Business Context and Reporting Period
Company: United States Antimony Corp (USAC)
Filing Type: Form 10-Q (Quarterly Report)
Period Ended: June 30, 2008
Operations: The Company operates two primary segments: Antimony (mining and processing) and Zeolite (mining and processing). USAC is classified as a smaller reporting company.
Key Financial Metrics
| Metric | Three Months Ended June 30, 2008 |
Six Months Ended June 30, 2008 |
Six Months Ended June 30, 2007 |
|---|---|---|---|
| Total Revenues | $1,414,651 | $2,842,045 | $2,717,343 |
| Net Income (Loss) | $701,230 | $560,037 | $(158,875) |
| Gross Profit | $94,266 | $165,288 | $105,145 |
| Operating Cash Flow | N/A | $(129,731) | $(181,711) |
| Cash Balance (End of Period) | $12,780 | $12,780 | $4,155 |
| Total Assets | $3,290,389 | $3,290,389 | $3,345,889 |
| Total Liabilities | $1,802,814 | $1,802,814 | $2,617,350 |
| Stockholders' Equity | $1,487,575 | $1,487,575 | $728,539 |
Segment Performance (Six Months 2008):
- Antimony: Revenues of $2,113,031; Gross Profit of $321,865.
- Zeolite: Revenues of $729,014; Gross Loss of $(156,577).
Material Changes vs. Prior Period
Profitability Turnaround: The Company reported a net income of $560,037 for the six months ended June 30, 2008, compared to a net loss of $158,875 in the same period in 2007. This reversal is primarily driven by a non-recurring item.
Unusual Item - Expired Contract: The Company recognized $800,000 in revenue during the second quarter of 2008 due to the expiration of an exclusivity agreement with a shareholder (Zeolite Company of America). The buyer failed to meet minimum purchase requirements, voiding the contract and allowing the Company to recognize the deferred revenue immediately.
Revenue Trends:
- Antimony: Revenues decreased slightly ($79,636) year-over-year due to lower volume (808,393 lbs vs. 911,972 lbs), though average price per pound increased ($2.61 vs. $2.40) due to higher raw material costs.
- Zeolite: Revenues increased significantly ($204,338) due to higher volume sold (1,669 tons increase), despite a slight decrease in average price per ton.
Cost Structure: Production costs for Antimony rose to $2.00/lb from $1.75/lb due to raw material inflation. Zeolite production costs improved to $92.16/ton from $142.14/ton due to increased efficiency.
Outlook, Risks, and Contingencies
Going Concern Warning: Management explicitly states there is "substantial doubt" about the Company's ability to continue as a going concern. As of June 30, 2008, the Company had negative working capital of approximately $1.32 million and an accumulated deficit of $20.4 million.
Liquidity Constraints:
- Cash on hand is minimal ($12,780).
- The Company is currently unable to raise funds by selling common stock because the number of outstanding and reserved shares (51.3 million) exceeds the authorized limit (50 million).
- Management plans to seek an increase in authorized shares in the second half of 2008 to enable future capital raises.
Internal Control Weaknesses: The Company identified material weaknesses in internal controls, including a lack of segregation of duties, insufficient accounting expertise on the Board, and the discovery of material misstatements requiring audit adjustments.
Environmental Liabilities: The Company has accrued costs for reclamation and remediation. While management believes they are in compliance, future environmental expenditures cannot be reliably estimated due to regulatory uncertainties.
Investor Verification Checklist
- Revenue Quality: Verify the sustainability of the $800,000 gain from the expired exclusivity contract; this is a non-recurring item that artificially inflated net income.
- Capital Authorization: Confirm if the Company has successfully increased its authorized share count to resolve the over-allocation issue preventing equity financing.
- Liquidity Runway: Assess the Company's ability to meet obligations with only $12,780 in cash and negative working capital of $1.32 million.
- Customer Concentration: Note that 68% of Antimony revenues for the six-month period came from a single customer, creating significant concentration risk.
- Internal Controls: Monitor remediation efforts regarding the identified material weaknesses in financial reporting and segregation of duties.