United States Antimony Corporation (NYSE American: UAMY) — 2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022, compared with fiscal 2021. The report was signed July 17, 2023. The filing states that the 2022 Form 10-K was not filed on time.
Business context
The company produces and sells antimony products, Idaho zeolite, and recovered gold and silver. Its operations span Montana and Idaho in the United States and mining, milling, and smelting facilities in Mexico. The company is classified as an exploration-stage issuer under SEC mining rules; it reports no proven and probable mineral reserves on its properties.
Financial and operating performance
| Metric | FY 2022 | FY 2021 |
|---|---|---|
| Revenue | $11.04 million | $7.75 million |
| Gross profit / margin | $2.00 million / 18.1% | $0.84 million / 10.8% |
| Operating income (loss) / margin | $348,205 / 3.2% | ($660,257) / (8.5%) |
| Net income (loss) | $428,661 | ($60,469) |
| Company-reported EBITDA (non-GAAP) | $1.37 million | $825,950 |
| Operating cash flow | ($249,277) | ($2.43 million) |
| Cash and cash equivalents | $19.06 million | $21.36 million |
| Working capital | $19.40 million | $21.50 million |
| Total debt | $312,005 | $215,150 |
Total assets were $34.70 million and stockholders’ equity was $31.87 million at year-end. Current liabilities were $2.22 million. Including $57,288 of restricted cash, cash and restricted cash totaled $19.12 million. The company reported $1.79 million of net cash used in investing activities, including $1.73 million of property and equipment purchases, and $268,000 of cash used in financing. Cash declined $2.30 million during the year. The company reported no significant off-balance-sheet arrangements.
Material changes versus FY 2021
- Revenue rose 42.6%, led by antimony: segment revenue increased 58.5% to $7.63 million, with pounds sold up 53.0% to 1.39 million. Average selling price rose 3.5% to $5.47 per pound; average cost fell 11.9% to $4.39 per pound.
- Antimony gross profit increased to $1.51 million from $267,000. Management attributed improvement to higher sales and prices, lower unit costs, and selling finished ingots directly from Mexico to U.S. customers to avoid further shipping and processing costs.
- Zeolite revenue increased 21.5% to $3.15 million and volume rose 11.1% to 13,047 tons. Gross profit was nearly flat at $340,000, while average cost per ton rose faster than the average selling price. Segment net income declined to $141,496 from $193,674.
- Precious-metals revenue fell 22.6% to $261,707 and gross profit fell 34.6% to $151,167.
- The company returned to profitability, reporting its first profitable year since 2018. FY 2021 included $443,400 of PPP loan forgiveness income and a $113,422 gain on settlement of a Hillgrove advance; these gains did not recur in 2022.
- FY 2022 included a $277,146 inventory write-down to net realizable value, mainly for Mexican operations, and a $59,350 provision for receivable losses. Management reported no long-lived asset impairment for 2022.
Outlook, risks, and contingencies
- Plans, not quantified guidance: Management plans to expand zeolite production and sales through plant, crushing, storage, and packaging improvements; continue processing antimony ores and concentrates; add electric furnaces in Montana; pursue additional ore sources; and advance geological work at Los Juarez. No numerical revenue, earnings, production, or capital-spending guidance is provided.
- Wadley option: The company has temporary mining and due-diligence rights at the Mexican property, with the diligence period extended to October 15, 2023. The filing’s descriptions of potential purchase payments differ: the business discussion describes $9 million plus tax, while the notes describe $2.23 million initially plus seven annual payments of $1.16 million. The final terms and whether the acquisition proceeds are uncertain.
- Exploration and permitting: No properties have declared proven and probable reserves. Los Juarez mining is halted pending further studies. Development plans depend on geological results, permits, surface rights, financing, and other approvals. Sierra Guadalupe antimony trisulfide received U.S. Department of Defense approval in 2023, as reported in the filing; production plans remain subject to execution and supply.
- Supply, cost, and market exposure: Antimony feedstock depends partly on foreign suppliers, and the company reported supplier shutdowns, equipment failure, labor shortages, and shipping difficulties. Antimony prices, fuel, freight, labor, packaging, and other input costs can materially affect margins. Zeolite operations also face labor, packaging-capacity, and seasonal water constraints.
- Mexico and environmental exposure: Risks include Mexican political and security conditions, peso movements and inflation, concession and title challenges, and regulatory changes. The company reported a $1.1 million Mexican tax assessment, including interest and penalties, after an adverse court ruling; it appealed and accrued no liability, believing it would prevail. Environmental loss exposure beyond recorded amounts could not be reasonably estimated. Recorded retirement and reclamation obligations were $332,011; the company also reported more than $200,000 of company-wide financial assurances.
- Controls and governance: Management concluded disclosure controls and internal control over financial reporting were ineffective at year-end 2022 because of a material weakness in segregation of duties and limited accounting staff. The company disclosed a $6,500 loan to a former executive in violation of the Sarbanes-Oxley Act and a 2023 discovery that a former employee misappropriated approximately $21,510 during 2020–2023. The former employee signed a $21,310 promissory note; $700 had been repaid as reported. Remediation efforts include additional finance support, audit-committee changes, and planned software and workflow improvements. The auditor issued an unqualified opinion on the financial statements but was not engaged to audit internal controls.
- Capital and dilution: The company reported $12.35 million of warrants outstanding at year-end, generally exercisable at $0.46 or $0.85 per share, and has warned that additional financing may dilute shareholders. The Series D preferred shares were converted into 1,692,672 common shares in January 2023, and the related $787,730 dividend was paid. The company repurchased 418,696 common shares for $202,980 and cancelled them in January 2023.
Important facts for investors to verify
- Reconcile the conflicting Wadley purchase-price descriptions and confirm the status, final terms, and financing implications of any acquisition.
- Review the appealed Mexican tax assessment, the basis for recording no accrual, and any subsequent court or tax-authority developments.
- Track remediation of the material weakness, timeliness of future SEC filings, and safeguards following the disclosed loan and misappropriation.
- Assess whether operating cash generation can support planned capital spending and growth, particularly given the FY 2022 operating cash outflow.
- Verify progress toward reliable antimony feedstock, mine and surface-rights access, required permits, and economic reserve definition; the filing reports no proven and probable reserves.
- Monitor zeolite cost inflation, production and packaging constraints, customer concentration (the seven largest customers represented 64% of revenue), and potential dilution from warrants or future financing.