UAMY

Business Context and Reporting Period

Company: United States Antimony Corporation (USAC)
Filing Type: Form 10-K (Annual Report)
Period Ended: December 31, 2010
Business Overview: USAC operates two primary divisions: Antimony (production of antimony oxide, metal, and sodium antimonate in Montana and Mexico) and Zeolite (mining and processing in Idaho). The company relies heavily on foreign sources for raw antimony materials and has no proven or probable reserves for either antimony or zeolite as defined by the SEC.

Key Financial Metrics

Segment Performance:
- Antimony: Revenue increased 159% to $6.66M; Gross profit rose to $903,560.
- Zeolite: Revenue increased 57% to $2.42M; Gross profit rose to $470,172.

Material Changes vs. Prior Period

• Profitability Turnaround: The company shifted from a net loss of $294,843 in 2009 to a net income of $805,213 in 2010. This was driven by a 121% increase in gross profit and a $493,000 income tax benefit resulting from the release of a deferred tax asset valuation allowance.
• Revenue Growth: Total revenue more than doubled, fueled by a 159% surge in antimony sales (due to higher volume and price) and a 57% increase in zeolite sales.
• Expense Management: General and administrative expenses decreased by $121,411 (26%) compared to 2009.
• Impairment Charges: The company recorded a $199,302 impairment charge on properties, plants, and equipment in Mexico due to the relocation of a mill site.
• Financing Activity: The company raised $799,522 through the sale of unregistered common stock and warrant exercises, offsetting significant capital expenditures of $965,919.

Outlook, Risks, and Contingencies

• Liquidity and Delinquency: Management disclosed delinquency on significant current liabilities, including approximately $79,900 in accounts payable and $16,500 in accrued interest. Creditors could demand immediate payment, potentially jeopardizing operations.
• Internal Control Weaknesses: Management identified material weaknesses in internal controls over financial reporting, citing a lack of segregation of duties, insufficient accounting expertise, and material misstatements requiring audit adjustments.
• Environmental Liabilities: The company has accrued $107,500 for environmental reclamation. However, the range of reasonably possible losses in excess of accrued amounts cannot be estimated. The company lacks environmental liability insurance.
• Customer Concentration: Approximately 37% of antimony revenue and 23% of zeolite revenue in 2010 came from single customers (Kohler and West Valley Environmental Services, LLC, respectively).
• Legal Proceedings: The company is involved in litigation regarding royalty payments for zeolite products. While a liability was recorded for one suit, no accrual has been estimated for another pending suit.
• Market Risk: Operating results are directly tied to volatile world market prices for antimony, which are beyond the company's control.

Investor Verification Checklist

• Debt Delinquency: Verify the status of the $79,900 in delinquent accounts payable and $16,500 in accrued interest to assess immediate liquidity risk.
• Internal Controls: Review the specific audit adjustments made due to material weaknesses in financial reporting and the plan to remediate segregation of duties.
• Environmental Accruals: Assess the adequacy of the $107,500 reclamation accrual given the company's statement that potential excess losses cannot be estimated.
• Customer Dependency: Evaluate the stability of contracts with Kohler (37% of antimony sales) and West Valley Environmental Services (23% of zeolite sales).
• Related Party Transactions: Review the $18,060 payable to the President/Director and the $54,587 royalty paid to a company controlled by a significant stockholder's relative.
• Reserve Status: Confirm the lack of SEC-defined "proven" or "probable" reserves for both antimony and zeolite operations.