United States Antimony Corporation — Q1 2014 10-Q
Reporting period: Three months ended March 31, 2014; financial statements are unaudited. The company operates U.S. and Mexican antimony businesses and a U.S. zeolite business.
Key financial results
| Metric | Q1 2014 | Q1 2013 |
|---|---|---|
| Revenue | $2.952 million | $2.967 million |
| Gross profit (loss) / margin | $(52,540) / (1.8%) | $(62,134) / (2.1%) |
| Operating loss | $(345,825) | $(355,419) |
| Net loss per statement of operations | $(358,170); $(0.01) per share | $(375,607); $(0.01) per share |
| Net cash from (used in) operations | $38,629 | $(104,389) |
| Capital expenditures | $296,147 cash outflow | $456,876 cash outflow |
Antimony sales volume rose about 8% to 441,218 pounds, while the reported average sales price fell 15% to $4.85 per pound. Zeolite volume increased about 32% to 3,350 tons; its reported segment net income rose to $108,492 from $68,444. Overall revenue was nearly flat, and the company remained loss-making.
Financial position and liquidity
- At March 31, cash and cash equivalents were $4,851; certificates of deposit were $248,915. Current assets were $1.888 million versus current liabilities of $3.040 million, producing negative working capital of $1.152 million, compared with negative $569,000 at year-end 2013.
- Total assets were $15.036 million and total liabilities $4.217 million. Debt included $154,503 of bank notes and $1.167 million of long-term debt, of which $399,391 was current. The company also reported $218,223 due to its receivables factor.
- Operating cash flow was positive, but cash declined $15,492 to $4,851 after investing outflows and financing inflows. Financing included $170,000 from common-stock issuance and $50,000 of long-term borrowings.
Changes, outlook, and risks
- Management attributed the quarterly loss principally to lower antimony prices, which more than offset higher sales volume. U.S. production costs increased, partly due to higher propane costs; Mexican non-production costs declined year over year.
- Management said Mexican output was constrained by permits for equipment and explosives, and expected Guadalupe ore supply to increase. The Madero smelter had about two months of feedstock stockpiled, and the company was expanding furnace capacity.
- A natural-gas pipeline for the Mexico smelter was substantially complete; management expected PEMEX hookup by June 1, 2014 and forecast fuel-cost reductions of 75% after conversion. The filing provides no formal earnings or revenue guidance.
- Management expected a potential new water-filtration product to create a significant zeolite market. It also stated that available liquidity and future operating cash flow would be adequate for the next 12 months, despite negative working capital and very low cash.
- Antimony prices and customer concentration are material risks: three customers represented 70.1% of quarterly revenue. Sales and most raw-material purchases are exposed to world antimony prices; management stated a $2-per-pound sales-price decline could reduce gross profit by about $1 per pound.
- Receivables factoring is with recourse, requires reimbursement for late customer payments, and is personally guaranteed by the CEO. The company disclosed material weaknesses in disclosure controls, including inadequate segregation of duties and audit adjustments for material financial-statement misstatements.
- Commitments for construction and improvements are stated as approximately “$350M,” including “$150M” for the pipeline; the filing text does not make the intended units clear. It also cites about $450,000 of San Miguel option payments scheduled for June 2014.
Investor verification priorities
- Reconcile the comparative net-loss figures: the statements of operations show Q1 2013 net loss of $375,607, while the cash-flow statement and MD&A cite $408,825.
- Confirm the cash-flow and working-capital discussion: the MD&A table gives a different operating-cash-flow figure from the cash-flow statement, and its narrative describes accounts receivable as decreasing although the balance sheet shows an increase.
- Clarify the units and amounts for the stated construction commitments, and assess funding needs against negative working capital, low cash, debt maturities, and planned investment.
- Check the common-stock warrant proceeds discrepancy: the financial statements report $170,000, while the unregistered-sales discussion reports $174,000 and mentions a $5,716 offering-cost adjustment.