UAMY

Business Context and Reporting Period

Company: United States Antimony Corporation
Filing Type: Form 10-Q (Quarterly Report)
Period Ended: June 30, 2010
Operations: The Company operates two primary segments: an Antimony Division (mining and processing in Montana and Mexico) and a Zeolite Division (mining and processing in Idaho). The Company is classified as a smaller reporting company.

Key Financial Metrics

Segment Performance (Six Months 2010):

• Antimony: Revenues of $2,532,555; Gross Profit of $385,793.
• Zeolite: Revenues of $972,444; Gross Profit of $121,888.

Material Changes vs. Prior Period

The Company reported a significant turnaround from losses to profitability compared to the same periods in 2009.

• Revenue Growth: Total revenues increased 103% for the six months ended June 30, 2010, compared to $1,724,444 in the prior year period. This was driven by higher sales volumes and increased commodity prices for both antimony and zeolite.
• Profitability: Net income for the six months ended June 30, 2010, was $120,466, compared to a net loss of $276,185 in the prior year. The three-month period showed a net income of $204,583 versus a loss of $37,141.
• Cost Structure: Production costs increased due to higher raw material prices and increased labor/maintenance costs, but were outpaced by revenue growth. Antimony production costs rose to $2.60/lb (6 months 2010) from $1.49/lb (6 months 2009).
• Cash Flow: Net cash used by operating activities improved significantly to $(7,457) for the six months ended June 30, 2010, compared to $(367,916) in the prior year, primarily due to the shift from operating losses to net income.

Outlook, Risks, and Contingencies

Management Commentary and Outlook:
Management expresses confidence in meeting obligations over the next twelve months, citing recent price increases, expectations of new customers, and reduced capital spending. However, the Company relies on continued profitable operations or additional financing to sustain the business.

Going Concern:
The financial statements are prepared on a going concern basis. The Company has negative working capital of approximately $150,000 and an accumulated deficit of approximately $21 million. These factors raise substantial doubt about the Company's ability to continue as a going concern without additional financing.

Risks and Contingencies:

• Customer Concentration: For the six months ended June 30, 2010, 30% of antimony revenues came from a single customer. In the second quarter, two customers accounted for 39% of antimony revenues.
• Legal Proceedings: The Company has accrued $36,459 regarding potential underpayment of royalties to individuals who have initiated legal action. Additionally, $43,650 is accrued for penalties assessed by the Mine Safety and Health Administration and Idaho Department of Environmental Quality for minor technical infractions.
• Internal Controls: Management identified material weaknesses in internal controls, including a lack of segregation of duties, insufficient accounting expertise, and the discovery of material misstatements during the prior year-end audit.

Investor Verification Checklist

• Liquidity Position: Verify the Company's ability to generate sufficient cash flow or secure financing given the negative working capital and substantial accumulated deficit.
• Customer Dependency: Assess the risk associated with the high concentration of revenue from a single customer (30% of antimony sales) and two key customers (39% in Q2).
• Internal Control Remediation: Monitor progress on remediation plans for material weaknesses in financial reporting and segregation of duties.
• Legal Accruals: Track the status of royalty payment disputes and environmental penalties to determine if additional liabilities may arise.
• Capital Expenditures: Review the impact of ongoing capital spending, particularly the $390,664 spent on the Mexico mill site in the first half of 2010, on future cash requirements.