<PAGE>
SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934
FOR QUARTER ENDED JUNE 30, 1996 COMMISSION FILE NO. 001-10156
ORIGINAL SIXTEEN TO ONE MINE, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS
CHARTER)
CALIFORNIA 94-0735390
---------- ----------
(State or other jurisdiction of (IRS Employer
incorporated or organization) identification No.)
Post Office Box 1621, Alleghany, CA 95910
-----------------------------------------
(Address of principal executive offices)
(916)287-3223
-------------
(Registrant's telephone number) (including area code)
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED
TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING
THE PAST 12 MONTH (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS REQUIRED
TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENT FOR
THE PAST 90 DAYS.
YES X NO
--- ---
AS OF JUNE 30, 1996, 3,501,868 SHARES OF COMMON STOCK, PAR $.10 PER SHARE, WERE
ISSUED AND OUTSTANDING.
<PAGE>
PART I: FINANCIAL INFORMATION
Original Sixteen to One Mine, Inc.
Condensed Balance Sheet
<TABLE>
<CAPTION>
ASSETS
June 30, 1996 December 31, 1995
------------------ -----------------
<S> <C> <C>
CURRENT ASSETS:
Cash $ 42,851 $ 180,618
Accounts Receivable 18,896 13,370
Inventory 1,634,906 2,228,192
Other Current Assets 18,160 9,552
------------------ -----------------
Total Current Assets 1,714,813 2,431,732
------------------ -----------------
MINING PROPERTY:
Real Estate & Property Rights
(at March 1, 1913, cost plus subsequent
additions, net of depletion of $524,145) 105,517 105,517
Mineral Property 415,263 415,263
Development 849,406 714,037
------------------ -----------------
Total Mining Property 1,370,186 1,234,817
------------------ -----------------
FIXED ASSETS:
Building & Mill 144,462 143,250
Vehicles 176,086 118,011
Equipment 755,223 693,703
------------------ -----------------
1,075,771 954,964
Accumulated Depreciation (624,243) (568,689)
------------------ -----------------
Net Fixed Assets 451,528 386,275
------------------ -----------------
Other Assets (Net of Amortization) 36,368 34,244
------------------ -----------------
Total Assets $ 3,572,895 $ 4,087,068
------------------ -----------------
------------------ -----------------
</TABLE>
See Accompanying Notes
2
<PAGE>
PART I: FINANCIAL INFORMATION
Original Sixteen to One Mine, Inc.
Condensed Balance Sheet
<TABLE>
<CAPTION>
LIABILITIES & STOCKHOLDERS' EQUITY
- ----------------------------------
June 30, 1996 December 31, 1995
------------------ -----------------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts Payable $ 46,863 $ 56,038
Income Taxes Payable 0 84,000
Deferred Income Taxes 633,000 632,000
Accrued Expenses 182 0
Line of Credit 260,921 260,921
Current Maturities of Long-Term Debt 3,649 3,531
------------------ -----------------
Total Current Liabilities 944,615 1,036,490
------------------ -----------------
LONG-TERM LIABILITIES:
Note Payable - GMAC 17,632 19,354
Less Current Maturities (3,649) (3,531)
------------------ -----------------
Total Long-Term Liabilites 13,983 15,823
------------------ -----------------
STOCKHOLDERS' EQUITY:
Capital Stock, par value $.10 - 10,000,000 shares
authorized; 3,501,868 and 3,513,062 shares
issued & outstanding as of June 30, 1996
and December 31, 1995, respectively 350,187 351,306
Paid-In-Capital 1,321,423 1,369,318
Notes Receivable-Employees (26,000) (52,000)
Retained Earnings 968,687 1,366,131
------------------ -----------------
Total Stockholders' Equity 2,614,297 3,034,755
------------------ -----------------
Total Liabilities and
Stockholders' Equity $ 3,572,895 $ 4,087,068
------------------ -----------------
------------------ -----------------
</TABLE>
See Accompanying Notes
3
<PAGE>
PART I: FINANCIAL INFORMATION
Original Sixteen to One Mine, Inc.
Statement of Income and Retained Earnings
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
1996 1995 1996 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
REVENUES:
Gold & Silver Production $ 86,326 $ 310,302 $ 751,923 $ 382,813
Miscellaneous 0 108,304 0 108,304
------------- ------------- ------------- -------------
Total Revenues 86,326 418,606 751,923 491,117
------------- ------------- ------------- -------------
EXPENSES:
Administration 2,009 0 10,230 0
Directors' Fees 0 0 4796 0
Salaries, Officers 33,346 31,694 86,822 68,671
Wages & Related 231,776 140,720 497,990 288,440
Contract Labor 7,784 14,441 31,846 31,653
Insurance 15,094 32,942 33,016 60,649
Professional Fees 27,408 11,406 66,088 37,185
Supplies 96,863 59,608 185,125 112,672
Taxes 3,961 23,895 15,076 58,442
Utilites 29,441 33,743 60,808 60,322
Drayage 15,076 11,413 29,898 20,042
Office 23,203 4,086 34,760 5,707
Shareholders' Expense 2,340 0 2,745 11,961
Advertising & Marketing 25,935 2,661 37,132 0
Depreciation & Amortization 29,215 28,585 58,430 57,170
------------- ------------- ------------- -------------
Total Expenses 543,451 395,194 115,4762 812,914
------------- ------------- ------------- -------------
Income(Loss) from Operations (457,125) (23,412) (402,839) (321,797)
------------- ------------- ------------- -------------
Other Income & (Expense):
Other Income 8,326 30,670 15,360 55,984
Other Expenses (888) (14,810) (8,965) (34,254)
------------- ------------- ------------- -------------
Total Other Income 7,438 15,860 6,395 21,730
------------- ------------- ------------- -------------
Income (Loss) Before Taxes (449,687) (39,272) (396,444) (300,067)
Provision for Income Tax and
income tax benefit 0 0 (1,000) 135,597
------------- ------------- ------------- -------------
Net Income (Loss) $ (449,687) $ 39,272 (397,444) $ (164,470)
------------- ------------- -------------
------------- ------------- -------------
Retained Earnings (December 31, 1995) 1,366,131
-------------
Retained Earnings (June 30, 1996) $ 968,687
-------------
-------------
Loss Per Share $ (0.11) $ (0.05)
------ ------
</TABLE>
See Accompanying Notes
4
<PAGE>
PART I: FINANCIAL INFORMATION
Original Sixteen to One Mine, Inc.
Statement of Cash Flows
<TABLE>
<CAPTION>
Six Months Ended Six Months Ended
June 30, 1996 June 30, 1995
------------------ ------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Cash Received From Customers $ 746,397 $ 496,294
Cash Received From Other Sources 7,846 64,165
Cash Paid to Suppliers & Employees (521,972) (498,901)
Interest Received 7,514 5,503
Interest Paid (7,640) 0
Taxes Paid In Cash (84,000) (28,200)
------------------ ------------------
Cash Provided By Operations 148,145 38,861
------------------ ------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments Made on Brown Bear Property 0 (150,000)
Purchase of Equipment (120,807) (39,369)
Payment Made For Development (135,369) (165,061)
Payment Made For Bond Deposit (5,000) 0
------------------ ------------------
Cash Used In Investing Activities (261,176) (354,430)
------------------ ------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Borrowings 0 266,000
Payments Made On Notes Payable (1,722) 0
Payments Received on Notes Receivable Employees 26,000 0
Repurchase and Retirement of Common Stock (49,014) (38,111)
------------------ ------------------
Cash Used in Financing Activities (24,736) 227,889
------------------ ------------------
Net Increase (Decrease) in Cash (137,767) (87,680)
Cash, Beginning 180,618 146,713
------------------ ------------------
Cash, Ending $ 42,851 $ 59,033
------------------ ------------------
------------------ ------------------
Reconciliation of Net Income to Cash Provided by Operating Activities:
Net Income (Loss) (397,444) (164,470)
Changes in Operating Assets & Liabilities:
(Increase) Decrease in Accounts Receivable (5,526) 5,177
Decrease in Inventory 593,286 335,886
Increase in Other Current Assets (8,608) (85,270)
Increase (Decrease) in Accounts Payable (9,175) 38,937
Decrease in Officers Compensation 0 (1,747)
Increase in Accrued Expenses 182 16,975
Decrease in Income Tax Payable (83,000) (28,200)
Decrease in Deferred Income Taxes 0 (135,597)
Depreciation 55,554 54,294
Amortization 2,876 2,876
------------------ ------------------
Cash Provided By Operations $ 148,145 $ 38,861
------------------ ------------------
------------------ ------------------
</TABLE>
See Accompanying Notes
5
<PAGE>
PART I - FINANCIAL INFORMATION
NOTES TO FINANCIAL STATEMENTS
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
Original Sixteen to One Mine, Inc. was incorporated October 9, 1911 as a
California corporation. It owns and operates mining claims in both Sierra and
Trinity Counties located in Northern California.
REVENUE
Revenue consists of gold and silver mined during the reporting period, either
sold during the period or held in inventory. It is recorded at the spot price
per ounce on the date of sale. Revenue does not include unprocessed high-grade
ore mined during the reporting period. Gold and silver held in inventory is
recorded at the spot price per ounce on the balance sheet date.
INVENTORY
Inventory consists of gold bullion, dore, specimens and jewelry. Inventory is
recorded at the spot price per ounce on the balance sheet date.
FIXED ASSETS
Fixed assets are stated at historical cost. Depreciation is being calculated
using straight-line and accelerated methods over the following estimated useful
lives:
Vehicles 3 to 5 years
Equipment 5 to 7 years
Buildings 18 to 31.5 years
DEPLETION POLICY
The Company has established a depletion policy for its mineral and mining
properties. Because of the geological formation in the Alleghany Mining
District, estimates of ore reserves cannot be calculated; therefore a cost per
unit depletion factor cannot be determined. Management has determined that a
straight-line method of depletion over a 25 year period would most accurately
match the estimated production of the mining properties (See Note 2). If
estimates of ore reserves become available, the units of production method of
depletion will be used.
6
<PAGE>
PART I - FINANCIAL INFORMATION (CONTINUED)
DEVELOPMENT
In February 1994, the Company began development of the 2483 winze into
unexplored ground. Costs associated with the development are being capitalized.
INCOME TAXES
Differences exist between the amount of income or loss reported for financial
statements and income tax reporting purposes. These differences are
attributable to the use of the cash basis reporting of ore revenues and
accelerated depreciation and depletion methods for income tax purposes. No
provision for income taxes has been made in the current year because of the
uncertainty of revenues for the remainder of the year. Income taxes for the six
months ended June 30, 1995, includes a benefit for net operating losses applied
in that period.
NET INCOME OR LOSS PER SHARE
Net income or loss per share has been computed using the common shares
outstanding at end of reporting period. The Company's stock equivalents have
been excluded from the calculation of shares outstanding.
NOTE 2: MINING PROPERTY
The original mining property is carried on the books at its March 1, 1913 value
of $379,000 as determined for depletion purposes in connection with Federal
income taxes. This value together with the cost of mining properties acquired
in 1920 and 1924 for the aggregated sum of $145,145 has been fully amortized
through depletion charges. During 1994, the Company purchased mining properties
at a cost of $300,000, and capitalized $86,633 in legal costs.
NOTE 3: INCOME TAXES
For Federal income tax purposes, the Company has operating loss carryforwards
which may provide future tax benefits, expiring as follows:
Year of expiration
------------------
2006 $345,753
2007 48,562
--------
$394,315
--------
--------
For California state income taxes, the Company has no operating loss
carryforwards.
7
<PAGE>
PART I - FINANCIAL INFORMATION (CONTINUED)
NOTE 4: NOTES PAYABLE
The Company has a note payable to the bank amounting to $17,632 bearing interest
at 9.95% and secured by a Chevrolet Astro Van. The note is payable in 60
monthly installments of $442 including interest.
At June 30, 1996, the Company has revolving lines of credit. The credit lines
expire June 30, 1997. The borrowing under these lines of credit at June 30,
1996, are $67,847 and $193,074.
8
<PAGE>
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS:
Currently miners are advancing six headings underground. All of these areas
were selected for gold production instead of long term development or
rehabilitation. Most of the gold production for the quarter came in June.
Two of the six mining targets have the greatest potential for producing
significant ounces of gold: the 1900 level raises and the 2233K underhand
stope.
The 1900 level raises are two separate wing raises that were started during the
quarter. One is driven in a southerly direction. One is driven in a northerly
direction and are respectively identified as the 1919 South Wing raise and the
1919 North Wing raise. Prior mining above this block of ground has been very
successful. In 1993, the company recorded one million dollars of gold mined in
one day from the 1333 stope. In July of 1995, the company recorded two million
dollars of gold mined over five days from the 1733 stope. Both of these areas
are directly up dip (over) the wing raises. Scattered gold was found throughout
the 120 feet of the southerly wing raise.
The 2233K underhand stope is in the most southerly part of the mine workings on
the K vein. The K vein is dipping towards the Sixteen to One vein and the
projected intersection is about 200 feet below the 2200 foot level. Mining in
this area began towards the end of the quarter after the old stope was cleared
of broken rock and debris.
A crew continues to work from the recently excavated 2483 winze. Miners
completed a raise connecting the 2600 level to the 2400 level during the second
quarter of 1996. This provides a second exit as well as additional options for
utilities and material handling. Gold has been found scattered throughout the
workings in significant but minor amounts.
COMPARISON OF SIX MONTHS ENDED JUNE 30, 1996 TO SIX MONTHS ENDED JUNE 30, 1995.
For six months ended June 30, 1996, revenues increased by $260,806 from the
comparable six months ended June 30, 1995. Production for the first six months
was $751,923. The reader is reminded that Original Sixteen to One operates a
high grade underground gold mine. While the vein system is proven and has
produced over 1 million ounces of gold, it is unthinkable to state our reserves
as "proven" according to standards recognized in the open pit gold mining
industry or in low grade underground mines; however, it is a proven gold
deposit. During the past four years a significant percentage of annual
production has been mined during a short period of time. For example, in 1993,
over $1 million was mined in a single day. During 1995 over $2 million was
mined in ten days. Quarterly comparisons are a difficult tool to use in
analyzing the company.
Total current assets decreased by $716,919 as accumulated gold inventory was
sold. Current liabilities decreased by $91,875. Lines of credit were used as
cash flow tools to minimize the amount of gold to be crushed in order to provide
the bank credits necessary to meet monthly overhead. The reason for
implementing these tools was to conserve the valuable quartz and gold inventory
used to supply the growing jewelry and specimen sales division established by
the Company in 1994.
Expenses increased by $341,848. The largest increase was wages and related
($209,550). Two factors have contributed to this increase: existing miners
wages have increased and additional employees have been added to the payroll.
LIQUIDITY AND CAPITAL RESOURCES AS OF JUNE 30, 1996
Gold production and accumulated inventory were the sources of cash during the
quarter. In order to finance the Company, inventory is sold. In the event that
gold production ceases and inventory is consumed, other financing alternatives
will be implemented to maintain the current level of activity.
The Company throughout its 85 year history has never experienced steady or
regular gold production when measured on a monthly,
quarterly, semi-annually or annual basis. This situation is due to the high-
grade nature of the gold deposit in Alleghany, California.
<PAGE>
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES AS OF JUNE 30, 1996 (CONTINUATION)
Considerations for determining mining priorities include: potential ounces of
each target, set-up costs, on-going cost, time, impact on the mine's
infrastructure (hoisting capacity, haulage, water) and the likelihood of little
or no gold production.
EVENTS THAT MAY HAVE A MATERIAL EFFECT ON FUTURE OPERATIONS, LIQUIDITY AND
CAPITAL RESOURCES
TECHNOLOGY
The Company continues to test various technologies for underground gold
location. Should one of the technologies prove to more effectively detect high-
grade pockets beyond the Company's current capabilities, the Company's ability
to produce gold at a low cost would be enhanced.
PRICE OF GOLD
Of material effect on the Company's financial operations is the price of gold.
The Company's primary income is based upon current and future prices of gold. A
decrease in the spot price of gold per ounce will decrease income. Conversely,
an increase in the spot price per ounce increases the Company's income. The
June 30, 1996, spot price for gold was $380.35 per troy ounce. The Company
makes no projections on either the future price of gold, deflation or inflation.
While any decrease of the spot price of gold is definitely a negative factor,
deflation and inflation can arguably be positive occurrences for the Company.
WORKING CAPITAL
The Company may seek to supplement its internally generated funds with funds
raised externally through a proposed registered public offering of its common
stock.
TIMBER
In 1994, the Company filed a Timber Harvest Plan and harvested trees in Sierra
County. Receipts in 1994, were $145,000. Logging operations were suspended due
to early snow storms. The remaining acreage under the timber harvest plan was
logged in 1995. Revenue from timber sales in 1995 is $108,304.
LACK OF PROVEN OR PROBABLE RESERVES OF COMMERCIAL ORE
The Company is engaged in production of gold, and continues to explore and
develop ore zones in the mine. While over 24,000 ounces of fine gold have been
recovered since January 1992, there are no assurances that the Company will
continue to find gold, or that if gold is found that it can be mined at a
profit. The Company has no proven (measured) reserves or probable (indicated)
reserves of gold at the mine as those terms are defined under Federal securities
regulations. However, the vein system owned and operated by the Company has
yielded over 1 million ounces of gold, thereby establishing it as a proven gold
deposit.
GOVERNMENTAL REGULATION
All mining operations are subject to substantial governmental regulation,
including Federal, State and local regulations concerning mine safety and
environmental protection. Compliance with these regulations may cause
significant delays in the operations of the Company and substantial capital
expense. The Company believes it is currently operating in compliance with all
known safety and environmental standards and regulations. However, amendments
or additions to or future interpretations of current regulations could have an
adverse effect on the Company's mining operations.
<PAGE>
EVENTS THAT MAY HAVE A MATERIAL EFFECT ON FUTURE OPERATIONS, LIQUIDITY AND
CAPITAL RESOURCES (CONTINUATION)
DIVIDENDS
On August 7, 1995, the board of directors declared a special dividend of $.05
per share to shareholders of record August 7, 1995, payable on September 10.
The common stock was ex-dividend on August 11, 1995, on the Pacific Stock
Exchange. The Company released this news on August 9, 1995. This was the first
dividend in 41 years. While the Company has a long history of issuing
dividends, the board of directors will evaluate its cash demands, accumulated
inventory and its mining activities to determine if and when the next special
dividend will be issued.
LIQUIDITY
The Company has, in the past, experienced a lack of liquidity and working
capital. Although the Company holds gold inventory of over $1.6 million and has
little long term debt as of June 30, 1996, there can be no assurance that
current gold production or gold inventory can be maintained or that the costs of
mine exploration and development will not exceed revenues and deplete current
assets of the Company. Management believes that the liquidity needs of the
Company in the near term will be met from the sale of existing inventory and the
production of gold.
PROPOSED CHANGES TO MINING LAWS
Congress is currently reviewing the 1872 Mining Law which controls unpatented
mining claims. One proposal would replace the current annual assessment work
requirement ($100 per claim) with an undetermined royalty payment. Although the
Company's current production comes from patented (rather than unpatented)
claims, any future production from the Company's unpatented mining claims may be
subject to an additional royalty payment or other costs, if revisions to the
1872 Mining Law are implemented.
SUBSEQUENT EVENTS
On July 3, 1996, gold was mined, sacked and inventoried from five locations
underground in the working headings. This is the first time that five headings
have produced gold simultaneously. While this re-enforced the wisdom of mining
in all of these areas, particular emphasis is placed on the 2333K underhand
stope and the 1919 wing raise north. Over 300 ounces of gold has been recorded
from the underhand stope. The gold was not scattered but wired in a lense that
continues down the dip of the vein. The company is encouraged by this discovery
and the nature and amount of vein material remaining to be mined. A 200 ounce
pod of gold was found in the 1919 wing raise north. A concentration of this
size in relation to the pockets of gold mined during 1993 and 1995 above this
area is a strong indicator that heavy gold solutions migrated through this area.
A large block of ground above the discovery remains to be mined.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1 - CHANGES IN SECURITIES
ITEM 2 - DEFAULTS UPON SENIOR SECURITIES
ITEM 3 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
ITEM 4 - OTHER INFORMATION
ITEM 5 - EXHIBITS & REPORTS ON FORM 8-K
<PAGE>
SIGNATURES
Pursuant to the requirements 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.
ORIGINAL SIXTEEN TO ONE MINE, INCORPORATED
(Registrant)
Date:________________________ ___________________________________
August 9, 1996 Michael M. Miller, President
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED BALANCE SHEET OF ORIGINAL SIXTEEN TO ONE MINE, INC., AS OF JUNE 30,
1996, AND THE RELATED STATEMENTS OF INCOME AND RETAINED EARNINGS AND CASH FLOWS
FOR THE SIX MONTHS THEN ENDED AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 42851
<SECURITIES> 0
<RECEIVABLES> 18896
<ALLOWANCES> 0
<INVENTORY> 1634906
<CURRENT-ASSETS> 18160
<PP&E> 2445957
<DEPRECIATION> 624243
<TOTAL-ASSETS> 3572895
<CURRENT-LIABILITIES> 944615
<BONDS> 13983
0
0
<COMMON> 350187
<OTHER-SE> 2264110
<TOTAL-LIABILITY-AND-EQUITY> 3572895
<SALES> 751923
<TOTAL-REVENUES> 767283
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1156087
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7640
<INCOME-PRETAX> (396444)
<INCOME-TAX> 1000
<INCOME-CONTINUING> (397444)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (397444)
<EPS-PRIMARY> (.11)
<EPS-DILUTED> 0
</TABLE>
