United States Antimony Corporation — Q2 2023 Form 10-Q
Reporting period: Three and six months ended June 30, 2023. USAC sells processed antimony, zeolite and precious-metals products, with operations in the United States and Mexico. Financial statements are unaudited.
Financial performance
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Revenue | $2.50 million | $3.59 million | $4.71 million | $7.17 million |
| Gross profit (loss) | $296,000 | $722,000 | ($240,000) | $1.86 million |
| Gross margin | 11.8% | 20.1% | (5.1%) | 26.0% |
| Operating income (loss) | ($510,000) | $367,000 | ($1.52 million) | $1.15 million |
| Net income (loss) | ($336,000) | $361,000 | ($1.14 million) | $1.15 million |
| Operating cash flow | Not separately stated | Not separately stated | ($3.19 million) | $745,000 |
| EBITDA (company-reported, non-GAAP) | ($93,000) | $595,000 | ($672,000) | $1.60 million |
At June 30, cash and cash equivalents were $13.69 million; working capital was $17.00 million, down from $19.40 million at December 31, 2022. Total debt was $266,000, including $83,000 current. Total assets were $32.27 million and stockholders’ equity was $30.73 million. Capital expenditures were $1.35 million for the first half, largely related to zeolite operations. The filing reports no separate Q2 cash-flow figure.
Changes and operating drivers
- First-half revenue fell 34% year over year. Antimony revenue declined 40%; reported causes included lower selling prices, fewer pounds sold, weaker demand and competition. First-quarter ore supply was also disrupted by a third-party supplier’s equipment failures.
- Antimony had a first-half gross loss of $582,000 versus gross profit of $1.55 million in the prior-year period. Management cited lower prices and volume, lower antimony concentration in processed ore, and higher vendor and labor costs.
- Zeolite revenue declined 25% for the first half, partly because a cone crusher failure curtailed production for about two months in Q1. The replacement cone was installed and management said production had increased and reliability improved. Precious-metals revenue rose 40% but remained a small part of total revenue.
- Operating expenses increased to $1.28 million for the first half from $715,000, including higher general and administrative, salaries, other operating and professional-fee costs.
Liquidity, outlook, risks and unusual items
- Cash decreased $5.37 million in the first half. Operating cash use reflected the net loss, increased receivables and inventory, and royalty payments. Management attributed higher receivables largely to late-quarter shipments collected after quarter-end, and said increased inventory included Mexican antimony ore for future processing.
- Management stated existing cash, operating cash flows and potential equity or debt financing were expected to be sufficient for planned operations and obligations over the next 12 months. The filing provides no quantified revenue or earnings guidance.
- Inventory was written down by $456,238 in the first half, compared with $136,836 in the prior-year period, because Mexican production costs exceeded expected sale proceeds for the antimony inventory involved.
- A Mexican tax assessment was approximately $1.265 million, including tax, interest and penalties. The company had not accrued a liability, believing it more likely than not to prevail in its appeal; the appeal remained pending. Management cautioned that an adverse outcome could materially affect results or financial position.
- After the quarter, on October 12, 2023, USAC notified Wadley it would not acquire the Wadley Property and terminated the option agreement. The company expected an approximately $140,000 loss on disposal in Q4 2023.
- Disclosure controls were deemed ineffective due to a material weakness in segregation of accounting duties, attributed to the small accounting staff. Management cited direct oversight and external professionals as mitigating measures.
- The cover page marks “No” for whether the company had filed all required Exchange Act reports during the preceding 12 months. The filing reports no material change in risk factors from the 2022 Form 10-K. Risks discussed include mineral supply and pricing, permitting and regulation, financing and dilution, operating interruptions, environmental matters, and Mexican tax, labor and security issues.
Important facts for investors to verify
- Whether antimony prices, supply, sales volumes and unit costs recover, given the first-half segment gross loss.
- Post-quarter collection of receivables and conversion of increased antimony inventory into sales and cash.
- Progress and outcome of the Mexican tax appeal, and any change to the unaccrued assessment exposure.
- Actual production and cost performance following the zeolite crusher replacement, and the final cost of terminating the Wadley option.
- Remediation of the disclosure-control weakness and the reason for the cover-page “No” response on prior required filings.