UAMY

Business Context and Reporting Period

Company: United States Antimony Corporation (USAC)
Filing Type: Form 10-K (Annual Report)
Period Ended: December 31, 2009
Business Overview: USAC operates two primary divisions: Antimony (production of antimony oxide, metal, and sodium antimonate in Montana and Mexico) and Zeolite (mining and processing in Idaho). The company is a smaller reporting company with no proven or probable reserves for antimony or zeolite as defined by the SEC. It relies on foreign sources for antimony raw materials.

Key Financial Metrics

Material Changes vs. Prior Period

• Revenue Decline: Total revenues decreased 22% to $4.1 million. Antimony sales dropped 31% due to lower volume and prices, while Zeolite sales declined slightly by 2%.
• Profitability Shift: Despite revenue declines, the Antimony Division improved gross profit by $62,734 due to reduced production costs. The Zeolite Division turned a $185,981 loss into a $16,882 profit, driven by lower production and delivery costs.
• Net Loss: The company reported a net loss of $294,843 in 2009, reversing a net income of $332,364 in 2008. This was primarily due to the absence of an $800,000 "one-time" gain from an expired exclusivity contract recorded in 2008, coupled with increased general and administrative expenses ($595,803 vs. $418,792).
• Debt Reduction: Significant debt was converted to common stock in 2009, reducing net interest expense from $40,938 to $5,605.
• Liquidity: Working capital remained negative but improved from a deficit of ~$1.1 million to ~$309,000. Cash on hand increased to $180,613.

Guidance, Outlook, Risks, and Contingencies

• Going Concern Uncertainty: Independent auditors have raised substantial doubt about the company's ability to continue as a going concern due to negative working capital, an accumulated deficit of approximately $20.9 million, and a reliance on future financing and profitable operations.
• Delinquent Liabilities: As of December 31, 2009, the company was delinquent on approximately $263,000 in accounts payable and $25,000 in accrued interest. Creditors could demand immediate payment, jeopardizing operations.
• Environmental Liabilities: The company has accrued $107,500 for environmental reclamation. Management believes this is adequate, but notes that the range of reasonably possible losses in excess of accruals cannot be estimated. There is no environmental liability insurance.
• Internal Control Weaknesses: Management identified material weaknesses in internal controls, including a lack of segregation of duties, insufficient accounting expertise, and material misstatements requiring audit adjustments.
• Market Risks: Operations are heavily dependent on volatile world market prices for antimony. Approximately 40% of antimony sales in 2009 were to a single customer.
• Outlook: Management anticipates bringing the Mexico operations (USAMSA) into full production in 2010, pending permitting and construction completion.

Investor Verification Checklist

• Going Concern Status: Verify the company's ability to secure additional financing or generate sufficient cash flow to meet obligations, given the auditor's "substantial doubt" qualification.
• Delinquent Payables: Confirm the status of the ~$263,000 in delinquent accounts payable and whether payment arrangements have been made to avoid operational shutdown.
• Customer Concentration: Assess the risk associated with 40% of antimony revenue coming from a single customer.
• Internal Controls: Review the specific steps management is taking to remediate material weaknesses in financial reporting and segregation of duties.
• Environmental Accruals: Monitor for any regulatory changes that could increase the $107,500 environmental reclamation liability beyond current estimates.
• Related Party Transactions: Scrutinize the conversion of $300,000 in related party debt to equity and the reimbursement of $100,150 to the CEO for equipment usage.