United States Antimony Corporation — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022; unaudited consolidated financial statements. The company produces and sells antimony products, zeolite and precious metals, with operations in the United States and Mexico.
Financial performance and position
| Metric | Q1 2022 | Q1 2021 / prior date |
|---|---|---|
| Revenue | $3.58 million | $1.25 million |
| Gross profit / margin | $1.14 million / 31.8% | $0.21 million / 16.9% |
| Operating income (loss) | $779,580 | ($341,726) |
| Net income (loss) | $786,252 | ($335,488) |
| Net income per common share | $0.01 | Nil |
| Operating cash flow | $163,903 | ($2.45 million) |
| Capital expenditures | $188,541 | $23,298 |
| Cash and cash equivalents | $21.33 million | $21.36 million at Dec. 31, 2021 |
| Working capital | $22.35 million | $21.55 million at Dec. 31, 2021 |
| Total debt | $211,093 | $215,150 at Dec. 31, 2021 |
Antimony generated $2.83 million of revenue, zeolite $674,042 and precious metals $77,334. Revenue increased about 186% year over year. Antimony sales volume rose to 433,350 pounds from 181,969 pounds, while its average selling price increased to $6.53 per pound from $3.61. Zeolite revenue grew, but gross profit fell to $33,797 from $76,061, partly reflecting higher equipment-maintenance expense. Company-reported EBITDA, a non-GAAP measure, was $1.01 million versus negative $110,769.
Material changes, outlook and risks
- Improved antimony pricing and volume drove the return to profitability. The company reported a strong order pipeline and expected antimony demand to remain strong for the foreseeable future; management expected prices to remain strong and keep pace with inflation in the short term. No quantified earnings or revenue guidance was provided.
- Management planned to use funds raised in 2021 for operational improvements at the Madero, Puerto Blanco, Bear River Zeolite and Thompson Falls facilities, aiming to increase production and reduce costs. Modified antimony trisulfide furnaces completed production runs; two additional electric furnaces had been delivered and were being modified.
- Management cited higher labor costs and uncertainty about inflation in labor, materials and other production costs. COVID-related workforce, supply and contractor disruptions could continue, with future financial effects not estimable and potentially material.
- The company relies on foreign raw-material sources and identifies procurement interruptions and volatile commodity prices as risks. It reported no SEC-defined proven or probable antimony reserves and no SEC-defined zeolite reserves or resources.
- Disclosure controls and procedures were deemed ineffective due to material weaknesses attributed to the small accounting staff and limited ability to segregate duties. Management relied on direct oversight and external professionals; no material control changes occurred during the quarter.
- Zeolite royalties vary from 8% to 13% of sales; the company was negotiating with certain royalty holders to modify agreement terms. It had accrued $381,054 in royalties payable at quarter-end. No material legal proceedings or significant off-balance-sheet arrangements were reported.
Important facts for investors to verify
- Reconcile the antimony gross-margin disclosures: segment figures show $1,055,777 gross profit on $2,828,930 revenue, or 37.3%, while the MD&A narrative states 60.6%.
- Assess whether higher antimony sales prices and volumes, and the reported order pipeline, can be sustained as production expands and operating costs change.
- Review the remediation and monitoring of the disclosed material weaknesses in disclosure controls and procedures.
- Track planned facility improvements, furnace modifications, related capital spending and their effect on production and costs.
- Monitor foreign feedstock availability, COVID-related operating disruptions, commodity and input-cost volatility, and the outcome of royalty negotiations.