UNITED STATES ANTIMONY CORP
10-Ks and 10-Qs
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark
One)
☑
ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the
fiscal year ended December 31, 2016
☐ 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)
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Montana
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81-0305822
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(State
or other jurisdiction of incorporation or
organization)
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(I.R.S.
Employer Identification No.)
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P.O.
Box 643, Thompson Falls, Montana
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59873
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(Address
of principal executive offices)
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(Zip
Code)
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Registrant's
telephone number, including area code: (406) 827-3523
Securities
registered pursuant to Section 12(b) of the Act: None
Securities
registered pursuant to Section 12(g) of the Act: Common Stock, par
value $.01 per share
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
☐
Check
if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-K contained in this form and will not be
contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K.
☑
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” and “small
reporting company” in Rule 12b-2 of the Exchange
Act.
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Large Accelerated
Filer
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☐
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Accelerated
Filer
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☐
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Non-Accelerated
Filer
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☐
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Smaller reporting
company
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☑
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Indicate
by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act)
Yes ☐ No
☑
The
aggregate market value of the voting stock held by non-affiliates
of the registrant, based on the average bid price of such stock,
was $11,420,775 as of June 30, 2016.
At
March 31, 2017, the registrant had 67,488,153
outstanding shares of par value
$0.01 common stock.
UNITED STATES ANTIMONY CORPORATION
2016 ANNUAL REPORT
TABLE OF CONTENTS
PART I
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ITEM 1.
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DESCRIPTION OF BUSINESS
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4
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General
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4
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History
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4
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Overview-2016
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4
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Antimony
Division
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5
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Zeolite
Division
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7
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Environmental
Matters
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8
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Employees
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9
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Other
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9
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ITEM 1A.
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RISK FACTORS
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9
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ITEM 1B.
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UNRESOLVED STAFF COMMENTS
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10
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ITEM 2.
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DESCRIPTION OF PROPERTIES
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10
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Antimony
Division
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10
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Zeolite
Division
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16
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ITEM 3.
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LEGAL PROCEEDINGS
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19
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ITEM 4.
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MINE SAFETY DISCLOSURES
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20
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PART II
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ITEM 5.
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MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
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20
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ITEM 6.
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SELECTED FINANCIAL DATA
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20
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ITEM 7.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATIONS
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20
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2
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ITEM 7A.
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QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
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27
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ITEM 7B.
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CRITICAL ACCOUNTING ESTIMATES
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ITEM 8.
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FINANCIAL STATEMENTS
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27
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ITEM 9.
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CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
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27
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ITEM 9A.
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CONTROLS AND PROCEDURES
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27
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ITEM 9B.
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OTHER INFORMATION
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PART III
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ITEM 10.
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DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS AND
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
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29
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ITEM 11.
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EXECUTIVE COMPENSATION
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31
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ITEM 12.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
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32
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ITEM 13.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
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34
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ITEM 14.
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PRINCIPAL ACCOUNTANT FEES AND SERVICE
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35
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PART IV
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ITEM 15.
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EXHIBITS AND REPORTS ON FORM 8-K
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36
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SIGNATURES
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40
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CERTIFICATIONS
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FINANCIAL STATEMENTS
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F1 - F22
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3
General
General
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Explanatory Note
: As used in this
report, the terms "we," "us" and "our" are used to refer to United
States Antimony Corporation and, as the context requires, its
management.
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Some of
the information in this Form 10-K contains forward-looking
statements that involve substantial risks and uncertainties. You
can identify these statements by forward-looking words as "may,"
"will," "expect," "anticipate," "believe," "estimate" and
"continue," or similar words. You should read statements that
contain these words carefully because they:
●
discuss our future
expectations;
●
contain projections
of our future results of operations or of our financial condition;
and
●
state other
"forward-looking" information.
History
United
States Antimony Corporation, or USAC, was incorporated in Montana
in January 1970 to mine and produce antimony products. In December
1983, we suspended antimony mining operations but continued to
produce antimony products from domestic and foreign sources. In
April 1998, we formed United States Antimony SA de CV or USAMSA, to
mine and smelt antimony in Mexico. Bear River Zeolite Company or
BRZ, was incorporated in 2000, and it is mining and producing
zeolite in southeastern Idaho. On August 19, 2005, USAC formed
Antimonio de Mexico, S. A. de C. V. to explore and develop antimony
and silver deposits in Mexico. Our principal business is the
production and sale of antimony, silver, gold, and zeolite
products. On May 16, 2012, we started trading on the NYSE MKT under
the symbol UAMY.
Overview
Antimony Sales
The
year 2016 marked a turnaround for USAC in spite of the lowest
antimony prices in seven years. Although the volume of antimony
sold (metal contained) increased 18% to a record of 2,936,880
pounds in 2016 from 2,487,321 pounds in 2015, a decrease in the
average sales price of antimony (metal contained basis) of
approximately $0.99 per pound saw our gross sales of antimony
decrease by $1,119,763 (11%). The antimony division had a negative
EBIDTA of $459,100 for 2016. Without a positive adjustment of
$914,770, the EBIDTA for 2015 would have been a negative
$1,553,359. Our loss from antimony increased from a loss of
$1,349,934 in 2015 to a loss of $1,543,107 in 2016. Without the
adjustment of $914,770 in 2015, the 2015 loss would have been
$2,264,704. During 2016, the increase in sales of our antimony
products (approximately 450,000 pounds) from 2015 was due to an
increase in volume of raw material received from our Canadian
supplier and from concentrates received from Hillgrove Mines of
Australia. For our Mexican operations, we processed approximately
1,220,000 pounds of antimony from Hillgrove, and approximately
366,000 pounds from our Mexican properties. This resulted in
approximately 1,514,000 pounds of finished antimony product sold.
The raw material received from our Mexican properties increased
from approximately 198,000 pounds in 2015 to 366,000 pounds in 2016
because we processed inventoried material from our Mexican
properties.
Zeolite Sales
Our
sales volume of zeolite in 2016 was 2,758 tons less than we sold in
2015, a decrease of 17%. Our average sales price increased by
approximately $15 per ton, from $173.17 in 2015 per ton to $188.17
per ton in 2016 (9%). The increase in price was primarily because
sales for 2015 contained higher volume, lower priced products.
During 2016, total sales of zeolite decreased approximately
$280,000 from 2015, and the profit decreased from $511,403 in 2015
to $233,907 in 2016, approximately $277,000.
4
Precious Metals Sales
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Precious Metals
Sales Silver/Gold
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Montana
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2012
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2013
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2014
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2015
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2016
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Ounces Gold Shipped
(Au)
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102.32
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59.74
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64.77
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89.12
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108.10
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Ounces Silver
Shipped (Ag)
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20,237.70
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22,042.46
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29,480.22
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30,420.75
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38,123.46
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Revenues
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$
647,554
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$
347,016
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$
461,083
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$
491,426
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$
556,650
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Mexico
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Ounces Gold Shipped
(Au)
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1.780
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Ounces Silver
Shipped (Ag)
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1,053.240
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Revenues
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$
22,690
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Australian
- Hillgrove
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Ounces Gold Shipped
(Au)
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496.65
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Revenues -
Gross
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$
597,309
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Revenues to
Hillgrove
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(481,088
)
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Revenues to
USAC
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$
116,221
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Total
Revenues
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$
647,554
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$
369,706
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$
461,083
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$
491,426
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$
672,871
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Antimony Division
Our
antimony smelter and precious metals plant is located in the Burns
Mining District of Sanders County, Montana, approximately 15 miles
west of Thompson Falls, MT. We hold 2 patented mill sites where the
plant is located. We have no "proven reserves" or "probable
reserves" of antimony, as these terms are defined by the Securities
and Exchange Commission. Environmental restrictions preclude mining
at this site.
Mining
was suspended in December 1983, because antimony could be purchased
more economically from foreign sources.
For
2016, and since 1983, we relied on foreign sources for raw
materials, and there are risks of interruption in procurement from
these sources and/or volatile changes in world market prices for
these materials that are not controllable by us. We have developed
sources of antimony in Mexico but we are still depending on foreign
companies for raw material in the future. We expect more raw
materials from our own properties for 2017 and later years. We
continue working with suppliers in North America, Central America,
Europe, Australia, and South America.
We
currently own 100% of the common stock, equipment, and the leases
on real property of United States Antimony, Mexico S.A. de C.V. or
“USAMSA”, which was formed in April 1998. We currently
own 100% of the stock in Antimony de Mexico SA de CV (AM) which
owns the San Miguel concession of the Los Juarez property. USAMSA
has three divisions (1) the Madero smelter in Coahuila, (2) the
Puerto Blanco flotation mill and oxide circuit in Guanajuato that
is ramping up for 2017, and (3) mining properties that include the
Los Juarez mineral deposit with concessions in Queretaro, the
Wadley mining concession in San Luis Potosi, the Soyatal deposits
in Queretaro, and the Guadalupe properties in
Zacatecas.
In our
existing operations in Montana, we produce antimony oxide, sodium
antimonate, antimony metal, and precious metals. Antimony oxide is
a fine, white powder that is used primarily in conjunction with a
halogen to form a synergistic flame retardant system for plastics,
rubber, fiberglass, textile goods, paints, coatings and paper.
Antimony oxide is also used as a color fastener in paint, as a
catalyst for production of polyester resins for fibers and film, as
a catalyst for production of polyethylene pthalate in plastic
bottles, as a phosphorescent agent in fluorescent light bulbs, and
as an opacifier for porcelains. Sodium antimonate is primarily used
as a fining agent (degasser) for glass in cathode ray tubes and as
a flame retardant. We also sell antimony metal for use in bearings,
storage batteries and ordnance.
5
We
estimate (but have not independently confirmed) that our present
share of the domestic market and international market for antimony
oxide products is approximately 4% and less than 1%, respectively.
We are the only significant U.S. producer of antimony products,
while China supplies 92% of the world antimony demand. We believe
we are competitive both domestically and world-wide due to the
following:
●
We have a
reputation for quality products delivered on a timely
basis.
●
We have two of the
three operating antimony smelters in North and Central
America.
●
We are the sole
domestic producer of antimony products.
●
We can ship on
short notice to domestic customers.
●
We are vertically
integrated, with raw materials from our own mines, mills, and
smelter in Mexico, along with the raw materials from exclusive
supply agreements we have with numerous ore and raw material
suppliers.
●
As a vertically
integrated company, we will have more control over our raw material
costs.
Following
is a six year schedule of our antimony sales:
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Schedule of
Antimony Sales
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Year
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Lbs Metal
Contained
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$
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Average
Price/Lb
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2016
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2,936,880
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$
8,744,170
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$
2.98
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2015
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2,487,321
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$
9,863,933
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$
3.97
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2014
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1,727,804
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$
8,132,410
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$
4.71
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2013
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1,579,182
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$
8,375,158
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$
5.30
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2012
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1,403,210
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$
8,753,449
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$
6.24
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2011
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1,401,423
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$
10,406,636
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$
7.43
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Concentration of
Sales
:
During
the two years ended December 31, 2016, the following sales were
made to our three largest customers:
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For the Year Ended
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Sales to
Largest Customers
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December 31,
2016
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December 31,
2015
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Mexichem
Specialty Compounds Inc.
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$
2,108,998
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$
3,142,586
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East
Penn Manufacturing Inc
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1,147,854
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1,236,250
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Kohler
Corporation
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1,474,854
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1,736,914
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$
4,731,706
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$
6,115,750
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% of Total Revenues
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39.80
%
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46.70
%
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While
the loss of one of our three largest customers would be a problem
in the short term, we have numerous requests from potential buyers
that we cannot fill, and we could quickly, in the present market
conditions, be able to replace the lost sales. Loss of all three of
our largest customers would be more serious and may affect our
profitability.
Marketing:
We
employ full-time marketing personnel and have negotiated various
commission-based sales agreements with other chemical distribution
companies.
Antimony Price Fluctuations:
Our operating results have been,
and will continue to be, related to the market prices of antimony
metal, which have fluctuated widely in recent years. The volatility
of prices is illustrated by the following table, which sets forth
the average prices of antimony metal per pound, as reported by
sources deemed reliable by us.
6
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Lbs of Antimony Contained
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USAC
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USA
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Rotterdam
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Sales
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Average
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Average
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Average
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Year
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Price/Lb
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Price/Lb
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Price/Lb
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2016
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$
2.99
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$
2.94
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$
2.98
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2015
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$
3.41
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$
3.32
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$
3.97
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2014
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$
4.40
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$
4.31
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$
4.71
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2013
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$
4.73
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$
4.78
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$
5.30
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2012
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$
5.86
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$
5.71
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$
6.24
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2011
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$
6.97
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$
7.05
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$
7.43
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A six
year price range of our sales prices for antimony oxide and
antimony metal, per pound, was as follows:
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Oxide
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Metal
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Combined
|
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Average
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Average
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Average
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Year
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Price/Lb
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Price/Lb
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Price/Lb
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2016
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$
3.11
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$
2.62
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$
2.98
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2015
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$
3.34
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$
3.71
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$
3.96
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2014
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$
4.00
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$
4.18
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$
4.71
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2013
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$
4.41
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$
4.69
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$
5.30
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2012
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$
5.14
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$
5.58
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$
6.24
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2011
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$
6.16
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$
7.42
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$
7.43
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Antimony
metal prices are determined by a number of variables over which we
have no control. These include the availability and price of
imported metals, the quantity of new metal supply, and industrial
demand. If metal prices decline and remain depressed, our revenues
and profitability may be adversely affected.
We use
various antimony raw materials to produce our products. We
currently obtain antimony raw material from sources in North
America, Mexico, and Australia.
Zeolite Division
We own
100% of Bear River Zeolite Company, (BRZ), an Idaho corporation
that was incorporated on June 1, 2000. BRZ has a lease with Webster
Farm, L.L.C. that entitles BRZ to surface mine and process zeolite
on property located near Preston, Idaho, in exchange for a royalty
payment. In 2010 the royalty was adjusted to $10 per ton sold. The
current minimum annual royalty is $60,000. In addition, BRZ has
more zeolite on U.S. Bureau of Land Management land. A company
controlled by the estate of Al Dugan, a significant stockholder
and, as such, an affiliate of USAC, receives a payment equal to 3%
of net sales on zeolite products. William Raymond and Nancy Couse
are paid a royalty that varies from $1 to $5 per ton. On a combined
basis, royalties vary from 8%-13%. BRZ has constructed a processing
plant on the property and it has improved its productive capacity.
In addition to
a large
amount of fully depreciated equipment that has been transferred
from the USAC division,
we have spent approximately
$
3,846,000 to purchase and
construct the processing plant as of December 31,
2016.
We have
no "proven reserves" or "probable reserves" of zeolite, as these
terms are defined by the Securities and Exchange
Commission.
7
"Zeolite"
refers to a group of industrial minerals that consist of hydrated
aluminosilicates that hold cations such as calcium, sodium,
ammonium, various heavy metals, and potassium in their crystal
lattice. Water is loosely held in cavities in the lattice. BRZ
zeolite is regarded as one of the best zeolites in the world due to
its high CEC of approximately 180-220 meq/100 gr., its hardness and
high clinoptilolite content, its absence of clay minerals, and its
low sodium content. BRZ's zeolite deposits’ characteristics
which the mineral useful for a variety of purposes
including:
●
Soil Amendment and Fertilizer
.
Zeolite has been successfully used to fertilize golf courses,
sports fields, parks and common areas, and high value agricultural
crops
●
Water Filtration
. Zeolite is
used for particulate, heavy metal and ammonium removal in swimming
pools, municipal water systems, fisheries, fish farms, and
aquariums.
●
Sewage Treatment
. Zeolite is
used in sewage treatment plants to remove nitrogen and as a carrier
for microorganisms.
●
Nuclear Waste and Other Environmental
Cleanup
. Zeolite has shown a strong ability to selectively
remove strontium, cesium, radium, uranium, and various other
radioactive isotopes from solution. Zeolite can also be used for
the cleanup of soluble metals such as mercury, chromium, copper,
lead, zinc, arsenic, molybdenum, nickel, cobalt, antimony, calcium,
silver and uranium.
●
Odor Control
. A major cause of
odor around cattle, hog, and poultry feed lots is the generation of
the ammonium in urea and manure. The ability of zeolite to absorb
ammonium prevents the formation of ammonia gas, which disperses the
odor.
●
Gas Separation
. Zeolite has
been used for some time to separate gases, to re-oxygenate
downstream water from sewage plants, smelters, pulp and paper
plants, and fish ponds and tanks, and to remove carbon dioxide,
sulfur dioxide and hydrogen sulfide from methane generators as
organic waste, sanitary landfills, municipal sewage systems and
animal waste treatment facilities.
●
Animal Nutrition
. Feeding up to
2% zeolite increases growth rates, decreases conversion rates,
prevents scours, and increases longevity.
●
Miscellaneous Uses
. Other uses
include catalysts, petroleum refining, concrete, solar energy and
heat exchange, desiccants, pellet binding, horse and kitty litter,
floor cleaner and carriers for insecticides, pesticides and
herbicides.
Environmental Matters
Our
exploration, development and production programs conducted in the
United States are subject to local, state and federal regulations
regarding environmental protection. Some of our production and
mining activities are conducted on public lands. We believe that
our current discharge of waste materials from our processing
facilities is in material compliance with environmental regulations
and health and safety standards. The U.S. Forest Service
extensively regulates mining operations conducted in National
Forests. Department of Interior regulations cover mining operations
carried out on most other public lands. All operations by us
involving the exploration for or the production of minerals are
subject to existing laws and regulations relating to exploration
procedures, safety precautions, employee health and safety, air
quality standards, pollution of water sources, waste materials,
odor, noise, dust and other environmental protection requirements
adopted by federal, state and local governmental authorities. We
may be required to prepare and present data to these regulatory
authorities pertaining to the effect or impact that any proposed
exploration for, or production of, minerals may have upon the
environment. Any changes to our reclamation and remediation plans,
which may be required due to changes in state or federal
regulations, could have an adverse effect on our operations. The
range of reasonably possible loss in excess of the amounts accrued,
by site, cannot be reasonably estimated at this time.
We
accrue environmental liabilities when the occurrence of such
liabilities is probable and the costs are reasonably estimable. The
initial accruals for all our sites are based on comprehensive
remediation plans approved by the various regulatory agencies in
connection with permitting or bonding requirements. Our accruals
are further based on presently enacted regulatory requirements and
adjusted only when changes in requirements occur or when we revise
our estimate of costs to comply with existing requirements. As
remediation activity has physically commenced, we have been able to
refine and revise our estimates of costs required to fulfill future
environmental tasks based on contemporaneous cost information,
operating experience, and changes in regulatory requirements. In
instances where costs required to complete our remaining
environmental obligations are clearly determined to be in excess of
the existing accrual, we have adjusted the accrual accordingly.
When regulatory agencies require additional tasks to be performed
in connection with our environmental responsibilities, we evaluate
the costs required to perform those tasks and adjust our accrual
accordingly, as the information becomes available. In all cases,
however, our accrual at year-end is based on the best information
available at that time to develop estimates of environmental
liabilities.
8
Antimony Processing Site
We have
environmental remediation obligations at our antimony processing
site near Thompson Falls, Montana ("the Stibnite Hill Mine Site").
We are under the regulatory jurisdiction of the U.S. Forest Service
and subject to the operating permit requirements of the Montana
Department of Environmental Quality. At December 31, 2016 and 2015,
we have accrued $100,000 to fulfill our environmental
responsibilities.
BRZ
During
2001, we recorded a reclamation accrual for our BRZ subsidiary,
based on an analysis performed by us and reviewed and approved by
regulatory authorities for environmental bonding purposes. The
accrual of $7,500 represents the our estimated costs of reclaiming,
in accordance with regulatory requirements, the acreage disturbed
by our zeolite operations remains unchanged at December 31,
2016.
General
Reclamation
activities at the Thompson Falls Antimony Plant have proceeded
under supervision of the U.S. Forest Service and Montana Department
of Environmental Quality. We have complied with regulators'
requirements and do not expect the imposition of substantial
additional requirements.
We have
posted cash performance bonds with a bank and the U.S. Forest
Service in connection with our reclamation activities.
We
believe we have accrued adequate reserves to fulfill our
environmental remediation responsibilities as of December 31, 2016.
We have made significant reclamation and remediation progress on
all our properties over thirty years and have complied with
regulatory requirements in our environmental remediation
efforts.
Employees
As of December 31, 2016, we employed 27 full-time employees in
Montana. In addition, we employed 16 people at our zeolite plant in
Idaho, and more than 60 employees at our mining, milling and
smelting operation in Mexico. The number of full-time employees may
vary seasonally. None of our employees are covered by any
collective bargaining agreement.
Other
We hold
no material patents, licenses, franchises or concessions, however
we consider our antimony processing plants proprietary in
nature.
We are
subject to the requirements of the Federal Mining Safety and Health
Act of 1977, the Occupational Safety and Health Administration's
regulations, requirements of the state of Montana and the state of
Idaho, federal and state health and safety statutes and Sanders
County, Montana and Franklin County, Idaho health
ordinances.
There
may be events in the future that we are not able to accurately
predict or over which we have no control. The risk factors listed
below, as well as any cautionary language in this report, provide
examples of risks, uncertainties and events that may cause our
actual results to differ materially from the expectations we
describe in our forward-looking statements.
If we were liquidated, our common
stockholders could lose part, or all, of their
investment
.
In the
event of our dissolution, the proceeds, if any, realized from the
liquidation of our assets will be distributed to our stockholders
only after the satisfaction of the claims of our creditors and
preferred stockholders. The ability of a purchaser of shares to
recover all, or any portion, of the purchase price for the shares,
in that event, will depend on the amount of funds realized and the
claims to be satisfied by those funds.
We may have un-asserted liabilities for environmental
reclamation.
Our
research, development, manufacturing and production processes
involve the controlled use of hazardous materials, and we are
subject to various environmental and occupational safety laws and
regulations governing the use, manufacture, storage, handling, and
disposal of hazardous materials and some waste products. The risk
of accidental contamination or injury from hazardous materials
cannot be completely eliminated. In the event of an accident, we
could be held liable for any damages that result and any liability
could exceed our financial resources. We also have one ongoing
environmental reclamation and remediation projects at our current
production facility in Montana. Adequate financial resources may
not be available to ultimately finish the reclamation activities if
changes in environmental laws and regulations occur, and these
changes could adversely affect our cash flow and profitability. We
do not have environmental liability insurance now, and we do not
expect to be able to obtain insurance at a reasonable cost. If we
incur liability for environmental damages while we are uninsured,
it could have a harmful effect on our financial condition and
results of operations. The range of reasonably possible losses from
our exposure to environmental liabilities in excess of amounts
accrued to date cannot be reasonably estimated at this
time.
9
We have accruals for asset retirement obligations and environmental
obligations.
We have
accruals totaling $265,782 on our balance sheet at December 31,
2016, for our environmental reclamation responsibilities and
estimated asset retirement obligations. If we are not able to
adequately perform these activities on a timely basis, we could be
subject to fines and penalties from regulatory
agencies.
Not
Applicable
Antimony Division
Our
antimony smelter and precious metals plant is located in the Burns
Mining District, Sanders County, Montana, approximately 14 miles
west of Thompson Falls on Montana Highway 471. This highway is
asphalt, and the property is accessed by cars and trucks. The
property includes two five-acre patented mill sites that are owned
in fee-simple by us. The claims are U. S. Antimony Mill Site No. 1
(Mineral Survey 10953) and U. S. Antimony Mill Site No. 2 (Mineral
Survey 10953).
The U.
S. Antimony Mill Sites were used to run a flotation mill and
processing plant for antimony that we mined on adjacent claims that
have been sold. Presently, we run a smelter that includes furnaces
of a proprietary design to produce antimony metal, antimony oxide,
and various other products. We also run a precious metals plant.
The facility includes 6 buildings and our main office. There are no
plans to resume mining on the claims that have been sold or
abandoned, although the mineral rights have been retained on many
of the patented mining claims. The U. S. Forest Service and Montana
Department of Environmental Quality have told us that the
resumption of mining would require an Environmental Impact
Statement, massive cash bonding, and would be followed by years of
law suits. The mill site is serviced with three-phase electricity
from Northwest Power, and water is pumped from a well.
We
claim no reserves on any of these properties.
10
Antimony
mining and milling operations in the U.S. were curtailed during
1983 due to continued declines in the price of antimony. We are
currently purchasing foreign raw antimony materials and producing
our own raw materials from our properties in Mexico. We continue to
produce antimony metal, oxide, sodium antimonite, and precious
metals from our processing facility near Thompson Falls,
Montana.
MINERAL PROPERTIES
LOS JUAREZ GROUP
We hold
properties that are collectively called the “Los
Juarez” property, in Queretaro, as follows:
1.
San
Miguel I and II were purchased by a USAC subsidiary, Antimonio de
Mexico, S. A. de C. V (AM), for $1,480,500. As of December 31,
2016, we have paid for the property, and have incurred significant
permitting costs. The property consists of 40
hectares.
2.
San
Juan I and II are concessions owned by AM and include 466
hectares.
3.
San
Juan III is held by a lease agreement by AM in which we will pay a
10% royalty, based on the net smelter returns from another USAC
Mexican subsidiary, named United States Antimony Mexico, S. A. de
C. V. or USAMSA. It consists of 214 hectares.
The
concessions collectively constitute 720 hectares. The claims are
accessed by roads that lead to highways.
11
12
Part of
the USAC Mexican property, including San Miguel I, II and part of
San Juan III, was originally drilled by the Penoles Company in
1970, when antimony metal prices were high. They did not proceed
with the property, due to the complex metallurgy of antimony.
Subsequently, the Mexican Government did additional work and
reported a deposit of mineralized material of 1,000,000 metric tons
(mt) grading 1.8% antimony and 8.1 ounces of silver per metric ton
(opmt) in Consejo de Recursos Minerales (Publicacion
M-4e). Such a report does not qualify as a comprehensive
evaluation, such as a final or bankable feasibility study that
concludes legal and technical viability, and economic feasibility.
The Securities and Exchange Commission does not recognize this
report, and we claim no reserves.
The
mineralized zone is a classic jasperoid-type deposit in the
Cretaceous El Doctor Limestone. The mineralization is confined to
silicified jasperiod pipes intruded upwards into limestone. The
zone strikes north 70 degrees west. The dimension of the deposit is
still conjectural. However, the strike length of the jasperoid is
more than 3,500 meters.
The
mineralization is typically very fine-grained stibnite with silver
and gold. It is primarily sulfide in nature due to its
encapsulation in silica. The mining for many years will be by open
pit methods. Eventually it will be by underground methods. At the
present time, mining has included hauling dump rock and rock from
mine faces.
13
SOYATAL MINING DISTRICT, PINAL DE AMOLES, QUERETARO,
MEXICO
Soyatal
On
October 30, 2009, the Company entered into a supply agreement with
the owners of the Soyatal concessions similar to that of Guadalupe.
During the term of the supply agreement the Company funded certain
of Soyatal’s equipment purchases, tax payments, labor costs,
milling and trucking costs, and other expenses incurred in the
Soyatal mining operations for approximately $140,000. In addition
to the advances for mining costs, the Company purchased antimony
ore from Soyatal that failed to meet agreed upon antimony metal
recoveries and resulted in approximately $320,000 of excess
advances paid to Soyatal. On April 4, 2012, the Company negotiated
an option to purchase the Soyatal properties for $1,500,000, and
made a deposit on the option of $55,000.
On
August 5, 2013, the Company notified the owners of Soyatal that it
was exercising the option to purchase the Soyatal property. The
option exercise agreement allowed the Company to apply all amounts
previously due the Company (the “Purchase Price
Credits”) by Soyatal of $420,411 to the purchase price
consideration. At December 31, 2013, the Company had Purchase Price
Credits of approximately $325,000 which can be used as payments on
the obligation at the rate of $100,000 per year until gone. The
Company is obligated to make payments of $200,000 annually through
2020, and a final payment of $100,000 is due in 2021. The debt
payable for the Soyatal mine is non-interest bearing. In 2013, the
Company recorded the debt and the related Soyatal mine asset by
determining the net present value of the contractual stream of
payments due using a 6% discount rate. The resulting discount on
the Soyatal debt was approximately $212,000 at December 31, 2013,
and is netted against the debt payable resulting in a discounted
amount of $762,541 at December 31, 2013. The discount is being
amortized to interest expense using the effective interest method
over the life of the debt.
During
2016 and 2015, $39,048 and $88,250 of the discount was amortized to
the Soyatal debt, resulting in a discounted amount owed of $776,319
and a remaining debt discount of approximately $84,750 at December
31, 2016. The Company did not make the $100,000 payment due in
January of 2015. The Company has been making payments of $5,000 per
month that have been informally agreed to by the parties while the
future payment terms of the Soyatal debt are negotiated. These
payments have been recorded as reductions of long term
debt.
Reportedly, the
Soyatal District was the third largest producer of antimony in
Mexico. U. S. Geological Survey Bulletin 960-B, 1948, Donald E.
White, Antimony Deposits of Soyatal District, State of Queretaro,
Mexico records the production from 1905-1943 at 25,600 tons of
antimony metal content. In 1942, the mines produced ore containing
1,737 tons of metal, and in 1943, they produced ore containing
1,864 tons of metal. This mining was performed primarily all by
hand labor, with no compressors or trammers, and the ore was
transported by mules, in sacks, to the railroad. Recoveries were
less than 40% of the values. Mining continued throughout World War
II.
Mr.
White remarks p. 84 and 85, “In the Soyatal Mines, as in
practically all antimony mines, it is difficult to estimate the
reserves, for the following reasons:
●
The individual
deposits are so extremely irregular in size, shape, and grade that
the amount of ore in any one of them is unknown until the ore has
been mined.
●
As only the
relatively high grade shipping ore is recovered, the ore bodies are
not systematically sampled and assayed…The total reserves are
thus unknown and cannot be estimated accurately, but they probably
would suffice to maintain a moderate degree of activity in the
district for at least 10 years. The mines may even contain enough
ore (mineralized deposit) to equal the total past
production.”
Minimal
ore recovery, primarily through hand mining and sorting methods,
has continued at the Soyatal properties since 1943. We do not claim
any reserves at Soyatal as defined by the SEC.
14
USAMSA PUERTO BLANCO FLOTATION MILL, GUANAJUATO,
MEXICO
During
2014, cleaner flotation machines were added the flotation mill at
San Luis de la Paz (Puerto Blanco), Guanajuato, Mexico. All of the
permits to construct and operate the plant have been obtained. The
flotation plant has a capacity of 140 metric tons per day. It
includes a 30” x 42” jaw crusher, a 4’x 8’
double-deck screen, a 36” cone crusher, an 8’x
36” Harding type ball mill, and eight No. 24 Denver sub A
type flotation machines, an 8’ disc filter, front end
loaders, tools and other equipment. The flotation circuit is used
for the processing of rock from Los Juarez, Guadalupe, and other
properties. We are in the process of installing a 400 metric ton
per day flotation mill that will be dedicated to processing ore
from our Los Juarez property. The crushing equipment currently in
place is adequate for both flotation mills. An oxide circuit was
added to the plant in 2013 and 2014 to mill oxide ores from Soyatal
and other properties. It includes a vertical shaft impactor, 3 ore
bins, 8 conveyors, a 4’ x 6’ high frequency screen,
jig, 8 standard concentrating tables, 5 pumps, sand screw and two
buildings. The capacity of the oxide circuit is 50 tons per day.
During 2016, less than 10% of the mill’s capacity was
utilized.
USAMSA MADERO SMELTER, ESTACION MADERO, PARRAS DE LA FUENTE,
COAHUILA, MEXICO.
USAC,
through its wholly owned subsidiary, USAMSA, owns and operates a
smelting facility at Estacion Madero, in the Municipio of Parras de
la Fuente, Coahuila, Mexico. The property includes 13.48 hectares.
Seventeen small rotating furnaces (SRF’s) and one large
rotating furnace (LRF) with an associated stack and scrubber were
permitted and installed by the end of 2015. Other equipment
includes cooling ducting, dust collectors, scrubber, laboratory,
warehouse, slag vault, stack, jaw crusher, screen, hammer mill, and
a 3.5’ x 8’ rod mill. The plant has a feed capacity of
five to six metric tons of direct shipping ore or concentrates per
day, depending on the quality of the feedstock. If the feedstock is
in the mid-range of 45% antimony, the smelter could produce
approximately 1.8 MM lbs of contained antimony annually.
Concentrates from our flotation plant, and hand-sorted ore from
Mexico sources and other areas, are being processed. The Madero
production is either sold or shipped to our Montana plant to
produce finished Antimony products and other derivative
by-products. Access to the plant is by road and railroad. Set forth
below are location maps:
15
ZEOLITE DIVISION
Location
This
property is located in the southeast corner of Idaho, approximately
seven miles east of Preston, Idaho, 34 miles north of Logan, Utah,
79 miles south of Pocatello, Idaho, and 100 miles north of
Salt Lake City, Utah.
The
mine is located in the N ½ of section 10 and the W ½ of
section 2, section 3, and the E ½ section 4, Township 15,
Range 40 East of the Boise Meridian, Franklin County, Idaho. The
plant and the initial pit are located on the Webster Farm, L.L.C.,
which is private land.
Transportation
The
property is accessed by seven miles of paved road and about l mile
of gravel road from Preston, Idaho. Preston is near the major
north-south Interstate Highway 15 to Salt Lake City or
Pocatello.
Several
Union Pacific rail sidings may be available to the mine. Bonida is
approximately 25 miles west of the mine and includes acreage out of
town where bulk rock could be stored, possibly in existing silos or
on the ground. Three-phase power is installed at this abandoned
site. Finished goods can also be shipped from the
Franklin County Grain Growers feed mill in the town of Preston on
the Union Pacific Railroad.
The
Burlington Northern Railroad can be accessed at Logan,
Utah.
Location
Map
16
Property and Ownership
BRZ
leases 320 acres from the Webster Farm, L.L.C. The term of the
lease is 15 years and it began on March 1, 2010. This includes the
mill site and zeolite in the area of the open pit. The property is
the NW ¼ and W ½ of the SW ¼ of section 3 and the N
½ of the W ¼ of section 10, Township 15 South, Range 40
East of the Boise Meridian, Franklin County, Idaho. The lease
requires a payment of $10.00 per ton plus an additional annual
payment of $10,000 on March 1st of each year. In addition, there
are two other royalty holders. Nick Raymond and the estate of
George Desborough each have a graduated royalty of $1.00 per ton to
$5.00 per ton, depending on the sale price.
The
balance of the property is on Bureau of Land Management property
and includes 480 acres held by 24, 20-acre Placer claims. Should we
drop our lease with Webster Farms LLC., we will retain these placer
claims as follows:
|
BRZ
1 IMC
185308
BRZ
2 IMC
185309
BRZ
3 IMC
185310
BRZ
4 IMC
185311
BRZ
5 IMC
185312
BRZ
6 IMC
185313
BRZ
7 IMC
185314
BRZ
8 IMC
185315
BRZ
9 IMC
185316
BRZ
10 IMC 185317
BRZ
11 IMC 185318
BRZ
12 IMC 185319
|
BRZ
20 IMC 186183
BRZ
21 IMC 186184
BRZ
22 IMC 186185
BRZ
23 IMC 186186
BRZ
24 IMC 186187
BRZ
25 IMC 186188
BRZ
26 IMC 186189
BRZ
27 IMC 186190
BRZ
28 IMC 186191
BRZ
29 IMC 186192
BRZ
30 IMC 186193
BRZ
31 IMC 186194
|
17
Geology
The
deposit is a very thick, sedimentary deposit of zeolitized volcanic
ash of Tertiary age known as the Salt Lake Formation. The
sedimentary interval in which the clinoptilolite occurs is more
than 1000 feet thick in the area. Thick intervals of the zeolite
are separated by thin limestone and sandstone beds deposited in the
freshwater lake where the volcanic ash accumulated.
The
deposit includes an 800- foot mountain. Zeolite can be sampled over
a vertical extent of 800 feet and on more than 700 acres. The
current pit covers more than 3 acres. Despite the
apparent size of the deposit, we claim no
reserves.
Exploration, Development, and Mining
Exploration
has been limited to the examination and sampling of surface
outcrops and mine faces.
Mining Methods
Depending
on the location, the zeolite is overlain by 1 to 12 feet of
zeolite-rich soil. On the ridges, the cover is very little, and in
the draws the soil is thicker. The overburden is stripped using a
tractor dozer, currently a Caterpillar D-8K. It is moved to the toe
of the pit, and will eventually be dozed back over the pit for
reclamation.
Although
near-surface rock is easily ripped, it is more economical to drill
and blast it. Breakage is generally good. Initial benches were 20
to 30 foot, and each bench is accessed by a road.
18
Haulage
is over approximately 4,000 feet of road on an uphill grade of 2.5%
to the mill. On higher benches, the grade will eventually be
downhill. Caterpillar 769 B rock trucks are being used. They haul
18 to 20 tons per load, and the cycle time is about 30
minutes.
With
the trucks and the other existing equipment, the mine is capable of
producing 80 tons per hour.
MILLING
Primary Crusher
The
primary crushing circuit is a conventional closed circuit,
utilizing a Stephens-Adamson 42” x 12’ apron feeder,
Pioneer 30” x 42” jaw crusher, Nordberg standard
3’ cone crusher, a 5’ by 12’ double
deck Kohlberg screen, and has a self-cleaning dust collector. The
rock is crushed to minus 1 inch and the circuit has a rated
capacity of more than 50 tons per hour.
Dryer
There
are two dryer circuits, one for lines one and two, and one for the
Raymond mill. The dryer circuits include one 50 ton feed bin, and
each dryer has a conveyor bypass around each dryer, a bucket
elevator, and a dry rock bin. The dryers are 25 feet long, 5 feet
in diameter and are fired with propane burners rated at 750,000
BTUs. One self-cleaning bag house services both dryers. Depending
on the wetness of the feed rock, the capacity is in the range of 10
tons per hour per dryer. During most of the year, the dryers are
not run.
Coarse Products Circuit
There
are two lines to produce coarse products:
●
Line 1 is a
closed circuit with a 100 HP vertical shaft impactor and a 5 deck
Midwestern multivibe screen.
●
Line 2 includes a
Jeffries 30” by 24” 60 HP hammer mill in a closed
circuit with two 5’ x 12’ triple deck Midwestern Multi
Vibe high frequency screens. The circuits also include bucket
elevators, (3) 125 ton capacity product silos, a 6 ton capacity
Crust Buster blender, augers, Sweco screens, and dust
collectors.
Fine Products Circuit
The
fine products circuit is in one building and it includes (2)
3.5’ x 10.5’ Derrick 2 deck high frequency (3450 RPM)
screens and various bucket elevators, augers, bins, and Sweco
screens for handling product. Depending on the screening sizes, the
plants can generate approximately 150 tons of granules and 125 tons
of fines per 24-hour day.
Raymond Mill Circuit
The
Raymond mill circuit includes a 6058 high-side Raymond mill with a
double whizzer, dust collector, two 100 ton product silos, feed
bin, conveyors, air slide, bucket elevators, and control booth. The
Raymond mill has a rated capacity of more than 10 tons per
hour.
USAC
had initiated an action against our prior investor relations
consultant asking that he be ordered to desist from contacting any
of our shareholders, and restrained from derogatory actions
intended to harm our Company’s reputation and causing
financial harm to the company. The settlement of our suit resulted
in a cash payment of $10,000 and the removal of restrictions on
100,000 shares of common stock previously issued to the prior
consultant.
No
director, officer or affiliate of USAC and no owner of record or
beneficial owner of more than 5.0% of our securities or any
associate of any such director, officer or security holder is a
party adverse to USAC or has a material interest adverse to USAC in
reference to pending litigation.
19
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.
Currently,
our common stock is traded on the NYSE-MKT under the symbol UAMY.
Prior to May 16, 2012, our common stock was traded over the Counter
Bulletin Board ("OTCBB") under the symbol "UAMY.OB." The following
table sets forth the range of high and low bid prices as reported
for the periods indicated. The quotations were taken from a website
available to the public, and generally believed to be accurate. The
quoted prices may not necessarily represent actual
transactions.
|
2016
|
High
|
Low
|
|
First
Quarter
|
$
0.33
|
$
0.17
|
|
Second
Quarter
|
0.31
|
0.20
|
|
Third
Quarter
|
0.60
|
0.20
|
|
Fourth
Quarter
|
0.47
|
0.22
|
|
2015
|
High
|
Low
|
|
First
Quarter
|
$
0.91
|
$
0.48
|
|
Second
Quarter
|
1.65
|
0.52
|
|
Third
Quarter
|
0.79
|
0.35
|
|
Fourth
Quarter
|
0.46
|
0.24
|
The
approximate number of holders of record of our common stock at
March 31, 2017, is 2,500.
We have
not declared or paid any dividends to our stockholders during the
last five years and do not anticipate paying dividends on our
common stock in the foreseeable future. Instead, we expect to
retain earnings for the operation and expansion of our
business.
In
March of 2016 the Company issued the Board members 550,000 shares
of the Company’s common stock for services in 2015 with a
value of $137,500.
In
December of 2016, the Company issued Daniel Parks, the
Company’s Chief Financial Officer, 200,000 shares of the
Company’s common stock valued at $54,000 to retain his
services for a two year period. As part of the agreement, Mr.
Parks’ hours worked and normal compensation will be
reduced.
During
2016, the Company awarded, but did not issue, common stock with a
value at December 31, 2016, of $168,750 to its Board of Directors
as compensation for their services as directors. In connection with
the issuances, the Company recorded $168,750 in director
compensation expense. In March of 2017, at a price of $0.40 per
share, the directors were issued 421,875 shares for
2016.
Not
Applicable.
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.
20
|
Results of Operations by
Division
|
|
|
|
Antimony - Combined USA
|
|
|
|
and Mexico
|
2016
|
2015
|
|
Lbs
of Antimony Metal USA
|
1,422,957
|
1,381,971
|
|
Lbs
of Antimony Metal Mexico:
|
1,513,923
|
1,105,350
|
|
Total Lbs of Antimony Metal Sold
|
2,936,880
|
2,487,321
|
|
Average
Sales Price/Lb Metal
|
$
2.98
|
$
3.97
|
|
Net loss/Lb Metal
|
$
(0.53
)
|
$
(0.54
)
|
|
|
|
|
|
Gross
antimony revenue - net of discount
|
$
8,744,170
|
$
9,863,933
|
|
Precious
metals revenue
|
672,871
|
491,426
|
|
Production
costs - USA
|
(3,274,100
)
|
(4,265,840
)
|
|
Product
cost - Mexico
|
(3,637,452
)
|
(4,201,005
)
|
|
Direct
sales and freight
|
(484,908
)
|
(438,582
)
|
|
General
and administrative - operating
|
(498,983
)
|
(428,022
)
|
|
Mexico
non-production costs
|
(357,706
)
|
(1,086,440
)
|
|
General
and administrative - non-operating
|
(1,469,576
)
|
(1,481,111
)
|
|
Gain
on liability adjustment
|
-
|
914,770
|
|
Non-operating
gains
|
|
|
|
Net
interest
|
(153,416
)
|
(7,718
)
|
|
EBITDA
|
(459,100
)
|
(638,589
)
|
|
Income
taxes
|
(298,138
)
|
|
|
Depreciation,&
amortization
|
(785,869
)
|
(711,345
)
|
|
Net loss - antimony
|
$
(1,543,107
)
|
$
(1,349,934
)
|
|
|
|
|
|
Zeolite
|
2016
|
2015
|
|
Tons sold
|
13,143
|
15,901
|
|
Average
Sales Price/Ton
|
$
188.17
|
$
173.17
|
|
Net income (Loss)/Ton
|
$
17.80
|
$
32.16
|
|
|
|
|
|
Gross
zeolite revenue
|
$
2,473,094
|
$
2,753,644
|
|
Production
costs
|
(1,210,831
)
|
(1,266,687
)
|
|
Direct
sales and freight
|
(278,633
)
|
(286,235
)
|
|
Royalties
|
(258,206
)
|
(279,435
)
|
|
General
and administrative - operating
|
(178,881
)
|
(108,847
)
|
|
General
and administrative - non-operating
|
(92,826
)
|
(80,229
)
|
|
Non-operating
gains
|
|
|
|
Net
interest
|
(5,942
)
|
633
|
|
EBITDA
|
447,775
|
732,844
|
|
Depreciation
|
(213,868
)
|
(221,441
)
|
|
Net income - Zeolite
|
$
233,907
|
$
511,403
|
|
|
|
|
|
Company-wide
|
2016
|
2015
|
|
Gross
revenue
|
$
11,890,135
|
$
13,109,003
|
|
Production
costs
|
(8,122,383
)
|
(9,733,532
)
|
|
Other
operating costs
|
(2,057,317
)
|
(2,627,561
)
|
|
General
and administrative - non-operating
|
(1,562,402
)
|
(1,561,340
)
|
|
Gain
on liability adjustment
|
-
|
914,770
|
|
Non-operating
gains
|
-
|
-
|
|
Net
interest
|
(159,358
)
|
(7,085
)
|
|
EBITDA
|
(11,325
)
|
94,255
|
|
Income
tax benefit (expense)
|
(298,138
)
|
|
|
Depreciation
& amortization
|
(999,737
)
|
(932,786
)
|
|
Net income (Loss)
|
$
(1,309,200
)
|
$
(838,531
)
|
21
Overview
Our
cost of production for the years ended December 31, 2016 and 2015
included plant construction and metallurgical testing at Puerto
Blanco and Madero, Mexico and to a lesser degree our plant in
Thompson Falls, Montana. The production from Mexico should be less
in Mexico during the first quarter of 2017 due to the transition of
processing Hillgrove concentrates to our own mines.
The
non-cash expense items totaled $1,160,215 for 2016 and included
$999,737 for depreciation and amortization, $5,454 for accretion,
and $168,750 for director compensation.
The
non-cash expense items totaled $1,075,423 for 2015 and included
$932,786 for depreciation and amortization, $5,137 for accretion,
and $137,500 for director compensation.
We are
producing and buying raw materials, which will allow us to ensure a
steady flow of products for sale. Our smelter at Madero, Mexico,
was producing primarily on custom concentrates from Australia in
2015 and 2016. Production during 2017 will be primarily from our
own Mexican properties, and we will still purchase a significant
portion of our raw materials for our smelter in
Montana.
We are
proceeding with the testing of the Los Juarez ore in the 100 ton
per day mill at Puerto Blanco. A 400 ton per day flotation mill is
permitted and is partially installed. This mill will be dedicated
to processing rock from the Los Juarez mining property. We have
adequate crushing capacity in place to feed the 400 ton per day
mill and the existing mill.
Our
principal smelter, precious metals recovery operation, and our
Company headquarters remain in Montana.
22
Results of Operations
Comparison of Years ended December 31,
2016 and
2015
Results of Operations by Division
|
|
2016
|
2015
|
|
Antimony Division - United States:
|
|
|
|
Revenues
- Antimony (net of discount)
|
$
8,744,170
|
$
9,863,933
|
|
Revenues
- Precious metals
|
672,871
|
491,426
|
|
|
9,417,041
|
10,355,359
|
|
Domestic
cost of sales:
|
|
|
|
Production
costs
|
3,274,100
|
4,265,840
|
|
Depreciation
|
81,328
|
61,819
|
|
Freight
and delivery
|
419,256
|
311,027
|
|
General
and administrative
|
272,161
|
192,298
|
|
Direct
sales expense
|
65,652
|
65,000
|
|
Total
domestic antimony cost of sales
|
4,112,497
|
4,895,984
|
|
|
|
|
|
Cost
of sales - Mexico
|
|
|
|
Production
costs
|
3,480,252
|
3,765,902
|
|
Depreciation
and amortization
|
704,541
|
649,525
|
|
Freight
and delivery
|
113,412
|
62,555
|
|
Reclamation
accrual
|
5,454
|
5,137
|
|
Land
lease expense
|
261,154
|
435,103
|
|
Mexico
non-production costs
|
357,706
|
1,086,440
|
|
General
and administrative
|
178,048
|
363,025
|
|
Total
Mexico antimony cost of sales
|
5,100,567
|
6,367,687
|
|
|
|
|
|
Total
revenues - antimony
|
9,417,041
|
10,355,359
|
|
Total
cost of sales - antimony
|
9,213,064
|
11,263,671
|
|
Total
gross profit (loss) - antimony
|
203,977
|
(908,312
)
|
|
|
|
|
|
Zeolite Division:
|
|
|
|
Revenues
|
2,473,094
|
2,753,644
|
|
Cost
of sales:
|
|
|
|
Production
costs
|
1,210,832
|
1,266,687
|
|
Depreciation
|
213,868
|
221,441
|
|
Freight
and delivery
|
226,258
|
289,927
|
|
General
and administrative
|
178,881
|
114,102
|
|
Royalties
|
258,206
|
279,435
|
|
Direct
sales expense
|
52,375
|
86,100
|
|
Total
cost of sales
|
2,140,420
|
2,257,692
|
|
Gross
profit - zeolite
|
332,674
|
495,952
|
|
|
|
|
|
Total
revenues - combined
|
11,890,135
|
13,109,003
|
|
Total
cost of sales - combined
|
11,353,484
|
13,521,363
|
|
Total
gross profit (loss) - combined
|
$
536,651
|
$
(412,360
)
|
23
During the two year period ended December 31,
2016, the most significant event affecting our financial
performance was the decrease in the price of antimony (see table
page 6). During the first half of 2016, the price for antimony hit
a seven year low. By the ended of 2016, we stopped the processing
of antimony concentrate for Hillgrove Mines, Ltd., of Australia and
started production from our own mines in Mexico.
The Mexican
production from our own mines was very low in 2015 and 2016 due to
the processing of concentrates from Hillgrove. Antimony (metal
contained) produced and sold from Hillgrove concentrates was
1,105,350 pounds during 2015 compared to 1,513,923 pounds for 2016,
an increase of 37%. The Puerto Blanco mill circuits were utilized
less than 10% of their capacity. Going forward, the increased
supply of raw material from Mexico and the metal prices for both
antimony and precious metals will be the most significant factors
influencing our operations.
During
the two year period ending December 31, 2016, we incurred excess
production costs at our Mexico operations. At the end of each year,
management determined an estimated portion of each operating unit
that was operating at less than expected capacity and assigned a
portion of that years cost to excess operating costs. The
production costs above the expected costs were reported in the
above schedule of results of operations by division as
“excess Mexico production costs”, which were $357,706
in 2016 and $1,086,440 in 2015. The excess Mexico production costs
are primarily due to holding costs from inactivity at the Wadley
and Los Juarez mines, the Puerto Blanco mill, and the loss of
production at the Madero smelter from metalurgical testing and
experimenting with various production methods and
formulas.
The
following are highlights of the significant changes during 2016 and
the two year period then ended:
Antimony:
a.
The
sale of antimony during 2016 was 2,936,880 pounds compared to
2,487,321 pounds in 2015, an
increase of 449,559
pounds or 18%.
b.
The
average sales price of antimony during 2016 was $2.98 per pound
compared to $3.97 during 2015, a
decrease of $0.99
per pound or 25%. During the beginning of 2017, the Rotterdam price
of antimony is
$3.90 per
pound.
c.
The metallurgical
problem with the Los Juarez concetrates has been solved with a
caustic leach circuit, and pilot mining, milling, and smelting will
resume. This will put the Puerto Blanco mill in operation. During
2016 and 2015, the Puerto Blanco mill was operating at less than
10% of capacity.
d.
In 2016, the
Mexican non-production costs were $357,706 compared to $1,086,440
for 2015. During 2016, the non-production costs amounted to $0.12
per pound of antimony produced. These costs include the holding
costs of mines and mills in Mexico that have been idle due to a
lack of furnace capacity at Madero and the solving of the Los
Juarez metallurgical problems.
e.
The net loss per
pound of antimony was $0.48 in 2016 even though the price had
fallen $0.99 per pound from 2015. The net loss per pound in 2015
was $0.54.
f.
Our cost of goods sold for antimony decreased
from $10,419,889 in 2015 to $8,248,125 in 2016 despite an increase
in production of
49,565 pounds or 15.3%.
For the year ended December 31, 2016, costs of
goods sold include operating and non-operating production costs
from Mexico operations.
g.
With its own
antimony raw materials, USAC will benefit fully from price
increases rather than just the smelting fees and small percentages
of the price increases. Additionally, the company will enjoy lower
processing and trucking costs.
During
2016, BRZ sold 13,143 tons compared to 15,901 tons in 2015, down
2,758 tons or 17.3%. During 2016, the sales dropped as a result of
the drop in oil prices and a sluggish economy. BRZ realized a
profit of $233,907 in 2016 after depreciation of $213,868 compared
to a profit of $511,403 in 2015 after depreciation of $221,441. The
reduced margin was a result of increases of $5,700 in commissions
paid to the new sales representatives, approximately $50,000 for
the repair of the Raymond mill, $14,893 for warehouse rental and
expenses at BRZ, $36,891 for medical insurance and related
expenses, and $55,707 for labor. BRZ has embarked on a sales
program with two field representatives and a research person that
prepares sales brochures and literature that is gaining new
customers.
General
and administrative costs, as reported in our statement of
operations, include fees paid to directors through stock based
compensation. In 2016 and 2015, we incurred $40,000 each year in
fees to the NYSE MKT that was included in general and
administrative expenses. General and administrative costs for 2016
and 2015 include general and administrative costs related to
commencement of production at our facilities in Mexico. The
combined general and administrative costs were 6.2%, and 5.6%, of
sales for 2016 and 2015, respectively. The combined general and
administrative salaries were 4.1%, and 3.3% of sales for 2016 and
2015, respectively.
24
The
increase in professional fees for 2016 (approximately $38,000) was
primarily due to increased attorney fees related to our former
Investor Relations representative. Our accounting fees related to
our annual audit and our quarterly SEC filings decreased from the
prior year.
Factoring costs
decreased in 2016 from approximately $41,000 in 2015 to
approximately $35,000 in 2016. The discounts we gave for early
payments decreased by approximately $24,000 in 2016 from 2015 due
to a decrease in our total sales.
Subsidiaries
The
Company has a 100% investment in two subsidiaries in Mexico, USAMSA
and AM, whose mineral property carrying values were assessed at
December 31, 2016 and 2015 for impairment. Management’s
assessment of the subsidiaries’ fair value was based on their
future benefit to us.
|
Financial Condition and Liquidity
|
|
|
|
|
2016
|
2015
|
|
Current
Assets
|
$
1,692,555
|
$
2,136,326
|
|
Current
liabilities
|
(3,382,123
)
|
(2,429,830
)
|
|
Net
Working Capital
|
$
(1,689,568
)
|
$
(293,504
)
|
|
|
|
|
|
Cash
provided (used) by operations
|
$
425,837
|
$
358,453
|
|
Cash
used for capital outlay
|
(583,029
)
|
(1,704,037
)
|
|
Cash
provided (used) by financing:
|
|
|
|
Net
payments from factor
|
136,617
|
468
|
|
Proceeds
from notes payable to bank
|
36,645
|
130,672
|
|
Proceeds
from (paymrnts to) Hillgrove advances
|
-
|
1,198,445
|
|
Principal
paid on long-term debt
|
(175,238
)
|
(94,141
)
|
|
Checks
issued and payable
|
35,682
|
-
|
|
Received
on notes receivable for stock
|
-
|
120,000
|
|
Net
change in cash
|
$
(123,486
)
|
$
9,860
|
Our net
working capital decreased for the year ended December 31, 2016,
from a negative amount of $293,504
at the beginning of
the year to a negative amount of $1,689,568 at the end of 2016. Our
current assets decreased primarily due to a decrease in our
inventories and accounts receivable, in Montana and in Mexico. The
capital improvements were paid for with cash and debt. Our current
liabilities increased primarily in the amount of accrued income
taxes payable and the current portion of long term debt due during
2016.
During
the year ending December 31, 2017, we are planning to finance our
improvements with operating cash flow. Our 2017 improvements are
expected to include improvements at both the Madero smelter and the
Thompson Falls smelter, and completing the installation of a leach
circuit at Puerto Blanco.
In
2016, cash provided by operations was primarily due to a reduction
of our inventories of approximately $239,000. We negotiated
decreases in our current liabilities for raw material of
approximately $915,000 during 2015.
The
current portion of our long term debt is serviceable from the cash
generated by operations.
At
December 31, 2016, our financial statements show that we have
negative working capital of approximately $1.7 million and
accumulated deficit of approximately $25.4 million. In
addition, we have incurred losses for the prior three years.
These factors indicate that there may be doubt regarding our
ability to continue as a going concern for the next twelve
months.
25
During
the year ended December 31, 2016, we endured some of the lowest
prices for antimony in the past seven years, with an average sales
price for our products of only $2.98 per pound of metal
contained. As of late March 2017, the price for antimony
metal contained is approximately $4.00 per pound. While we
experience increase in our raw material cost in the United States
as a result, most of the $1.02 market increase will result in
increased cash flow.
In
addition, we have cut costs for our labor at our Mexico locations
which will result in a lower cost of raw material from Mexico.
These cuts have resulted from not processing concentrates from
Hillgrove Mines of Australia LTD in 2017. This has resulted in a
large reduction in our work force at our Madero smelter, along with
a significant decrease in our operating costs for fuel, natural
gas, electricity, and reagents. Although our total production in
Mexico will decrease due to the lack of Hillgrove concentrates, we
are ramping up production from our own mining properties. We are
currently on schedule to have seventeen small rotating furnaces in
operation by the second quarter of 2017.
In
addition, we have implemented wage and other cost reductions across
at the corporate level that will decrease our administrative costs
in 2017. We expect to continue paying a low cost for propane in
Montana, which in years past has been a major operating
cost.
In
2017, we have negotiated a reduced monthly lease cost for the
Wadley mine approximately $11,600 a decrease from $23,200 per
month. In addition, we paid the final installment to purchase
mining concessions in the Los Juarez mining area. In 2015 and
2016, we paid $100,000 and $68,600, respectively, for these
concession rights.
We
believe that our current circumstances and actions taken by
management will enable us to be actively operating for the next
twelve months.
Our
stockholders’ equity section makes note that we have a
liquidation preference of $5,884,376 for our preferred stock. This
consists of a liquidation payment of $5,281,519 due if we liquidate
our company or sell substantially all our assets, and $651,506 of
undeclared dividends. The Board of Directors’ does not intend
to declare dividends on preferred stock as due and payable at any
time in the near future. We do not feel that the liquidation
preference and undeclared dividends related to our preferred stock
will be an impediment to raising capital in the future by issuing
additional shares of common stock, and are not going to affect our
liquidity.
Critical Accounting Estimates
We
have, besides our estimates of the amount of depreciation on our
assets, two critical accounting estimates. The value of our
unprocessed ore in inventory is assessed on assays taken at the
time the ore is delivered, and may vary when the ore is processed
and final settlement is made. Also, the asset recovery obligation
on our balance sheet is based on an estimate of the future cost to
recover and remediate our properties as required by our permits
upon cessation of our operations, and may differ when we cease
operations.
●
The value of
unprocessed purchased ore in our inventory at the Wadley mining
concession and Puerto Blanco mill is based on assays taken at the
time the ore is delivered, and may vary when the ore is processed
and final settlement is made. We assay the purchased ore to
estimate the amount of antimony contained per metric ton, and then
make a payment based on the Rotterdam price of antimony and the %
of antimony contained. Our payment scale incorporates a penalty for
ore with a low percentage of antimony. It is reasonably likely that
the initial assay will differ from the amount of metal recovered
from a given lot. If the initial assay of a lot of ore on hand at
the end of a reporting period were different, it would cause a
change in our reported inventory and accounts payable amounts, but
would not change our reported cost of goods sold or net income
amounts. At December 31, 2016, if we had overestimated the per cent
of antimony in our total inventory of purchased ore by 2.5%, (a 10%
correction to the amount of antimony metal contained if we assayed
25.0% antimony per metric ton), the amount of our inventory and
accounts payable would be smaller by approximately $1,500. Our net
income would not be affected. Direct shipping ore (DSO) purchased
at our Madero smelter is paid for at a fixed amount at the time of
delivery and assaying, and is not subject to accounting estimates.
The amount of the accounting estimate for purchased ore at our
Puerto Blanco mill is in a constant state of change because the
amount of purchased ore and the per cent of metal contained are
constantly changing. Due to the amount of ore on hand at the end of
a reporting period, as compared to the amount of total assets,
liabilities, equity, and the ore processed during a reporting
period, any change in the amount of estimated metal contained would
likely not result in a material change to our financial
condition.
26
●
The asset recovery
obligation and asset on our balance sheet is based on an estimate
of the future cost to recover and remediate our properties as
required by our permits upon cessation of our operations, and may
differ when we cease operations. At December 31, 2011, we made an
estimate that the cost of the machine and man hours probable to be
needed to put our properties in the condition required by our
permits once we cease operations would be $134,000. For purposes of
the estimate, we used a probable life of 20 years and costs that,
initially, are comparable to rates that we would incur at the
present. We are adding to (an accretion of 6%) the liability each
year, and amortizing the asset over 20 years ($6,700 annually),
which decreases our net income in total each year (by $12,155 for
2016). We will make periodic reviews of the remaining life of the
mine and other operations, and the estimated remediation costs upon
closure, and adjust our account balances accordingly. At this time,
we think that an adjustment in our asset recovery obligation is not
required, and an adjustment in future periods would not have a
material impact in the year of adjustment, but would change the
amount of the annual accretion and amortization costs charged to
our expenses by an undetermined amount.
Not
Applicable.
The
consolidated financial statements of the registrant are included
herein on pages F1-F23.
None
Evaluation of disclosure controls and procedures
At the
end of the period covered by this Annual Report on Form 10-K, an
evaluation was carried out under the supervision of and with the
participation of our management, including the Principal Executive
Officer and the Principal Financial Officer of the effectiveness of
the design and operations of our disclosure controls and procedures
(as defined in Rule 13a – 15(e) and Rule 15d – 15(e)
under the Exchange Act) as of the end of the period covered by this
report. Based on that evaluation, the Principal Executive
Officer and the Principal Financial Officer have concluded that our
disclosure controls and procedures were not effective in ensuring
that: (i) information required to be disclosed by the Company in
reports that it files or submits to the Securities and Exchange
Commission under the Exchange Act is recorded, processed,
summarized, and reported within the time periods specified in
applicable rules and forms and (ii) material information required
to be disclosed in our reports filed under the Exchange Act is
accumulated and communicated to our management, including our CEO
and CFO, as appropriate, to allow for accurate and timely decisions
regarding required disclosure.
Disclosure controls
and procedures were not effective due primarily to a material
weakness in the segregation of duties in the Company’s
internal control of financial reporting as discussed
below.
27
Management's annual report on internal control over financial
reporting
The
management of USAC is responsible for establishing and maintaining
adequate internal control over financial reporting. This internal
control system has been designed to provide reasonable assurance to
our management and Board of Directors regarding the preparation and
fair presentation of our published financial
statements.
All
internal control systems, no matter how well designed, have
inherent limitations. Therefore, even those systems determined to
be effective can provide only reasonable assurance with respect to
financial statement preparation and presentation.
The
management of USAC has assessed the effectiveness of our internal
control over financial reporting as of December 31, 2016. To make
this assessment, we used the criteria for effective internal
control over financial reporting described in Internal
Control-Integrated Framework (2013), issued by the Committee of
Sponsoring Organizations of the Treadway Commission
(COSO).
As a
result of our assessment, we concluded that we have material
weaknesses in our internal control over financial reporting as of
December 31, 2016. These weaknesses are as follows:
●
Inadequate
design of internal control over the preparation of the financial
statements and financial reporting processes;
●
Inadequate
monitoring of internal controls over significant accounts and
processes including controls associated with domestic and Mexican
subsidiary operations and the period-end financial reporting
process; and
●
The
absence of proper segregation of duties within significant
processes and ineffective controls over management oversight,
including antifraud programs and controls.
We are
aware of these material weaknesses and will develop procedures to
ensure that independent review of material transactions is
performed. The chief financial officer will develop internal
control measures to mitigate the lack of inadequate documentation
of controls and the monitoring of internal controls over
significant accounts and processes including controls associated
with the period-ending reporting processes, and to mitigate the
segregation of duties within significant accounts and processes and
the absence of controls over management oversight, including
antifraud programs and controls.
We plan
to consult with independent experts when complex transactions are
entered into.
Because
these material weaknesses exist, management has concluded that our
internal control over financial reporting as of December 31, 2016,
is ineffective.
Changes in internal control over financial reporting
There
were no changes in internal control over financial reporting for
the quarter ended December 31, 2016.
28
Identification of directors and executive officers at December 31,
2016, is as follows:
|
Name
|
|
Age
|
|
Affiliation
|
|
Expiration of Term
|
|
|
|
|
|
|
|
|
|
John C. Lawrence
|
|
78
|
|
Chairman, President,
Director
|
|
Annual meeting
|
|
|
|
|
|
|
|
|
|
John C. Gustavsen
|
|
68
|
|
First Vice-President
|
|
Annual meeting
|
|
|
|
|
|
|
|
|
|
Russell C. Lawrence
|
|
48
|
|
Second Vice-President
and
Director
|
|
Annual meeting
|
|
|
|
|
|
|
|
|
|
Matthew Keane
|
|
61
|
|
Third Vice-President
|
|
Annual meeting
|
|
|
|
|
|
|
|
|
|
Daniel L. Parks
|
|
68
|
|
Chief Financial Officer
|
|
Annual meeting
|
|
|
|
|
|
|
|
|
|
Alicia Hill
|
|
35
|
|
Secretary, Controller,
and
Treasurer
|
|
Annual meeting
|
|
|
|
|
|
|
|
|
|
Gary D. Babbitt
|
|
71
|
|
Director
|
|
Annual meeting
|
|
|
|
|
|
|
|
|
|
Whitney Ferer
|
|
58
|
|
Director
|
|
Annual meeting
|
|
|
|
|
|
|
|
|
|
Hart W. Baitis
|
|
67
|
|
Director
|
|
Annual meeting
|
|
|
|
|
|
|
|
|
|
Jeffrey Wright
|
|
47
|
|
Director
|
|
Annual meeting
|
|
|
|
|
|
|
|
|
|
Craig Thomas
|
|
42
|
|
Director
|
|
Annual meeting
|
Business Experience of Directors and Executive
Officers
John C. Lawrence
. Mr. Lawrence has been the president and a
director since our inception in 1969. Mr. Lawrence was the
president and a director of AGAU Mines, Inc., our corporate
predecessor. He is a member of the Society of Mining Engineers and
a recipient of the Uuno Sahinen Silver Medallion Award presented by
Butte Tech, University of Montana. He has a vast background in
mining, milling, smelting, chemical processing and oil and
gas.
Gary D. Babbitt
. Mr. Babbitt has experience in the mining
industry with approximately 30 years dealing with joint ventures,
purchases, royalty leases and contracts. He has a working knowledge
of Spanish and has negotiated supply and mining agreements in
Mexico. Mr. Babbitt has a B.A. from the Albertson College of Idaho,
and earned his J.D. from the University of Chicago.
Russell C. Lawrence
. Mr. Lawrence has experience in applied
physics, mining, refining, excavation, electricity, electronics,
and building contracting. He graduated from the University of Idaho
in 1994 with a degree in physics, and worked for the Physics
Department at the University of Idaho for a period of 10 years. He
has also worked as a building contractor and for USAC at the
smelter and laboratory at Thompson Falls, for USAMSA in the
construction and operation of the USAMSA smelter in Mexico, and for
Antimonio de Mexico, S. A. de C. V. at the San Miguel Mine in
Mexico.
Hart W. Baitis.
Mr. Baitis graduated from the University of
Oregon in 1971 with a B.S. in Geology, and was awarded a Ph. D. in
Geology in 1976. He has 35 years of experience as an exploration
geologist in the United States, Canada, Central America, and
Mexico. Mr. Baitis is experienced in numerous geologic environments
and terrains, and has been involved in all phases of exploration,
ranging from field geologist, consultant, management, and
acquisition team director.
29
Whitney Ferer.
Mr. Ferer was nominated to the board of
USAC in February 2012. He worked for 34 years for Aaron Ferer &
Sons Co. headquartered in Omaha, Nebraska, where he was the Vice
President of Operations and Senior Trader, as well Vice
Chairman of the Board of AF&S Co.. He has been involved
in the patenting of various processes for the breakdown of plastics
and metal recovery, and was Vice President of the Lead & Zinc
Division of AF&S. In addition, Mr. Ferer has been
activ
e
in the trading of all
metals, and facilitated the opening of eight offices in the Far
East and China for AF&S. Mr. Ferer has recently opened
his own company W.H. Ferer Co., LLC. He is one of the
largest traders of antimony metal and oxides in the United States
and, additionally, he handles approximately 20-30 elements in
various forms and grades.
Jeffrey D. Wright
. Mr. Wright graduated from North Carolina
University in 1991, and from the University of Southern California,
Marshall School of Business (MBA) in 2004. Mr. Wright was a naval
officer from 1991 through 1996, serving aboard the aircraft carrier
USS Carl Vinson and the destroyer USS John Young. After duty in the
military, Mr. Wright held successively more responsible positions
in the securities and finance industry. From 2011 through 2013 he
was the managing director metals and mining research for Global
Hunter Securities, and he held the same position for H.C.
Wainwright for 2013 through 2015.
Craig W. Thomas.
Mr. Thomas is a professional investor with
fifteen years of investing experience. He is currently
the co-founder of Shareholder Advocates for Value Enhancement and
the managing member of various investment
partnerships. Mr. Thomas is currently a director
of Full House Resorts, Inc. Mr. Thomas earned a B.A. from
Stanford University and an M.B.A. from the Graduate School of
Business at Stanford University.
Alicia Hill.
Ms. Hill was hired by the Company in 2006 as an
accounting assistant, and was eventually promoted to chief
accountant responsible for the recording of transactions for three
companies. In 2011, she was appointed Company Controller,
Secretary, and Treasurer. Ms. Hill has guided the Company through
the listing on the NYSE-MKT, in the addition of a new division in
Mexico, and has been the liaison with the Company’s auditors
through a progressively complicated reporting process.
Daniel L. Parks.
Mr. Parks graduated from the University of
Idaho in 1974 with a B.S. in Accounting, and was licensed as a
certified public accountant in 1976. He worked as an auditor for
Coopers & Lybrand for three years, as controller for a lumber
manufacturing company for one year, and owned his own accounting
practice for thirty years. Mr. Parks was extensively involved in
auditing and financial statement preparation during this
time.
John C. Gustaven.
Mr. Gustaven graduated from Rutgers
University in 1970 with a BS in chemistry and started work for
Harshaw Chemical (purchased by Amspec Chemical Corporation), a
major producer of antimony trioxide. Mr. Gustaven took engineering
courses from 1976 through 1980, and became president and treasurer
of the company in 1983. He was promoted CEO in 1990. Mr. Gustaven
designed a new type of production furnace for antimony trioxide
that eventually produced 20 million pounds of antimony trioxide per
year. Mr. Gustaven is conversant in Spanish, Chinese, and other
languages, and travelled to many countries as part of his duties as
president of Amspec Chemical Corporation. Mr. Gustaven came to work
at United States Antimony Corporation in November of
2011.
Matt Keane
. Mr. Keane graduated from Mankato State
University in 1978 with degrees in geography and environmental
studies. Mr. Keane was owner of a construction business and a
retail building supply business before becoming the director of
sales for United States Antimony Corporation in 2000. Mr. Keane has
developed the Company’s growing zeolite sales through Bear
River Zeolite and the increase in the Company’s share of the
domestic market for antimony products.
We are
not aware of any involvement by our directors or executive officers
during the past five years in legal proceedings that are material
to an evaluation of the ability or integrity of any director or
executive officer.
Board Meetings and Committees
Our Board of Directors held
four (4) regular meetings during the 2016 calendar year. Each
incumbent director attended all of the meetings held during the
2016 calendar year, in the aggregate, by the Board and each
committee of the Board of which he was a member.
Our
Board of Directors established an Audit Committee on December 10,
2011. It consists of four members, Gary Babbitt (Chairman), Whitney
Ferer, Jeffrey Wright, and Craig Thomas. None of the Audit
Committee members are involved in our day-to-day financial
management. Jeffrey Wright and Craig Thomas are considered
financial experts.
30
During
2011, the Board also established a Compensation Committee and a
Nominating Committee.
Board Member Compensation
Following is a summary of fees,
cash payments, stock awards, and other reimbursements to Directors
during the year ended December 31, 2016:
Directors
Compensation
|
Name and Principal Position
|
Fees Earned or paid in Cash
|
Stock Awards
|
Total Fees, Awards, and Other Compensation
|
|
John
C. Lawrence, Chairman
|
|
$
25,000
|
$
25,000
|
|
Gary
D. Babbitt, Director
|
$
21,750
|
$
25,000
|
$
46,750
|
|
Russell
Lawrence, Director
|
|
$
25,000
|
$
25,000
|
|
Hartmut
Baitis, Director
|
|
$
25,000
|
$
25,000
|
|
Whitney
Ferer, Director
|
|
$
25,000
|
$
25,000
|
|
Jeffrey
Wright, Director
|
|
$
25,000
|
$
25,000
|
|
Craig
Thomas, Director
|
|
$
18,750
|
$
18,750
|
|
Totals
|
$
21,750
|
$
168,750
|
$
190,500
|
Section 16(a)
Beneficial Ownership Reporting Compliance
Section 16(a) of
the Securities Exchange Act of 1934 requires our directors and
executive officers and the holders of 10% or more of our common
stock to file reports of ownership and changes in ownership with
the Securities and Exchange Commission. Officers, directors and
stockholders holding more than 10% of our common stock are required
by the regulation to furnish us with copies of all Section 16(a)
forms they have filed. Based solely on our review of copies of
Forms 3, 4 and 5 furnished to us, Mr. Baitis, Mr. Babbitt, Mr.
Ferer, and Mr. Russell Lawrence did not file timely Forms 3, 4 or
Form 5 reports during 2016 and 2015.
Code of Ethics
The
Company has adopted a Code of Ethics that applies to the Company's
executive officers and its directors. The Company will provide,
without charge, a copy of the Code of Ethics on the written request
of any person addressed to the Company at: United States Antimony
Corporation, P.O. Box 643, Thompson Falls, MT 59873.
Summary Compensation Table
The
Securities and Exchange Commission requires the following table
setting forth the compensation paid by USAC to its principal
executive officer for fiscal years ended December 31, 2015 and
2014.
|
Name and Principal Position
|
Year
|
Salary
|
Bonus
|
Stock Awards (2)
|
Total
|
|
John
C. Lawrence,
|
2016
|
$
141,000
|
N/A
|
$
25,000
|
$
166,000
|
|
President
and Chief Executive Officer
|
2015
|
$
141,000
|
|
$
25,000
|
$
166,000
|
|
|
|
|
|
|
|
|
John
C. Gustaven,
|
2016
|
$
100,000
|
N/A
|
|
$
100,000
|
|
Executive
Vice President
|
2015
|
$
100,000
|
|
|
$
100,000
|
|
|
|
|
|
|
|
|
Russell
Lawrence,
|
2016
|
$
120,000
|
N/A
|
$
25,000
|
$
145,000
|
|
Vice
President for Latin America
|
2015
|
$
120,000
|
|
$
25,000
|
$
145,000
|
(2)
These figures
represent the fair value, as of the date of issuance, the annual
director's fees for John C. Lawrence and Russell Lawrence payable
in shares of USAC's common stock.
31
Compensation for
all executive officers, except for the President/CEO position, is
recommended to the compensation committee of the Board of Directors
by the President/CEO. The compensation committee makes the
recommendation for the compensation of the President/CEO. The
compensation committee has identified a peer group of mining
companies to aid in reviewing the President’s compensation
recommendations for executives, and for reviewing the compensation
of the President/CEO. The full Board approves the compensation
amounts recommended by the compensation committee. Currently, the
executive managements’ compensation only includes base salary
and health insurance. The Company does not have annual performance
based salary increases, long term performance based cash
incentives, deferred compensation, retirement benefits, or
disability benefits. For the year ended December 31, 2015, Russell
Lawrence (VP) received an increase in base compensation of $15,000
annually. The Board of Directors determined that Mr.
Lawrence’s compensation for the prior years was not adequate
for the duties assigned to Mr. Russell as the Vice President for
Latin America, and that a raise was appropriate to compensate for
management of the Latin American operations.
Two
executive officers, the President/CEO and the Vice-President for
the Latin American operations, receive restricted stock awards for
their services as Board members.
The
following table sets forth information concerning the outstanding
equity awards at December 31, 2016, held by our principal executive
officer. There were not any other outstanding equity awards or plan
based awards to officers or
directors as of
December 31, 2016.
|
Option
Awards
|
|||||
|
|
Number
of Securities Underlying
|
|
|
|
|
|
|
Unexercised
Options
|
|
|
|
|
|
|
Exercisable
|
Unexercisable
|
Underlying
Unexercised
|
Exercise
|
Expiration
|
|
Name
|
#
|
#
|
Unearned
Options
|
Price
|
Date
|
|
John
C. Lawrence
|
250,000
|
0
|
0
|
$
0.25
|
None
|
|
(Chairman
of the Board
of
Directors and Chief
Executive
Officer)
|
|
|
|
|
|
The
following table sets forth information regarding beneficial
ownership of our common stock as of March 30, 2017, by (i) each
person who is known by us to beneficially own more than 5% of our
Series B, C, and D preferred stock or common stock; (ii) each of
our executive officers and directors; and (iii) all of our
executive officers and directors as a group. Unless otherwise
stated, each person's address is c/o United States Antimony
Corporation, P.O. Box 643, 47 Cox Gulch, Thompson Falls, Montana
59873.
32
|
Title of Class
|
|
Name and Address of
Beneficial Owner
(1)
|
Amount and Nature of Beneficial Ownership
|
Percent of Class
(1)
|
Percent of all Voting Stock
|
|
Common
Stock
|
|
Reed
Family Limited Partnership
328
Adams Street
Milton,
MA 02186
|
4,018,335
|
5.95
%
|
5.80
%
|
|
Common
Stock
|
|
The
Dugan Family
c/o
A.W. Dugan
1415
Louisana Street, Suite 3100
Houston,
TX 77002
|
6,362,927
(3)
|
9.43
%
|
9.19
%
|
|
Series
B Preferred
|
|
Excel
Mineral Company
P.O.
Box 3800
Santa
Barbara, CA 93130
|
750,000
(5)
|
100.00
%
|
N/A
|
|
Series
C Preferred
|
|
Richard
A. Woods
59
Penn Circle West
Penn
Plaza Apts.
Pittsburgh,
PA 15206
|
48,305
(4)
|
27.10
%
|
*
|
|
Series
C Preferred
|
|
Dr.
Warren A. Evans
69
Ponfret Landing Road
Brooklyn,
CT 06234
|
32,203
(4)
|
18.10
%
|
*
|
|
Series
C Preferred
|
|
Edward
Robinson
1007
Spruce Street, 1st floor
Philadelphia,
PA 19107
|
32,203
(4)
|
18.10
%
|
*
|
|
Series
C Preferred
|
|
All
Series C Preferred Shareholders as a Group
|
177,904
(4)
|
100.00
%
|
*
|
|
|
|
John
C. Lawrence
|
4,343,607
(2)
|
68.59
%
|
6.27
%
|
|
|
|
Russell
Lawrence
|
343,145
|
5.42
%
|
*
|
|
|
|
Hart
Baitis
|
233,680
|
3.69
%
|
*
|
|
|
|
Garry
Babbitt
|
271,486
|
4.29
%
|
*
|
|
Common
Stock
|
|
Whitney
Ferer
|
162,500
|
2.57
%
|
*
|
|
|
|
Jeffrey
Wright
|
130,320
|
2.06
%
|
*
|
|
|
|
Mathew
Keane
|
10,300
|
0.16
%
|
*
|
|
|
|
Daniel
Parks
|
264,500
|
4.18
%
|
*
|
|
|
|
Craig
Thomas
|
572,711
|
9.04
%
|
*
|
|
Common
Stock
|
|
All
Directors and Executive Officers as a Group
|
6,332,249
|
100.00
%
|
9.16
%
|
|
|
|
John
C. Lawrence
|
1,590,672
(4)
|
90.80
%
|
2.29
%
|
|
Series
D Preferred
|
|
Leo
Jackson
|
102,000
|
5.80
%
|
*
|
|
|
|
Garry
Babbitt
|
58,333
|
3.40
%
|
*
|
|
Series
D Preferred
|
|
All
Series D Preferred Shareholders as a Group
|
1,751,005
(4)
|
100.00
%
|
2.52
%
|
|
|
|
All
Directors and Executive Officers as a Group
|
6,332,249
(2)
|
78.38
%
|
9.16
%
|
|
Common
Stock and Preferred Stock w/ voting rights
|
|
|
-
|
-
|
-
|
|
|
|
All
preferred Shareholders that are officers or directors
|
1,751,005
(4)
|
21.62
%
|
2.52
%
|
|
Common
and Preferred Voting Stock
|
|
All
Directors and Executive Officers as a Group
|
8,083,254
|
100.00
%
|
11.69
%
|
33
(1)
Beneficial Ownership
is determined in accordance with the rules of the Securities and
Exchange Commission and generally includes voting or investment
power with respect to securities. Shares of common stock subject to
options or warrants currently exercisable or convertible, or
exercisable or convertible within 60 days of March 31, 2017, are
deemed outstanding for computing the percentage of the person
holding options or warrants but are not deemed outstanding for
computing the percentage of any other person. Percentages are based
on a total of
67,066,278
shares of common stock, 750,000
shares of Series B Preferred Stock, 177,904 shares of Series C
Preferred Stock, and 1,751,005 shares of Series D Preferred Stock
outstanding on March 30, 2017. Total voting stock of 68,245,187
shares is a total of all the common stock issued, and all of the
Series C and Series D Preferred Stock outstanding at March 31,
2017.
(2)
Includes 4,031,107
shares of common stock and 250,000 stock purchase warrants.
Excludes 183,324 shares owned by the estate of Mr. Lawrence's
sister, as to which Mr. Lawrence disclaims beneficial
ownership.
(3)
Includes shares
owned by the estate of Al W. Dugan and shares owned by companies
owned and controlled by the estate of Al W. Dugan. Excludes 183,333
shares owned by Lydia Dugan as to which the estate of Mr. Dugan
disclaims beneficial ownership.
(4)
The outstanding
Series C and Series D preferred shares carry voting rights equal to
the same number of shares of common stock.
(5)
The outstanding Series
B preferred shares carry voting rights only if the Company is in
default in the payment of declared dividends. The Board of
Directors has not declared any dividends as due and payable for the
Series B preferred stock.
Described
below are transactions during the last two years to which we are a
party and in which any director, executive officer or beneficial
owner of five percent (5%) or more of any class of our voting
securities or relatives of our directors, executive officers or
five percent (5%) beneficial owners has a direct or indirect
material interest. See also transactions described in notes 4, 9,
10, 11, 12, 15 and 19 to our Financial Statements as of December
31, 2015.
On
March 23, 2015, the Company issued the Board members 183,825 shares
of the Company’s common stock for services in 2014 with a
value of $125,000.
During
2015, the Company awarded, but did not issue, common stock with a
value at December 31, 2015, of $137,500 to its Board of Directors
as compensation for their services as directors. In connection with
the issuances, the Company recorded $137,500 in director
compensation expense.
On
March 31 and August 11, 2015, the Company issued Herbert Denton,
the Company investor relations consultant, 5,000 and 100,000
shares, respectively, of the Company’s common stock in
exchange for services. On September 30, 2105, a note receivable for
$30,000 due from Mr. Denton for was cancelled, and $30,000 was
deleted from additional paid in capital.
In
March of 2016 the Company issued the Board members 550,000 shares
of the Company’s common stock at $0.25 per share for services
in 2015 with a value of $137,500.
In
December of 2016, the Company issued Daniel Parks, the
Company’s Chief Financial Officer, 200,000 shares of the
Company’s common stock valued at $54,000 to retain his
services for a two year period. As part of the agreement, Mr.
Parks’ hours worked and normal compensation will be
reduced.
During
2016, the Company awarded, but did not issue, common stock with a
value at December 31, 2016, of $168,750 to its Board of Directors
as compensation for their services as directors. In connection with
the issuances, the Company recorded $168,750 in director
compensation expense. In March of 2017, at a price of $0.40 per
share, the directors were issued 421,875 shares for
2016.
We
reimbursed John C. Lawrence, a director and Chief Executive
Officer, for operational and maintenance expenses incurred in
connection with our use of equipment owned by Mr. Lawrence,
including welding trucks, backhoes, and an aircraft. Reimbursements
for 2016 and 2015 totaled $16,791 and $32,397,
respectively.
34
The
Company's Board of Directors and audit committee reviews and
approves audit and permissible non-audit services performed by
DeCoria, Maichel & Teague P.S., as well as the fees charged by
DeCoria, Maichel & Teague P.S. for such services. In its review
of non-audit service fees and its appointment of DeCoria, Maichel
& Teague P.S. as the Company's independent accountants, the
Board of Directors considered whether the provision of such
services is compatible with maintaining DeCoria, Maichel &
Teague P.S. independence. All of the services provided and fees
charged by DeCoria, Maichel & Teague P.S. in 2016 were
pre-approved by the Board of Directors and its audit
committee.
Audit Fees
The
aggregate fees billed by DeCoria, Maichel & Teague P.S. for
professional services for the audit of the annual financial
statements of the Company and the reviews of the financial
statements included in the Company's quarterly reports on Form 10-Q
for 2016 and 2015 were $134,985 and $151,741, respectively, net of
expenses.
Audit-Related Fees
There
were no other fees billed by DeCoria, Maichel & Teague P.S.
during the last three fiscal years for assurance and related
services that were reasonably related to the performance of the
audit or review of the Company's financial statements and not
reported under "Audit Fees" above.
Tax Fees
The
aggregate fees billed by DeCoria, Maichel & Teague P.S. during
the last two fiscal years for professional services rendered by
DeCoria, Maichel & Teague P.S. for tax compliance for 2016 and
2015 were $12,695 and $10,115, respectively.
All Other Fees
There
were no other fees billed by DeCoria, Maichel & Teague P.S.
during the last two fiscal years for products and services provided
by DeCoria, Maichel & Teague P.S
35
|
Exhibit Number
|
|
Description
|
|
|
|
|
|
3.01
|
|
Articles of Incorporation of USAC, filed as an exhibit to USAC's
Form 10-KSB for the fiscal year ended December 31, 1995 (File
No.001-08675), are incorporated herein by this
reference.
|
|
|
|
|
|
3.02
|
|
Amended and Restated Bylaws of USAC, filed as an exhibit to
amendment No. 2 to USAC's Form SB-2 Registration Statement (Reg.
No. 333-45508) are incorporated herein by this
reference.
|
|
|
|
|
|
3.03
|
|
Articles of Correction of Restated Articles of Incorporation of
USAC.
|
|
|
|
|
|
3.04
|
|
Articles of Amendment to the Articles of Incorporation of United
States Antimony Corporation, filed as an exhibit to USAC's Form
10-QSB for the quarter ended September 30, 2002 (File No.
001-08675), are incorporated herein by this reference.
|
|
|
|
|
|
4.01
|
|
Key Employees 2000 Stock Plan, filed as an exhibit to USAC's Form
S-8 Registration Statement filed on March 10, 2000 (File No.
333-32216) is incorporated herein by this reference.
|
Documents
filed with USAC's Annual Report on Form 10-KSB for the year ended
December 31, 1995 (File No. 001-08675), are incorporated herein by
this reference:
|
10.1
|
|
Yellow Jacket Venture Agreement
|
|
|
|
|
|
10.11
|
|
Agreement Between Excel-Mineral USAC and Bobby C.
Hamilton
|
|
|
|
|
|
10.12
|
|
Letter Agreement
|
|
|
|
|
36
|
10.13
|
|
Columbia-Continental Lease Agreement Revision
|
|
|
|
|
|
10.14
|
|
Settlement Agreement with Excel Mineral Company
|
|
|
|
|
|
10.15
|
|
Memorandum Agreement
|
|
|
|
|
|
10.16
|
|
Termination Agreement
|
|
|
|
|
|
10.17
|
|
Amendment to Assignment of Lease (Geosearch)
|
|
|
|
|
|
10.18
|
|
Series B Stock Certificate to Excel-Mineral Company,
Inc.
|
|
|
|
|
|
10.19
|
|
Division Order and Purchase and Sale Agreement
|
|
|
|
|
|
10.2
|
|
Inventory and Sales Agreement
|
|
|
|
|
|
10.21
|
|
Processing Agreement
|
|
|
|
|
|
10.22
|
|
Release and settlement agreement between Bobby C. Hamilton and
United States Antimony Corporation
|
|
|
|
|
|
10.23
|
|
Columbia-Continental Lease Agreement
|
|
|
|
|
|
10.24
|
|
Release of Judgment
|
|
|
|
|
|
10.25
|
|
Covenant Not to Execute
|
|
|
|
|
|
10.26
|
|
Warrant Agreements filed as an exhibit to USAC's Annual Report on
Form 10-KSB for the year ended December 31, 1996 (File No.
001-08675), are incorporated herein by this reference
|
|
|
|
|
|
10.27
|
|
Letter from EPA, Region 10 filed as an exhibit to USAC's Quarterly
Report on Form 10-QSB for the quarter ended September 30, 1997
(File No. 001-08675) is incorporated herein by this
reference
|
|
|
|
|
|
10.28
|
|
Warrant Agreements filed as an exhibit to USAC's Annual Report on
Form 10-KSB for the year ended December 31, 1997 (File No.
001-08675) are incorporated herein by this reference
|
|
|
|
|
|
10.3
|
|
Answer, Counterclaim and Third-Party Complaint filed as an exhibit
to USAC's Quarterly Report on Forms 10-QSB for the quarter ended
September 30, 1998 (File No. 001-08675) is incorporated herein by
this reference
|
Documents
filed with USAC's Annual Report on Form 10-KSB for the year ended
December 31, 1998 (File No. 001-08675), are incorporated herein by
this reference:
|
10.31
|
|
Warrant Issue-Al W. Dugan
|
|
|
|
|
|
10.32
|
|
Amendment Agreement
|
Documents
filed with USAC's Quarterly Report on Form 10-QSB for the quarter
ended March 31, 1999 (File No. 001-08675) is incorporated herein by
this reference:
|
10.33
|
|
Warrant Issue-John C. Lawrence
|
|
|
|
|
|
10.34
|
|
PVS Termination Agreement
|
37
Documents
filed as an exhibit to USAC's Form 10-KSB for the year ended
December 31, 1999 (File No. 001-08675) are incorporated herein by
this reference:
|
10.35
|
|
Maguire Settlement Agreement
|
|
|
|
|
|
10.36
|
|
Warrant Issue-Carlos Tejada
|
|
|
|
|
|
10.37
|
|
Warrant Issue-Al W. Dugan
|
|
|
|
|
|
10.38
|
|
Memorandum of Understanding with Geosearch Inc.
|
|
|
|
|
|
10.39
|
|
Factoring Agreement-Systran Financial Services Company
|
|
|
|
|
|
10.4
|
|
Mortgage to John C. Lawrence
|
|
|
|
|
|
10.41
|
|
Warrant Issue-Al W. Dugan filed as an exhibit to USAC's Quarterly
Report on Form 10-QSB for the quarter ended March 31, 2000 (File
No. 001-08675) is incorporated herein by this
reference
|
|
|
|
|
|
10.42
|
|
Agreement between United States Antimony Corporation and Thomson
Kernaghan & Co., Ltd. filed as an exhibit to USAC form 10-QSB
for the quarter ended June 30, 2000 (File No. 001-08675) are
incorporated herein by this reference
|
|
|
|
|
|
10.43
|
|
Settlement agreement and release of all claims between the Estate
of Bobby C. Hamilton and United States Antimony Corporation filed
as an exhibit to USAC form 10-QSB for the quarter ended June 30,
2000 (File No. 001-08675) are incorporated herein by this
reference.
|
|
|
|
|
|
10.44
|
|
Supply Contracts with Fortune America Trading Ltd. filed as an
exhibit to USAC form 10-QSB for the quarter ended June 30, 2000
(File No. 001-08675) are incorporated herein by this
reference
|
|
|
|
|
|
10.45
|
|
Amended and Restated Agreements with Thomson Kernaghan & Co.,
Ltd, filed as an exhibit to amendment No. 3 to USAC's Form SB-2
Registration Statement (Reg. No. 333-45508), are incorporated
herein by this reference
|
|
|
|
|
|
10.46
|
|
Purchase Order from Kohler Company, filed as an exhibit to
amendment No. 4 to USAC's Form SB-2 Registration Statement (Reg.
No. 333-45508) are incorporated herein by this
reference
|
Documents
filed as an exhibit to USAC's Form 10-QSB for the quarter ended
June 30, 2002 (File No. 001-08675) are incorporated herein by this
reference:
|
10.47
|
|
Bear River Zeolite Company Royalty Agreement, dated May 29,
2002
|
|
|
|
|
|
10.48
|
|
Grant of Production Royalty, dated June 1, 2002
|
|
|
|
|
|
10.49
|
|
Assignment of Common Stock of Bear River Zeolite Company, dated May
29, 2002
|
|
|
|
|
|
10.5
|
|
Agreement to Issue Warrants of USA, dated May 29, 2002
|
|
|
|
|
|
10.51
|
|
Secured convertible note payable - Delaware Royalty Company dated
December 22, 2003*
|
|
|
|
|
|
10.52
|
|
Convertible note payable - John C. Lawrence dated December 22,
2003*
|
|
|
|
|
|
10.53
|
|
Pledge, Assignment and Security Agreement dated December 22,
2003*
|
|
|
|
|
|
10.54
|
|
Note Purchase Agreement dated December 22, 2003*
|
|
|
|
|
38
|
14
|
|
Code of Ethics*
|
|
|
|
|
|
31.1
|
|
Rule 13a-14(a)/15d-14(a) Certifications
|
|
|
|
Certification of John C. Lawrence*
|
|
|
|
|
|
32.1
|
|
Section 1350 Certifications
|
|
|
|
Certification of John C. Lawrence*
|
|
|
|
|
|
44.1
|
|
CERCLA Letter from U.S. Forest Service filed as an exhibit to USAC
form 10-QSB for the quarter ended June 30, 2000 (File No.
001-08675) are incorporated herein by this reference and filed as
an exhibit to USAC's Form 10-KSB for the year ended December 31,
1995 (File No. 1-8675) is incorporated herein by this
reference
|
* Filed
herewith.
Reports
on Form 8-K
39
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.
|
|
UNITED STATES
ANTIMONY CORPORATION
|
|
|
|
|
(Registrant) |
|
|
|
|
|
|
|
|
Date:
March
31, 2017
|
By:
|
/s/
John C.
Lawrence
|
|
|
|
|
John C. Lawrence |
|
|
|
|
President, Director, and Principal Executive Officer |
|
|
|
|
|
|
|
Date:
March
31, 2017
|
By:
|
/s/ Daniel L. Parks |
|
|
|
|
Daniel L. Parks |
|
|
|
|
Chief Financial Officer |
|
|
|
|
|
|
|
Date:
March
31, 2017
|
By:
|
/s/ Alicia Hill |
|
|
|
|
Alicia Hill |
|
|
|
|
Controller |
|
|
|
|
|
|
|
|
|
|
|
Pursuant
to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the dates
indicated.
|
Date:
March
31, 2017
|
By:
|
/s/
John C.
Lawrence
|
|
|
|
|
John C.
Lawrence
|
|
|
|
|
Director and
President
(Principal
Executive)
|
|
|
|
|
|
|
|
Date:
March
31, 2017
|
By:
|
/s/
Whitney
Ferer
|
|
|
|
|
Whitney
Ferer
|
|
|
|
|
Director
|
|
|
|
|
|
|
|
Date:
March
31, 2017
|
By:
|
/s/
Gary
Babbitt
|
|
|
|
|
Gary
Babbitt
|
|
|
|
|
Director
|
|
|
|
|
|
|
|
Date:
March
31, 2017
|
By:
|
/s/
Hart
Baitis
|
|
|
|
|
Hart
Baitis
|
|
|
|
|
Director
|
|
|
|
|
|
|
|
Date:
March
31, 2017
|
By:
|
/s/
Russell
Lawrence
|
|
|
|
|
Russell
Lawrence
|
|
|
|
|
Director
|
|
|
|
|
|
|
|
Date:
March
31, 2017
|
By:
|
/s/
Jeffrey
Wright
|
|
|
|
|
Jeffrey
Wright
|
|
|
|
|
Director
|
|
|
|
|
|
|
|
Date:
March
31, 2017
|
By:
|
/s/
Craig
Thomas
|
|
|
|
|
Craig
Thomas
|
|
|
|
|
Director
|
|
40
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of United States
Antimony Corporation:
We have audited the accompanying consolidated balance sheets of
United States Antimony Corporation and Subsidiaries (“the
Company”) as of December 31, 2016 and 2015, and the related
consolidated statements of operations, changes in
stockholders’ equity and cash flows for the years then ended.
These consolidated financial statements are the responsibility of
the Company’s management. Our responsibility is to express an
opinion on the consolidated financial statements based on our
audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated
financial position of United States Antimony Corporation and
Subsidiaries as of December 31, 2016 and 2015, and the results of
its operations and its cash flows for the years then ended in
conformity with accounting principles generally accepted in the
United States of America.
/s/: DeCoria, Maichel & Teague, P.S.
DeCoria, Maichel & Teague, P.S.
Spokane, Washington
March 27, 2017
F-1
United States Antimony Corporation and Subsidiaries
December 31, 2016 and 2015
|
ASSETS
|
|
|
|
|
2016
|
2015
|
|
Current
assets:
|
|
|
|
Cash
and cash equivalents
|
$
10,057
|
$
133,543
|
|
Certificates
of deposit
|
251,641
|
250,414
|
|
Accounts
receivable, net
|
552,119
|
422,673
|
|
Inventories
|
855,637
|
1,094,238
|
|
Other
current assets
|
23,101
|
235,458
|
|
Total
current assets
|
1,692,555
|
2,136,326
|
|
|
|
|
|
Properties,
plants and equipment, net
|
15,695,966
|
16,030,333
|
|
Restricted
cash for reclamation bonds
|
63,274
|
76,012
|
|
Other
assets
|
314,203
|
17,530
|
|
Total
assets
|
$
17,765,998
|
$
18,260,201
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
|
Current
liabilities:
|
|
|
|
Checks
issued and payable
|
$
35,682
|
$
-
|
|
Accounts
payable
|
1,797,251
|
1,629,972
|
|
Due
to factor
|
150,399
|
13,782
|
|
Accrued
payroll, taxes and interest
|
213,695
|
221,446
|
|
Other
accrued liabilities
|
122,968
|
141,545
|
|
Payables
to related parties
|
14,525
|
32,396
|
|
Deferred
revenue
|
78,730
|
78,730
|
|
Notes
payable to bank
|
167,317
|
130,672
|
|
Income
taxes payable (Note 13)
|
410,510
|
-
|
|
Long-term
debt, current portion, net of discount
|
391,046
|
181,287
|
|
Total
current liabilities
|
3,382,123
|
2,429,830
|
|
|
|
|
|
Long-term
debt, net of discount and current portion
|
1,472,869
|
1,717,745
|
|
Hillgrove
advances payable (Note 10)
|
1,134,221
|
1,254,846
|
|
Stock
payable to directors for services
|
168,750
|
137,500
|
|
Asset
retirement obligations and accrued reclamation costs
|
265,782
|
260,327
|
|
Total
liabilities
|
6,423,745
|
5,800,248
|
|
Commitments
and contingencies (Note 4, 10 and 15)
|
|
|
|
|
|
|
|
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 $915,000 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 $4,920,178 and $4,879,029
|
|
|
|
respectively)
|
17,509
|
17,509
|
|
Common
stock, $0.01 par value, 90,000,000 shares authorized;
|
|
|
|
67,066,278
and 66,316,278 shares issued and outstanding,
respectively
|
670,662
|
663,162
|
|
Additional
paid-in capital
|
36,074,733
|
35,890,733
|
|
Accumulated
deficit
|
(25,429,930
)
|
(24,120,730
)
|
|
Total
stockholders' equity
|
11,342,253
|
12,459,953
|
|
Total
liabilities and stockholders' equity
|
$
17,765,998
|
$
18,260,201
|
The accompanying notes are an integral part of these consolidated
financial statements.
F-2
United States Antimony Corporation and Subsidiaries
For the years ended December 31, 2016 and 2015
|
|
2016
|
2015
|
|
|
|
|
|
REVENUES
|
$
11,890,135
|
$
13,109,003
|
|
|
|
|
|
COST OF REVENUES
|
11,353,484
|
13,521,363
|
|
|
|
|
|
GROSS PROFIT (LOSS)
|
536,651
|
(412,360
)
|
|
|
|
|
|
OPERATING
EXPENSES:
|
|
|
|
General
and administrative
|
681,487
|
736,265
|
|
Salaries
and benefits
|
483,937
|
436,897
|
|
Gain
on liability adjustment (Note 5)
|
-
|
(914,770
)
|
|
Hillgrove
advance - earned credit (Note 10)
|
(120,329
)
|
(142,170
)
|
|
Professional
fees
|
308,078
|
280,415
|
|
TOTAL
OPERATING EXPENSES
|
1,353,173
|
396,637
|
|
|
|
|
|
INCOME
(LOSS) FROM OPERATIONS
|
(816,522
)
|
(808,997
)
|
|
|
|
|
|
OTHER
INCOME (EXPENSE):
|
|
|
|
Other
income
|
-
|
5,200
|
|
Interest
income
|
1,437
|
6,383
|
|
Interest
expense
|
(160,795
)
|
-
|
|
Factoring
expense
|
(35,182
)
|
(41,117
)
|
|
TOTAL
OTHER INCOME (EXPENSE)
|
(194,540
)
|
(29,534
)
|
|
|
|
|
|
INCOME
(LOSS) BEFORE INCOME TAXES
|
(1,011,062
)
|
(838,531
)
|
|
|
|
|
|
INCOME
TAX PROVISION
|
(298,138
)
|
-
|
|
|
|
|
|
NET INCOME (LOSS)
|
(1,309,200
)
|
(838,531
)
|
|
|
|
|
|
Preferred
dividends
|
(48,649
)
|
(48,649
)
|
|
Net
income (loss) available to
|
|
|
|
common
stockholders
|
$
(1,357,849
)
|
$
(887,180
)
|
|
|
|
|
|
Net
income (loss) per share of
|
|
|
|
common
stock:
|
|
|
|
Basic
and diluted
|
$
(0.02
)
|
$
(0.01
)
|
|
|
|
|
|
Weighted
average shares outstanding:
|
|
|
|
Basic
and diluted
|
66,781,757
|
66,207,241
|
The accompanying notes are an integral part of these consolidated
financial statements.
F-3
United States Antimony Corporation and Subsidiaries
Consolidated Statement of Changes in Stockholders'
Equity
For the years ended December 31, 2016 and 2015
|
|
|
|
|
|
Additional
|
Notes Receivable
|
|
|
|
|
Total Preferred Stock
|
Common Stock
|
Paid
|
For
|
Accumulated
|
|
||
|
|
Shares
|
Amount
|
Shares
|
Amount
|
In Capital
|
Stock Sales
|
Deficit
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
Balances,
December 31, 2014
|
2,678,909
|
$
26,788
|
66,027,453
|
$
660,274
|
$
35,740,671
|
$
(150,000
)
|
$
(23,282,199
)
|
$
12,995,534
|
|
|
|
|
|
|
|
|
|
-
|
|
Issuance of
common stock to directors for services
|
|
|
183,825
|
1,838
|
123,162
|
|
|
125,000
|
|
Issuance of
common stock to consultant for services and settlement
agreement
|
|
|
105,000
|
1,050
|
56,900
|
|
|
57,950
|
|
Forgiveness of
note receivable
|
|
|
|
|
(30,000
)
|
30,000
|
|
-
|
|
Cash received
on notes receivable
|
|
|
|
|
|
120,000
|
|
120,000
|
|
Net
loss
|
|
|
|
|
|
|
(838,531
)
|
(838,531
)
|
|
|
|
|
|
|
|
|
|
|
|
Balances,
December 31, 2015
|
2,678,909
|
$
26,788
|
66,316,278
|
$
663,162
|
$
35,890,733
|
$
-
|
$
(24,120,730
)
|
$
12,459,953
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of
common stock to directors for services
|
|
|
550,000
|
5,500
|
132,000
|
|
|
137,500
|
|
Issuance of
common stock to chief financial officer
|
|
|
200,000
|
2,000
|
52,000
|
|
|
54,000
|
|
Net
loss
|
|
|
|
|
|
|
(1,309,200
)
|
(1,309,200
)
|
|
|
|
|
|
|
|
|
|
|
|
Balances,
December 31, 2016
|
2,678,909
|
$
26,788
|
67,066,278
|
$
670,662
|
$
36,074,733
|
$
-
|
$
(25,429,930
)
|
$
11,342,253
|
The accompanying notes are an integral part of these consolidated
financial statements.
F-4
United States Antimony Corporation and Subsidiaries
For the years ended December 31, 2016 and 2015
|
Cash
Flows From Operating Activities:
|
2016
|
2015
|
|
Net
income (loss)
|
$
(1,309,200
)
|
$
(838,531
)
|
|
Adjustments
to reconcile net income (loss) to net cash
|
|
|
|
provided
(used) by operating activities:
|
|
|
|
Depreciation
and amortization
|
999,737
|
932,786
|
|
Amortization
of debt discount
|
70,590
|
-
|
|
Gain
on sale of equipment
|
-
|
(5,200
)
|
|
Bad
debt expense
|
-
|
18,668
|
|
Hillgrove
advance earned credit
|
(120,329
)
|
(142,170
)
|
|
Accretion
of asset retirement obligation
|
5,455
|
5,137
|
|
Common
stock issued for services
|
54,000
|
57,950
|
|
Common
stock accrued for directors fees
|
168,750
|
137,500
|
|
Non-cash
miscellaneous income
|
(1,595
)
|
-
|
|
Change
in:
|
|
|
|
Accounts
receivable
|
(129,446
)
|
13,333
|
|
Inventories
|
238,601
|
339,301
|
|
Other
current assets
|
212,356
|
(194,357
)
|
|
Other
assets
|
(296,673
)
|
49,382
|
|
Accounts
payable
|
167,280
|
(191,701
)
|
|
Accrued
payroll, taxes and interest
|
(7,751
)
|
86,201
|
|
Other
accrued liabilities
|
(18,577
)
|
66,115
|
|
Income
taxes payable
|
410,510
|
-
|
|
Payables
to related parties
|
(17,871
)
|
24,039
|
|
Net
cash provided by operating activities
|
425,837
|
358,453
|
|
|
|
|
|
Cash
Flows From Investing Activities:
|
|
|
|
Redemption
of reclamation bonds
|
12,810
|
-
|
|
Proceeds
from sale of equipment
|
-
|
5,200
|
|
Purchase
of properties, plants and equipment
|
(595,839
)
|
(1,709,237
)
|
|
Net
cash used by investing activities
|
(583,029
)
|
(1,704,037
)
|
|
|
|
|
|
Cash
Flows From Financing Activities:
|
|
|
|
Net
proceeds from factor
|
136,617
|
468
|
|
Proceeds
from Hillgrove advances
|
-
|
1,198,445
|
|
Proceeds
from notes payable to bank, net
|
36,645
|
130,672
|
|
Principal
payments of long-term debt
|
(175,238
)
|
(94,141
)
|
|
Checks
issued and payable
|
35,682
|
-
|
|
Received
on notes receivable for stock sales
|
-
|
120,000
|
|
Net
cash provided by financing activities
|
33,706
|
1,355,444
|
|
NET
INCREASE (DECREASE) IN CASH
|
|
|
|
AND
CASH EQUIVALENTS
|
(123,486
)
|
9,860
|
|
Cash
and cash equivalents at beginning of year
|
133,543
|
123,683
|
|
Cash
and cash equivalents at end of year
|
$
10,057
|
$
133,543
|
|
|
|
|
|
SUPPLEMENTAL
DISCLOSURE OF CASH FLOW INFORMATION
|
|
|
|
Interest
paid in cash (net of amount capitalized)
|
$
14,694
|
|
|
Income
taxes paid in cash
|
13,090
|
|
|
Noncash
investing and financing activities:
|
|
|
|
Properties,
plants & equipment acquired with long-term debt
|
42,735
|
$
1,061,479
|
|
Properties,
plants & equipment acquired with accrued liability
|
|
36,619
|
|
Imputed
interest capitalized as property, plant and equipment
|
26,796
|
57,088
|
|
Properties,
plants & equipment acquired with other long term
assets
|
|
586,893
|
|
Common
stock payable issued to directors
|
137,500
|
125,000
|
|
Forgiveness
of note receivable for stock sales
|
|
30,000
|
The accompanying notes are an integral part of these consolidated
financial statements.
F-5
United States Antimony Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2016 and 2015
1. Background of Company and Basis of
Presentation
AGAU
Mines, Inc., predecessor of United States Antimony Corporation
("USAC" or "the Company"), was incorporated in June 1968 as a
Delaware corporation to mine gold and silver. USAC was incorporated
in Montana in January 1970 to mine and produce antimony products.
In June 1973, AGAU Mines, Inc. was merged into USAC. In December
1983, the Company suspended its antimony mining operations when it
became possible to purchase antimony raw materials more
economically from foreign sources. The principal business of the
Company has been the production and sale of antimony
products.
During
2000, the Company formed a 75% owned subsidiary, Bear River Zeolite
Company ("BRZ"), to mine and market zeolite and zeolite products
from a mineral deposit in southeastern Idaho. In 2001, an operating
plant was constructed at the zeolite site and zeolite production
and sales commenced. During 2002, the Company acquired the
remaining 25% of BRZ and continued to produce and sell zeolite
products.
During
2005, the Company formed a 100% owned subsidiary, Antimonio de
Mexico S.A. de C.V. (“AM”), to explore and develop
potential antimony properties in Mexico.
During
2006, the Company acquired 100% ownership in United States
Antimony, Mexico S.A. de C.V. (“USAMSA”), which became
a wholly-owned subsidiary of the Company.
2. Concentrations of Risk
|
|
For the Year Ended
|
|
|
Sales to
Largest
Customers
|
December 31,
2016
|
December 31,
2015
|
|
Mexichem
Specialty Compounds Inc.
|
$
2,108,998
|
$
3,142,586
|
|
East
Penn Manufacturing Inc
|
1,147,854
|
1,236,250
|
|
Kohler
Corporation
|
1,474,854
|
1,736,914
|
|
|
$
4,731,706
|
$
6,115,750
|
|
% of Total Revenues
|
39.80
%
|
46.70
%
|
|
Largest
Accounts
Receivable
|
December 31,
2016
|
December 31,
2015
|
|
Gopher
Resources
|
|
$
141,570
|
|
GE
Lighting
|
$
162,582
|
|
|
Teck
American Inc
|
|
80,946
|
|
Kohler
Corporation
|
151,500
|
|
|
Wildfire
Construction
|
|
43,327
|
|
|
$
314,082
|
$
265,843
|
|
% of Total Receivables
|
83.90
%
|
62.90
%
|
The
Company's revenues from antimony sales are strongly influenced by
world prices for such commodities, which fluctuate and are affected
by numerous factors beyond the Company's control, including
inflation and worldwide forces of supply and demand. The aggregate
effect of these factors is not possible to predict
accurately.
3. Summary of Significant Accounting Policies
Principles of Consolidation
The
Company's consolidated financial statements include the accounts of
BRZ, USAMSA and AM, all wholly-owned subsidiaries. Intercompany
balances and transactions are eliminated in
consolidation.
F-6
United States Antimony Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2016 and 2015
3. Summary of Significant Accounting Policies,
Continued:
Use of Estimates
The
preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during
the reporting period. Significant and critical estimates include
property, plant and equipment depreciation and impairment, accounts
receivable allowance, deferred income taxes, income taxes payable,
environmental remediation liabilities and asset retirement
obligations. Actual results could differ from those
estimates.
Cash and Cash Equivalents
The
Company considers cash in banks and investments with original
maturities of three months or less when purchased to be cash
equivalents.
Restricted Cash
Restricted cash at
December 31, 2016 and 2015 consists of cash held for reclamation
performance bonds, and is held as certificates of deposit with
financial institutions.
Accounts Receivable
Accounts receivable
are stated at the amount that management expects to collect from
outstanding balances. Management provides for probable
uncollectible amounts through an allowance for doubtful accounts.
Changes to the allowance for doubtful accounts are based on
management’s judgment, considering historical write-offs,
collections and current credit conditions. Balances which remain
outstanding after management has used reasonable collection efforts
are written off through a charge to the allowance for doubtful
accounts and a credit to the applicable accounts receivable.
Payments received on receivables subsequent to being written off
are considered a bad debt recovery.
Inventories
Inventories at
December 31, 2016 and 2015 consisted of finished antimony products,
antimony metal, antimony concentrates, antimony ore, and finished
zeolite products, and are stated at the lower of first-in,
first-out weighted average 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 allocated based on production
quantity. Stockpiled ore is carried at the lower of average cost or
net realizable value. Since the Company's antimony inventory is a
commodity with a sales value that is subject to world prices for
antimony that are beyond the Company's control, a significant
change in the world market price of antimony could have a
significant effect on the net realizable value of inventories. The
Company periodically reviews its inventories to identify excess and
obsolete inventories and to estimate reserves for obsolete
inventories as necessary to reflect inventories at net realizable
value.
Translations of Foreign Currencies
All
amounts are presented in United States (US) Dollars, and the US
Dollar is the functional currency of the Company and its foreign
subsidiaries. All transactions are carried out in US Dollars, or
translated at the time of the transaction.
F-7
United States Antimony Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2016 and 2015
3. Summary of Significant Accounting Policies,
continued:
Going Concern Consideration
At
December 31, 2016, our financial statements show that we have
negative working capital of approximately $1.7 million and
accumulated deficit of approximately $25.4 million. In
addition, we have incurred losses for the prior three years.
These factors indicate that there may be doubt regarding our
ability to continue as a going concern for the next twelve
months.
During
the year ended December 31, 2016, we endured some of the lowest
prices for antimony in the past seven years, with an average sales
price for our products of only $2.98 per pound of metal
contained. As of late March 2017, the price for antimony
metal contained is approximately $4.00 per pound. While we
experience an increase in our raw material cost in the United
States as a result, most of the $1.02 market increase will result
in increased cash flow.
In
addition, we have cut costs for our labor at our Mexico locations
which will result in a lower cost of raw material from Mexico.
These cuts have resulted from not processing concentrates from
Hillgrove Mines of Australia LTD in 2017. This has resulted in a
large reduction in our work force at our Madero smelter, along with
a significant decrease in our operating costs for fuel, natural
gas, electricity, and reagents. Although our total production in
Mexico will decrease due to the lack of Hillgrove concentrates, we
are ramping up production from our own mining properties. We are
currently on schedule to have seventeen small rotating furnaces in
operation by the second quarter of 2017.
In
addition, we have implemented wage and other cost reductions across
at the corporate level that will decrease our administrative costs
in 2017. We expect to continue paying a low cost for propane in
Montana, which in years past has been a major operating
cost.
In
2017, we have negotiated a reduced monthly lease cost for the
Wadley mine of approximately $11,600 a decrease from $23,200 per
month. In addition, we paid the final installment to purchase
mining concessions in the Los Juarez mining area. In 2015 and
2016, we paid $100,000 and $68,600, respectively, for these
concession rights.
We
believe that our current circumstances and actions taken by
management will enable us to be actively operating for the next
twelve months.
Properties, Plants and Equipment
Properties, plants
and equipment are stated at historical cost and are depreciated
using the straight-line method over estimated useful lives of two
to thirty years. Vehicles and office equipment are stated at cost
and are depreciated using the straight-line method over estimated
useful lives of three to twelve years. Maintenance and repairs are
charged to operations as incurred. Betterments of a major nature
are capitalized. Expenditures for new property, plant, equipment,
and improvements that extend the useful life or functionality of
the asset are capitalized. The Company capitalized $665,370 and
$3,451,317 in plant construction and other capital costs for the
years ended December 31, 2016 and 2015, respectively. These amounts
include capitalized interest of $35,305 and $66,965, respectively.
When assets are retired or sold, the costs and related accumulated
depreciation are eliminated from the accounts and any resulting
gain or loss is reflected in operations.
Mineral
properties are amortized over the estimated economic life of the
mineral resource using the straight-line method, based upon
estimated lives of the properties, or the units-of-production
method, based upon estimated units of mineral
resource.
F-8
United States Antimony Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2016 and 2015
3. Summary of Significant Accounting Policies,
continued:
Management of the
Company periodically reviews the net carrying value of all of its
long-lived assets. These reviews consider the net realizable value
of each asset or group to determine whether a permanent impairment
in value has occurred and the need for any asset write-down. An
impairment loss is recognized when the estimated future cash flows
(undiscounted and without interest) expected to result from the use
of an asset are less than the carrying amount of the asset.
Measurement of an impairment loss is based on the estimated fair
value of the asset if the asset is expected to be held and
used.
Mineral Rights
The
costs to obtain the legal right to explore, extract and retain at
least a portion of the benefits from mineral deposits are
capitalized as mineral rights in the year of acquisition. These
capitalized costs are amortized on the statement of operations
using the straight line method over the expected life of the
mineral deposit when placed into production. Mineral rights are
assessed for impairment when facts and circumstances indicate that
the potential for impairment exists. No impairment has been
indicated for the years ended December 31, 2016 or 2015 as a result
of this assessment. Mineral rights are subject to write down in the
period the property is abandoned.
Exploration and Development
The
Company records exploration costs as operating expenses in the
period they occur, and capitalizes development costs on discrete
mineralized bodies that have proven reserves in compliance with
Securities and Exchange Commission Industry Guide 7, and are in
development or production.
Asset Retirement Obligations and Reclamation Costs
All of
the Company's mining operations are subject to reclamation and
remediation requirements. Minimum standards for mine reclamation
have been established by various governmental agencies. Costs are
estimated based primarily upon environmental and regulatory
requirements and are accrued. The liability for reclamation is
classified as current or noncurrent based on the expected timing of
expenditures. Reclamation differs from an asset retirement
obligation in that no associated asset is recorded in the case of
reclamation liabilities.
It is
reasonably possible that because of uncertainties associated with
defining the nature and extent of environmental contamination,
application of laws and regulations by regulatory authorities, and
changes in remediation technology, the ultimate cost of remediation
and reclamation could change in the future. The Company continually
reviews its accrued liabilities for such remediation and
reclamation costs as evidence becomes available indicating that its
remediation and reclamation liability has changed.
The
Company records the fair value of an asset retirement obligation as
a liability in the period in which the Company incurs a legal
obligation for the retirement of long-lived assets if it is
probable that such costs will be incurred and they are reasonably
estimable. A corresponding asset is also recorded and depreciated
over the life of the assets on a straight line basis. After the
initial measurement of the asset retirement obligation, the
liability will be adjusted to reflect changes in the estimated
future cash flows underlying the obligation. Determination of any
amounts included in determination of fair value is based upon
numerous estimates and assumptions, including future retirement
costs, future inflation rates, and the Company’s
credit-adjusted risk-free interest rates.
Revenue Recognition
Sales
of antimony and zeolite products are recorded upon shipment and
when title passes to the customer. Prepayments received from
customers prior to the time that products are processed and shipped
are recorded as deferred revenue. When the related products are
shipped, the amount recorded as deferred revenue is recognized as
revenue. The Company's sales agreements do not provide for product
returns or allowances.
Sales
of precious metals are recognized when pervasive evidence of an
arrangement exists, the price is reasonably determinable, the
product has been delivered, no obligations remain, and collection
is reasonably assured.
F-9
United States Antimony Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2016 and 2015
3. Summary of Significant Accounting Policies,
continued:
Common Stock Issued for Consideration Other than Cash
All
transactions in which goods or services are received for the
issuance of shares of the Company’s common stock are
accounted for based on the fair value of the consideration received
or the fair value of the common stock issued, whichever is more
readily determinable.
Income Taxes
Income
taxes are accounted for under the liability method. Under this
method, deferred income tax liabilities or assets are determined at
the end of each period using the tax rate expected to be in effect
when the taxes are actually paid or recovered. A valuation
allowance is recognized on deferred tax assets when it is more
likely than not that some or all of these deferred tax assets will
not be realized.
The
Company applies generally accepted accounting principles for
recognition of uncertainty in income taxes and prescribing a
recognition threshold and measurement attribute for the recognition
and measurement of a tax position taken or expected to be taken in
a tax return.
Income (Loss) Per Common Share
Basic
earnings per share is calculated by dividing net income (loss)
available to common stockholders by the weighted average number of
common shares outstanding during the period. Diluted earnings per
share is calculated based on the weighted average number of common
shares outstanding during the period plus the effect of potentially
dilutive common stock equivalents, including warrants to purchase
the Company's common stock and convertible preferred stock.
Management has determined that the calculation of diluted earnings
per share for the years ended December 31, 2016, and 2015, does not
add any shares to basic weighted average shares.
As of
December 31, 2016 and 2015, potentially dilutive common stock
equivalents not included in the calculation of diluted earnings per
share are as follows:
|
|
December 31,
2016
|
December 31,
2015
|
|
Warrants
|
250,000
|
250,000
|
|
Convertible
preferred stock
|
1,751,005
|
1,751,005
|
|
Total
possible dilution
|
2,001,005
|
2,001,005
|
Fair Value of Financial Instruments
The
Company’s financial instruments include cash and cash
equivalents, certificates of deposits, restricted cash, due to
factor, and long-term debt. The carrying value of these instruments
approximates fair value based on their contractual
terms.
Fair Value Measurements
When
required to measure assets or liabilities at fair value, the
Company uses a fair value hierarchy based on the level of
independent, objective evidence surrounding the inputs used. The
Company determines the level within the fair value hierarchy in
which the fair value measurements in their entirety fall. The
categorization within the fair value hierarchy is based upon the
lowest level of input that is significant to the fair value
measurement. Level 1 uses quoted prices in active markets for
identical assets or liabilities, Level 2 uses significant other
observable inputs, and Level 3 uses significant unobservable
inputs. The amount of the total gains or losses for the period are
included in earnings that are attributable to the change in
unrealized gains or losses relating to those assets and liabilities
still held at the reporting date. The Company has no financial
assets or liabilities that are adjusted to fair value on a
recurring basis.
F-10
United States Antimony Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2016 and 2015
3. Summary of Significant Accounting Policies,
continued:
Recent Accounting Pronouncements
In
August 2014, the Financial Accounting Standards Board
(“FASB”) issued Accounting Standards Update
(“ASU”) No. 2014-15, Presentation of Financial
Statements—Going Concern. The provisions of ASU No. 2014-15
require management to assess an entity’s ability to continue
as a going concern by incorporating and expanding upon certain
principles that are currently in U.S. auditing standards.
Specifically, the amendments (1) provide a definition of the term
substantial doubt, (2) require an evaluation every reporting period
including interim periods, (3) provide principles for considering
the mitigating effect of management’s plans, (4) require
certain disclosures when substantial doubt is alleviated as a
result of consideration of management’s plans, (5) require an
express statement and other disclosures when substantial doubt is
not alleviated, and (6) require an assessment for a period of one
year after the date that the financial statements are issued (or
available to be issued). The amendments in this ASU are effective
for the annual period ending after December 15, 2016, and for
annual periods and interim periods thereafter. The Company adopted
the ASU No. 2014-15 on December 31, 2016.
In May
2014, the FASB issued ASU No. 2014-09 Revenue Recognition,
replacing guidance currently codified in Subtopic 605-10 Revenue
Recognition-Overall with various SEC Staff Accounting Bulletins
providing interpretive guidance. The guidance establishes a new
five step principle-based framework in an effort to significantly
enhance comparability of revenue recognition practices across
entities, industries, jurisdictions, and capital markets. ASU No.
2014-09 is effective for annual and interim reporting periods
beginning after December 15, 2017. We are in the process of
evaluating this guidance and our method of adoption.
In July
2015, the FASB issued ASU 2015-11 Inventory (Topic 330):
Simplifying the Measurement of Inventory. The update provides for
inventory to be measured at the lower of cost and net realizable
value, and is effective for the fiscal years beginning after
December 15, 2016. We do not believe that this will have an impact
on our consolidated financial statements when adopted.
In
November 2015, the FASB issued ASU No. 2015-17 Income Taxes -
Balance Sheet Classification of Deferred Taxes (Topic 740). The
update is designed to reduce complexity of reporting deferred
income tax liabilities and assets into current and non-current
amounts in a statement of financial position. The FASB has proposed
the presentation of deferred income taxes, changes to deferred tax
liabilities and assets be classified as non-current in the
statement of financial position. The update is effective for fiscal
years beginning after December 15, 2016. ASU No. 2015-17 is not
expected to have a material impact on our consolidated financial
statements.
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. The Company is currently evaluating the impact of
implementing this update on the consolidated financial
statements.
Other
accounting standards that have been issued by FASB that do not
require adoption until a future date are not expected to have a
material impact on the consolidated financial statements upon
adoption.
Reclassifications
Certain
reclassifications have been made to conform prior year’s data
to the current year’s presentation. These reclassifications
have no effect on previously reported operations,
stockholders’ equity (deficit) or cash flows.
F-11
United States Antimony Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2016 and 2015
4.
Accounts
Receivable and Due to Factor
The
Company factors designated trade receivables pursuant to a
factoring agreement with LSC Funding Group L.C., an unrelated
factor (the “Factor”). The agreement
specifies that eligible trade receivables are factored with
recourse. The performance of all obligations and payments to the
factoring company is personally guaranteed by John C. Lawrence, the
Company’s President and Chairman of the Board of Directors.
Selected trade receivables are submitted to the factor, and the
Company receives 85% of the face value of the receivable by wire
transfer. Upon payment by the customer, the remainder of the amount
due is received from the Factor, less a one-time servicing fee of
2% for the receivables factored. This servicing fee is
recorded on the consolidated statement of operations in the period
of sale to the 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.
Receivables, net of
allowances, are presented as current assets and the amount
potentially due to the Factor is presented as a secured financing
in current liabilities.
|
Accounts Receivble
|
December 31,
2016
|
December 31,
2015
|
|
Accounts
receivable - non factored
|
$
401,720
|
$
412,922
|
|
Accounts
receivable - factored with recourse
|
150,399
|
13,782
|
|
less
allowance for doubtful accounts
|
-
|
(4,031
)
|
|
Accounts
receivable - net
|
$
552,119
|
$
422,673
|
Factoring fees paid
by the Company during the years ended December 31, 2016 and 2015,
were $35,182 and $41,117, respectively. For the years ended
December 31, 2016 and 2015, net accounts receivable of
approximately $1.80 million and $2.10 million, respectively, were
sold under the agreement.
Proceeds from the
sales were used to fund inventory purchases and operating expenses.
The agreement is for a term of one year with automatic renewal for
additional one-year terms.
5. Inventories
The
major components of the Company's inventories at December 31, 2016
and 2015 were as follows:
|
|
2016
|
2015
|
|
Antimony
Metal
|
$
112,300
|
$
102,207
|
|
Antimony
Oxide
|
326,126
|
332,068
|
|
Antimony
Concentrates
|
30,815
|
133,954
|
|
Antimony
Ore
|
181,815
|
319,631
|
|
Total
antimony
|
651,056
|
887,860
|
|
Zeolite
|
204,581
|
206,378
|
|
|
$
855,637
|
$
1,094,238
|
At
December 31, 2016 and 2015, antimony metal consisted principally of
recast metal from antimony-based compounds, and metal purchased
from foreign suppliers. Antimony oxide inventory consisted of
finished product oxide held at the Company's plant. Antimony
concentrates and ore were held primarily at sites in Mexico and are
essentially raw material, carried at cost. At December 31, 2015,
antimony inventory was valued at net realizable value. The
Company's zeolite inventory consists of salable zeolite material
held at BRZ's Idaho mining and production facility, and is carried
at cost.
F-12
United States Antimony Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2016 and 2015
5. Inventories, continued:
Gain on Liability Adjustment
During
the first quarter of 2015, we noted that the amounts we were being
invoiced by our Canadian supplier did not appear to be in
compliance with our understanding of what we should be paying for
the raw material supplied by them. We determined that since April
of 2012 the supplier had been billing us for the entire amount of
pounds of antimony delivered to us, even though we believed that we
should only pay for 90% of the delivered antimony since we lose
approximately 10% in processing. We contacted the supplier, and
after a mutual review and modification of information that we had
supplied to them, the supplier proposed a settlement of $914,770 to
be credited against amounts we owed them. We agreed to the
settlement amount and recorded it as a reduction of an account
payable to the supplier and recognized a gain on liability
adjustment in our statement of operations.
6. Properties, Plants and Equipment
The
major components of the Company's properties, plants and equipment
at December 31, 2016 and 2015 are shown below:
|
|
Antimony Segment
|
Zeolite Segment
|
|
|
|
2016
|
USAC
|
USAMSA
|
BRZ
|
TOTAL
|
|
Plant
& Equipment
|
$
908,578
|
$
7,943,686
|
$
3,477,260
|
$
12,329,524
|
|
Buildings
|
247,210
|
900,992
|
349,946
|
1,498,148
|
|
Mineral
Rights and Interests
|
-
|
3,793,502
|
3,664
|
3,797,166
|
|
Land
& Other
|
3,274,572
|
2,529,294
|
15,310
|
5,819,176
|
|
|
4,430,360
|
15,167,474
|
3,846,180
|
23,444,014
|
|
Accumulated
Depreciation
|
(2,538,257
)
|
(2,836,164
)
|
(2,373,627
)
|
(7,748,048
)
|
|
|
$
1,892,103
|
$
12,331,310
|
$
1,472,553
|
$
15,695,966
|
|
2015
|
USAC
|
MEXICO
|
BRZ
|
TOTAL
|
|
Plant
& Equipment
|
$
872,548
|
$
7,497,791
|
$
3,347,629
|
$
11,717,968
|
|
Buildings
|
247,210
|
900,992
|
349,946
|
1,498,148
|
|
Mineral
Rights and Interests
|
-
|
3,743,352
|
-
|
3,743,352
|
|
Land
& Other
|
3,274,572
|
2,529,294
|
15,310
|
5,819,176
|
|
|
4,394,330
|
14,671,429
|
3,712,885
|
22,778,644
|
|
Accumulated
Depreciation
|
(2,456,928
)
|
(2,131,624
)
|
(2,159,759
)
|
(6,748,311
)
|
|
|
$
1,937,402
|
$
12,539,805
|
$
1,553,126
|
$
16,030,333
|
At
December 31, 2016 and 2015, the Company had $521,376 and $891,576,
of assets that were considered to be construction in progress and
had not yet been depreciated. The majority of this amount relates
to equipment not yet placed in service.
F-13
United States Antimony Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2016 and 2015
7.
Asset
Retirement Obligation and Accrued Reclamation Costs
Changes
to the Asset Retirement Obligation balance during 2016 and 2015 are
as follows:
|
Asset Retirement Obligation
|
|
|
Balance
December 31, 2014
|
$
147,690
|
|
Accretion
during 2015
|
5,137
|
|
Balance
December 31, 2015
|
152,827
|
|
Accretion
during 2016
|
5,455
|
|
Balance
December 31, 2016
|
$
158,282
|
The
Company’s total asset retirement obligation and accrued
reclamation costs of $265,782 and $260,327, at December 31, 2016
and 2015, respectively, include reclamation obligations for the
Idaho and Montana operations of $107,500.
8.
|
Long-Term
debt at December 31, 2016 and 2015, is as follows:
|
December 31,
|
December 31,
|
|
|
2016
|
2015
|
|
Note
payable to First Security Bank, bearing interest at
6%;
|
|
|
|
payable
in monthly installments of $917; maturing
|
|
|
|
September
2018; collateralized by equipment.
|
$
18,245
|
$
27,845
|
|
Note
payable to Caterpillar Financial Services, bearing interest at
6%;
|
|
|
|
payable
in monthly installments of $1,300; maturing
|
|
|
|
August
2019; collateralized by equipment.
|
40,556
|
-
|
|
Note
payable to Wells Fargo Bank, bearing interest at 4%;
|
|
|
|
payable
in monthly installments of $477; original maturity date
of
|
|
|
|
December
2016; collateralized by equipment.
|
473
|
5,399
|
|
Note
payable to De Lage Landen Financial Services,
|
|
|
|
bearing
interest at 5.30%; payable in monthly installments of
$549;
|
|
|
|
original
maturity date of March 2016; collateralized by
equipment.
|
-
|
2,171
|
|
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.
|
20,581
|
27,587
|
|
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.
|
22,944
|
29,300
|
|
Note
payable to Phyllis Rice, bearing interest
|
|
|
|
at
1%; payable in monthly installments of $2,000;
|
|
|
|
original
maturity date of 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.
|
776,319
|
820,272
|
|
Obligation
payable for Guadalupe Mine, non-interest bearing,
|
|
|
|
annual
payments from $60,000 to $149,078 through 2026, net of
discount.
|
970,651
|
972,312
|
|
|
1,863,915
|
1,899,032
|
|
Less
current portion
|
(391,046
)
|
(181,287
)
|
|
Long-term
portion
|
$
1,472,869
|
$
1,717,745
|
F-14
United States Antimony Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2016 and 2015
8.
Long-Term
Debt, Continued:
At
December 31, 2016, principal payments on debt are due as
follows:
|
Year Ending December 31,
|
|
|
2017
|
$
391,046
|
|
2018
|
260,232
|
|
2019
|
307,081
|
|
2020
|
198,436
|
|
2021
|
108,150
|
|
Thereafter
|
598,970
|
|
|
$
1,863,915
|
Guadalupe Mine
On
March 7, 2012 and on April 4, 2012, the Company entered into a
supply agreement and a loan agreement, respectively, (“the
Agreements”) with several individuals collectively referred
to as ‘Grupo Roga’ or ‘Guadalupe.’ During
the term of the supply agreement the Company funded certain of
Guadalupe’s equipment purchases, tax payments, labor costs,
milling and trucking costs, and other expenses incurred in the
Guadalupe mining operations for approximately $112,000. In addition
to the advances for mining costs, the Company purchased antimony
ore from Guadalupe that failed to meet agreed upon antimony metal
recoveries and resulted in approximately $475,000 of excess
advances paid to Guadalupe.
The
Agreements with Guadalupe granted the Company an option to purchase
the concessions outright for $2,000,000. On September 29, 2015, the
Company notified the owners of Guadalupe that it was exercising the
option to purchase the Guadalupe property. The option exercise
agreement allowed the Company to apply all amounts previously due
the Company by Guadalupe of $586,893 to the purchase price
consideration, resulting in a net obligation for the purchase of
the Guadalupe mine of $1,413,107. The Company is obligated to make
annual payments that vary from $60,000 to $149,077 annually through
2026. The debt payments are non-interest bearing. In 2015, the
Company determined the net present value of the future contractual
stream of payments to be $972,722 using a 6% discount rate. The
Company recorded $972,722 as the cost of the concessions and the
debt payable equal to total payments due of $1,413,107 less a
discount of $440,385. The discount is being amortized to interest
expense using the effective interest method over the life of the
debt. During the years ended December 31, 2016 and 2015, the
Company paid $60,000 and $15,000 on this debt, respectively, and
amortized $58,339 and $14,591, respectively, of
discount.
9.
Notes
Payable to Bank
|
At
December 31, 2016 and 2015, the Company had the following notes
payable to bank:
|
|
|
|
|
|
|
|
|
December 31,
|
December 31,
|
|
|
2016
|
2015
|
|
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
|
$
76,350
|
$
36,881
|
|
|
|
|
|
|
|
|
|
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
|
90,967
|
93,791
|
|
Total
notes payable to the bank
|
$
167,317
|
$
130,672
|
These
notes are personally guaranteed by John C. Lawrence the
Company’s President and Chairman of the Board of Directors.
The maximum amount available for borrowing under each note is
$99,998.
F-15
United States Antimony Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2016 and 2015
10.
Hillgrove
Advances Payable
On
November 7, 2014, the Company entered into a loan and concentrate
processing agreement with Hillgrove Mines Pty Ltd of Australia
(Hillgrove) by which Hillgrove advanced the Company funds to be
used to expand their smelter in Madero, Mexico, and in Thompson
Falls, Montana, so that they may process antimony and gold
concentrates produced by Hillgrove’s mine in Australia. The
agreement required that the Company construct equipment so that it
can process approximately 200 metric tons of concentrate initially
shipped by Hillgrove, with a provision so that the Company may
expand to process more than that. The parties agreed that the
equipment will be owned by USAC and USAMSA. The agreement called
for the Company to sell the final product for Hillgrove, and
Hillgrove to have approval rights of the customers for their
products. The agreement allows the Company to recover its operating
costs at a rate approved by Hillgrove, and to charge a 7.5%
processing fee and a 2.0% sales commission on each sale. The
initial term of the agreement is five years; however, Hillgrove may
suspend or terminate the agreement at its discretion. The Company
may terminate the agreement and begin using the furnaces for their
own production if Hillgrove fails to recommence shipments within
365 days of a suspension notice.
The
terms of the agreement require payment upon Hillgrove’s
issuance of a stop notice. If a stop notice was issued between one
year and two years, there was a formula to prorate the repayment
amount from 0% to 81.25%. If a stop order is issued after two
years, the repayment obligation is 81.25% of the funds advanced at
that point. No stop notice was issued during the initial two year
period ended November 7, 2016, thus the Company’s obligation
to Hillgrove is 81.25% of total advanced funds. Through December
31, 2016, Hillgrove advanced the Company a total of $1,396,721,
resulting in a net liability of $1,134,221 which is 81.25% of
monies advanced. The difference between the amount advanced and the
amount payable of $262,500 was recorded as deferred earned credit
and recognized ratably through the period ending November 7, 2016.
During the year ended December 31, 2016 and 2015, $120,329 and
$142,171 of the deferred earned credit was recognized. Based on
conversations with Hillgrove, management does not anticipate
receiving a stop notice in 2017 thus the entire amount is
classified as long term.
11.
Stockholders'
Equity
Issuance of Common
Stock for Cash
The
Company did not issue any common stock for cash in 2015 or
2016.
Issuance of Common
Stock for Services to
Directors and Consultants
On
December 30, 2015, the Company awarded shares of unregistered
common stock to be paid to its directors for services during 2015,
having a fair value of $125,000, based on the stock price at the
date declared. In March of 2016 the Company issued the Board
members 550,000 shares of the Company’s common stock at $0.25
per share for services in 2015 with a value of
$137,500.
During
2015, the Company issued 105,000 shares to Herbert Denton for
investor relations services provided and in connection with the
Settlement Agreement (Note 15). The shares estimated fair value at
the time of issue was approximately $27,950.
In
December of 2016, the Company issued Daniel Parks, the
Company’s Chief Financial Officer, 200,000 shares of the
Company’s common stock valued at $54,000 to retain his
services for a two year period. As part of the agreement, Mr.
Parks’ hours worked and normal compensation will be
reduced.
During
2016, the Company awarded common stock with a value at December 31,
2016 of $168,750 to its Board of Directors as compensation for
their services as directors. In connection with the issuances, the
Company recorded $168,750 as director compensation expense and
accrued stock payable. In March 2017, the directors were issued
421,875 shares for this award.
F-16
United States Antimony Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2016 and 2015
11. Stockholders'
Equity, Continued:
Common Stock Warrants
The
Company's Board of Directors has the authority to issue stock
warrants for the purchase of preferred or unregistered common stock
to directors and employees of the Company.
At
December 31, 2016 and 2015, warrants for purchase of 250,000 shares
of the Company’s common stock for $0.25 per share are
outstanding and have no expiration date. These warrants are owned
by the Company’s president. During 2015, warrants for
purchase of 476,917 shares of common stock for $4.50
expired.
Preferred Stock
The
Company's Articles of Incorporation authorize 10,000,000 shares of
$0.01 par value preferred stock available for issuance with such
rights and preferences, including liquidation, dividend,
conversion, and voting rights, as the Board of Directors may
determine.
Series B
During
1993, the Board established a Series B preferred stock, consisting
of 750,000 shares. The Series B preferred stock has preference over
the Company's common stock and Series A preferred stock (none of
which are outstanding); has no voting rights (absent default in
payment of declared dividends); and is entitled to cumulative
dividends of $0.01 per share per year, payable if and when declared
by the Board of Directors. During the years ended December 31, 2016
and 2015 the Company recognized $7,500 in Series B preferred stock
dividend. In the event of dissolution or liquidation of the
Company, the preferential amount payable to Series B preferred
stockholders is $1.00 per share plus dividends in arrears. No
dividends have been declared or paid with respect to the Series B
preferred stock. The Series B Preferred stock is no longer
convertible to shares of the Company’s common stock. At
December 31, 2016 and 2015, cumulative dividends in arrears on the
outstanding Series B shares were $165,000 and $157,500,
respectively.
Series C
During
2000, the Board established a Series C preferred stock, consisting
of 205,996 shares. In 2002, 28,092 shares were converted to common
stock and cancelled, leaving 177,904 Series C preferred shares
authorized and outstanding. The Series C preferred stock has
preference over the Company’s common stock and has voting
rights equal to that number of shares outstanding, but no
conversion or dividend rights. In the event of dissolution or
liquidation of the Company, the preferential amount payable to
Series C preferred stockholders is $0.55 per share.
Series D
During
2002, the Board established a Series D preferred stock, authorizing
the issuance of up to 2,500,000 shares. The Series D preferred
stock has preference over the Company’s common stock but is
subordinate to the liquidation preferences of the holders of the
Company’s outstanding Series A, Series B and Series C
preferred stock. Series D preferred stock carries voting rights and
is entitled to annual dividends of $0.0235 per share. The dividends
are cumulative and payable after payment and satisfaction of the
Series A, B and C preferred stock dividends. No dividends have been
declared or paid with respect to the Series D preferred stock. At
December 31, 2016 and 2015, the cumulative dividends in arrears on
the 1,751,005 outstanding Series D shares were $542,664 and
$501,515, respectively, payable if and when declared by the Board
of Directors. In the event of dissolution or liquidation of the
Company, the preferential amount payable to Series D preferred
stockholders is $2.50 per share. At December 31, 2016 and 2015, the
liquidation preference for Series D preferred stock was $4,920,178
and $4,879,029, respectively. Holders of the Series D preferred
stock have the right, subject to the availability of authorized but
unissued common stock, to convert their shares into shares of the
Company's common stock on a one-to-one basis without payment of
additional consideration and are not redeemable unless by mutual
consent. The majority of Series D preferred shares are held by John
Lawrence, president of the Company.
F-17
United States Antimony Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2016 and 2015
12. 2000 Stock Plan
In
January 2000, the Company's Board of Directors resolved to create
the United States Antimony Corporation 2000 Stock Plan ("the
Plan"). The purpose of the Plan is to attract and retain the best
available personnel for positions of substantial responsibility and
to provide additional incentive to employees, directors and
consultants to promote the success of the Company's business. The
maximum number of shares of common stock or options to purchase
common stock that may be issued pursuant to the Plan is 500,000. At
December 31, 2016 and 2015, 300,000 shares of the Company's common
stock had been previously issued and are outstanding under the
Plan. There were no issuances under the Plan during 2016 and
2015.
13. Income Taxes
Domestic and
foreign components of income (loss) from operations before income
taxes for the years ended December 31, 2016 and 2015, are as
follows:
|
|
2016
|
2015
|
|
Domestic
|
$
(263,652
)
|
$
982,901
|
|
Foreign
|
(747,410
)
|
(1,821,432
)
|
|
Total
|
$
(1,011,062
)
|
$
(838,531
)
|
At
December 31, 2016 and 2015, the Company had net deferred tax assets
as follows:
|
|
2016
|
2015
|
|
Deferred
tax assets:
|
|
|
|
Foreign
exploration costs
|
$
47,011
|
$
87,494
|
|
Foreign
net operating loss carry forward
|
1,309,445
|
2,515,954
|
|
Domestic
net operating loss carry forward
|
465,145
|
185,472
|
|
Deferred
tax assets
|
1,821,601
|
2,788,920
|
|
|
|
|
|
Valuation
allowance (foreign)
|
(1,309,445
)
|
(2,515,954
)
|
|
Valuation
allowance (domestic)
|
(299,522
)
|
(90,220
)
|
|
Total
deferred tax assets
|
212,634
|
182,746
|
|
|
|
|
|
Deferred
tax liabilities:
|
|
|
|
Property,
plant, and equipment
|
(210,912
)
|
(181,224
)
|
|
Other
|
(1,722
)
|
(1,522
)
|
|
Total
deferred tax liabilities
|
(212,634
)
|
(182,746
)
|
|
Net
Deferred Tax Assets
|
$
-
|
$
-
|
At
December 31, 2016, the Company has federal net operating loss
(“NOL”) carry forwards of approximately $0.9 million
that expire at various dates between 2026 and 2037. In addition,
the Company has Montana state net operating loss carry forwards of
approximately $2.9 million which expire between 2017 and 2023, and
Idaho state net operating loss carry forwards of approximately $1.2
million, which expire between 2032 and 2037. The Company has
approximately $4.3 million of Mexican net operating loss carry
forwards which expire between 2023 and 2026.
At
December 31 2016 and 2015, the Company had deferred tax assets
arising principally from net operating loss carry forwards for
income tax purposes. As management cannot determine that it is more
likely than not the benefit of the net deferred tax asset will be
realized, a valuation allowance equal to 100% of the net deferred
tax asset has been recorded at December 31, 2016 and
2015.
F-18
United States Antimony Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2016 and 2015
13. Income Taxes, continued:
The
income tax provision differs from the amount of income tax
determined by applying the U.S. federal income tax rate to pretax
loss for the years ended December 31, 2016 and 2015, due to the
following:
|
|
2016
|
2015
|
|
Tax
benefit at federal statutory rate
|
$
(353,872
)
|
$
(293,486
)
|
|
State
income tax effect
|
(21,754
)
|
(32,283
)
|
|
Foreign
income tax effect
|
37,371
|
91,072
|
|
Non-deductible
items
|
3,263
|
-
|
|
Percentage
depletion
|
(40,976
)
|
-
|
|
Change
in valuation allowance - Domestic
|
151,745
|
(311,732
)
|
|
Change
in valuation allowance - Foreign
|
224,223
|
546,429
|
|
Foreign
tax assessment
|
285,048
|
-
|
|
Alternative
minimum tax - Domestic
|
13,090
|
-
|
|
Total
|
$
298,138
|
$
-
|
|
Change
in valuation allowance is comprised of the following:
|
|
|
|
|
|
|
|
|
2016
|
2015
|
|
Domestic
|
|
|
|
Change
in deferred tax asset for current year
|
$
(151,745
)
|
$
(166,547
)
|
|
Adjustment
for prior year tax estimate to actual
|
(57,557
)
|
(145,185
)
|
|
|
$
(209,302
)
|
$
(311,732
)
|
|
Foreign
|
|
|
|
Change
in deferred tax asset for current year
|
$
(224,223
)
|
$
589,613
|
|
Adjustment
for impact of tax assessment
|
285,048
|
-
|
|
Impact
on change in foreign exchange rate
|
421,643
|
366,591
|
|
Adjustment
for prior year tax estimates to actual
|
724,041
|
(409,775
)
|
|
|
$
1,206,509
|
$
546,429
|
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 is approximately $666,400 in U.S. Dollars
(“USD”) as of December 31, 2016. Approximately $285,000
USD of the total assessment is interest and penalties. SAT’s
assessment is based on the disallowance of specific costs that the
Company deducted on the 2013 USAMSA income tax return. These
disallowed costs were incurred by the Company for USAMSA’s
business operations. SAT claims that the costs were not deductible
or were not supported by appropriate documentation.
Management has
reviewed the assessment notice from SAT and believes numerous
findings have no merit. The Company has engaged accountants and tax
attorneys in Mexico to defend its position. An appeal has been
filed which is expected to be completed during 2017.
F-19
United States Antimony Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2016 and 2015
13. Income Taxes, continued:
At
December 31, 2016, management has estimated possible outcomes for
this assessment and believes it will ultimately pay an amount
ranging from 30% of the total assessment to the total assessed
amount. The Company’s agreement with the tax professionals is
that the professionals will receive 30% of the amount of tax relief
they are able to achieve. At December 31, 2016, we have accrued a
potential liability of $410,510 USD of which $285,048 is for unpaid
income taxes, $75,510 is for interest expense, and $49,952 is for
penalties. The amount accrued represents management’s best
estimate of the amount that will ultimately be paid. The outcome
could vary from this estimate. In addition, fluctuation in exchange
rates have an ongoing impact on the amount the Company will pay in
U.S. dollars. At March 17, 2017, the assessed amount is
approximately $712,000 in U.S dollars.
If an
issue addressed during the SAT audit is resolved in a manner
inconsistent with management expectations, the Company will adjust
its net operating loss carryforward, or accrue any additional
penalties, interest, and tax associated with the audit. Our tax
professionals in Mexico have reviewed and filed tax returns with
the SAT for 2014 and 2015, and have advised us that they do not
expect us to have a tax liability for those years relating to
similar issues.
During
the years ended December 31, 2016 and 2015, there were no material
uncertain tax positions taken by the Company. The Company United
States income tax filings are subject to examination for the years
2014 through 2016, and 2013 through 2016 in Mexico. The Company
charges penalties on assessments to general and administrative
expense and charges interest to interest expense.
14. Related-Party Transactions
The
Company’s President and Chairman, John Lawrence, rents
equipment and an aircraft to the Company and charges the Company
for lodging and meals provided to consultants, customers and other
parties by an entity that Mr. Lawrence owns. The amount due to Mr.
Lawrence as of December 31, 2016 and 2015 was $14,525 and $32,396,
respectively. Expenses paid to Mr. Lawrence for the years ended
December 31, 2016 and 2015 were $16,791 and $30,844,
respectively.
15. Commitments and Contingencies
In
2005, Antimonio de Mexico, S. A. (“AM”) signed an
option agreement that gives AM the exclusive right to explore and
develop the San Miguel I and San Miguel II concessions for annual
payments. Total payments will not exceed $1,430,344, reduced by
taxes paid. During the years ended December 31, 2016 and 2015,
$65,000 and $127,500, respectively, was paid and capitalized as
mineral rights in accordance with the Company’s accounting
policies. At December 31, 2016, the Company has made all of the
required payments under the agreement.
In June
of 2013, the Company entered into a lease to mine antimony ore from
concessions located in the Wadley Mining district in Mexico. The
lease calls for a mandatory term of one year and requires payments
of $10,500 plus IVA tax per month. The lease is renewable each year
with a 15 day notice to the lessor, and agreement of terms. The
lease was renewed in June of 2016.
From
time to time, the Company is assessed fines and penalties by the
Mine Safety and Health Administration (“MSHA”). Using
appropriate regulatory channels, management may contest these
proposed assessments. At December 31, 2016 and 2015, the Company
has no accruals relating to such assessments.
In
prior years, the Company utilized Providence Capital, Inc., a
Delaware corporation (“Providence”), and
Herbert A. Denton to provide investor relations services.
On April 1, 2015, we entered into an agreement
with
F-20
United States Antimony Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2016 and 2015
15. Commitments and Contingencies
Providence to
provide us services as our Investor Relations Representative.
We terminated this agreement in May 2015, and signed a Settlement
Agreement dated July 27, 2015, and a Supplemental Settlement
Agreement dated August 1, 2015. These agreements provided for
a payment to Mr. Denton of 100,000 shares of the Company’s
common stock and $25,000 to be paid in five equal installments. On
August 31, 2015, we issued 100,000 shares of common stock valued at
$0.55 per share or $55,000 to Mr. Denton. On October 12,
2015, we served Mr. Denton with a notice of material breach of the
termination agreements and suspended the remaining payments of
$15,000. We have subsequently filed an action in federal court to
force Mr. Denton to comply with the terms of the termination
agreements and for damages related to his non-compliance.
Subsequent to the Company’s filing, Mr. Denton filed a
counterclaim against the Company seeking an award for damages for
breach of contract, conversion, defamation of character, failure to
exercise business judgement and intentional infliction of emotional
duress and damage to reputation. We have settled with Mr. Denton
for a cash payment of $10,000 and the removal of all restrictions
on the 100,000 shares of common stock we previously issued to
him.
16.
Business Segments
The
Company is currently organized and managed by four segments, which
represent the three operating units: United States antimony
operations, Mexican antimony operations and United States zeolite
operations, and separate segment for revenue received from the sale
of precious metals recovered from the antimony process. The
Company’s precious metals segment was added as a new
reporting segment in 2016. The precious metals activity has been
reclassified from the antimony segment for 2015. The
Company’s
Other operating
costs
include general and administrative expenses, freight
and delivery, and other non-production related costs.
Other income and expense
consists
primarily of interest income and expense and factoring
expense.
The
Madero smelter and Puerto Blanco mill at the Company’s Mexico
operation brings antimony up to an intermediate stage, which is
then shipped to the United States operation for finishing and sales
at the Thompson Falls, Montana plant. 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. Precious metal revenues are from
sales to customers in the United States and Canada.
Segment
disclosures regarding sales to major customers and for property,
plant, and equipment are located in Notes 2 and 6,
respectively.
|
Properties, plants
|
December
31,
|
December
31,
|
|
and equipment, net:
|
2016
|
2015
|
|
Antimony
|
|
|
|
United
States
|
$
1,892,103
|
$
1,937,402
|
|
Mexico
|
12,331,310
|
12,539,805
|
|
Subtotal
Antimony
|
14,223,413
|
14,477,207
|
|
Zeolite
|
1,472,553
|
1,553,126
|
|
Total
|
$
15,695,966
|
$
16,030,333
|
|
|
|
|
|
Total Assets:
|
December 31,
2016
|
December 31,
2015
|
|
Antimony
|
|
|
|
United
States
|
$
2,693,614
|
$
2,676,263
|
|
Mexico
|
13,027,952
|
13,400,895
|
|
Subtotal
Antimony
|
15,721,566
|
16,077,158
|
|
Zeolite
|
2,044,432
|
2,183,043
|
|
Total
|
$
17,765,998
|
$
18,260,201
|
F-21
United States Antimony Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2016 and 2015
16. Business Segments,
Continued:
|
|
For the year ended
|
For the year ended
|
|
Capital expenditures:
|
December 31,
2016
|
December 31,
2015
|
|
Antimony
|
|
|
|
United
States
|
$
36,028
|
$
33,028
|
|
Mexico
|
496,046
|
3,435,002
|
|
Subtotal
Antimony
|
532,074
|
3,468,030
|
|
Zeolite
|
133,296
|
196,238
|
|
Total
|
$
665,370
|
$
3,664,268
|
|
Segment Operations for the
|
Antimony
|
Antimony
|
Precious
|
Bear River
|
|
|
Year ended December 31, 2016
|
USA
|
Mexico
|
Metals
|
Zeolite
|
Totals
|
|
|
|
|
|
|
|
|
Total
revenues
|
$
8,740,602
|
$
3,568
|
$
672,871
|
$
2,473,094
|
$
11,890,135
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
81,328
|
704,541
|
-
|
213,868
|
999,737
|
|
|
|
|
|
|
|
|
Income
(loss) from operations
|
4,048,193
|
(5,109,734
)
|
-
|
245,019
|
(816,522
)
|
|
|
|
|
|
|
|
|
Income
tax expense
|
(13,090
)
|
(285,048
)
|
-
|
-
|
(298,138
)
|
|
|
|
|
|
|
|
|
Other
income (expense)
|
(34,262
)
|
(149,165
)
|
-
|
(11,113
)
|
(194,540
)
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS)
|
$
2,859,972
|
$
(5,133,439
)
|
$
672,871
|
$
233,907
|
$
(1,309,200
)
|
|
Segment Operations for the
|
Antimony
|
Antimony
|
Precious
|
Bear River
|
|
|
Year ended December 31, 2015
|
USAC
|
Mexico
|
Metals
|
Zeolite
|
Totals
|
|
|
|
|
|
|
|
|
Total
revenues
|
$
9,856,398
|
$
7,535
|
$
491,426
|
$
2,753,644
|
$
13,109,003
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
61,819
|
649,526
|
-
|
221,441
|
932,786
|
|
|
|
|
|
|
|
|
Income
(loss) from operations
|
4,990,865
|
(6,311,265
)
|
-
|
511,403
|
(808,997
)
|
|
|
|
|
|
|
|
|
Other
income (expense):
|
(24,280
)
|
-
|
-
|
(5,255
)
|
(29,534
)
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS)
|
$
4,475,160
|
$
(6,311,265
)
|
$
491,426
|
$
506,148
|
$
(838,531
)
|
F-22
TABLE OF CONTENTS
Part IItem 1. Description Of BusinessItem 1A Risk FactorsItem 1B Unresolved Staff CommentsItem 2 Description Of PropertiesItem 3 Legal ProceedingsItem 4 Mine Safety DisclosuresPart IIItem 5 Market For Common Equity and Related Stockholder MattersItem 6 Selected Financial DataItem 7 Management's Discussion and Analysis Or Plan Of OperationsItem 7A Quantitative and Qualitative Disclosures About Market RiskItem 8 Financial StatementsItem 9 Changes in and Disagreements with Accountants on Accounting and Financial DisclosureItem 9A Controls and ProceduresPart IIIItem 10 Directors, Executive Officers, Promoters and Control Persons, Compliance with Section 16(a) Of The Exchange ActItem 10 Directors, Executive Officers, Promoters and Control Persons, Compliance withItem 11 Executive CompensationItem 12 Security Ownership Of Certain Beneficial Owners and ManagementItem 13 Certain Relationships and Related TransactionsItem 14 Principal Accountant Fees and ServicesItem 15. Exhibits and Reports on Form 8-kItem 5 Other Events - October 10, 2003