10QSB 1 form10qsb_14548.txt FORM 10-QSB FOR PERIOD ENDED 6-30-06 ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB (Mark One) [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30,2006 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period ____________ to ____________ Commission file number 33-00215 UNITED STATES ANTIMONY CORPORATION (Name of small business issuer in its charter) MONTANA 81-0305822 ------- ---------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) P.O. BOX 643, THOMPSON FALLS, MONTANA 59873 ------------------------------------------- (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code: (406) 827-3523 Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [X] Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X] No [ ] Indicate by check mark whether the registrant is a shell company as defined by Rule 12b-2 of the Exchange act. YES [ ] No [X] Transitional Small Business Disclosure Format. YES [ ] No [X] At August 01, 2006, the registrant had outstanding 37,268,030 shares of par value $0.01 common stock ================================================================================ UNITED STATES ANTIMONY CORPORATION QUARTERLY REPORT ON FORM 10-QSB FOR THE PERIOD ENDED JUNE 30, 2006 TABLE OF CONTENTS Page PART I - FINANCIAL INFORMATION Item 1: Financial Statements..................................................3 Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations.............................................8 Item 3: Controls and Procedures..............................................12 PART II - OTHER INFORMATION Item 1: Legal Proceedings....................................................13 Item 2: Unregistered Sales of Equity Securities and Use of Proceeds..........13 Item 3: Defaults among Senior Securities.....................................13 Item 4: Submission of Matters to a Vote of Security Holders..................13 Item 5: Other Information....................................................13 Item 6: Exhibits and Reports on Form 8-K.....................................13 SIGNATURE....................................................................14 CERTIFICATIONS...............................................................15 [The balance of this page has been intentionally left blank.] 2 PART I-FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS UNITED STATES ANTIMONY CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET

(Unaudited) June 30, 2006 ASSETS Current assets: Cash $ 142,387 Accounts receivable, less allowance for doubtful accounts of $30,000 229,062 Inventories 146,626 ---------- Total current assets 518,075 Properties, plants and equipment, net 1,287,163 Restricted cash for reclamation bonds 86,917 Deferred financing costs, net amortization 11,250 ---------- Total assets $1,903,405 ========== LIABILITES AND STOCKHOLDERS' DEFICIT Current liabilities: Checks issued and payable $ 83,794 Accounts payable 597,107 Accrued payroll and related taxes 74,863 Other accrued liabilities 72,586 Deferred revenue 35,710 Accured interest payable 68,472 Payable to related parties 261,503 Long-term debt, current 182,763 Accrued reclamation costs, current 71,250 ---------- Total current liabilities 1,448,048 Secured convertible and convertible notes payable 350,000 Long term debt, noncurrent 477,909 Accrued reclamations costs, noncurrent 71,250 ---------- Total liabilities $2,347,207 ========== Commitments and contingencies (Note 3) Stockholders' deficit: Preferred stock, $0.01 par value, 10,000,000 shares authorized: Series A: 4,500 shares issued and outstanding 0 Series B: 750,000 shares issued and outstanding 7,500 Series C: 177,942 shares issued and outstanding 1,779 Series D: 1,757,600 shares issued and outstanding 17,576 Common stock, $0.01 par value, 50,000,000 shares authorized: 36,735,773 and 34,445,666 issued and outstanding 367,358 Additional paid-in capital 19,627,594 Accumulated deficit (20,465,609) ---------- Total stockholders' deficit (443,802) ---------- Total liabilities and stockholders' deficit $1,903,405 ==========

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL INFORMATION. 3 UNITED STATES ANTIMONY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

For the three months ended For the six months ended June 30, 2006 June 30, 2005 June 30, 2006 June 30, 2005 ------------- ------------- ------------- ------------- Antimony Division Revenues: $ 866,118 $ 633,506 $ 1,627,857 $ 1,356,040 ----------- ----------- ----------- ----------- Cost of Sales: Production costs 615,132 515,788 1,159,706 992,446 Depreciation 9,434 10,300 15,514 20,600 Freight and delivery 53,860 43,114 105,008 92,344 General and administrative 7,360 27,565 17,000 39,927 Direct sales expense 19,610 11,146 35,631 26,985 ----------- ----------- ----------- ----------- 705,396 607,913 1,332,859 1,172,302 ----------- ----------- ----------- ----------- Income from operations - antimony 160,722 25,593 294,998 183,738 ----------- ----------- ----------- ----------- Zeolite Division Revenues: 286,345 377,689 496,365 687,678 ----------- ----------- ----------- ----------- Cost of Sales: Production costs 241,739 243,339 508,547 498,165 Depreciation 28,549 18,200 55,807 36,400 Freight and delivery 10,637 26,289 21,532 48,851 General and administrative 61,077 94,987 109,674 157,248 Direct sales expense 23,235 32,096 36,405 63,986 ----------- ----------- ----------- ----------- 365,237 414,911 731,965 804,650 ----------- ----------- ----------- ----------- Loss from operations - zeolite (78,892) (37,222) (235,600) (116,972) ----------- ----------- ----------- ----------- Income (loss) from operations - combined 81,830 (11,629) 59,398 66,766 ----------- ----------- ----------- ----------- Other (income) expense: Corporate general and administrative 60,474 45,816 163,458 127,076 Exploration expense 76,326 -- 209,976 -- USAMSA investment adjustment -- 882 -- 1,764 Interest income and other (417) (321) (1,261) (653) Interest expense 27,832 38,003 51,743 73,849 Factoring expense 23,755 25,686 42,751 53,945 ----------- ----------- ----------- ----------- Net other expense 187,970 110,066 466,667 255,981 ----------- ----------- ----------- ----------- Net loss $ (106,140) $ (121,695) $ (407,269) $ (189,215) ----------- ----------- ----------- ----------- Net loss per share of common stock - basic $ Nil $ Nil $ 0.01 $ Nil ----------- ----------- ----------- ----------- Basic weighted average shares outstanding 35,293,850 31,912,670 34,951,825 31,731,925 =========== =========== =========== ===========

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL INFORMATION. 4 UNITED STATES ANTIMONY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

For the six months ended June 30, 2006 June 30, 2005 ------------- ------------- Cash flows from operating activities: Net loss $ (407,269) $ (189,215) Adjustments to reconcile net loss to net cash used by operating activities: Depreciation and amortization 75,070 62,514 Change in: Restricted cash -- 2,095 Accounts Receivable (119,748) (46,694) Inventories 43,117 3,438 Accounts Payable 35,726 185,997 Accrued payroll and related taxes (29,177) 18,138 Other accrued liabilities (6,088) (4,778) Deferred revenue (34,290) (30,000) Accrued interest payable 14,890 14,580 Payable to related parties (14,852) 5,563 ---------- ---------- Net cash from operating activities (442,621) 21,638 ---------- ---------- Cash flow from investing activities: Purchase of properties, plants and equipment (289,429) (209,533) ---------- ---------- Net cash from investing activities (289,429) (209,533) ---------- ---------- Cash flow from financing activities: Proceeds from issuance of common stock 547,800 264,875 Proceeds from exercise of common stock warrants 90,000 -- Principal payments on notes payable (73,632) (57,877) Proceeds from notes payable -- 58,019 Proceeds from related party payable -- 25,000 Change in checks issued and payable 22,428 -- ---------- ---------- Net cash from financing activities 586,596 290,017 ---------- ---------- Net change in cash (145,454) 102,122 ---------- ---------- Cash, beginning of period 287,841 11,642 ---------- ---------- Cash, end of period $ 142,387 $ 113,764 ========== ========== Supplemental disclosures: Non cash investing and financing activities: Common stock issued for acquisition of property, plant & $ 43,500 equipment Property, plant & equipment acquired with payable $ 95,000

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL INFORMATION. 5 PART I - FINANCIAL INFORMATION, CONTINUED: UNITED STATES ANTIMONY CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. BASIS OF PRESENTATION: The unaudited consolidated financial statements have been prepared by the Company in accordance with accounting principles generally accepted in the United States of America for interim financial information, as well as the instructions to Form 10-QSB. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of the Company's management, all adjustments (consisting of only normal recurring accruals) considered necessary for a fair presentation of the interim financial statements have been included. Operating results for the six month period ended June 30, 2006 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2006. Certain consolidated financial statement amounts for the six month period ended June 30, 2005 have been reclassified to conform to the 2006 presentation. These reclassifications had no effect on the net loss or accumulated deficit as previously reported. For further information refer to the financial statements and footnotes thereto in the Company's Annual Report on Form 10-KSB for the year ended December 31, 2005. At December 31, 2005, the Company owned 50% of United States Antimony, Mexico S.A. de C.V. ("USAMSA"). The Company accounted for this investment interest using the equity method. In March, 2006, the Company acquired the other 50% of USAMSA. USAMSA is included in the consolidated financial information at June 30, 2006 and inter-company balances and transactions have been eliminated in consolidation. 2. LOSS PER COMMON SHARE: The Company accounts for its income (loss) per common share according to the Statement of Financial Accounting Standards No. 128 "Earnings Per Share" ("SFAS No. 128"). Under the provisions of SFAS No. 128, primary and fully diluted earnings per share are replaced with basic and diluted earnings per share. Basic earnings per share is arrived at by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding, and does not include the impact of any potentially dilutive common stock equivalents. Common stock equivalents, including warrants of 8,776,727 shares to purchase the Company's common stock and 1,750,000 shares of common stock issuable upon the conversion of debentures are excluded from the calculations when their effect is antidilutive. 3. COMMITMENTS AND CONTINGENCIES: Until 1989, the Company mined, milled and leached gold and silver in the Yankee Fork Mining District in Custer County, Idaho. In 1994, the U.S. Forest Service, under the provisions of the Comprehensive Environmental Response Liability Act of 1980 ("CERCLA"), designated the cyanide leach plant as a contaminated site. In 1996, the Idaho Department of Environmental Quality requested that the Company sign a consent decree related to completing the reclamation and remediation at the Preachers Cove mill. The Company believes its reclamation is substantially complete. In November of 2001, the Environmental Protection Agency ("EPA") listed two by-products of the Company's antimony oxide manufacturing process as hazardous wastes under subtitle C of the Resource Conservation and Recovery Act ("RCRA"), and emergency notification requirements for releases to the environment under CERCLA. On November 26, 2002, the Company received a notice of violation related to a hazardous waste discharge that was discovered during a hazardous waste compliance evaluation inspection conducted at the Company's Thompson Falls antimony facility. In response to the notice, the 6 UNITED STATES ANTIMONY CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED), CONTINUED: 3. COMMITMENTS AND CONTINGENCIES CONTINUED: Company removed certain antimony materials from its production area and agreed to ensure that future releases of hazardous waste would not occur. The Company's management believes that USAC is currently in substantial compliance with environmental regulatory requirements and that its accrued environmental reclamation costs are representative of management's estimate of costs required to fulfill its reclamation obligations. Such costs are accrued at the time the expenditure becomes probable and the costs can reasonably be estimated. The Company recognizes, however, that in some cases future environmental expenditures cannot be reliably determined due to the uncertainty of specific remediation methods, conflicts between regulating agencies relating to remediation methods and environmental law interpretations, and changes in environmental laws and regulations. Any changes to the Company's reclamation plans as a result of these factors could have an adverse affect on the Company's operations. The range of possible losses in excess of the amounts accrued cannot be reasonably estimated at this time. 4. BUSINESS SEGMENTS The Company has two operating segments, antimony and zeolite. Management reviews and evaluates the operating segments exclusive of interest and factoring expenses. Therefore, interest expense is not allocated to the segments. Selected information with respect to segments for the six month period ended June 30, 2006 and 2005 are as follows: 2006 2005 Capital expenditures: Antimony $ 313,435 $ 0 Zeolite $ 114,496 $ 209,533 5. ADOPTION OF NEW ACCOUNTING PRINCIPLE On January 1, 2006, the Company adopted Statement of Financial Accounting Standards No. 123 (revised 2004), "Share-Based Payment," ("SFAS 123(R)") which requires the measurement of the cost of employee services received in exchange for an award of an equity instrument based on the grant-date fair value of the award. SFAS 123(R) supersedes previous accounting guidance under the intrinsic value method prescribed by Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25"). The Company adopted SFAS 123(R) using the modified prospective transition method, which requires the application of the accounting standard as of January 1, 2006. There was no impact on the financial statements as of and for the three months ended March 31, 2006 as a result of the adoption of SFAS 123(R). In accordance with the modified prospective transition method, the financial statements for prior periods have not been restated to reflect, and do not include, the impact of SFAS 123(R). 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL GENERAL This report contains both historical and prospective statements concerning the Company and its operations. Prospective statements (known as "forward-looking statements") may or may not prove true with the passage of time because of future risks and uncertainties. The Company cannot predict what factors might cause actual results to differ materially from those indicated by prospective statements. RESULTS OF OPERATIONS The Company's operations resulted in a net loss of $407,269 for the six-month period ended June 30, 2006, compared with a net loss of $189,215 for the same period ended June 30, 2005. The increase in the loss for the second quarter of 2006 compared to the similar period of 2005 is primarily due to an increase in expenses related to the exploration and development of the Mexican Project. In 2005, USAC formed a Mexican Company called Antimonio de Mexico, S. A. e C. V. ("ADM"). ADM then signed an exclusive contract to explore and exploit a 40 hectar concession in the State Queretaro, Mexico with an option to purchase. A Mexican Government Monograph (Consejo de Recursos Minerales Publicacio M-4e) reported a resource of 1,000,000 metric tons having a grade of 1.8% antimony and 8.1 ounces per ton silver. During the first quarter of 2006, ADM obtained 466 hectars nearby that represents a continuation of the mineralized zone. ADM then purchased the other 50% of the outstanding stock of United States Antimony de Mexico S. A. de C. V. ("USAMSA") giving USAC a 100% ownership in USAMSA through ADM. USAMSA operated an antimony smelting facility in the State of Coahuila that has been shut down since 1996. ADM also purchased the real property consisting of 6 hectars and all the equipment at the smelter site. During the second quarter of 2006 the USAMSA smeltering facility at Madero, Coahuila, Mexico was completed with new furnaces, scrubber, pond, office, fans, and was completely re-wired. Equipment including scales, crushers, compressors, water systems and various other equipment were installed. Although some of these purchases have been capitalized and others identified as expenses for the Mexican project, there are many of the organizational and travel expenses that have been adsorbed as USAC exploration expenses that adversely impact the profitability of the USAC Antimony Division. FOR THE THREE MONTH PERIOD ENDED JUNE 30, 2006 COMPARED TO THE THREE MONTH PERIOD ENDED JUNE 30, 2005. The Company's operations resulted in a net loss of $106,140 for the three-month period ended June 30, 2006, compared with a net loss of $121,695 for the same period ended June 30, 2005. The decrease in the loss for the second quarter of 2006 compared to the similar period of 2005 is primarily due to an increase in profitability of the antimony division. ANTIMONY DIVISION: Total revenues from antimony product sales for the second quarter of 2006 were $866,118 compared with $633,506 for the comparable quarter of 2005, an increase of $232,612. The increase directly related to increase in average sales price by 42% plus production from a legacy slag pile at Thompson Falls, Montana. During the three-month period ended June 30, 2006, 63% of the Company's revenues from antimony product sales were from sales to one customer. Sales of antimony products during the second quarter of 2006 consisted of 390,230 pounds at an average sale price of $2.21 per pound. During the second quarter of 2005 sales of antimony products consisted of 406,657 pounds at an average sale price of $1.56 per pound. 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION (CONTINUED) The cost of antimony production was $615,132, or $1.57 per pound sold, during the second quarter of 2006 compared to $515,788, or $1.27 per pound sold, during the second quarter of 2005. The increase in the cost of production is related to the increase in costs of fuel and maintenance and the decrease in production of product. Antimony depreciation for the second quarter of 2006 was $9,434 compared to $10,300 for the second quarter of 2005. The decrease in depreciation directly related to equipment being fully depreciated. Antimony freight and delivery for the second quarter of 2006 was $53,860 compared to $43,114 of freight and delivery expense during the second quarter of 2005. The increase is directly related to increase in fuel and delivery increases. General and administrative expenses in the antimony division were $7,360 during the second quarter of 2006 compared to $27,565 during the same quarter of 2005. The decrease in the general and administrative expenses is related to the Company being removed from the tax rolls in Lemhi and Custer Counties in Idaho, less interest expense on accounts payable and the reduced bank charge expenses related to the cash accounts. Antimony sales expenses were $19,610 in the second quarter of 2006 compared with $11,146 during the second quarter of 2005. The increase is related to commission paid during the second quarter of 2006. ZEOLITE DIVISION: Sales of zeolite products during the second quarter of 2006 were $286,345 at an average sales price of $110.68 per ton, compared with the same quarter sales in 2005 of $377,689 at an average sales price of $91.93 per ton. The decrease in sales for the second quarter of 2006 compared to the same quarter of 2005 was due to the loss of a major customer. The cost of zeolite production was $241,739, or $ 92.83 per ton sold, for the second quarter of 2006 compared to $243,339, or $ 59.23 per ton sold, during the second quarter of 2005. The decrease in the cost of production is related to the decrease in production of product. Zeolite depreciation for the second quarter of 2006 was $28,549 compared to $18,200 for the second quarter of 2005. The increase in depreciation is due to the continued purchase of capital assets associated with zeolite production. Zeolite freight and delivery for the second quarter of 2006 was $10,637 compared to $26,289 for the second quarter of 2005. The decrease is due to decrease in product produced and shipped. During the second quarter of 2006, the Company incurred costs totaling $61,077 associated with general and administrative expenses of its 100% owned subsidiary Bear River Zeolite Company, compared to $94,987 of such expenses in the comparable quarter of 2005. The decrease is due to the decrease in production and sales in the second quarter of 2006. Zeolite sales expenses were $23,235 during the second quarter of 2006 compared to $32,096 during the second quarter of 2005. The decrease is directly related to decreased sales. 9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION (CONTINUED) ADMINISTRATIVE Interest expense of $27,832 was incurred during the second quarter of 2006 compared to $38,003 during the second quarter of 2005. The decrease is due to the decrease in notes payable. Accounts receivable factoring expense was $23,755 during the second quarter of 2006 compared to $25,686 during the second quarter of 2005. The decrease was primarily due to a decrease in zeolite sales. General and administrative expenses for the corporation were $60,474 during the second quarter of 2006 compared to $45,816 for the same quarter in 2005. The increase is primarily due to the increase in general and administrative activities associated with the Mexican Project. FOR THE SIX MONTH PERIOD ENDED JUNE 30, 2006 COMPARED TO THE SIX MONTH PERIOD ENDED JUNE 30, 2005. ANTIMONY DIVISION: The sales for the first six months of 2006 were $1,627,857 compared to $1,356,040 for the first six months of 2005. The increase is related to the increase in the average sales price increase. The cost of antimony production was $1,159,706 during the second quarter of 2006 compared to $992,446 during the second quarter of 2005. The increase in the cost of production is related to the increase in costs of fuel and maintenance. Antimony depreciation for the first six months of 2006 was $15,514 compared to $20,600 for the first six months of 2005. The decrease in depreciation directly related to equipment being fully depreciated. Antimony freight and delivery for the first six month of 2006 was $105,008 compared to $92,344 of freight and delivery expense during the first six months of 2005. The increase is directly related to increase in fuel and delivery increases. General and administrative expenses in the antimony division were $17,000 during the FIRST SIX MONTH of 2006 compared to $39,927 during the same quarter of 2005. The decrease in the general and administrative expenses is related to the Company being removed from the tax rolls in Lemhi and Custer Counties in Idaho and the reduction of bank charge expenses related to the cash accounts. Antimony sales expenses were $35,631 in the FIRST SIX MONTHS of 2006 compared with $26,985 during the FIRST SIX MONTHS of 2005. The increase is related to commission paid during the second quarter of 2006. ZEOLITE DIVISION: Sales of zeolite products during the first six months of 2006 were $496,365 compared with the same quarter sales in 2005 of $687,678. The decrease in sales for the first six months of 2006 compared to the same quarter of 2005 was due to the loss of a major customer. The cost of zeolite production was $508,547 for the FIRST SIX MONTHS of 2006 compared to $498,165 for FIRST SIX MONTHS of 2005. The increase in the cost of production is related to the increase in costs of fuel and maintenance and the decrease in production of product. Zeolite depreciation for the second quarter of 2006 was $55,807 compared to $36,400 for the FIRST SIX MONTHS of 2005. The increase in depreciation is due to the continued purchase of capital assets associated with zeolite production. 10 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION (CONTINUED) Zeolite freight and delivery for the FIRST SIX MONTHS of 2006 was $21,532 compared to $26,289 for the FIRST SIX MONTHS of 2005. The decrease is due to decrease in product produced and shipped. During the FIRST SIX MONTHS of 2006, the Company incurred costs totaling $109,674 associated with general and administrative expenses of it's 100% owned subsidiary Bear River Zeolite Company, compared to $157,248 of such expenses in the comparable quarter of 2005. The decrease is due to the decrease in production and sales in the second quarter of 2006. Zeolite sales expenses were $36,405 during the FIRST SIX MONTHS of 2006 compared to $63,986 during the second quarter of 2005. The decrease is directly related to decreased sales. ADMINISTRATIVE: Interest expense of $51,743 was incurred during the first six months of 2006 compared to $73,849 during the first six months of 2005. The decrease is due to the decrease in notes payable. Accounts receivable factoring expense was $42,751 during the first six months of 2006 compared to $53,945 during the first six months of 2005. The decrease was primarily due to a decrease in zeolite sales. General and administrative expenses for the corporation were $163,458 during the first six months of 2006 compared to $127,076 for the same quarter in 2005. The increase is primarily due to the increase in general and administrative activities associated with the Mexican Project. FINANCIAL CONDITION AND LIQUIDITY At June 30, 2006, Company assets totaled $1,903,405, and there was a stockholders' deficit of $443,802. The stockholders' deficit decreased $274,031 from December 31, 2005, primarily due to antimony profitability. At June 30, 2006 the Company's total current liabilities exceeded its total current assets by $929,973. Due to the Company's operating losses, negative working capital, and stockholders' deficit, the Company's independent accountants included a paragraph in the Company's 2005 financial statements relating to a going concern uncertainty. To continue as a going concern the Company must generate profits from its antimony and zeolite sales and to acquire additional capital resources through the sale of its securities or from short and long-term debt financing. Without financing and profitable operations, the Company may not be able to meet its obligations, fund operations and continue in existence. While management is optimistic that the Company will be able to sustain profitable operations and meet its financial obligations, there can be no assurance of such. The Company's management is confident, however, that it will be able to generate cash from operations and financing sources that will enable it to meet its obligations over the next twelve months. Cash used by operating activities during the first six months of 2006 was $442,619, and resulted from net loss of $407,269 during the first six months of 2006 as adjusted by increasing accounts receivable, decreasing inventories and the non-cash affects of depreciation and amortization expenses. The costs incurred in Mexico depleted cash resourses. Cash used in investing activities during the first six months of 2006 was $289,429 and primarily related to the Mexican Project and improvements to the zeolite packaging plant. Net cash provided by financing activities was $586,596 during the first six months of 2006 was primarily generated from proceeds from the sale of common stock. At the May 26, 2006 meeting of the Board of Directors accepted the resignation of Director Robert A Rice due to health concerns. 11 ITEM 3. CONTROLS AND PROCEDURES As required by the SEC rules, we have evaluated the effectiveness of the design and operation of the Company's disclosure controls and procedures as of the end of the period covered by this Quarterly Report. This evaluation was performed under the supervision and with the participation of the Company's management, including the President & Chief Executive Officer and Vice President Finance, Secretary and Treasurer. Based upon that evaluation, our President & Chief Executive Officer and Vice President Finance, Secretary and Treasurer have concluded that the Company's controls and procedures were not effective as of the end of the period covered by this Quarterly Report due to inadequate supervision and segregation of duties. The term "disclosure controls and procedures" is defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, or the Exchange Act. This term refers to the controls and procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the Securities and Exchange Commission. In connection with the audit of the Company's consolidated financial statements for the year ended December 31, 2005, the Company's independent registered public accounting firm advised the Board of Directors and management of certain significant internal control deficiencies that they considered to be, in the aggregate, material weaknesses. In particular, our independent registered public accounting firm identified the following weaknesses in our internal control systems: (1) lack of segregation of duties and (2) lack of formal procedures relating to all areas of financial reporting including a lack of review by management. A material weakness is a significant deficiency in one or more of the internal control components that alone or in the aggregate precludes our internal controls from reducing to an appropriately low level of risk that material misstatements in our financial statements will not be prevented or detected on a timely basis. The Company considered these matters in connection with the period-end closing of accounts and preparation of related consolidated financial statements and determined that no prior period financial statements were materially affected by such matters. We believe that the material weakness began in 2003 and existed at the end of the period covered by this report. The size of the Company has prevented us from being able to employ sufficient resources at this time to enable us to have an adequate level of supervision and segregation of duties within our internal control system. We will continue to monitor and assess the costs and benefits of additional staffing within the Company. However, we have not taken any formal steps at this time to correct the material weaknesses identified by our independent registered public accounting firm. If we are unable to correct these material weaknesses, there is more than a remote likelihood that a material misstatement to our consolidated financial statements will not be prevented or detected, in which case investors could lose confidence in management's financial statement assertions. This could have an adverse effect on our ability to raise additional capital and could also have an adverse effect on our stock price. There has been no change in the Company's internal controls over financial reporting during the quarter ended June 30, 2006, that has materially affected, or is reasonably likely to materially affect, the Company's internal controls over financial reporting. 12 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS None ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS During the three month period ended June 30, 2006 the Company sold 546,000 shares of its restricted common stock for $0.30 per share, 637,500 shares for $0.40, 55,556 shares for $0.45 or $443,800 and issued 200,000 shares for $0.30 and 20,000 shares for $0.25 of its restricted common stock to exercising warrant holders for $65,000. ITEM 3. DEFAULTS UPON SENIOR SECURITIES The registrant has no outstanding senior securities. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None ITEM 5. OTHER INFORMATION None ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K None Reports on Form 8-K None 13 SIGNATURE Pursuant to the requirements of Section 13 or 15(b) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. UNITED STATES ANTIMONY CORPORATION (Registrant) By: /s/ John C. Lawrence Date: August 18, 2006 ----------------------------- John C. Lawrence, Director and President (Principal Executive, Financial and Accounting Officer) 14