
payable in monthly installments of $778; maturing
    
    
December 2022; collateralized by equipment.
  37,972 
  40,278 
Note payable to De Lage Landen Financial Services,
    
    
bearing interest at 3.51%; payable in monthly installments of $655;
    
    
maturing September 2019; collateralized by equipment.
  9,630 
  13,344 
Note payable to De Lage Landen Financial Services,
    
    
bearing interest at 3.51%; payable in monthly installments of $655;
    
    
maturing December 2019; collateralized by equipment.
  12,106 
  15,776 
Note payable to Phyllis Rice, bearing interest
    
    
at 1%; payable in monthly installments of $2,000; maturing
    
    
March 2015; collateralized by equipment.
  14,146 
  14,146 
Obligation payable for Soyatal Mine, non-interest bearing,
    
    
 annual payments of $100,000 or $200,000 through 2019, net of discount.
  682,229 
  715,709 
Obligation payable for Guadalupe Mine, non-interest bearing,
    
    
 annual payments from $60,000 to $149,078 through 2026, net of discount.
  937,431 
  951,711 
 
  1,717,482 
  1,786,114 
Less current portion
  (632,655)
  (546,988)
Long-term portion
 $1,084,827 
 $1,239,126 
 
At June 30, 2018, principal payments on debt are due as follows:
 
12 Months Ending June 30,
 
 
 
 
 
 
 
 
Principal Payment
 
 
Discount
 
 
Net
 
2019
  710,481 
  (77,826)
  632,655 
2020
  320,163 
  (62,435)
  257,728 
2021
  207,185 
  (48,238)
  158,947 
2022
  157,601 
  (39,188)
  118,413 
2023
  155,499 
  (32,594)
  122,905 
Thereafter
  483,069 
  (56,235)
  426,834 
 
 $2,033,998 
 $(316,516)
 $1,717,482 
 
 
10
 
 
United States Antimony Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited), Continued:
 
10. 
Related Party Transactions
 
During the three and six months ended June 30, 2018 and 2017, the Chairman of the audit committee and compensation committee received $4,500 and $4,500, respectively, for services performed. See Note 12 for shares of common stock issued to directors.
 
During the three and six months ended June 30, 2018 and 2017, the Company paid $2,461 and $4,555, and $2,480 and $5,054, respectively, to John Lawrence, our President and Chief Executive Officer, as reimbursement for equipment used by the Company. Mr. Lawrence advanced the Company $75,000 for ongoing operating expenses during the six months ended June 30, 2018, which has been repaid as of June 30, 2018.
 
11. 
Income Taxes
 
During the three and six months ended June 30, 2018, and the year ended December 31, 2017, the Company determined that a valuation allowance equal to 100% of any deferred tax asset was appropriate, as management of the Company cannot determine that it is more likely than not the Company will realize the benefit of a net deferred tax asset. The net effect is that the deferred tax asset is fully reserved for at June 30, 2018 and December 31, 2017. Management estimates the effective tax rate at 0% for the current year.
 
      Mexican Tax Assessment
 
In 2015, the Mexican tax authority (“SAT”) initiated an audit of the USAMSA’s 2013 income tax return. In October 2016, as a result of its audit, SAT assessed the Company $13.8 million pesos, which was approximately $666,400 in U.S. Dollars (“USD”) as of December 31, 2016. Approximately $285,000 USD of the total assessment is interest and penalties. SAT’s assessment is based on the disallowance of specific costs that the Company deducted on the 2013 USAMSA income tax return. These disallowed costs were incurred by the Company for USAMSA’s business operations. SAT claims that the costs were not deductible or were not supported by appropriate documentation. At June 30, 2018, the assessed amount is $694,752 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 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. For the three and six months ended June 30, 2018, the Company recognized a $62,752 and $12,752 decrease, respectively, and for the three and six months ended June 30, 2017, recognized a $51,642 and $10,191 decrease, respectively, due to the change in exchange rates. 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 other tax years and have advised the Company that they do not expect the Company to have a tax liability for those years relating to similar issues.
 
 
11
 
 
United States Antimony Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited), Continued:
 
12.            
Stockholder’s Equity
 
Issuance of Common Stock for Payable to Board of Directors
 
During the six month period 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 during the three and six months ended June 30, 2017, the Company accrued $43,750 and $87,500, respectively, in directors’ fees payable that will be paid in common stock.
 
On May 3, 2018, the Board of Directors was issued a total of 739,018 shares of common stock for $175,000 in directors’ fees that were payable at December 31, 2017. In addition during the quarter and six months ended June 30, 2018, the Company accrued $43,750 and $87,500, respectively, in directors’ fees payable that will be paid in common stock.
 
13.            
Business Segments
 
The Company is currently organized and managed by four segments, which represent our operating units: United States antimony operations, Mexican antimony operations, precious metals recovery and United States zeolite operations.
 
The Madero smelter and Puerto Blanco mill at the Company’s Mexico operation brings antimony up to an intermediate stage, which may be sold directly or shipped to the United States operation for finishing 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.
 
Segment disclosure regarding sales to major customers is located in Note 4.
 
Properties, plants
 
 
 
 
 
 
  and equipment, net:
 
June 30, 2018
 
 
December 31, 2017
 
Antimony
 
 
 
 
 
 
United States
 $1,661,616 
 $1,687,997 
Mexico
  11,266,118 
  11,452,507 
Subtotal Antimony
  12,927,734 
  13,140,504 
Precious metals
  649,741 
  642,774 
Zeolite
  1,277,151 
  1,349,619 
   Total
 $14,854,626 
 $15,132,897 
 
Total Assets:
 
June 30, 2018
 
 
December 31, 2017
 
Antimony
 
 
 
 
 
 
United States
 $2,317,937 
 $2,510,323 
Mexico
  11,950,342 
  12,073,219 
Subtotal Antimony
  14,268,279 
  14,583,542 
Precious metals
  649,741 
  642,774 
Zeolite
  1,827,447 
  1,904,938 
   Total
 $16,745,467 
 $17,131,254 
 
 
12
 
 
United States Antimony Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited), Continued:
 
13.            
Business Segments, Continued:
 
 
 
For the Three Months Ended
 
 
For the Six Months Ended
 
 
 
June 30, 2018
 
 
June 30, 2017
 
 
June 30, 2018
 
 
June 30, 2017
 
Capital expenditures:
 
 
 
 
 
 
 
 
 
 
 
 
Antimony
 
 
 
 
 
 
 
 
 
 
 
 
United States
 $- 
 $- 
 $- 
 $- 
Mexico
  70,892 
  47,033 
  110,977 
  75,716 
Subtotal Antimony
  70,892 
  47,033 
  110,977 
  75,716 
Precious Metals
  - 
  16,582 
  40,988 
  59,582 
Zeolite
  8,691 
  8,030 
  22,423 
  15,946 
   Total
 $79,583 
 $71,645 
 $174,388 
 $151,244 
 
 
Segment Operations for the three
months ended June 30, 2018
 
Antimony
USA
 
 
Antimony
Mexico
 
 
Total
Antimony
 
 
Precious
Metals
 
 
Zeolite
 
 
Totals
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total revenues
 $1,492,520 
 $- 
 $1,492,520 
 $81,293 
 $682,534 
 $2,256,347 
 
    
    
    
    
    
    
Depreciation and amortization
 $13,170 
 $97,844 
 $111,014 
 $17,011 
 $47,072 
 $175,097 
 
    
    
    
    
    
    
Income (loss) from operations
  391,895 
  (808,575)
  (416,680)
  114,801 
  141,826 
  (160,053)
 
    
    
    
    
    
    
Other income (expense):
  (1,938)
  41,630 
  39,692 
  - 
  (2,424)
  37,268 
 
    
    
    
    
    
    
NET INCOME (LOSS)
 $389,957 
 $(766,945)
 $(376,988)
 $114,801 
 $139,402 
 $(122,785)
 
Segment Operations for the three
months ended June 30, 2017
 
Antimony
USA
 
 
Antimony
Mexico
 
 
Total
Antimony
 
 
Precious
Metals
 
 
Zeolite
 
 
Totals
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total revenues
 $2,077,300 
 $- 
 $2,077,300 
 $144,766 
 $616,414 
 $2,838,480 
 
    
    
    
    
    
    
Depreciation and amortization
 $18,700 
 $145,875 
 $164,575 
 $- 
 $49,800 
 $214,375 
 
    
    
    
    
    
    
Income (loss) from operations
  844,257 
  (1,089,834)
  (245,577)
  144,766 
  132,640 
  31,829 
 
    
    
    
    
    
    
Other income (expense):
  (11,965)
  (33,605)
  (45,570)
  - 
  (3,214)
  (48,784)
 
    
    
    
    
    
    
NET INCOME (LOSS)
 $832,292 
 $(1,123,439)
 $(291,147)
 $144,766 
 $129,426 
 $(16,955)
 
 
13
 
 
United States Antimony Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited), Continued:
 
13.            
Business Segments, Continued:
 
Segment Operations for the six
months ended June 30, 2018
 
Antimony
USA
 
 
Antimony
Mexico
 
 
Total
Antimony
 
 
Precious
Metals
 
 
Zeolite
 
 
Totals
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total revenues
 $3,174,333 
 $- 
 $3,174,333 
 $141,703 
 $1,373,240 
 $4,689,276 
 
    
    
    
    
    
    
Depreciation and amortization
 $26,380 
 $297,366 
 $323,746 
 $34,021 
 $94,892 
 $452,659 
 
    
    
    
    
    
    
Income (loss) from operations
  589,934 
  (1,551,357)
  (961,423)
  107,682 
  293,919 
  (559,822)
 
    
    
    
    
    
    
Other income (expense):
  (2,716)
  (29,488)
  (32,204)
  - 
  (5,199)
  (37,403)
 
    
    
    
    
    
    
NET INCOME (LOSS)
 $587,218 
 $(1,580,845)
 $(993,627)
 $107,682 
 $288,720 
 $(597,225)
 
Segment Operations for the six
months ended June 30, 2017
 
Antimony
USA
 
 
Antimony
Mexico
 
 
Total
Antimony
 
 
Precious
Metals
 
 
Zeolite
 
 
Totals
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total revenues
 $4,046,026 
 $17,782 
 $4,063,808 
 $165,577 
 $1,228,426 
 $5,457,811 
 
    
    
    
    
    
    
Depreciation and amortization
 $38,200 
 $292,050 
 $330,250 
    
 $99,800 
 $430,050 
 
    
    
    
    
    
    
Income (loss) from operations
  1,173,160 
  (1,841,012)
  (667,852)
  165,577 
  222,232 
  (280,043)
 
    
    
    
    
    
    
Other income (expense):
  (23,044)
  (98,569)
  (121,613)
  - 
  (6,602)
  (128,215)
 
    
    
    
    
    
    
NET INCOME (LOSS)
 $1,150,116 
 $(1,939,581)
 $(789,465)
 $165,577 
 $215,630 
 $(408,258)
 
14.            
Subsequent Events
 
On July 31, 2018, the Company entered into a Member Interest and Share Capital Purchase Agreement (the “Agreement”) with Great Lakes Chemical Corporation and Lanxess Holding Company US Inc., as the sellers, and the Company as the buyer. The transaction is expected to close on August 31, 2018.   Under the Agreement, the Company will acquire a subsidiary of the sellers which includes an antimony plant, equipment and land located in Reynosa, Mexico.   The Company plans to disassemble, salvage and transport the antimony plant and equipment for use in its existing operations in both Mexico and the United States. The project will involve moving heavy equipment and could take up to a year. 
 
ITEM 2. 
Management’s Discussion and Analysis of Results of Operations and FinancialCondition
 
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.
 
 
14
 
 
Antimony - Combined USA
 
Three Months Ended
 
 
Three Months Ended
 
 
Six Months Ended
 
 
Six Months Ended
 
   and Mexico
 
June 30, 2018
 
 
June 30, 2017
 
 
June 30, 2018
 
 
June 30, 2017
 
Lbs of Antimony Metal USA
  161,044 
  345,152 
  424,664 
  804,818 
Lbs of Antimony Metal Mexico:
  165,214 
  160,204 
  317,558 
  248,388 
   Total Lbs of Antimony Metal Sold
  326,258 
  505,356 
  742,222 
  1,053,206 
Average Sales Price/Lb Metal
 $4.57 
 $4.11 
 $4.28 
 $3.86 
Net loss/Lb Metal
 $(1.16)
 $(0.58)
 $(1.34)
 $(0.75)
 
    
    
    
    
Gross antimony revenue
 $1,492,520 
 $2,077,300 
 $3,174,333 
 $4,063,808 
 
    
    
    
    
Cost of sales - domestic
  (834,627)
  (1,009,940)
  (2,024,663)
  (2,309,821)
Cost of sales - Mexico
  (795,125)
  (1,055,002)
  (1,511,093)
  (1,786,460)
Operating expenses
  (279,448)
  (257,935)
  (600,000)
  (635,379)
Non-operating expenses
  39,692 
  (45,570)
  (32,204)
  (121,613)
 
  (1,869,508)
  (2,368,447)
  (4,167,960)
  (4,853,273)
 
    
    
    
    
Net loss - antimony
  (376,988)
  (291,147)
  (993,627)
  (789,465)
Depreciation,& amortization
  111,014 
  164,575 
  323,746 
  330,250 
   EBITDA - antimony
 $(265,974)
 $(126,572)
 $(669,881)
 $(459,215)
 
    
    
    
    
Precious Metals
    
    
    
    
Ounces sold
    
    
    
    
  Gold
  15 
  51 
  29 
  133 
  Silver
  4,960 
  8,639 
  9,841 
  17,552 
 
    
    
    
    
Gross precious metals revenue
 $81,293 
 $144,766 
 $141,703 
 $165,577 
Production costs, royalties, and shipping costs
  33,508 
  - 
  (34,021)
  - 
Net income - precious metals
  114,801 
  144,766 
  107,682 
  165,577 
Depreciation
  17,011 
  - 
  34,021 
  - 
   EBITDA - precious metals
 $131,812 
 $144,766 
 $141,703 
 $165,577 
 
    
    
    
    
Zeolite
    
    
    
    
Tons sold
  3,578 
  3,422 
  7,331 
  6,775 
Average Sales Price/Ton
 $190.76 
 $180.13 
 $187.32 
 $181.32 
Net income (Loss)/Ton
 $38.96 
 $37.82 
 $39.38 
 $31.83 
 
    
    
    
    
Gross zeolite revenue
 $682,534 
 $616,414 
 $1,373,240 
 $1,228,426 
Cost of sales
  (518,757)
  (470,646)
  (1,033,239)
  (972,524)
Operating expenses
  (21,951)
  (13,128)
  (46,082)
  (33,670)
Non-operating expenses
  (2,424)
  (3,214)
  (5,199)
  (6,602)
Net income - zeolite
  139,402 
  129,426 
  288,720 
  215,630 
Depreciation
  47,072 
  49,800 
  94,892 
  99,800 
   EBITDA - zeolite
 $186,474 
 $179,226 
 $383,612 
 $315,430 
 
    
    
    
    
Company-wide
    
    
    
    
Gross revenue
 $2,256,347 
 $2,838,480 
 $4,689,276 
 $5,457,811 
Production costs
  (2,114,999)
  (2,535,588)
  (4,603,016)
  (5,068,805)
Operating expenses
  (301,401)
  (271,063)
  (646,082)
  (669,049)
Non-operating expenses
  37,268 
  (48,784)
  (37,403)
  (128,215)
Net income (loss)
  (122,785)
  (16,955)
  (597,225)
  (408,258)
Depreciation,& amortization
  175,097 
  214,375 
  452,659 
  430,050 
   EBITDA
 $52,312 
 $197,420 
 $(144,566)
 $21,792 
 
 
15
 
 
PART I - FINANCIAL INFORMATION, CONTINUED:
 
ITEM 2.  Management’s Discussion and Analysis of Results of Operations and Financial Condition, continued:
 
Company-Wide
 
For the second quarter of 2018, we recognized a net loss of $122,785, on sales of $2,256,347, compared to a net loss of $16,955 in the second quarter of 2017 on sales of $2,838,480. The loss in the second quarter of 2018 was primarily due to a decrease in the raw materials received from our North American supplier. The loss in the first quarter of 2017 was primarily due to the loss of raw material from Hillgrove Mines of Australia. During the first six months of 2018, we endured supply interruptions from our North American supplier, and we have been notified that due to a lack of raw material, they will not be able to supply us with raw material from September 17, 2018 through November 5, 2018. We anticipate that normal supply quantities from our North American supplier will resume for the remainder of 2018. We will be directing our resources during that time to increasing our supply of raw material from Mexico.
 
For the three and six months ended June 30, 2018, EBITDA was $52,312 and $(144,566), compared to $197,420 and $21,792 for the same periods of 2017.
 
Net non-cash expense items totaled $287,780 and for the three months ended June 30, 2018 and included $175,097 for depreciation and amortization, $21,120 for amortization of debt discount, $43,750 for director compensation and $47,813 for other items. Net non-cash expense items totaled $572,065 for the six months ended June 30, 2018 and included $452,659 for depreciation and amortization, $42,240 of debt discount, $87,500 for director compensation and $(10,334) for other items.
 
Net non-cash expense items totaled $282,985 for the three months ended June 30, 2017 and included $214,375 for depreciation and amortization, $23,413 for amortization of debt discount, $43,750 for director compensation and $1,447 for other items. Net non-cash expense items totaled $618,238 for the six months ended June 30, 2017 and included $430,050 for depreciation and amortization, $46,828 of debt discount, $87,500 for director compensation and $53,860 for other items.
 
For the three and six months ended June 30, 2018, general and administrative expenses were $186,411 and 337,242, respectively compared to $138,995 and $343,559 for the same periods in 2017.
 
Antimony
 
For the three and six months ended June 30, 2018, we sold 326,258 and 742,222 pounds of antimony compared to 505,356 and 1,053,206 pounds for the three and six months ended June 30, 2017. The raw material received from our North American supplier decreased by approximately 184,000 pounds. We did not see an increase in raw material from Mexico for the second quarter of 2018, but we did see an increase of approximately 69,000 pounds for the six months ended June 30, 2018.
 
The average sales price of antimony during the three and six months ended June 30, 2018 was $4.57 and $4.28 per pound compared to $4.11 and $3.86 during the same periods in 2017.
 
The cyanide leach circuit at Puerto Blanco has been permitted, and construction of the leach circuit is underway, and we expect to start testing during the fourth quarter of 2018. The largest project is the construction of the tailings pond, and we are anticipating it will be ready for a liner by the end of September 2018. Construction of the equipment is underway in Montana, and the leach plant floor with a containment lip has been completed. The equipment will be placed directly on the floor, and we do not believe that a building will be necessary. During the construction phase, our metallurgical lab in Montana has been busy testing and confirming the metallurgy. Three technical discoveries were made that will increase recovery, expedite processing, and cut costs.
 
 
16
 
 
At the Wadley mine, production is being increased with more miners and load haul equipment. The use of pneumatic hammers is planned in lieu of explosives.
 
Precious Metals
 
The caustic leach of flotation concentrates from Los Juarez was successful, and the pilot production of the Los Juarez gold, silver, and antimony will commence with the completion of the cyanide leach plant at Puerto Blanco.
 
For the three and six months ended June 30, 2018, EBITDA for precious metals was $131,812 and $141,703, compared to $144,766 and $165,577 for the same periods of 2017.
 
The estimated recovery of precious metals per metric ton, after the caustic leach and cyanide leach circuits, is as follows:
 
Metal
 
Assay
 
 
Recovery
 
 
Value
 
 
Value/Mt
 
Gold
 
0.035 opmt
 
  90%
 
$1200/oz
 
 $37.80 
Silver
 
3.27 opmt
 
  90%
 $15.50/oz 
 $45.61 
Antimony
  0.652%
  70%
 
4.14/lb
 
 $41.52 
Total
    
    
    
 $124.93 
 
Current and prior years’ revenue from precious metals is as follows:
 
Precious Metal Sales Silver/Gold
 
2015
 
 
2016
 
 
2017
 
 
Six Months 2018
 
Montana
 
 
 
 
 
 
 
 
 
 
 
 
Ounces Gold Shipped (Au)
  89.12 
  108.10 
  107.00 
  29.43 
Ounces Silver Shipped (Ag)
  30,421 
  38,123 
  32,021 
  9,841 
Revenues
 $491,426 
 $556,650 
 $480,985 
 $141,703 
Australian - Hillgrove
    
    
    
    
Ounces Gold Shipped (Au)
  - 
  496.65 
  90.94 
  - 
Revenues - Gross
  - 
 $597,309 
 $96,471 
  - 
Revenues to Hillgrove
  - 
  (481,088)
  (202,584)
  - 
Revenues to USAC
  - 
 $116,221 
 $(106,113)
  - 
 Total Revenues
 $491,426 
 $672,871 
 $374,872 
 $141,703 
 
Bear River Zeolite (BRZ)
 
For the three and six months ended June 30, 2018, BRZ sold 3,578 and 7,331 tons of zeolite compared to 3,422 and 6,775 tons in the same periods of 2017, up 156 tons or 4.6% for the three months and 556 tons or 8.2% for the six months. .
 
BRZ realized a profit of $139,402 after depreciation of $47,072 in the second quarter of 2018, compared to $129,426 after depreciation of $49,800 in the second quarter of 2017. The increase in profit from our zeolite operations was $9,976 or 6.9%. For the six months ended June 30, 2018, BRZ realized a gross profit of $288,720 after depreciation of $94,982 compared to a gross profit of $215,630 after depreciation of $99,800, an increase of $73,090 or 32%.
 
BRZ realized an EBITDA for the three and six months ended June 30, 2018 of $186,474 and $383,612, compared to $179,225 and 315,430 for the same periods in 2017.
 
 
17
 
 
We are anticipating continued growth in all areas of zeolite sales.
 
Financial Position
 
Financial Condition and Liquidity
 
June 30,
 
 
December 31,
 
 
 
2018
 
 
2017
 
Current assets
 $1,442,819 
 $1,562,270 
Current liabilities
  (4,209,889)
  (3,934,726)
   Net Working Capital
 $(2,767,070)
 $(2,372,456)
 
    
    
 
 
 
Six Months Ended
 
 
 
June 30,
 
 
June 30,
 
 
 
2018
 
 
2017
 
Cash provided by operations
 $197,817 
 $239,654 
Cash used for capital outlay
  (174,388)
  (151,244)
Cash provided (used) by financing:
    
    
   Net proceeds (payments to) factor
  (5,440)
  20,471 
   Proceeds from notes payable to bank
  - 
  24,827 
   Change in check issued and payable
  82,330 
  (12,776)
   Advances from related party
  75,000 
  - 
   Payment on advances from related party
  (75,000)
  - 
   Payment of notes payable to bank
  (1,556)
  - 
   Principal paid on long-term debt
  (110,872)
  (106,439)
      Net change in cash and cash equivalents
 $(12,109)
 $14,493 
 
Our net working capital decreased by approximately $395,000 from December 31, 2017. Our cash decreased by approximately $12,000 during the same period. The decrease in our net working capital was primarily due to an increase of approximately $50,000 in the current portion of long term debt and a decrease in inventories of approximately $200,000. We have estimated commitments for construction and improvements of $100,000, including $50,000 to finish building and installing the precious metals leach circuits. We believe that with our current cash balance, along with the future cash flow from operations and operating agreements, we have adequate liquid assets to meet these commitments and service our debt for the next twelve months. We have lines of credit of $202,000 which have been drawn down by $191,009 at June 30, 2018.
 
ITEM 3.
 
None
 
 
18
 
 
 
PART I - FINANCIAL INFORMATION, CONTINUED:
 
Management’s Discussion and Analysis of Results of Operations and Financial Condition, continued:
 
ITEM 4. Controls and Procedures
 
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
 
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to management, as appropriate, to allow timely decisions regarding required disclosure. Our chief financial officer conducted an evaluation of the effectiveness of the Company's disclosure controls and procedures (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)) as of June 30, 2018. It was determined that there were material weaknesses affecting our disclosure controls and procedures and, as a result of those weaknesses, our disclosure controls and procedures were not effective as of June 30, 2018. These material weaknesses are as follows:
 
● 
Inadequate design of internal control over the preparation of the financial statements and financial reporting processes;
● 
Inadequate monitoring of internal controls over significant accounts and processes including controls associated with domestic and Mexican subsidiary operations and the period-end financial reporting process; and
● 
The absence of proper segregation of duties within significant processes and ineffective controls over management oversight, including antifraud programs and controls.