Business Context and Reporting Period
Company: United States Antimony Corporation (USAC)
Filing Type: Form 10-K (Annual Report)
Period Ended: December 31, 2008
Business Overview: USAC operates two primary divisions: the Antimony Division, which produces antimony oxide, sodium antimonate, and antimony metal from foreign raw materials at a facility in Montana; and the Zeolite Division (Bear River Zeolite Company), which mines and processes zeolite in Idaho. The company is developing new mining and milling operations in Mexico, with production expected to begin in 2009.
Key Financial Metrics
| Metric | 2008 | 2007 |
|---|---|---|
| Total Revenue | $5,275,987 | $5,259,127 |
| Net Income (Loss) | $332,364 | $(623,692) |
| Antimony Revenue | $3,705,240 | $4,116,863 |
| Antimony Gross Profit | $447,961 | $681,137 |
| Zeolite Revenue | $1,570,747 | $1,142,264 |
| Zeolite Operating Loss | $(185,981) | $(709,440) |
| Total Assets | $3,271,114 | $3,345,889 |
| Total Liabilities | $1,487,616 | $2,617,350 |
| Stockholders' Equity | $1,783,498 | $728,539 |
| Working Capital | $(1,095,749) | $(1,347,102) |
| Cash Flow from Operations | $(378,576) | $(347,295) |
Material Changes vs. Prior Period
- Profitability Turnaround: The company reported a net income of $332,364 in 2008, reversing a net loss of $623,692 in 2007. This was primarily driven by a one-time gain of $800,000 from an expired exclusivity contract for zeolite sales.
- Antimony Division: Sales volume decreased by 10% (1.36 million lbs vs. 1.63 million lbs) due to raw material supply constraints. Gross profit declined from $681,137 to $447,961 despite a higher average selling price ($2.72/lb vs. $2.52/lb).
- Zeolite Division: Sales increased 38% to $1.57 million due to a 30% increase in tonnage shipped. The operating loss narrowed significantly from $709,440 to $185,981, attributed to reduced fuel costs, lower regulatory fines, and the elimination of an unprofitable bagging line.
- Liquidity: While working capital remains negative at approximately $1.1 million, the company reduced total liabilities by over $1.1 million compared to 2007, largely due to the reclassification of deferred revenue upon contract expiration.
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. This is due to negative working capital, an accumulated deficit of approximately $20.6 million, and a reliance on external financing and profitable operations to meet obligations.
Outlook and Guidance
- Mexico Operations: Subsidiaries in Mexico (USAMSA and AM) commenced operations in Q1 2009. Management anticipates bringing antimony, silver, and gold operations on stream in 2009 following the completion of a flotation mill and crusher.
- Capital Needs: The company must generate profits from operations and acquire additional capital through stock sales or debt financing to sustain existence.
Risks and Contingencies
- Delinquent Liabilities: As of year-end, the company was delinquent on approximately $400,000 in accounts payable and $60,000 in accrued interest. Creditors could demand immediate payment, jeopardizing operations.
- Customer Concentration: 65% of antimony sales in 2008 were to a single customer. Loss of this customer would materially impact the business.
- Environmental Liabilities: The company has accrued $107,500 for environmental reclamation. The range of reasonably possible losses in excess of this accrual cannot be estimated. The company lacks environmental liability insurance.
- Internal Controls: Management identified material weaknesses in internal controls, including a lack of segregation of duties and insufficient accounting expertise for complex transactions.
Investor Verification Checklist
- Going Concern Status: Verify the company's ability to secure additional financing or generate sufficient cash flow to cover delinquent liabilities and operational costs.
- One-Time Gains: Assess the sustainability of the 2008 net income, which was heavily influenced by the $800,000 non-recurring gain from an expired contract.
- Mexico Project Timeline: Confirm the operational status and permitting progress of the San Miguel mine and mill in Mexico, which is critical for future growth.
- Related Party Transactions: Review the significant debt and interest owed to the President/Director (John C. Lawrence) and the terms of the factoring agreement for accounts receivable.
- Environmental Compliance: Monitor regulatory requirements for the Thompson Falls, Montana site and the potential for increased reclamation costs.