10-Q 1 uamy_10q.htm QUARTERLY REPORT Blueprint
 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
(Mark One)
 
[X] 
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended September 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
X
 
No
 
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
 
YES
X
 
No
 
 
Indicate by check mark whether the registrant is a 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   X  

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
X
 
At November 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 SEPTEMBER 30, 2018
(UNAUDITED)
 
TABLE OF CONTENTS
 
 
 Page
PART I – FINANCIAL INFORMATION
 
 
 
Item 1: Financial Statements (unaudited)
1-16
 
 
Item 2: Management’s Discussion and Analysis of Results of Operations and Financial Condition
17-20
 
 
Item 3: Quantitative and Qualitative Disclosure about Market Risk
21
 
 
Item 4: Controls and Procedures
21
 
 
PART II – OTHER INFORMATION
 
 
 
Item 1: Legal Proceedings
22
 
 
Item 2: Unregistered Sales of Equity Securities and Use of Proceeds
22
 
 
Item 3: Defaults upon Senior Securities
22
 
 
Item 4: Mine Safety Disclosures
22
 
 
Item 5: Other Information
22
 
 
Item 6: Exhibits and Reports on Form 8-K
22
 
 
SIGNATURE
22
 
 
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, 2018
 
 
December 31, 2017
 
Current assets:
 
 
 
 
 
 
Cash and cash equivalents
 $519,282 
 $27,987 
Certificates of deposit
  252,954 
  252,298 
Accounts receivable, net
  574,216 
  362,579 
Inventories
  716,896 
  914,709 
Other current assets
  - 
  4,697 
Total current assets
  2,063,348 
  1,562,270 
 
    
    
Properties, plants and equipment, net
  14,866,458 
  15,132,897 
Restricted cash for reclamation bonds
  57,234 
  63,345 
IVA receivable and other assets
  464,334 
  372,742 
Total assets
 $17,451,374 
 $17,131,254 
 
    
    
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
Current liabilities:
    
    
Checks issued and payable
 $41,820 
 $28,248 
Accounts payable
  2,304,976 
  2,276,357 
Due to factor
  16,048 
  10,880 
Accrued payroll, taxes and interest
  135,299 
  185,283 
Other accrued liabilities
  330,064 
  168,578 
Payables to related parties
  56,337 
  22,668 
Deferred revenue
  32,400 
  60,049 
Notes payable to bank
  100,000 
  192,565 
Income taxes payable (Note 11)
  - 
  443,110 
Long-term debt, current portion, net of discount
  669,407 
  546,988 
Total current liabilities
  3,686,351 
  3,934,726 
 
    
    
Long-term debt, net of discount and current portion
  1,001,563 
  1,239,126 
Hillgrove advances payable
  1,134,196 
  1,134,221 
Common stock payable to directors for services
  131,250 
  175,000 
Asset retirement obligations and accrued reclamation costs
  276,183 
  271,572 
Total liabilities
  6,229,543 
  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
  (25,894,102)
  (26,564,324)
Total stockholders' equity
  11,221,831 
  10,376,609 
Total liabilities and stockholders' equity
 $17,451,374 
 $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 nine months ended
 
 
 
September 30, 2018
 
 
September 30, 2017
 
 
September 30, 2018
 
 
September 30, 2017
 
 
 
 
 
 
 
 
 
 
 
 
 
 
REVENUES
 $2,091,725 
 $2,369,714 
 $6,781,001 
 $7,827,525 
 
    
    
    
    
COST OF REVENUES
  2,268,854 
  2,315,646 
  6,871,870 
  7,381,020 
 
    
    
    
    
GROSS PROFIT (LOSS)
  (177,129)
  54,068 
  (90,869)
  446,505 
 
    
    
    
    
OPERATING EXPENSES):
    
    
    
    
     General and administrative
  151,825 
  130,698 
  489,067 
  480,482 
     Salaries and benefits
  93,723 
  97,487 
  281,596 
  282,263 
     Professional fees
  211,583 
  53,045 
  332,550 
  190,965 
 Gain on plant acquisition (Note 13)
  (1,500,000)
  - 
  (1,500,000)
  - 
TOTAL OPERATING EXPENSES (INCOME)
  (1,042,869)
  281,230 
  (396,787)
  953,710 
 
    
    
    
    
INCOME (LOSS) FROM OPERATIONS
  865,740 
  (227,162)
  305,918 
  (507,205)
 
    
    
    
    
OTHER INCOME (EXPENSE):
    
    
    
    
Interest income
  19 
  19 
  849 
  857 
Gain on tax settlement (Note 11)
  443,110 
  - 
  443,110 
  - 
Interest expense
  (27,516)
  (25,960)
  (76,163)
  (80,764)
Foreign exchange gain (loss)
  (12,752)
  2,642 
  - 
  (49,000)
Factoring expense
  (1,154)
  (12,104)
  (3,492)
  (34,711)
TOTAL OTHER INCOME (EXPENSE)
  401,707 
  (35,403)
  364,304 
  (163,618)
 
    
    
    
    
INCOME (LOSS) BEFORE INCOME TAXES
  1,267,447 
  (262,565)
  670,222 
  (670,823)
 
    
    
    
    
     Preferred dividends
  (12,162)
  (12,162)
  (36,487)
  (36,487)
 
    
    
    
    
   Net income (loss) available to common stockholders
 $1,255,285 
 $(274,727)
 $633,735 
 $(707,310)
 
    
    
    
    
Net income (loss) per share of common stock:
    
    
    
    
Basic
 $0.02 
 
 NIL
 
 $0.01 
 $(0.01)
Diluted
 $0.02 
 
 NIL
 
 $0.01 
 $(0.01)
 
    
    
    
    
Weighted average shares outstanding:
    
    
    
    
Basic
  68,227,171 
  67,488,153 
  67,894,207 
  67,387,337 
Diluted
  68,373,471 
  67,488,153 
  67,992,339 
  67,387,337 
 
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, 2018
 
 
September 30, 2017
 
Cash Flows From Operating Activities:
 
 
 
 
 
 
Net income (loss)
 $670,222 
 $(670,823)
Adjustments to reconcile net income (loss) to net cash
    
    
provided (used) by operating activities:
    
    
Depreciation and amortization expense
  678,010 
  637,225 
Gain on tax settlement
  (443,110)
  - 
Gain on plant acquisition
  (1,500,000)
  - 
Amortization of loan discount
  63,360 
  70,242 
Accretion of asset retirement obligation
  4,611 
  4,342 
Common stock payable for director fees
  131,250 
  131,250 
Foreign exchange (gain) loss
  - 
  49,000 
Other non-cash items
  (681)
  (682)
Change in:
    
    
Accounts receivable, net
  (211,637)
  55,722 
Inventories
  197,813 
  (84,243)
Other current assets
  4,697 
  (790)
Other assets
  (91,592)
  (83,437)
Accounts payable
  28,619 
  402,207 
Accrued payroll, taxes and interest
  (49,984)
  (50,862)
Deferred revenues
  (27,649)
  - 
Other accrued liabilities
  161,486 
  30,305 
Payables to related parties
  33,669 
  1,797 
Net cash provided (used) by operating activities
  (350,916)
  491,253 
 
    
    
Cash Flows From Investing Activities:
    
    
Purchase of properties, plants and equipment
  (411,571)
  (279,465)
Proceeds from plant acquisition
  1,500,000 
  - 
Net cash provided (used) by investing activities
  1,088,429 
  (279,465)
 
    
    
Cash Flows From Financing Activities:
    
    
   Net proceeds from (payments to) factor
  5,168 
  13,338 
   Checks issued and payable
  13,572 
  12,726 
   Advances from related party
  125,000 
  - 
   Payments on advances from related party
  (125,000)
  - 
Principal payments on notes payable to bank
  (92,565)
  (64,291)
Principal payments on long-term debt
  (178,504)
  (156,042)
Net cash provided (used) by financing activities
  (252,329)
  (194,269)
 
    
    
NET INCREASE IN CASH AND CASH EQUIVALENTS
  485,184 
  17,519 
Cash and cash equivalents and restricted cash at beginning of period
  91,332 
  73,332 
Cash and cash equivalents and restricted cash at end of period
 $576,516 
 $90,851 
 
    
    
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 nine month periods ended September 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 September 30, 2018, the Company’s consolidated financial statements show negative working capital of approximately $1.6 million and accumulated deficit of approximately $25.9 million.  In addition, although the Company has a net income for the third quarter of 2018, the Company has had recurring operating 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 were stable or improved slightly during 2018. Through September 30, 2018, the average sale price for antimony is approximately $4.14 per pound. Additionally, in November 2017, the Company renegotiated its domestic sodium antimonite supply agreement with our North American supplier resulting in a lower cost per antimony per pound of approximately $0.44. During the first nine months of 2018, we endured supply interruptions from our North American supplier, and they have notified us that we will not be receiving normal shipments until 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 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 in 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. In addition, a new leach circuit expected to come on line during 2019 in Mexico will result in more extraction of precious metals. The portion of the precious metals recovery system at the Madero smelter is complete and the cyanide leach circuit being built at the Puerto Blanco plant is expected to be completed this fall.
 
 
4
 
 
United States Antimony Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
 
1. 
Basis of Presentation, Continued:
 
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.
 
In the third quarter of 2018, we closed on an agreement to purchase and dismantle an antimony processing plant in Reynosa, Mexico. The agreement was structured as a capital purchase agreement, and we were paid $1,500,000 to assist us in the plant closure and salvage operation (See Note 13). We expect that we will be able to complete the closure and salvage for less than that amount and use any remaining proceeds and salvaged equipment to enhance and improve our Mexican antimony operations. In addition, in the third quarter of 2018 we settled the tax assessment from the Mexican government completely in our favor (See Note 11). The accrual of $443,110 recorded as a potential tax liability in prior years was reversed and recognized as a gain during the quarter ended September 30, 2018. We paid our Mexican tax representatives $157,500 to negotiate the tax settlement, and we reported this expense as professional fees. Both of these transactions improved our net working capital position.
 
Subsequent to September 30, 2018, on November 7, 2018, the Company agreed to sell real property acquired in the Reynosa transaction for $700,000.  The agreement calls for a down payment of $150,000 which we received on November 8, 2018, payment of $150,000 on December 8, 2018, and two more payments of $200,000 each on January 8 and February 8, 2019.
 
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 additional operating capital, will enable the Company to 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 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 nine months ended September 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.
 
 
5
 
 
United States Antimony Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
 
2. 
Developments in Accounting Pronouncements, Continued:
 
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 $57,234 as of September 30, 2018 and $63,345 as of December 31, 2017 and $63,274 as of September 30, 2017 and December 31, 2016, as well as amounts previously reported for cash and cash equivalents.
 
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.
 
Included in the calculation of diluted earnings per share for the quarter and nine month periods ended September 30, 2018 are 250,000 shares of stock warrants. For the three and nine months ended September 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:
 
 
 
September 30, 2018
 
 
September 30, 2017
 
Warrants
  - 
  250,000 
Convertible preferred stock
  1,751,005 
  1,751,005 
Total possible dilution
  1,751,005 
  2,001,005 
 
 
 
6
 
 
United States Antimony Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
 
4. 
Revenue Recognition
 
Our products consist of the following:
 
Antimony: includes antimony oxide, sodium antimonate, antimony trisulfide, and antimony metal
 
Zeolite: includes coarse and fine zeolite crushed in various sizes.
● 
Precious Metals: includes unrefined and refined gold and silver
 
For our antimony and zeolite products, revenue is recognized upon the completion of the performance obligation which is met when the transaction price can be reasonably estimated and revenue is recognized generally at the time when risk is transferred. We have determined the performance obligation is met and title is transferred either upon shipment from our warehouse locations or upon receipt by the customer as specified in individual sales orders. The performance obligation is met because at that time, 1) legal title is transferred to the customer, 2) the customer has accepted the product and obtained the ability to realize all of the benefits from the product, 3) the customer has the significant risks and rewards of ownership to it, 4) it is very unlikely product will be rejected by the customer upon physical receipt, and 5) we have the right to payment for the product. Shipping costs related to the sales of antimony and zeolite products are recorded to cost of sales as incurred. For zeolite products, royalty expense due a third party by the Company is also recorded to cost of sales upon sale in accordance with terms of underlying royalty agreements.
 
For sales of precious metals, the performance obligation is met, the transaction price is known, and revenue is recognized at the time of transfer of control of the agreed-upon metal quantities to the customer. Refining and shipping costs related to sales of precious metals are recorded to cost of sales as incurred.
 
Sales of products for the three and nine month periods ended September 30, 2018 and 2017 were as follows:
 
 
 
Three Months Ended
 
 
Nine Months Ended
 
 
 
  September 30,
 
 
  September 30,
 
 
 
2018
 
 
2017
 
 
2018
 
 
2017
 
Antimony
 $1,366,540 
 $1,796,776 
 $4,540,873 
 $5,860,584 
Zeolite
  653,365 
  494,694 
  2,026,605 
  1,723,120 
Precious metals
  71,820 
  78,244 
  213,523 
  243,821 
 
 $2,091,725 
 $2,369,714 
 $6,781,001 
 $7,827,525 
 
The following is sales information by geographic area based on the location of customers for the three and nine month periods ended September 30, 2018 and 2017:
 
 
 
Three Months Ended
 
 
Nine Months Ended
 
 
 
September 30,
 
 
September 30,
 
 
 
2018
 
 
2017
 
 
2018
 
 
2017
 
United States
 $1,876,218 
 $2,208,417 
 $6,151,068 
 $7,284,803 
Canada
  215,507 
  161,297 
  629,933 
  542,722 
 
 $2,091,725 
 $2,369,714 
 $6,781,001 
 $7,827,525 
 
 
7
 
 
United States Antimony Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
 
4. 
Revenue Recognition, Continued:
 
Sales of products to significant customers were as follows for the three and nine month periods ended September 30, 2018 and 2017:
 
 
 
For the Three Months Ended
 
 
For the Nine Months Ended
 
Sales to Three
 
September 30,
 
 
September 30,
 
 
September 30,
 
 
September 30,
 
Largest Customers
 
2018
 
 
2017
 
 
2018
 
 
2017
 
Ampacet Corporation
 $142,414 
 $150,234 
 $472,674 
 $- 
Mexichem Specialty Compounds Inc.
  587,568 
  909,965 
  1,985,249 
  2,466,388 
Kohler Corporation
  471,358 
  512,451 
  1,122,908 
  1,458,949 
East Penn Corporation
  - 
  - 
  - 
  512,641 
 
 $1,201,340 
 $1,572,650 
 $3,580,831 
 $4,437,978 
% of Total Revenues
  57%
  66%
  53%
  57%
 
Accounts receivable from largest customers were as follows for September 30, 2018 and December 31, 2017:
 
Three Largest
 
 
 
 
 
 
Accounts Receivable
 
September 30, 2018
 
 
December 31, 2017
 
Kohler Corporation
 $154,903 
 $169,991 
Earth Innovations Inc.
  36,107 
  31,522 
Axens North America, Inc.
  38,403 
  31,237 
 
 $229,413 
 $232,750 
% of Total Receivables
  40%
  47%
 
Our trade accounts receivable balance related to contracts with customers was $574,216 at September 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.
 
 
8
 
 
United States Antimony Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
 
5. 
Inventories
 
Inventories at September 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 September 30, 2018 and December 31, 2017 is as follows:
 
 
 
September 30,
 
 
December 31,
 
 
 
2018
 
 
2017
 
Antimony oxide
 $304,165 
 $408,217 
Antimony with precious metal content
  - 
  35,554 
Antimony ore
  156,997 
  187,133 
     Total antimony
  461,162 
  630,904 
Zeolite
  255,734 
  283,805 
 
 $716,896 
 $914,709 
 
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
 
September 30, 2018
 
 
December 31, 2017
 
Accounts receivable - non factored
 $558,168 
 $351,699 
Accounts receivable - factored with recourse
  16,048 
  10,880 
      Accounts receivable - net
 $574,216 
 $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 September 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.
 
 
9
 
 
United States Antimony Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited), Continued:
 
8. 
Notes Payable to Bank
 
At September 30, 2018 and December 31, 2017, the Company had the following notes payable to bank:
 
 
 
September 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
 $1 
 $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
  99,999 
  93,702 
Total notes payable to the bank
 $100,000 
 $192,565 
 
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 September 30, 2018 and December 31, 2017, is as follows:
 
September 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.
 $- 
 $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.
  16,453 
  27,096 
Note payable to Cat Financial Services, bearing interest at 6%;
    
    
payable in monthly installments of $778; maturing
    
    
December 2022; collateralized by equipment.
  35,596 
  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.
  7,749 
  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.
  10,246 
  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.
  661,988 
  715,709 
Obligation payable for Guadalupe Mine, non-interest bearing,
    
    
annual payments from $60,000 to $149,078 through 2026, net of discount.
  924,792 
  951,711 
 
  1,670,970 
  1,786,114 
Less current portion
  (669,407)
  (546,988)
Long-term portion
 $1,001,563 
 $1,239,126 
 
 
 
10
 
 
United States Antimony Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited), Continued:
 
9. 
Debt, Continued:
 
At September 30, 2018, principal payments on debt are due as follows:
 
12 Months Ending September 30,
 
 
 
 
 
 
 
 
Principal Payment
 
 
Discount
 
 
Net
 
2019
  744,149 
  (74,742)
  669,407 
2020
  284,331 
  (58,282)
  226,049 
2021
  182,197 
  (45,336)
  136,861 
2022
  157,692 
  (37,610)
  120,082 
2023
  153,087 
  (30,922)
  122,165 
Thereafter
  444,910 
  (48,504)
  396,406 
 
 $1,966,366 
 $(295,396)
 $1,670,970 
 
10. 
Related Party Transactions
 
During the three and nine months ended September 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 nine months ended September 30, 2018 and 2017, the Company paid $1,764 and $6,686, and $2,175 and $8,989, respectively, to John Lawrence, our President and Chief Executive Officer, as reimbursement for equipment used by the Company. Mr. Lawrence advanced the Company $125,000 for ongoing operating expenses during the nine months ended September 30, 2018, which has been repaid as of September 30, 2018.
 
11. 
Income Taxes
 
During the three and nine months ended September 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 September 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.
 
Management reviewed the assessment notice from SAT and believes numerous findings have no merit. The Company engaged accountants and tax attorneys in Mexico to defend its position. An appeal was filed.
 
As of December 31, 2017, the Company had accrued a potential tax liability of $443,110 associated with this assessment. In the third quarter of 2018, we settled a tax assessment from the Mexican government completely in our favor. The accrual of $443,110 recorded as potential tax liability was reversed and recognized as a gain during the quarter ended September 30, 2018. The Company paid Mexican tax representatives $157,500 that were recognized as professional fees expense, to negotiate this settlement during the quarter ended September 30, 2018.
 
 
11
 
 
United States Antimony Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited), Continued:
 
11. 
Income Taxes, Continued:
 
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.
 
12. 
Stockholder’s Equity
 
Issuance of Common Stock for Payable to Board of Directors
 
During the nine month period 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 during the three and nine months ended September 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 nine months ended September 30, 2018, the Company accrued $43,750 and $131,250, respectively, in directors’ fees payable that will be paid in common stock.
 
13. 
Plant Acquisition
 
On August 31, 2018, the Company closed a Member Interest and Capital Share Agreement (the “Agreement”) with Great Lakes Chemical Corporation and Lanxess Holding Company US Inc., as the sellers, and the Company as the buyer. Under the Agreement, the Company acquired a subsidiary of the sellers which includes an antimony plant, equipment and land located in Reynosa, Mexico.   The Company 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.  In addition, the Company was paid $1,500,000 by the sellers, which was recognized as operating income in the quarter ended September 30, 2018, to assist in the salvage and transport costs of the useable equipment. The transaction was accounted for as an asset acquisition as there was no business associated with the acquired assets. We expect that we will be able to complete the closure and salvage for less than that amount and use any remaining proceeds and salvaged equipment to enhance and improve our Mexican antimony operations.
 
14. 
Business Segments
 
The Company is currently organized and managed by four segments, which represent our operating units: United States antimony operations, Mexican antimony operations, precious metals recovery and United States zeolite operations.
 
The Madero smelter and Puerto Blanco mill at the Company’s Mexico operation brings antimony up to an intermediate stage, which may be sold directly or shipped to the United States operation for finishing at the Thompson Falls, Montana plant. The precious metals recovery plant is operated in conjunction with the antimony processing plant at Thompson Falls, Montana. The zeolite operation produces zeolite near Preston, Idaho. Almost all of the sales of products from the United States antimony and zeolite operations are to customers in the United States.
 
 
12
 
 
United States Antimony Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited), Continued:
 
14.            
Business Segments, Continued:
 
Segment disclosure regarding sales to major customers is located in Note 4.
 
Properties, plants
 
 
 
 
 
 
  and equipment, net:
 
September 30, 2018
 
 
December 31, 2017
 
Antimony
 
 
 
 
 
 
United States
 $1,648,447 
 $1,687,997 
Mexico
  11,341,144 
  11,452,507 
Subtotal Antimony
  12,989,591 
  13,140,504 
Precious metals
  632,730 
  642,774 
Zeolite
  1,244,137 
  1,349,619 
   Total
 $14,866,458 
 $15,132,897 
 
Total Assets:
 
September 30, 2018
 
 
December 31, 2017
 
Antimony
 
 
 
 
 
 
United States
 $2,779,883 
 $2,510,323 
Mexico
  12,135,234 
  12,073,219 
Subtotal Antimony
  14,915,117 
  14,583,542 
Precious metals
  632,730 
  642,774 
Zeolite
  1,903,527 
  1,904,938 
   Total
 $17,451,374 
 $17,131,254 
 
 
 
 
For the Three Months Ended
 
 
For the Nine Months Ended
 
 
 
September 30, 2018
 
 
September 30, 2017
 
 
September 30, 2018
 
 
September 30, 2017
 
Capital expenditures:
 
 
 
 
 
 
 
 
 
 
 
 
Antimony
 
 
 
 
 
 
 
 
 
 
 
 
United States
 $- 
 $22,241 
 $- 
 $22,241 
Mexico
  223,390 
  45,326 
  334,367 
  121,042 
Subtotal Antimony
  223,390 
  67,567 
  334,367 
  143,283 
Precious Metals
  - 
  24,798 
  40,988 
  84,379 
Zeolite
  13,793 
  35,856 
  36,216 
  51,803 
   Total
 $237,183 
 $128,221 
 $411,571 
 $279,465 
 
 
 
13
 
 
United States Antimony Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited), Continued:
 
14.            
Business Segments, Continued:
 
Segment Operations for the three
 
Antimony
 
 
Antimony
 
 
Total
 
 
Precious
 
 
 
 
 
 
 
months ended September 30, 2018
 
USA
 
 
Mexico
 
 
Antimony
 
 
Metals
 
 
Zeolite
 
 
Totals
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total revenues
 $1,366,540 
 $- 
 $1,366,540 
 $71,820 
 $653,365 
 $2,091,725 
 
    
    
    
    
    
    
Depreciation and amortization
 $13,170 
 $148,363 
 $161,533 
 $17,011 
 $46,807 
 $225,351 
 
    
    
    
    
    
    
Income (loss) from operations
  1,259,735 
  (537,067)
  722,668 
  54,809 
  88,263 
  865,740 
 
    
    
    
    
    
    
Other income (expense):
  (3,715)
  409,238 
  405,523 
  - 
  (3,816)
  401,707 
 
    
    
    
    
    
    
NET INCOME (LOSS)
 $1,256,020 
 $(127,829)
 $1,128,191 
 $54,809 
 $84,447 
 $1,267,447 
 
 
Segment Operations for the three
 
Antimony
 
 
Antimony
 
 
Total
 
 
Precious
 
 
 
 
 
 
 
months ended September 30, 2017
 
USA
 
 
Mexico
 
 
Antimony
 
 
Metals
 
 
Zeolite
 
 
Totals
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total revenues
 $1,796,775 
 $- 
 $1,796,775 
 $78,245 
 $494,694 
 $2,369,714 
 
    
    
    
    
    
    
Depreciation and amortization
  14,200 
  127,675 
 $141,875 
  15,100 
  50,200 
  207,175 
 
    
    
    
    
    
    
Income (loss) from operations
  435,497 
  (861,683)
  (426,186)
  63,145 
  135,879 
  (227,162)
 
    
    
    
    
    
    
Other income (expense):
  (11,611)
  (20,772)
  (32,383)
  - 
  (3,020)
  (35,403)
 
    
    
    
    
    
    
NET INCOME (LOSS)
 $423,886 
 $(882,455)
 $(458,569)
 $63,145 
 $132,859 
 $(262,565)
 
 
14
 
 
United States Antimony Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited), Continued:
 
14.            
Business Segments, Continued:
 
Segment Operations for the nine
 
Antimony
 
 
Antimony
 
 
Total
 
 
Precious
 
 
 
 
 
 
 
months ended September 30, 2018
 
USA
 
 
Mexico
 
 
Antimony
 
 
Metals
 
 
Zeolite
 
 
Totals
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total revenues
 $4,540,873 
 $- 
 $4,540,873 
 $213,523 
 $2,026,605 
 $6,781,001 
 
    
    
    
    
    
    
Depreciation and amortization
 $39,550 
 $445,729 
 $485,279 
 $51,032 
 $141,699 
 $678,010 
 
    
    
    
    
    
    
Income (loss) from operations
  1,849,669 
  (2,088,424)
  (238,755)
  162,491 
  382,182 
  305,918 
 
    
    
    
    
    
    
Other income (expense):
  (6,431)
  379,750 
  373,319 
  - 
  (9,015)
  364,304 
 
    
    
    
    
    
    
NET INCOME (LOSS)
 $1,843,238 
 $(1,708,674)
 $134,564 
 $162,491 
 $373,167 
 $670,222 
 
 
Segment Operations for the nine
 
Antimony
 
 
Antimony
 
 
Total
 
 
Precious
 
 
 
 
 
 
 
months ended September 30, 2017
 
USA
 
 
Mexico
 
 
Antimony
 
 
Metals
 
 
Zeolite
 
 
Totals
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total revenues
 $5,842,801 
 $17,782 
 $5,860,583 
 $243,822 
 $1,723,120 
 $7,827,525 
 
    
    
    
    
    
    
Depreciation and amortization
  42,900 
  397,325 
 $440,225 
  47,000 
  150,000 
 $637,225 
 
    
    
    
    
    
    
Income (loss) from operations
  1,618,156 
  (2,680,293)
  (1,062,137)
  196,821 
  358,110 
  (507,206)
 
    
    
    
    
    
    
Other income (expense):
  (34,654)
  (119,341)
  (153,995)
  - 
  (9,622)
  (163,617)
 
    
    
    
    
    
    
NET INCOME (LOSS)
 $1,583,502 
 $(2,799,634)
 $(1,216,132)
 $196,821 
 $348,488 
 $(670,823)
 
15.            
Subsequent Events
 
Subsequent to September 30, 2018, on November 7, 2018, the Company agreed to sell real property in acquired in the Reynosa transaction for $700,000.  The agreement calls for a down payment of $150,000 which we received on November 8, 2018, payment of $150,000 on December 8, 2018, and two more payments of $200,000 each on January 8 and February 8, 2019.
 
 
15
 
 
 
16
 
 
ITEM 2.   
Management’s Discussion and Analysis of Results of Operations and Financial Condition
 
General
 
Certain matters discussed are forward-looking statements that involve risks and uncertainties, including the impact of antimony prices and production volatility, changing market conditions and the regulatory environment and other risks. Actual results may differ materially from those projected. These forward-looking statements represent our judgment as of the date of this filing. We disclaim, however, any intent or obligation to update these forward-looking statements.
 
Antimony - Combined USA
 
Three Months Ended
 
 
Three Months Ended
 
 
Nine Months Ended
 
 
Nine Months Ended
 
   and Mexico
 
September 30, 2018
 
 
September 30, 2017
 
 
September 30, 2018
 
 
September 30, 2017
 
Lbs of Antimony Metal USA
  229,865 
  298,472 
  690,838 
  1,102,290 
Lbs of Antimony Metal Mexico:
  105,748 
  123,919 
  405,329 
  372,307 
   Total Lbs of Antimony Metal Sold
  335,613 
  422,391 
  1,096,167 
  1,474,597 
Average Sales Price/Lb Metal
 $4.07 
 $4.25 
 $4.14 
 $3.97 
Net income (loss)/Lb Metal
 $3.36 
 $(1.09)
 $0.12 
 $(0.82)
 
    
    
    
    
Gross antimony revenue
 $1,366,540 
 $1,796,775 
 $4,540,873 
 $5,860,583 
 
    
    
    
    
Cost of sales - domestic
  (735,284)
  (968,875)
  (2,759,947)
  (2,766,229)
Cost of sales - Mexico
  (973,149)
  (833,876)
  (2,484,242)
  (2,620,336)
Operating income (expenses)
  1,064,561 
  (420,210)
  464,561 
  (1,536,155)
Non-operating income (expenses)
  405,523 
  (32,383)
  373,319 
  (153,995)
 
  (238,349)
  (2,255,344)
  (4,406,310)
  (7,076,715)
 
    
    
    
    
Net income (loss) - antimony
  1,128,191 
  (458,569)
  134,564 
  (1,216,132)
Depreciation,& amortization
  161,533 
  141,875 
  485,279 
  440,225 
   EBITDA - antimony
 $1,289,724 
 $(316,694)
 $619,843 
 $(775,907)
 
    
    
    
    
Precious Metals
    
    
    
    
Ounces sold
    
    
    
    
  Gold
  24 
  37 
  54 
  169 
  Silver
  5,415 
  4,555 
  15,256 
  22,108 
 
    
    
    
    
Gross precious metals revenue
 $71,820 
 $78,245 
 $213,523 
 $243,822 
Cost of sales
  (17,011)
  (15,100)
  (51,032)
  (47,001)
Net income - precious metals
  54,809 
  63,145 
  162,491 
  196,821 
Depreciation
  17,011 
  15,100 
  51,032 
  47,000 
   EBITDA - precious metals
 $71,820 
 $78,245 
 $213,523 
 $243,821 
 
    
    
    
    
Zeolite
    
    
    
    
Tons sold
  3,556 
  2,671 
  10,887 
  9,446 
Average Sales Price/Ton
 $183.74 
 $185.21 
 $186.15 
 $182.42 
Net income (loss)/Ton
 $23.75 
 $49.74 
 $34.28 
 $36.89 
 
    
    
    
    
Gross zeolite revenue
 $653,365 
 $494,694 
 $2,026,605 
 $1,723,120 
Cost of sales
  (543,410)
  (297,815)
  (1,576,649)
  (1,167,108)
Operating income (expenses)
  (21,692)
  (61,000)
  (67,774)
  (197,902)
Non-operating income (expenses)
  (3,816)
  (3,020)
  (9,015)
  (9,622)
Net income - zeolite
  84,447 
  132,859 
  373,167 
  348,488 
Depreciation
  46,807 
  50,200 
  141,699 
  150,000 
   EBITDA - zeolite
 $131,254 
 $183,059 
 $514,866 
 $498,488 
 
    
    
    
    
Company-wide
    
    
    
    
Gross revenue
 $2,091,725 
 $2,369,714 
 $6,781,001 
 $7,827,525 
Cost of sales
  (2,268,854)
  (2,115,666)
  (6,871,870)
  (6,600,674)
Operating expenses
  1,042,869 
  (481,210)
  396,787 
  (1,734,057)
Non-operating expenses
  401,707 
  (35,403)
  364,304 
  (163,617)
Net income (loss)
  1,267,447 
  (262,565)
  670,222 
  (670,823)
Depreciation,& amortization
  225,351 
  207,175 
  678,010 
  637,225 
   EBITDA
 $1,492,798 
 $(55,390)
 $1,348,232 
 $(33,598)
 
 
17
 
 
PART I - FINANCIAL INFORMATION, CONTINUED:
 
ITEM 2.  
Management’s Discussion and Analysis of Results of Operations and Financial Condition, continued:
 
Company-Wide
 
For the third quarter of 2018, we recorded net income of $1,267,447. Net income includes income of $443,110 associated with the settlement of our Mexican tax assessment and receipt of $1,500,000 for decommissioning an antimony plant in Reynosa, Mexico. We recognized revenue of $2,091,725 for the third quarter of 2018. We reported a net loss of $262,565 in the third quarter of 2017 on sales of $2,369,714. We incurred an operating income in the third quarter of 2018 which was primarily due to the $1,500,000 gain on the Reynosa plant acquisition offset by a decrease in the raw materials received from our North American supplier. The loss in the third quarter of 2017 was primarily due to the loss of raw material from Hillgrove Mines of Australia. During the first nine 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 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 nine months ended September 30, 2018, EBITDA was $1,492,798 and $1,348,232, compared to $(55,390) and $(33,598) for the same periods of 2017.
 
Net non-cash expense items totaled $302,973  for the three months ended September 30, 2018 and included $225,351 for depreciation and amortization, $21,120 for amortization of debt discount, $43,750 for director compensation and $12,752 for other items. Net non-cash expense items totaled $572,065 for the nine months ended September 30, 2018 and included $678,010 for depreciation and amortization, $63,360 of debt discount, $131,250 for director compensation.
 
Net non-cash expense items totaled $282,985 for the three months ended September 30, 2017 and included $207,175 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 $901,223 for the nine months ended September 30, 2017 and included $637,225 for depreciation and amortization, $70,242 of debt discount, $131,250 for director compensation and $55,307 for other items.
 
For the three and nine months ended September 30, 2018, general and administrative expenses were $151,825 and $489,067, respectively, compared to $130,698 and $480,482 for the same periods in 2017.
 
Antimony
 
For the three and nine months ended September 30, 2018, we sold 335,613 and 1,096,167 pounds of antimony compared to 422,391 and 1,474,597 pounds for the three and nine months ended September 30, 2017. The raw material received from our North American supplier decreased by approximately 444,000 pounds for the nine months ended September 30, 2018. We had a decrease in raw material of approximately 18,000 pounds from Mexico for the third quarter of 2018, but we did see an increase of approximately 30,000 pounds for the nine months ended September 30, 2018.
 
The average sales price of antimony during the three and nine months ended September 30, 2018 was $4.07 and $4.14 per pound compared to $4.25 and $3.97 during the same periods in 2017.
 
 
18
 
 
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 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.
 
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.
 
The Guadalupe mine has started production, and will be shipping DSO to our Madero smelter by the end of 2018.
 
The Soyatal mine will be started once we receive an explosives permit.
 
Precious Metals
 
The caustic leach of flotation concentrates from Los Juarez was successful, and the pilot production of the Los Juarez gold, silver, and antimony will commence with the completion of the cyanide leach plant at Puerto Blanco. The cyanide leach plant at Puerto Blanco is on schedule to start testing in quarter four of 2018. Tests will include three technical discoveries that we expect to increase recovery and expedite processing.
 
For the three and nine months ended September 30, 2018, EBITDA for precious metals was $71,820 and $213,523, compared to $78,245 and $243,821 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
 
 
Nine Months 2018
 
Montana
 
 
 
 
 
 
 
 
 
 
 
 
Ounces Gold Shipped (Au)
  89.12 
  108.10 
  107.00 
  53.69 
Ounces Silver Shipped (Ag)
  30,421 
  38,123 
  32,021 
  15,256 
Revenues
 $491,426 
 $556,650 
 $480,985 
 $213,523 
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 
 $213,523 
 
 
19
 
 
Bear River Zeolite (BRZ)
 
For the three and nine months ended September 30, 2018, BRZ sold 3,556 and 10,887 tons of zeolite compared to 2,671 and 9,446 tons in the same periods of 2017, up 885 tons or 33.2% for the three months and 1,441 tons or 15.3% for the nine months.
 
BRZ realized net income of $84,447 after depreciation of $46,807 in the third quarter of 2018, compared to $132,859 after depreciation of $50,200 in the third quarter of 2017. For the nine months ended September 30, 2018, BRZ realized net income of $373,167 after depreciation of $141,699 compared to a net income of $348,488 after depreciation of $150,000.
 
BRZ realized an EBITDA for the three and nine months ended September 30, 2018 of $131,254 and $514,866, compared to $183,059 and $498,488 for the same periods in 2017.
 
We are anticipating continued growth in all areas of zeolite sales.
 
Financial Position
 
Financial Condition and Liquidity
 
September 30,
 
 
December 31,
 
 
 
2018
 
 
2017
 
Current assets
 $2,063,348 
 $1,562,270 
Current liabilities
  (3,686,351)
  (3,934,726)
   Net Working Capital
 $(1,623,003)
 $(2,372,456)
 
 
 
Nine Months Ended
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