UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2021
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File No. 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
(Address of principal executive offices)
Registrant’s telephone number: (406 )827-3523
Securities registered pursuant to Section 12(g) of the Act:
Title of Each Class
Trading Symbol(s)
Name of Each Exchange on Which Registered
Common Stock, $0.01 par value
UAMY
NYSE American
Check 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, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
Large Accelerated Filer
Accelerated Filer
Non-Accelerated Filer
Small Reporting Company
Emerging Growth Company
Indicated by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):Yes ☐ No ☒
APPLICABLE ONLY TO CORPORATE ISSUERS:
At November 15, 2021, the registrant had outstanding 106,117,844 shares of par value $0.01 common stock.
QUARTERLY REPORT ON FORM 10-Q
FOR THE PERIOD
ENDED SEPTEMBER 30, 2021
TABLE OF CONTENTS
Page
PART I – FINANCIAL INFORMATION
Item 1: Financial Statements (unaudited)
1-18
Item 2: Management’s Discussion and Analysis of Results of Operations and Financial Condition
19-23
Item 3: Quantitative and Qualitative Disclosure about Market Risk
24
Item 4: Controls and Procedures
PART II – OTHER INFORMATION
Item 1: Legal Proceedings
26
Item 2: Unregistered Sales of Equity Securities and Use of Proceeds
Item 3: Defaults upon Senior Securities
Item 4: Mine Safety Disclosures
Item 5: Other Information
Item 6: Exhibits and Reports on Form 8-K
SIGNATURE
27
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
Condensed Consolidated Balance Sheets (Unaudited)
September 30, 2021 and December 31, 2020
ASSETS
September 30,
2021
December 31,
2020
Current assets:
Cash and cash equivalents
Certificates of deposit
Accounts receivable
Inventories (Note 5)
Total current assets
Properties, plants and equipment, net (Note 13)
Restricted cash for reclamation bonds
IVA receivable and other assets
Total assets
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Checks issued and payable
Accounts payable
Accrued liabilities (Note 6)
Payables to related party (Note 9)
Notes payable to bank (Note 7)
Export tax assessment payable (Note 11)
Hillgrove advances payable (Note 12)
Long-term debt, current portion (Note 8)
Total current liabilities
Long-term debt, net of current portion (Note 8)
CARES Act note payable (Note 14)
Stock payable to directors for services (Note 10)
Asset retirement obligations and accrued reclamation costs
Total liabilities
Commitments and contingencies (Note 6 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 $945,000 and $937,500 respectively)
Series C: 177,904 shares issued and outstanding (liquidation preference $97,847 both years)
Series D: 1,751,005 shares issued and outstanding (liquidation preference $5,084,770 and $5,043,622 respectively)
Common stock, $0.01 par value, 150,000,000 shares authorized; 106,117,844 and 75,949,757 shares issued and outstanding, respectively
Additional paid-in capital
Accumulated deficit
Total stockholders' equity
Total liabilities and stockholders' equity
The accompanying notes are an integral part of the condensed consolidated financial statements.
Condensed Consolidated Statements of Operations - Unaudited
For the three months ended
For the nine months ended
REVENUES
COST OF REVENUES
GROSS PROFIT (LOSS)
OPERATING EXPENSES:
General and administrative
Salaries and benefits
Site care and maintenance expenses
Professional fees
Loss on abandonment of mineral properties
TOTAL OPERATING EXPENSES
LOSS FROM OPERATIONS
OTHER INCOME (EXPENSE):
Interest income
Interest expense
Gain on forgiveness of CARES Act debt (Note 14)
Grant income
Gain on settlement of Hillgrove advance (Note 12)
TOTAL OTHER INCOME (EXPENSE)
NET LOSS
Preferred dividends
Net loss available to common stockholders
Net loss per share of
common stock:
Basic and diluted
Nil
Weighted average shares outstanding:
Condensed Consolidated Statement of Changes in Stockholders' Equity
For the periods ended September 30, 2021 and September 30, 2020
(Unaudited)
Total Preferred Stock
Common Stock
Total
Paid
Accumulated
Stockholders'
Three months ended September 30,2021
Shares
Amount
In Capital
Deficit
Equity
Balances, July 1, 2021
Issuance of common stock to Directors (Note 10)
Net loss
Balances, September 30, 2021
Additional
Three months ended September 30,2020
Balances, July 1, 2020
Issuance of common stock and warrants for cash
Common stock issuance costs
Balances, September 30, 2020
Nine months ended September 30,2021
Balances, January 1, 2021
Issuance of common stock for cash (Note 10)
Common stock issuance costs (Note 10)
Common stock issued upon exercise of warrants (Note 10)
Nine months ended September 30,2020
Balances, January 1, 2020
Issuance of common stock upon exercise of warrants
Issuance of common stock to Directors
Condensed Consolidated Statements of Cash Flows - Unaudited
Cash Flows From Operating Activities:
Adjustments to reconcile net loss to net cash provided (used) by operating activities:
Depreciation and amortization
Accretion of asset retirement obligation
Common stock payable for directors fees
Gain on settlement of Hillgrove advance
Gain on forgiveness of Cares Act debt
Other non-cash items
Change in:
Inventories
Accrued liabilities
Export tax assessment payable
Payables to related parties
Net cash used by operating activities
Cash Flows From Investing Activities:
Proceeds from redemption of certificates of deposit
Purchase of properties, plants and equipment
Net cash used by investing activities
Cash Flows From Financing Activities:
Change in checks issued and payable
Net proceeds from (payments to) factor
Payments on advances from related party
Proceeds from note payable-SBA
Proceeds from issuance of common stock, net of issuance costs
Proceeds from exercise of warrants
Payments on Hillgrove advances payable
Borrowing on notes payable to bank
Principal paid on notes payable to bank
Principal payments of long-term debt
Net cash provided by financing activities
NET INCREASE IN CASH AND CASH
EQUIVALENTS AND RESTRICTED CASH
Cash and cash equivalents and restricted cash at beginning of period
Cash and cash equivalents and restricted cash at end of period
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Common stock payable issued to directors (Note 10)
Payable to related party satisfied with issuance of stock (Note 10)
PART I - FINANCIAL INFORMATION, CONTINUED:
Notes to Condensed 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, 2021 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2021.
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, 2020.
Going Concern Consideration
At September 30, 2021, the Company’s condensed consolidated financial statements show working capital of approximately $21.2 million and an accumulated deficit of approximately $32.7 million. The Company has incurred losses for the past two fiscal years which are principally a result of the Company’s antimony operations due to both depressed antimony prices and production costs incurred in Mexico. To improve conditions, the Company continues searching for areas to reduce these production costs.
In the nine months of 2021, the Company raised net proceeds of approximately $23.3 million from sale of shares of its common stock and approximately $1.8 million from the exercise of stock purchase warrants. These funds have been and will continue to be used for general corporate purposes, working capital, hiring of additional labor, leverage for reducing legacy contracts, additional managerial staff at United States Antimony Corporation (“USAC”) and Bear River Zeolite (“BRZ”) headquarters, a revised website including measures aimed at increased visibility for advertising, more labor at its Mexican smelter, repair and improved infrastructure at the Mexican smelter, potential securement of additional antimony mine reserves in Mexico, and improvement of furnaces in Montana. With the funds raised, management believes the Company has sufficient funds to sustain its operations and meet its financial obligations during the twelve months following the date of issuance of these condensed consolidated financial statements.
2.
Developments in Accounting Pronouncements
Accounting Standards Updates Adopted
In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2019-12 Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The update contains a number of provisions intended to simplify the accounting for income taxes. The update was adopted as of January 1, 2021, and its adoption did not have a material impact on the Company’s condensed consolidated financial statements.
Developments in Accounting Pronouncements, Continued:
Accounting Standards Updates to Become Effective in Future Periods
In August 2020, the FASB issued ASU No.2019-12 Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. The update is to address issues identified as a result of the complexity associated with applying generally accepted accounting principles for certain financial instruments with characteristics of liabilities and equity. The update is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years and with early adoption permitted. Management is evaluating the impact of this update on the Company’s condensed consolidated financial statements.
Other accounting standards that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on the condensed consolidated financial statements upon adoption.
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 stock options, warrants to purchase the Company’s common stock, and convertible preferred stock.
At September 30, 2021 and 2020, 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:
Warrants
Convertible preferred stock
Total possible dilution
4.
Revenue Recognition
Products consist of the following:
·
Revenue Recognition, Continued:
Sales of products for the three and nine month periods ended September 30, 2021 and 2020 were as follows:
Three Months Ended
Nine Months Ended
Antimony
Zeolite
Precious metals
The following is sales information by geographic area based on the location of customers for the three and nine month periods ended September 30, 2021 and 2020:
United States
Canada
Sales of products to significant customers were as follows for the three and nine month periods ended September 30, 2021 and 2020:
For the Three Months Ended
For the Nine Months Ended
Sales to
Largest Customers
Company A
Company B
Company C
Company D
Company E
% of Total Revenues
At September 30, 2021, the Company had a sales order backlog of 1,192 tons of zeolite and 44,092 pounds of antimony.
Accounts receivable from largest customers were as follows at September 30, 2021 and December 31, 2020:
Largest
Accounts Receivable
Company F
Company G
Company H
Company I
Company J
% of Total Receivables
Our trade accounts receivable balance related to contracts with customers was $722,727 at September 30, 2021 and $238,634 at December 31, 2020. Our products do not involve any warranty agreements and product returns are not typical.
5.
Inventories at September 30, 2021 and December 31, 2020 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. Inventories at September 30, 2021 and December 31, 2020 are as follows:
Antimony Metal
Antimony Oxide
Antimony Ore
Total antimony
Antimony oxide inventory consisted of finished product oxide held at the Company’s plants in Montana and Mexico. Antimony concentrates and ore were held primarily at sites in Mexico and are essentially raw material. The Company’s zeolite inventory consists of salable zeolite material.
As of September 30, 2021 and December 31, 2020, all inventory is valued at cost except for antimony ore inventory in Mexico which was valued at net realizable value as of December 31, 2020.
6.
Commitments and Contingencies
The Company pays various royalties on the sale of zeolite products. On a combined basis, royalties vary from 8%-13%. During the three and nine month periods ended September 30, 2021, the Company had royalty expense of $64,212 and $195,779, respectively. During the three and nine month periods ended September 30, 2020, the Company had royalty expense of $52,569 and $178,187, respectively. At September 30, 2021 and December 31, 2020, the Company had accrued royalties payable of $376,704 and $434,981, respectively, which is included in accrued liablities. The Company is currently in negotiations with certain royalty holders to modify the terms of the agreements.
7.
Notes Payable to Bank
At September 30, 2021 and December 31, 2020, the Company had the following notes payable to bank:
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
Total notes payable to the bank
The notes are paid in full as of September 30, 2021 and the lien on the Certificate of Deposit has been released. An amount of $210,184 of the Certificate of Deposit was released during the nine months ended September 30, 2021 and the cash was transferred to the checking account, leaving a Certificate of Deposits balance of $44,028 at September 30, 2021 compared to $254,212 at December 31, 2020.
Notes to Condensed Consolidated Financial Statements (Unaudited), Continued:
8.
Debt
Long-Term debt at September 30, 2021 and December 31, 2020 is as follows:
Note payable to Zeo Inc., non interest bearing,
payable in 11 quarterly installments of $8,300 with a final payment of $8,700;
maturing December 2022; uncollateralized.
Note payable to Cat Financial Services, bearing interest at 6%;
payable in monthly installments of $778; maturing
December 2022; collateralized by equipment.
Note payable to Phyllis Rice, bearing interest
at 1%; payable in monthly installments of $2,000; originally maturing
March 2015; collateralized by equipment.
Less current portion
Long-term portion
9.
Related Party Transactions
The Company’s previous President and Chairman, John Lawrence, rented equipment to the Company and charged the Company for lodging and meals provided to consultants, customers and other parties by an entity that Mr. Lawrence owned. The amount due to Mr. Lawrence’s estate as of September 30, 2021 and December 31, 2020 was $nil and $171,017. During the nine months ended September 30, 2021, the Company paid off the full amount of $171,017 to John Lawrence’s estate for reimbursement of these expenses.
During 2019, Mr. Lawrence advanced funds to the Company that had a balance at December 31, 2020 of $56,215. During the nine month period ended September 30, 2021, the Company paid First Security Bank on behalf of Mr. Lawrence $56,215. The balance of the advances due to Mr. Lawrence at September 30, 2021 is $nil.
John C. Gustavsen, Interim CEO of the Company, has an advance due from the Company of $200 at December 31, 2020. During the nine month period ended September 30, 2021, the Company paid $200 to Mr. Gustavsen as reimbursement on these advances.
During the nine months ended September 30, 2021, Russ Lawrence, Interim President & Director, incurred expenses of $18,487 and charged the Company for lodging and meals provided to visiting Board of Directors by an entity that Russ Lawrence owns. During the nine month period ended September 30, 2021, the Company paid Russ Lawrence $17,740, leaving a balance due of $747 which is included in accounts payable on the balance sheet.
10.
Stockholder’s Equity
In February 2021, the Company sold shares of its common stock in two separate transactions: On February 3, 2021, 15,300,000 shares were sold at $0.70 for gross proceeds of $10,710,000; and on February 18, 2021, 10,990,000 shares were sold at at $1.30 for gross proceeds of $14,287,000. A total of $1,654,820 of cash issuance costs were incurred on these sales.
During the nine months ended September 30, 2021, the Company accrued $84,375 in directors’ fees payable that will be paid in common stock.
During the nine months ended September 30, 2021, the Company issued 112,610 shares of common stock to the board of director’s to satisfy the directors’ fees payable of $110,000 that were outstanding at December 31, 2020.
During the nine month period ended September 30, 2021, the Company issued 3,765,477 shares of common stock and received $1,790,703 in cash from the exercise of warrants. For the same period in 2020, the Company’s former president, John Lawrence, exercised warrants for 250,000 shares of common stock in exchange for a payable due to him of $62,500.
Concurrent with the February 3, 2021 sale of common stock, the Company sold warrants to purchase 7,650,000 shares of common stock at an exercise price of $0.85 per share. The warrants are initially exercisable six months following issuance and expire five and one-half years from the issuance date. In connection with the February 2021 sales of common stock, the Company also issued 1,606,500 warrants with an exercise price of $0.85 and 804,000 warrants with an exercise price of $0.46 as commission to the placement agent.
Transactions in common stock purchase warrants for the nine month period ended September 30, 2021 and the year ended December 31, 2020 are as follows:
Number of Warrants
Exercise Prices
Balance December 31, 2019
0.25 - $0.65
Issued
Exercised
Balance December 31, 2020
0.46 - $0.65
0.46- $0.85
Balance September 30, 2021
0.46 - $0.85
These warrants expire as follows:
Exercise Price
Expiration
Date
143,707
2022
2,285,715
2026
9,256,500
804,000
12,489,922
11.
Income and Other Taxes
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. SAT’s assessment was based on the disallowance of specific costs that the Company deducted on the 2013 USAMSA income tax return. The Company engaged accountants and tax attorneys in Mexico to defend its position. The assessment was settled in 2018 with no assessment against the Company.
In early 2019, the Company was notified that SAT re-opened its audit of USAMSA’s 2013 income tax return and, in November 2019, SAT assessed the Company $16.3 million pesos, which was approximately $818,000 USD as of September 30, 2021. Management reviewed the 2019 assessment notice from SAT and, similar to the earlier assessment, believes the findings have no merit. The Company engaged a tax attorney in Mexico to defend its position. An appeal was filed by the Company in November 2019 suspending SAT from taking immediate action regarding the assessment. The Company posted a guarantee of the amount in March 2020 as is required under the appeal process. In August 2020, the Company filed a lawsuit against SAT for resolution of the process and, in December 2020, filed closing arguments. Management expects the appeal process to continue through 2021.
At September 30, 2021 and December 31, 2020, management assessed the possible outcomes for this tax audit and believes, based on discussions with its tax attorney in Mexico, that the most likely outcome will be that the Company will be successful in its appeal resulting in no tax due. Management determined that no amount should be accrued at September 30, 2021 and December 31, 2020 relating to this potential tax liability. There can be no assurance that the Company’s ultimate liability, if any, will not have a material adverse effect on the Company’s results of operations or financial position. If an issue addressed during the SAT audit is resolved in a manner inconsistent with management expectations, the Company will adjust its current net operating loss carryforward, or accrue penalties, interest, and tax associated with the assessment.
Other Taxes
In 2016, USAMSA imported coal from the United States to its smelter in Mexico to process Australian concentrates associated with the Hillgrove agreement (Note 12). At that time, the Company applied for and was granted a Maquiladora (IMMEX), in accordance with a Manufacturing and Export Services Industry program offered by the Mexican government to attract and promote foreign investment in Mexico. With the IMMEX, all imported goods to Mexico that are also exported in altered form are exempt from the requirement of paying the 16% tax (IVA). The Company did not pay IVA on any of the imported coal used to process the Australian concentrates. In 2020, the Company was informed by the SAT that it owed the 16% IVA money for all the coal imported for the processing of the Australian concentrates. Additionally, there were penalties and fees that SAT added to the total amount. In late 2020, the Company filed a motion before the Taxpayer’s Defense Agency (PRODECON), but the motion was denied. To avoid exorbitant penalties, the Company elected to pay the assessed amount in early 2021. For the year ended December 31, 2020, the Company recognized an export tax expense of $1,120,730 and accrued a liability for this assessment. The assessment was settled with a payment of $1,120,730 during the three month period ended March 31, 2021.
12.
Hillgrove Advances Payable
On November 7, 2014, the Company entered into an advance and concentrate processing agreement with Hillgrove Mines Pty Ltd of Australia (Hillgrove) in which the Company was advanced funds from Hillgrove to build facilities to process Hillgrove antimony concentrate. The Company has not processed Hillgrove concentrate for more than two years. The agreement requires the Company to pay the advance balance after Hillgrove issues a stop notice. Payments would begin 90 days after the stop notice issue date and be made in six equal and quarterly installments. Hillgrove was acquired by Red River Resources LTD (“Red River”) during 2019. The balance of the advance liability due was $1,134,221 at December 31, 2020. In April 2021, the Company successfully negotiated a settlement with Red River for an agreed upon amount of $1,020,799 which was paid on paid on April 8, 2021. The Company recognized a gain on settlement of the advance in the amount of $113,422 during the three month period ended June 30, 2021.
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 Puerto Blanco mill and the Madero smelter at the Company’s Mexico operation bring antimony up to an intermediate or finished stage, which may be sold directly or shipped to the United States operation for finishing at the Thompson Falls, Montana plant. The Puerto Blanco mill in Mexico is the site of our crushing and flotation plant, and a cyanide leach plant which will recover precious metals after the ore goes through the crushing and flotation cycles. A precious metals recovery plant is operated in conjunction with the antimony processing plant at Thompson Falls, Montana, where a 99% precious metals mix will be produced. 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, although the Company does have a sales operation in Canada.
Segment disclosure regarding sales to major customers is located in Note 4.
Properties, plants
and equipment, net:
Mexico
Subtotal Antimony
At September 30, 2021 and December 31, 2020, the Company had $807,471 and $755,978, respectively, of assets that were not yet placed in service and have not yet been depreciated.\
Business Segments, Continued:
Capital expenditures:
Precious Metals
Segment Operations for the three
Precious
Bear River
months ended September 30, 2021
USAC
Metals
Totals
Total revenues
Income (loss) from operations
Other income (expense):
NET INCOME (LOSS)
months ended September 30, 2020
Segment Operations for the nine
14.
Note Payable-Small Business Administration Loan
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (the “CARES Act”) Act was signed into United States law.
On April 20, 2020, the Company received a loan of $443,400 pursuant to the Paycheck Protection Program (the “PPP”) under Division A, Title I of the CARES Act, which was enacted March 27, 2020. The loan, which was in the form of a Note dated April 20, 2020 had a maturity date on April 19, 2022 and an interest rate of 1% per annum. The loan was to be forgiven under the provisions of the CARES Act if the Company used the funds for qualifying expenses. Qualifying expenses included payroll costs, costs used to continue group health care benefits, rent, and utilities. During the three month period ended June 30, 2021, the Company received notification that the loan had been forgiven. The amount of the loan, $443,400, was recognized as gain on forgiveness of the CARES Act loan.
ITEM 2. Management’s Discussion and Analysis of Results of Operations and Financial Condition
COVID-19 Coronavirus Pandemic Response and Impact
One of the principal challenges facing the Company in 2021 as a result of stimulus funding from Covid-19 has been the evaporation of available labor. This issue has seriously impacted both operations in Montana and at its zeolite operation in Idaho. The following measures are being taken in an attempt to obtain and retain laborers:
The Company has raised the starting wage both in Montana and Idaho and as a result increased its labor costs for existing laborers.
The Company has advertised on multiple job search platforms and is also advertising in two languages on conventional job search platforms as well as on multiple social media sites.
The Company is increasing capacity at the Mexican smelter where labor is not a problem.
The Company is investigating hiring from alternative potential labor pools.
It is difficult to hire people if they are getting paid more not to work, which is the reality in many cases but is hopeful that the situation(s) fueling this crisis will end soon.
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.
ITEM 2. Management’s Discussion and Analysis of Results of Operations and Financial Condition, continued:
Three Months
Nine Months
Ended
Antimony - Combined USA and Mexico
Lbs of Antimony Metal USA
Lbs of Antimony Metal Mexico:
Total Lbs of Antimony Metal Sold
Average Sales Price/Lb Metal
Net loss/Lb Metal
Gross antimony revenue - net of discount
Cost of sales - domestic
Cost of sales - Mexico
Operating expenses
Non-operating income (expenses)
Net loss - antimony
Depreciation,& amortization
EBITDA - antimony
Ounces sold
Gold
Silver
Gross precious metals revenue
Cost of sales
Net income - precious metals
Depreciation
EBITDA - precious metals
Tons sold
Average Sales Price/Ton
Net income (Loss)/Ton
Gross zeolite revenue
Non-operating expenses
Net income (loss) - zeolite
EBITDA - zeolite
Company-wide
Gross revenue
Production costs
EBITDA
Certain amounts shown in this table may not add exactly to total amounts due to rounding differences
Company-Wide
For the third quarter of 2021, we recognized a net loss of $99,232 on sales of $2,051,713 and other income and expense of $12,730 after depreciation and amortization of $223,196. We reported a net loss of $993,240 in the third quarter of 2020 on sales of $1,007,231, after depreciation and amortization of $217,650.
For the first nine months of 2021, we recognized a net loss of $97,579 on sales of $5,580,562 and other income and expense of $588,299, after depreciation and amortization of $665,604. We reported a net loss of $1,576,405 for the first nine months of 2020 on sales of $4,335,413, after depreciation and amortization of $667,298.
For the three and nine months ended September 30, 2021, EBITDA was a positive $123,964 and $568,025 compared to a negative $775,590 and $909,107 for the same periods in 2020.
For the three and nine months ended September 30, 2021, general and administrative expenses were $112,744 and $572,905 compared to $110,051 and $429,973 for the same periods of 2020.
Antimony has been the focus of the Company since its inception. China, historically the sole supplier of lump antimony trisulfide and the dominate supplier of antimony in general, has held back the export of all antimony products leading to a marked increase in price in 2021.
The Madero crew continued to produce crude antimony oxide and some of this production was simultaneously diverted to crude metal. While the price is high the Company has decided to convert some of its crude oxide to finished metal. This move will eliminate shipping charges for the finished metal as the product will be shipped directly to the customer.
Two new furnaces in Thompson Falls are fully operational and started producing test batches of antimony trisulphide in early October. Throughput nameplate capacity of antimony trisulphide will increase from 100 lbs per day to approximately 1100 lbs per day. A second sample of antimony trisulfide lump has been prepared and sent for grinding and laboratory analysis. If the quality meets specifications, the second sample will be sent to the Picatinny Arsenal of the U. S. Department of Defense.
The Company continues to track developments at Ambri, Inc. which has purchased the Company’s antimony metal during the year and may be a significant customer in the future.
For the three and nine month periods ended September 30, 2021, we sold 306,045 pounds and 827,131 pounds of antimony compared to 146,842 and 675,993 pounds for the three and nine month periods ended September 30, 2020. The raw material received from our North American supplier increased by approximately 64,077 and 238,195 pounds for the three and nine month periods ended September 30, 2021, compared to the same periods for 2020. We had an increase in raw material from Mexico of approximately 87,223 pounds for the three month period and a decrease of 86 pounds for the nine month period ended September 30, 2021, compared to the same periods for 2020.
The average sales price of antimony during the three and nine month periods ended September 30, 2021 was $4.20 and $4.08 per pound compared to $3.25 and $3.71 during the same periods in 2020.
Discussions have been initiated with Canadian and American gold and silver exploration companies, presently operating in Mexico, with a view towards a joint venture option agreement. A potential joint venture would ideally have existing personnel with experience in exploration for gold and silver in Mexico and would initially fund and manage the initial exploration programs as part of their earn-in requirement. Traditionally summer is a slow time for junior exploration companies and progress on negotiations has been slower than expected.
For the three and nine month periods ended September 30, 2021, revenue for precious metals from North American sources was $73,736 and $280,164 compared to $48,832 and $173,029 for the same periods of 2020.
Current and prior periods’ revenue from precious metals is as follows:
Precious Metal Sales Silver/Gold
Ounces Gold Shipped (Au)
Ounces Silver Shipped (Ag)
Total Revenues
Bear River Zeolite (BRZ)
On August 12, 2021 the bearings went out on the primary jaw crusher, essentially shutting down production. The Company was able to source and purchase a refurbished jaw crusher, which shortened the down time that would have been required for repairs and dovetailed with the continuing program to upgrade the efficiency and reliability of the zeolite plant. Installation of the new jaw crusher was completed and online by September 3, 2021. Pit production test work utilizing a D-9 dozer to rip the in-situ zeolite instead of drilling and blasting continues. New uses and increased awareness of several of the recognized uses of zeolite are becoming known to the public. This is especially apparent in the advanced treatment requirements for mine discharge water and in the removal of naturally occurring radioactive isotopes in otherwise potable drinking water sources.
For the three and nine month periods ended September 30, 2021, BRZ sold 3,045 and 8,823 tons of zeolite compared to 2,500 and 8,354 tons in the same periods of 2020.
For the three and nine month periods ended September 30, 2021, BRZ realized a net loss of $12,867 and income of $194,364 after depreciation of $41,776 and $122,619 compared to a net income of $95,969 and $344,145 after depreciation of $42,015 and $140,395 for the same period of 2020.
BRZ realized an EBITDA for the three and nine month periods ended September 30, 2021 of $28,909 and $316,983 compared to $137,984 and $484,540 for the same periods in 2020.
Financial Position
Financial Condition and Liquidity
Current assets
Current liabilities
Net Working Capital
Cash used by operations
Cash provided (used) by investing:
Cash used for capital outlay
Cash provided (used) by financing:
Net payments (to) from factor
Payments on notes payable to bank
Proceeds from common stock issued, net
Principal paid on long-term debt
Net change in cash, cash equivalents and restricted cash
Our net working capital increased by $23,909,538 from December 31, 2020 to September 30, 2021. Our cash and cash equivalents increased by $20,898,398 during the same period. We spent $616,479 for capital items, our debt decreased by $1,901,479 including $1,020,799 paid to Hillgrove, and our accounts payable and other accrued liabilities decreased by $1,895,860 including $1,120,730 paid for an export tax assessment. During the first nine months of 2021, we raised approximately $23.3 million from sale of shares of common stock and approximately $1.8 million for the exercise of warrants.
We have estimated commitments and improvements of less than $100,000 to finish building and installing the precious metals leach circuits. However, this funding will be implemented after its geological study of the Los Juarez property. The Company plans to conduct a proper study of the Los Juarez property and its tailings at its flotation plant and pending the results of these studies decide how to proceed regarding a drill program and/or mining of the property. The study may involve a partnership with a junior mining Company in order to assist US Antimony in the proper characterization of the deposit. Should the deposit be of great value, the Company will likely move the flotation plant closer to the mine. 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.
At September 30, 2021, the Company’s condensed consolidated financial statements show working capital of approximately $21.2 million and an accumulated deficit of approximately $32.7 million. The Company continues to search for areas to reduce production costs, and expects improvement in cash flow for the remainder of the year from the sale of antimony and zeolite along with the increased price of antimony as the price of antimony has been increasing during the past nine months.
In the first half of 2021, the Company raised net proceeds of approximately $23.3 million from sale of shares of its common stock and approximately $1.8 million from the exercise of stock purchase warrants. These funds have been and will continue to be used for general corporate purposes, working capital, hiring of additional labor, leverage for reducing legacy contracts, a geochemical, geological, and geophysical study of the Los Juarez property, additional managerial staff at USAC and BRZ headquarters, a revised website including measures aimed at increased visibility for advertising, more labor at its Mexican smelter, repair and improved infrastructure at the Mexican smelter, potential securement of additional antimony mine reserves in Mexico, and improvement of furnaces in Montana. With the funds raised, management believes the Company has sufficient funds to sustain its operations and meet its financial obligations during the 12 months following the date of issuance of these condensed consolidated financial statements.
ITEM 3.
None
ITEM 4. Controls and Procedures
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, as appropriate, to allow timely decisions regarding required disclosure. Our Interim President & Director conducted an evaluation of the effectiveness of the Company’s disclosure controls and procedures (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)) as of September 30, 2021. It was determined that there were material weaknesses affecting our disclosure controls and procedures and, as a result of those weaknesses, our disclosure controls and procedures were not effective as of September 30, 2021. These material weaknesses are as follows:
We are aware of these material weaknesses and will develop procedures to ensure that independent review of material transactions is performed. The Interim President & Director will develop internal control measures to mitigate the lack of inadequate documentation of controls and the monitoring of internal controls over significant accounts and processes including controls associated with the period-ending reporting processes,
ITEM 4. Controls and Procedures, continued:
and to mitigate the segregation of duties within significant accounts and processes and the absence of controls over management oversight, including antifraud programs and controls.
We plan to consult with independent experts when complex transactions are entered into.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
There were no significant changes made to internal controls over financial reporting for the quarter ended September 30, 2021.
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Item 3. DEFAULTS UPON SENIOR SECURITIES
The registrant has no outstanding senior securities.
Item 4. MINE SAFETY DISCLOSURES
The information concerning mine safety violations or other regulatory matters required by Section 1503 (a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K is included in Exhibit 95 to this Annual Report.
Item 5. OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
Certifications
Certifications Pursuant to the Sarbanes-Oxley Act
Reports on Form 8-K
SIGNATURES
Pursuant to the requirements of Section 13 or 15(b) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant)
/s/ John C. Gustavsen
(Principal Executive)
/s/ Russell Lawrence
Date: November 15, 2021
Russell C. Lawrence, Interim President & Director