United States Antimony Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited),
Continued:
Long-Term debt at
September 30, 2020 and December 31, 2019 is as
follows:
|
|
|
|
|
|
Note payable to Zeo
Inc., non interest bearing,
|
|
|
payable in 11
quarterly installments of $8,300 with a final payment of
$8,700;
|
|
|
maturing December
2022; uncollateralized.
|
$75,100
|
$100,000
|
Note payable to Cat
Financial Services, bearing interest at 6%;
|
|
|
payable in monthly
installments of $778; maturing
|
|
|
December 2022;
collateralized by equipment.
|
20,974
|
26,250
|
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.
|
|
700
|
Note payable to
Phyllis Rice, bearing interest
|
|
|
at 1%; payable in
monthly installments of $2,000; originally maturing
|
|
|
March 2015;
collateralized by equipment.
|
6,146
|
6,146
|
|
102,220
|
133,096
|
Less current
portion
|
(55,956)
|
(56,334)
|
Long-term
portion
|
$46,264
|
$76,762
|
At
September 30, 2020, principal payments on debt are due as
follows:
12 Months Ending
September 30,
|
|
2021
|
55,956
|
2022
|
41,920
|
2023
|
4,344
|
|
$102,220
|
10.
Related
Party Transactions
On June
16, 2020, John C. Lawrence, the Company’s founder, Chief
Executive officer, and Chairman of the Board of Directors, passed
away. The Company’s Executive Vice-President, John C.
Gustaven, has been appointed to Interim Chief Executive
Officer.
The
Company’s previous President and Chairman, John Lawrence,
rented equipment to the Company and charged the Company for lodging
and meals provided to consultants, customers and other parties by
an entity that Mr. Lawrence owns. The amount due to Mr.
Lawrence’s estate as of September 30, 2020 and December 31,
2019 was $178,380 and $156,974, respectively. For the three and
nine months ended September 30, 2020, the Company paid $0 and
$1,532, respectively, compared to $1,764 and $8,034 for the three
and nine months ended September 30, 2019, respectively, to John
Lawrence, our previous President and Chief Executive Officer, as
reimbursement for equipment used by the Company.
During
2019, Mr. Lawrence advanced funds to the Company that had a balance
at December 31, 2019 of $192,134. During the three and nine month
periods ended September 30, 2020, the Company paid First Security
Bank on behalf of Mr. Lawrence $18,490 and $117,150, respectively,
on these advances. A portion of this amount was in the form of the
exercise of a warrant held by Mr. Lawrence for 250,000 shares of
common stock at an exercise price of $0.25 or $62,500. The balance
of the advances due to Mr. Lawrence at September 30, 2020 is
$74,984.
United States Antimony
Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited),
Continued:
10.
Related
Party Transactions, Continued:
John C.
Gustaven, Interim Chief Executive Officer of the Company, has an
advance due from the Company of $200 and $10,200, respectively, at
September 30, 2020 and December 31, 2019. During the three and nine
month periods ended September 30, 2020, the Company paid Mr.
Gustaven $0 and $10,000, respectively, on these
advances.
During
the nine month periods ended September 30, 2020 and September 30,
2019, the Company accrued $89,858 and $96,875, respectively, in
directors’ fees payable that will be paid in common
stock.
During
the nine months ended September 30, 2020, the Company issued
250,000 shares of common stock to John Lawrence, the
Company’s previous president, upon exercise of a
warrant.
Warrants
At
December 31, 2019, warrants for purchase of 250,000 shares of the
Company’s common stock for $0.25 per share were outstanding
and have no expiration date. These warrants were owned by the
Company’s previous president. The warrants were exercised on
March 18, 2020.
Warrants for
purchase of 452,041 shares of the Company’s common stock were
sold with shares of common stock in 2019. The
warrants have an exercise price of $0.65 per share and expire in
2022. None have been exercised and all are outstanding
at September 30, 2020 and December 31, 2019.
Warrants for
purchase of 5,742,858 shares of the Company’s common stock
were sold with shares of common stock in July of
2020. The warrants have an exercise price of
$0.46 per share and expire in 2025. None have been
exercised and all are outstanding at September 30, 2020. The
warrants can be exercised on a cashless basis. The warrants contain
a repricing provision whereby if the Company raises at leaset
$6,000,000 in gross proceeds from the sale of its common stock at
an effective price per share less than the warrants’ exercise
price, the exercise price of the warrants will be repriced to the
lower price.
During
the three and nine month periods ended September 30, 2020 and year
ended December 31, 2019, the Company determined that a valuation
allowance equal to 100% of any deferred tax asset was appropriate,
as management of the Company cannot determine that it is more
likely than not the Company will realize the benefit of its net
deferred tax asset. The net effect is that the deferred tax asset
is fully reserved for at September 30, 2020 and December 31, 2019.
Management estimates the effective tax rate at 0% for the current
year.
In
early 2019, the Company was notified by the Mexican tax authority
(“SAT”) began its re-assessment of USAMSA’s 2013
income tax return. In November 2019, SAT assessed the Company $16.3
million pesos, which was approximately $738,000 USD as of September
30, 2020.
Management
has reviewed the 2019 assessment notice from SAT and believes the
findings have no merit. The Company has engaged a tax attorney in
Mexico to defend its position. An appeal was filed by the Company
in November 2019 suspending SAT from taking immediate action
regarding the assessment. The Company posted a guarantee of the
amount in March 2020 as is required under the appeal process.
Management expects the appeal process to continue through 2020 and
into 2021.
United States Antimony Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited),
Continued:
12.
Income
Taxes,
Continued:
At
September 30, 2020, management assessed the possible outcomes for
this tax audit and believes, based on its discussions with its tax
attorney in Mexico, that the most likely outcome will be that the
Company will be successful in its appeal resulting in no tax due.
Management determined that no amount should be accrued at September
30, 2020 relating to this potential tax liability. There can be no
assurance that the Company’s ultimate liability, if any, will
not have a material adverse effect on the Company’s results
of operations or financial position.
If
an issue addressed during the SAT audit is resolved in a manner
inconsistent with management expectations, the Company will adjust
its net operating loss carryforward, or accrue penalties, interest,
and tax associated with the assessment.
13. Hillgrove Advances Payable
On
November 7, 2014, the Company entered into an advance and
concentrate processing agreement with Hillgrove Mines Pty Ltd of
Australia (Hillgrove) in which the Company was advanced funds from
Hillgrove to build facilities to process Hillgrove antimony
concentrate. The Company has not processed Hillgrove concentrate
for more than two years. The agreement requires the Company to pay
the advance balance after Hillgrove issues a stop notice. Payments
would begin 90 days after the stop notice issue date and be made in
six equal and quarterly installments. The balance of the advance
liability due to Hillgrove was $1,134,221 at both September 30,
2020 and December 31, 2019. Hillgrove was acquired by Red River
Resources LTD (“Red River”) during 2019. Although the
Company has not received a stop notice through the date these
financial statements were issued, management has determined that
one might be forthcoming during the next twelve months. Based on
management’s assessment of likelihood and the payment terms
of the agreement, $378,074 of the balance is classified as current
as of September 30, 2020 and December 31, 2019.
The
Company is currently organized and managed by four segments, which
represent our operating units: United States antimony operations,
Mexican antimony operations, precious metals recovery and United
States zeolite operations.
The
Puerto Blanco mill and the Madero smelter at the Company’s
Mexico operation bring antimony up to an intermediate or finished
stage, which may be sold directly or shipped to the United States
operation for finishing at the Thompson Falls, Montana plant. The
Puerto Blanco mill in Mexico is the site of our crushing and
flotation plant, and a cyanide leach plant which will recover
precious metals after the ore goes through the crushing and
flotation cycles. A precious metals recovery plant is operated in
conjunction with the antimony processing plant at Thompson Falls,
Montana, where a 99% precious metals mix will be produced. The
zeolite operation produces zeolite near Preston, Idaho. Almost all
of the sales of products from the United States antimony and
zeolite operations are to customers in the United States, although
the Company does have a sales operation in Canada.
United States Antimony Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited),
Continued:
14.
Business
Segments. Continued:
Segment
disclosure regarding sales to major customers is located in Note
4.
Properties,
plants
and
equipment, net:
|
|
|
Antimony
|
|
|
United
States
|
$1,641,364
|
$1,631,100
|
Mexico
|
7,782,821
|
8,800,820
|
Subtotal
Antimony
|
9,424,185
|
10,431,920
|
Precious
metals
|
934,312
|
567,738
|
Zeolite
|
1,063,006
|
1,187,190
|
Total
|
$11,421,503
|
$12,186,848
|
At
September 30, 2020 and December 31, 2019, the Company had $841,503
and $1,306,579, respectively, of assets that were not yet placed in
service and have not yet been depreciatied.
|
For the Three
Months Ended
|
For the Nine
Months Ended
|
|
|
|
|
|
Capital
expenditures:
|
|
|
|
|
Antimony
|
|
|
|
|
United
States
|
|
|
$32,448
|
$2,713
|
Mexico
|
$2,923
|
$190,861
|
33,585
|
607,564
|
Subtotal
Antimony
|
2,923
|
190,861
|
66,033
|
610,277
|
Precious
Metals
|
17,366
|
4,095
|
138,211
|
17,247
|
Zeolite
|
|
9,304
|
16,211
|
50,313
|
Total
|
$20,289
|
$204,260
|
$220,455
|
$677,837
|
United States Antimony Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited),
Continued:
14.
Business
Segments, Continued:
Segment
Operations for the three
|
|
|
|
|
|
|
months ended
September 30, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
$477,273
|
$-
|
$477,273
|
$48,832
|
$481,126
|
$1,007,231
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
$7,395
|
$146,099
|
$153,494
|
$22,141
|
$42,015
|
$217,650
|
|
|
|
|
|
|
|
Income (loss) from
operations
|
$(208,676)
|
$(904,337)
|
$(1,113,013)
|
$26,691
|
$98,221
|
$(988,101)
|
|
|
|
|
|
|
|
Other income
(expense):
|
(2,883)
|
(4)
|
(2,887)
|
-
|
(2,252)
|
(5,139)
|
|
|
|
|
|
|
|
NET INCOME
(LOSS)
|
$(211,559)
|
$(904,341)
|
$(1,115,900)
|
$26,691
|
$95,969
|
$(993,240)
|
Segment
Operations for the three
|
|
|
|
|
|
|
months ended
September 30, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
$1,080,871
|
$-
|
$1,080,871
|
$55,500
|
$651,563
|
$1,787,934
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
$10,935
|
$210,766
|
$221,701
|
$17,630
|
$46,825
|
$286,156
|
|
|
|
|
|
|
|
Income (loss) from
operations
|
$227,712
|
$(921,965)
|
$(694,253)
|
$37,869
|
$114,923
|
$(541,461)
|
|
|
|
|
|
|
|
Other income
(expense):
|
(4,602)
|
(18,037)
|
(22,639)
|
-
|
(4,492)
|
(27,131)
|
|
|
|
|
|
|
|
NET INCOME
(LOSS)
|
$223,110
|
$(940,002)
|
$(716,892)
|
$37,869
|
$110,431
|
$(568,592)
|
United States Antimony Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited),
Continued:
14.
Business
Segments, Continued:
Segment
Operations for the nine
|
|
|
|
|
|
|
months ended
September 30, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
$2,509,183
|
$-
|
$2,509,183
|
$173,029
|
$1,653,201
|
$4,335,413
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
$22,184
|
$438,297
|
$460,481
|
$66,422
|
$140,395
|
$667,298
|
|
|
|
|
|
|
|
Income (loss) from
operations
|
$156,884
|
$(2,182,979)
|
$(2,026,095)
|
$106,607
|
$351,965
|
$(1,567,523)
|
|
|
|
|
|
|
|
Other income
(expense):
|
(1,058)
|
(4)
|
(1,062)
|
-
|
(7,820)
|
(8,882)
|
|
|
|
|
|
|
|
NET INCOME
(LOSS)
|
$155,826
|
$(2,182,983)
|
$(2,027,157)
|
$106,607
|
$344,145
|
$(1,576,405)
|
|
|
|
|
|
|
|
Segment
Operations for the nine
|
|
|
|
|
|
|
months ended
September 30, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
$3,820,689
|
$473,592
|
$4,294,281
|
$140,550
|
$2,081,751
|
$6,516,582
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
$32,690
|
$508,934
|
$541,624
|
$51,652
|
$139,426
|
$732,702
|
|
|
|
|
|
|
|
Income (loss) from
operations
|
$1,083,360
|
$(3,318,053)
|
$(2,234,693)
|
$88,898
|
$460,149
|
$(1,685,646)
|
|
|
|
|
|
|
|
Other income
(expense):
|
(10,388)
|
(54,375)
|
(64,763)
|
-
|
(11,682)
|
(76,445)
|
|
|
|
|
|
|
|
NET INCOME
(LOSS)
|
$1,072,972
|
$(3,372,428)
|
$(2,299,456)
|
$88,898
|
$448,467
|
$(1,762,091)
|
15. Note Payable-Small Business Administration Loans and
Grant
On
March 27, 2020, the Coronavirus Aid, Relief, and Economic Security
(the “CARES Act”) Act was signed into United States
law.
On
April 22, 2020, the Company received a loan of $443,400 pursuant to
the Paycheck Protection Program (the “PPP”) under
Division A, Title I, Section 1102 and 1106 of the CARES Act.
The loan, which was in the form of a promissory note, as
amended, dated April 22, 2020 issued by the Company (the
“Note”); the Note matures on April 13, 2022 and bears
interest at a rate of 1% per annum. The Note may be prepaid by the
Company at any time prior to maturity with no prepayment penalties.
Under the terms of the PPP, certain amounts of the loan may be
forgiven if they are used for qualifying expenses as described in
the CARES Act. Qualifying expenses include payroll costs, costs
used to continue group health care benefits, mortgage payments,
rent, and utilities. As of September 30, 2020, the Company has used
funds from the loan to pay qualifying expenses. The Company
intends to apply for forgiveness of the loan when it receives
instructions from the lender at which time grant income of $443,400
will be recognized.
During
the three months ended September 30, 2020, the Company received
$10,000 under Division A, Title I, Section 1110 of the CARES Act.
The Company is not required to pay this amount back and thus
recognized $10,000 as government grant income during the
period.
16.
Subsequent Events
None
ITEM
2.
Management’s Discussion and Analysis of Results
of Operations and FinancialCondition
COVID-19 Coronavirus Pandemic Response and Impact
Following
the outbreak of the COVID-19 coronavirus global pandemic
("COVID-19") in early 2020, in March 2020 the U.S. Centers for
Disease Control issued guidelines to mitigate the spread and health
consequences of COVID-19. The Company implemented changes to its
operations and business practices to follow the guidelines and
minimize physical interaction, including using technology to allow
employees to work from home when possible and altering production
procedures and schedules, asset maintenance, and limiting
discretionary spending. As long as they are required, the
operational practices implemented could have an adverse impact on
our operating results due to deferred production and revenues or
additional costs. The negative impact of COVID-19 remains
uncertain, including on overall business and market
conditions. There is uncertainty related to the potential
additional impacts COVID-19 could have on our operations and
financial results for the year.
General
Certain
matters discussed are forward-looking statements that involve risks
and uncertainties, including the impact of antimony prices and
production volatility, changing market conditions and the
regulatory environment and other risks. Actual results may differ
materially from those projected. These forward-looking statements
represent our judgment as of the date of this filing. We disclaim,
however, any intent or obligation to update these forward-looking
statements.
|
|
|
|
|
Antimony - Combined USA and
Mexico
|
|
|
|
|
Lbs of Antimony
Metal USA
|
89,052
|
187,889
|
375,519
|
597,308
|
Lbs of Antimony
Metal Mexico
|
57,790
|
155,549
|
300,474
|
607,407
|
Total
Lbs of Antimony Metal Sold
|
146,842
|
343,438
|
675,993
|
1,204,715
|
Average Sales
Price/Lb Metal
|
$3.25
|
$3.15
|
$3.71
|
$3.56
|
Net
loss/Lb Metal
|
$(7.60)
|
$(2.09)
|
$(3.00)
|
$(1.91)
|
|
|
|
|
|
Gross antimony
revenue
|
$477,273
|
$1,080,871
|
$2,509,183
|
$4,294,281
|
|
|
|
|
|
Cost of sales -
domestic
|
(491,092)
|
(628,050)
|
(1,559,018)
|
(2,271,512)
|
Cost of sales -
Mexico
|
(557,399)
|
(892,714)
|
(1,805,127)
|
(3,138,309)
|
Operating
expenses
|
(223,293)
|
(254,360)
|
(852,631)
|
(1,119,153)
|
Non-operating
expenses
|
(2,887)
|
(22,639)
|
(1,062)
|
(64,763)
|
Loss on abandonment
of mineral properties
|
(318,502)
|
-
|
(318,502)
|
-
|
|
(1,593,173)
|
(1,797,763)
|
(4,536,340)
|
(6,593,737)
|
|
|
|
|
|
Net
loss - antimony
|
(1,115,900)
|
(716,892)
|
(2,027,157)
|
(2,299,456)
|
Depreciation,&
amortization
|
153,494
|
221,701
|
460,481
|
541,624
|
EBITDA
- antimony
|
$(962,406)
|
$(495,191)
|
$(1,566,676)
|
$(1,757,832)
|
|
|
|
|
|
Precious
Metals
|
|
|
|
|
Ounces
sold
|
|
|
|
|
Gold
|
6
|
12
|
31
|
36
|
Silver
|
2,403
|
3,445
|
11,434
|
8,333
|
|
|
|
|
|
Gross precious
metals revenue
|
$48,832
|
$55,500
|
$173,029
|
$140,550
|
Production
costs
|
(22,141)
|
(17,631)
|
(66,422)
|
(51,652)
|
Net
income - precious metals
|
26,691
|
37,869
|
106,607
|
88,898
|
Depreciation
|
22,141
|
17,630
|
66,422
|
51,652
|
EBITDA
- precious metals
|
$48,832
|
$55,499
|
$173,029
|
$140,550
|
|
|
|
|
|
Zeolite
|
|
|
|
|
Tons
sold
|
2,500
|
3,483
|
8,354
|
10,924
|
Average Sales
Price/Ton
|
$192.45
|
$187.07
|
$197.89
|
$190.57
|
Net
income (Loss)/Ton
|
$38.39
|
$31.71
|
$41.20
|
$41.05
|
|
|
|
|
|
Gross zeolite
revenue
|
$481,126
|
$651,563
|
$1,653,201
|
$2,081,751
|
Cost of
sales
|
(371,690)
|
(520,356)
|
(1,254,823)
|
(1,568,174)
|
Operating
expenses
|
(11,215)
|
(16,284)
|
(46,414)
|
(53,428)
|
Non-operating
expenses
|
(2,252)
|
(4,492)
|
(7,820)
|
(11,682)
|
Net
income - zeolite
|
95,969
|
110,431
|
344,145
|
448,467
|
Depreciation
|
42,015
|
46,825
|
140,395
|
139,426
|
EBITDA
- zeolite
|
$137,985
|
$157,256
|
$484,539
|
$587,893
|
|
|
|
|
|
Company-wide
|
|
|
|
|
Gross
revenue
|
$1,007,231
|
$1,787,934
|
$4,335,413
|
$6,516,582
|
Production
costs
|
(1,442,322)
|
(2,058,751)
|
(4,685,390)
|
(7,029,647)
|
Operating
expenses
|
(234,508)
|
(270,644)
|
(899,045)
|
(1,172,581)
|
Non-operating
expenses
|
(5,139)
|
(27,131)
|
(8,882)
|
(76,445)
|
Loss on abandonment
of mineral properties
|
(318,502)
|
-
|
(318,502)
|
-
|
Net
income (loss)
|
(993,240)
|
(568,592)
|
(1,576,405)
|
(1,762,091)
|
Depreciation,&
amortization
|
217,650
|
286,156
|
667,298
|
732,702
|
EBITDA
|
$(775,590)
|
$(282,436)
|
$(909,108)
|
$(1,029,389)
|
PART I - FINANCIAL INFORMATION, CONTINUED:
ITEM
2.
Management’s
Discussion and Analysis of Results of Operations and
FinancialCondition, continued:
Company-Wide
For the
third quarter of 2020, we recognized a net loss of $993,240 on
sales of $1,007,231, after depreciation and amortization of
$217,650. We reported a net loss of $568,592 in the third quarter
of 2019 on sales of $1,787,834, after depreciation and amortization
of $286,156.
For the
first nine months of 2020, we recognized a net loss of $1,576,405
on sales of $4,335,413, compared to a net loss of $1,762,091 in the
first nine months of 2019, on sales of $6,516,582. In addition to
normal operating costs, the loss in the first nine months of 2020
was significantly impacted by supply constrictions and the decrease
in the market price for antimony.
For the
three and nine months ended September 30, 2020, EBITDA was a
negative $775,590 and a negative $909,108 compared to a negative
$282,436 and $1,029,389 for the same periods in 2019.
Net
non-cash expense items totaled $1,081,115 for the nine months ended
September 30, 2020 and included $667,298 for depreciation and
amortization, $318,502 for impairment loss on mining activities,
$89,858 for director compensation and $5,457 for other items Net
non-cash expense items totaled $1,023,700 for the first nine months
of 2019 and included $732,702 for depreciation and amortization,
$136,000 for common stock issued for services, $96,875 for director
compensation, $54,110 for amortization of debt discount and $4,013
for other items.
For the
three and nine months ended September 30, 2020, general and
administrative expenses were $108,643 and $425,174, respectively,
compared to $139,456 and $498,539 for the same periods of
2019.
Antimony
For the
three and nine month periods ended September 30, 2020, we sold
146,842 and 675,993 pounds, respectively, of antimony compared to
343,438 and 1,204,715 pounds, respectively, for the three and nine
month periods ended September 30, 2019, respectively. The raw
material received from our North American supplier decreased by
approximately 99,000 and 222,000 pounds, respectively, for the
three and nine month periods ended September 30, 2020, compared to
the same quarter for 2019. We had a decrease in raw material from
Mexico of approximately 98,000 and 307,000 pounds from Mexico for
for the three and nine month periods ended September 30, 2020,
compared to the same quarter for 2019.
As a
condition for reducing our antimony related work force in Mexico,
we were obligated by Mexican law to provide a termination fee to
workers at both our Wadley mine and our Madero smelter. This was a
one-time fee and substantially increased our loss in Mexico for the
third quarter of 2020.
The
average sales price of antimony during the three and nine month
periods ended September 30, 2020 was $3.25 and $3.71 per pound,
respectively, compared to $3.15 and $3.56, respectively, during the
same period in 2019.
Precious Metals
The
caustic leach of flotation concentrates from Los Juarez has been
successful, and the cyanide leach plant at Puerto Blanco is on
schedule to start the pilot production of Los Juarez gold, silver,
and antimony during the first half of 2021.
For the
three and nine month periods ended September 30, 2020, income for
precious metals from North American sources was $48,832 and
$173,029, compared to $55,500 and $140,550 for the same periods of
2019.
From
the Los Juarez deposit, the estimated recovery value of precious
metals per metric ton, after the caustic leach and cyanide leach
circuits, is as follows:
Schedule of
recovery values
|
|
|
|
|
Metal
|
|
|
|
|
Gold
|
|
90%
|
|
$59.85
|
Silver
|
|
90%
|
$24.0/oz
|
$70.63
|
Antimony
|
0.652%
|
70%
|
|
$27.11
|
Total
|
|
|
|
$157.59
|
Current
and prior periods’ revenue from precious metals is as
follows:
Precious
Metal Sales Silver/Gold
|
For the three
months ended September 30,
|
For the nine
months ended September 30,
|
Montana
|
|
|
|
|
Ounces Gold Shipped
(Au)
|
6.08
|
12.53
|
30.79
|
27.67
|
Ounces Silver
Shipped (Ag)
|
2,402.68
|
3,444.68
|
11,433.80
|
7,604.84
|
Total
Revenues
|
$48,832
|
$55,500
|
$173,029
|
$117,979
|
|
|
|
|
|
Mexico
|
|
|
|
|
Ounces Gold Shipped
(Au)
|
-
|
|
-
|
8.21
|
Ounces Silver
Shipped (Ag)
|
-
|
|
-
|
727.88
|
Total
Revenues
|
$0
|
$0
|
$0
|
$22,571
|
Bear River Zeolite (BRZ)
For the
three and nine month periods ended September 30, 2020, BRZ sold
2,500 and 8,354 tons of zeolite, respectively, compared to 3,483
and 10,924 tons in the same periods of 2019.
For the
three and nine month periods ended September 30, 2020, BRZ realized
net income of $95,969 and $344,145, respectively, after
depreciation of $42,015 and $140,395, respectively, compared to a
net income of $110,431 and $448,467, after depreciation of $46,825
and $139,426, respectively, for the same periods of
2019.
A large
part of our zeolite sales were generated by the use of swimming
pools, and that activity has been severely impacted by the
pandemic. We expect a resumption of normal sales to this industry
in the future.
BRZ
realized an EBITDA for the three and nine month periods ended
September 30, 2020 of $137,985 and $484,539, respectively, compared
to $157,256 and $587,893, respectively, for the same periods in
2019.
We are
anticipating growth in all areas of zeolite sales.
Financial Position
Financial
Condition and Liquidity
|
|
|
|
|
|
Current
assets
|
$2,476,542
|
$1,279,755
|
Current
liabilities
|
(3,588,963)
|
(3,975,681)
|
Net
Working Capital
|
$(1,112,421)
|
$(2,695,926)
|
|
|
|
|
For the
Three Months Ended
|
|
|
|
Cash provided
(used) by operations
|
$(566,587)
|
$(283,542)
|
Cash provided
(used) by investing:
|
|
|
Cash used for
capital outlay
|
(220,455)
|
(677,837)
|
Payment received on
note receivable
|
-
|
400,000
|
Cash provided
(used) by financing:
|
|
|
Net payments (to)
from factor
|
(5,032)
|
42,580
|
Proceeds from notes
payable to bank, net of payments
|
(46,270)
|
14,311
|
Principal paid on
long-term debt
|
(30,876)
|
(116,961)
|
Advances from
related party
|
-
|
237,400
|
Payments on
advances from related parties
|
(64,650)
|
(17,387)
|
Proceeds from note
payable-SBA
|
443,400
|
-
|
Stock issued for
cash
|
1,813,068
|
431,322
|
Checks issued and
payable
|
(2,879)
|
(14,777)
|
Net
change in cash and restricted cash
|
$1,319,719
|
$15,109
|
Our net
working capital increased by $1,583,505 from December 31, 2019 to
September 30, 2020. Our cash and cash equivalents increased by
$1,319,719 during the same period. We spent approximately $220,000
for capital items, and our debt, excluding the SBA loan which we
anticipate not having to pay, decreased by approximately $77,000.
We have estimated commitments for construction and improvements of
less than $100,000 to finish building and installing the precious
metals leach circuits. We believe that with our current cash
balance, along with the future cash flow from operations and
operating agreements, we have adequate liquid assets to meet these
commitments and service our debt for the next twelve months. We
have lines of credit of $199,998 which have been drawn down by
$150,796 at September 30, 2020.
At
September 30, 2020, the Company’s consolidated financial
statements show negative working capital of approximately $1.1
million and an accumulated deficit of approximately $30.9
million. With the exception of 2018, the Company has incurred
losses for the past several years. The net income in 2018 was
primarily due to non-recurring events which contributed
approximately $2.5 million to net income. These factors indicate
that there is substantial doubt regarding the ability to continue
as a going concern for the next twelve months.
Over
the past several years, the Company has been able to make required
principal payments on its debt from cash generated from
operations. The abandonment of the mineral properties in
Mexico in November 2019 resulted in the removal of approximately
$1,500,000 of debt and the related payments which were $86,000 in
2019 and $193,000 in 2018. In March of 2020, the Company
applied for and received funds from a note payable-Small Business
Administration (“SBA”) for $443,400. Management
believes that the Company can make debt payments when due. In
August 2019 and in July 2020 the Company was successful in raising
$404,199 and $1,813,068, respectively, from the sale of shares of
common stock to fund capital projects in
Mexico.
The
continuing losses are principally a result of the Company’s
antimony operations, due to both depressed antimony prices and high
production costs incurred in Mexico. To improve conditions,
the Company plans to continue searching for areas to reduce
production costs, and we have decided to de-emphasize our antimony
production and concentrate our resources on finishing the precious
metals system in Mexico to take advantage of the current high
prices for silver and gold. Management expects improvement in
cash flow in 2021 from the sale of precious metals extracted from
the leach circuit scheduled to come on line in Mexico in the second
half of 2021.
There
can be no assurance that management plans will alleviate the doubt
regarding the Company’s ability to continue as a going
concern over the next twelve months, particularly during the
current period of market instability related to the COVID-19
pandemic. If the going concern assumption were not
appropriate for these financial statements, then adjustments would
be necessary to the carrying values of the assets and liabilities,
the reported revenues and expenses, and the balance sheet
classifications used.
None
ITEM 4. Controls and
Procedures
EVALUATION
OF DISCLOSURE CONTROLS AND PROCEDURES
We
maintain disclosure controls and procedures that are designed to
ensure that information required to be disclosed in our reports
under the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported within the time periods specified in the
SEC's rules and forms, and that such information is accumulated and
communicated to management, as appropriate, to allow timely
decisions regarding required disclosure. Our chief financial
officer conducted an evaluation of the effectiveness of the
Company's disclosure controls and procedures (as defined in the
Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)) as
of September 30, 2020. It was determined that there were material
weaknesses affecting our disclosure controls and procedures and, as
a result of those weaknesses, our disclosure controls and
procedures were not effective as of September 30, 2020. These
material weaknesses are as follows:
●
Inadequate design
of internal control over the preparation of the financial
statements and financial reporting processes;
●
Inadequate
monitoring of internal controls over significant accounts and
processes including controls associated with domestic and Mexican
subsidiary operations and the period-end financial reporting
process; and
●
The absence of
proper segregation of duties within significant processes and
ineffective controls over management oversight, including antifraud
programs and controls.
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.
CHANGES
IN INTERNAL CONTROL OVER FINANCIAL REPORTING
There
were no significant changes made to internal controls over
financial reporting for the quarter ended September 30,
2020.