SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended September 30, 1997 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 (I.R.S. Employer Identification No.)
incorporated or organization
Post Office Box 1621, Alleghany, CA 95910
(Address of principal executive offices)
(530) 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 months (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 September 30, 1997, 3,534,065 shares of Common Stock, par value $.10 per
share, were issued and outstanding.
<PAGE>
PART I: FINANCIAL INFORMATION
Original Sixteen to One Mine, Inc.
Condensed Balance Sheet
September 30, 1997 and December 31, 1996
ASSETS
September 30, 1997 December 31, 1996
Current Assets:
Cash $ 29,053 $ 31,640
Accounts Receivable 46,173 20,571
Inventory 903,918 1,138,041
Other Current Assets 27,306 25,056
----------- -----------
Total Current Assets 1,006,450 1,215,308
----------- -----------
Mining Property:
Real Estate & Property Rights
net of depletion of $524,145 182,091 182,091
Mineral Property 415,263 415,263
Development Costs
net of amortization of $56,900 and
$0 in 1997 and 1996, respectively 842,085 898,985
----------- -----------
1,439,439 1,496,339
----------- -----------
Fixed Assets:
Equipment 856,308 822,620
Building & Mill 148,462 144,462
Vehicles 186,793 176,086
----------- -----------
1,191,563 1,143,168
Less: Accumulated Depreciation (778,576) (665,583)
----------- -----------
Net Fixed Assets 412,987 477,585
----------- -----------
Other Assets
Net of amortization of
$44,395 and $41,007 in
1997 and 1996, respectively 23,667 28,493
----------- ----------
TOTAL ASSETS $ 2,882,543 $ 3,217,725
=========== ===========
See Accompanying Notes
<PAGE>
PART I: FINANCIAL INFORMATION
Original Sixteen to One Mine, Inc.
Condensed Balance Sheet
September 30, 1997 and December 31, 1996
(continued)
LIABILITIES & STOCKHOLDERS' EQUITY
September 30, 1997 December 31, 1996
Current Liabilities:
Accounts payable and accrued compensation $ 143,934 $ 151,734
Related party advances 0 54,000
Notes payable due within one year 48,931 267,793
Accrued expenses 10,292 0
Deferred income taxes 375,000 375,000
----------- -----------
Total Current Liabilities 578,157 848,527
----------- -----------
Notes payable due after one year 9,465 11,924
----------- -----------
Total Liabilities 587,622 860,451
----------- ----------
Stockholders' Equity:
Capital Stock, par value $.10 per share
10,000,000 shares authorized;
3,534,065 and 3,504,065 shares
issued & outstanding as of
September 30, 1997 and December 31, 1996
respectively 353,406 350,407
Additional paid-in capital 1,357,203 1,321,204
Notes receivable from employees (26,000) (26,000)
Retained earnings 610,312 711,663
------------ ------------
Total Stockholders' Equity 2,294,921 2,357,274
------------ ------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 2,882,543 $ 3,217,725
============ ============
See Accompanying Notes
<PAGE>
PART I: FINANCIAL INFORMATION
Original Sixteen to One Mine, Inc.
Statement of Income and Retained Earnings
Three Months End Nine Months End
9/30/97 9/30/96 9/30/97 9/30/96
------- ------- ------- -------
Revenue:
Gold & jewelry sales $ 591,652 $ 458,109 $2,052,069 $1,210,032
Expenses:
Salaries and wages 468,299 331,206 1,236,706 916,018
Depreciation & amortization
of fixed assets 64,222 11,112 123,617 69,542
Amortization of
development costs 21,100 0 56,900 0
Contract Labor 12,193 23,096 25,086 54,942
Telephone and utilities 26,709 26,932 85,606 87,740
Taxes-property and payroll 33,176 13,215 58,934 28,291
Insurance 8,535 8,925 32,802 41,941
Supplies 120,558 77,777 259,796 262,902
Drayage 23,591 10,963 54,805 40,861
Promotion 3,144 6,910 18,660 44,042
Office expenses 5,008 10,100 23,496 44,860
Legal and accounting 9,207 26,820 62,610 92,908
Other expenses 16,479 6,054 50,253 23,825
--------- -------- ---------- ---------
Total Expenses 812,221 553,110 2,089,271 1,707,872
--------- -------- ---------- ---------
Loss from Operations (220,569) (95,001) (37,202) (497,840)
Other Income & (Expense):
Other Income 2,815 30,036 16,444 45,396
Other Expenses (10,113) (9,381) (79,593) (18,346)
--------- --------- --------- ---------
Total Other Income (Expense) (7,298) 20,655 (63,149) 27,050
--------- --------- --------- ---------
Loss Before Taxes (227,867) (74,346) (100,351) (470,790)
Provision for Income Taxes 0 0 (1,000) (1,000)
--------- --------- --------- --------
Net Loss $ (227,867) $ (74,346) (101,351) $(471,790)
========== ========== =========
Retained Earnings (12/31/96) 711,663
---------
Retained Earnings (6/30/97) $ 610,312
==========
Loss Per Share ($0.06) ($0.02) ($0.03) ($0.13)
See Accompanying Notes
<PAGE>
PART I: FINANCIAL INFORMATION
Original Sixteen to One Mine, Inc.
Statement of Cash Flows
Nine Months Ended September 30,
1997 1996
------ ------
Cash Flows From Operating Activities:
Net loss $ (101,351) $ (471,790)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 174,719 69,542
Increase in accounts receivable (25,602) (11,630)
Decrease in inventory 234,123 846,134
Increase in other current assets (2,250) (17,430)
Decrease in accounts payable and
accrued compensation (7,800) (38,358)
Increase in accrued expenses 10,292 537
Decrease in corporate income taxes payable 0 (83,000)
--------- ---------
Net cash provided by operating activities 282,131 294,005
--------- ---------
Cash Flows From Investing Activities:
Purchase of land 0 (78,174)
Purchase of fixed assets (48,395) (124,729)
Payments made for development 0 (182,944)
--------- ---------
Net cash used by investing activities (48,395) (385,847)
--------- ---------
Cash Flows From Financing Activities:
Payments made on notes payable (238,493) (3,094)
Payments received on notes receivable
from employees 0 26,000
Payments made to employees for advances
made to the company (54,000) 0
Proceeds from additional borrowings 17,170 0
Proceeds from sales of common stock 39,000 0
Repurchase & retirement of common stock 0 (49,014)
--------- ---------
Net cash used by financing activities (236,323) (26,108)
--------- ---------
Decrease in Cash (2,587) (117,950)
Cash, beginning of year 31,640 180,618
--------- ---------
Cash, end of period $ 29,053 $ 62,668
========== ==========
Supplemental Schedule of Other Cash Flows:
Cash paid during the period for:
Interest expense $ 18,954 $ 16,807
========== ==========
Income taxes $ 22,007 $ 84,000
========== ==========
See Accompanying Notes
<PAGE>
PART I: FINANCIAL INFORMATION
Original Sixteen to One Mine, Inc.
Notes to Financial Statements
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
Original Sixteen to One Mine, Inc., owns and operates mining claims in Sierra
and Trinity Counties located in Northern California.
REVENUE
Revenue primarily consists of gold and silver mined during the reporting period
without regard to what was sold or held in inventory. They are recorded at the
spot price per ounce on the statement date. Revenue does not include
unprocessed high-grade ore mined during the reporting period. Gold and silver
held in inventory are recorded at the spot price per ounce on the balance
sheet date. Jewelry sales and sales of unprocessed high grade ore are also
included in revenue.
INVENTORY
Inventory consists of gold and silver 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.
DEVELOPMENT
In February 1994, the Company began development of the 2483 winze into
unexplored ground. Costs associated with the development have been capitalized.
These costs are being amortized over the estimated production from the new
headings.
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, with the exception of state minimum income tax, has
been made in the current year due to the uncertainty of revenues for the
remainder of the year.
NET INCOME OR LOSS PER SHARE
Net gain 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 Company's 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
incurred in defense of certain mining claims.
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.
NOTE 4 - NOTES PAYABLE
The Company has a note payable to the bank amounting to $12,235, bearing
interest at 9.95% and secured by a vehicle. The note is payable in 60 monthly
installment of $442.
At September 30, 1997, the Company has two revolving lines of credit in the
amount of $275,000, expiring June 30, 1998. At September 30, 1997, $46,160 was
owed to the bank.
PART II: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATION
Comparison of First Six Months of 1997 with 1996
STATEMENT OF INCOME AND RETAINED EARNINGS
The Company's revenues increased $381,399 (22%) the first nine months of 1997
compared with the same period of 1996. Gold production has continued to
increase during the third quarter of 1997. The spot price of gold has shown a
significant decline from $369.60 per troy ounce on December 31, 1996, to
$334.10 on September 30, 1997. This has a direct impact on the volume of gold
needed to maintain the same inventory dollars.
Gold production is measured in fine troy ounces. During the first three
quarters of 1996, production from the mine totaled 3,349.80 troy ounces as
follows:
January 849.33 April 0.00
February 483.37 May 227.69
March 81.00 June 645.71
-------- --------
Quarter Total 1,413.70 Quarter Total 873.40
======== ========
July 757.51
August 264.11
September 41.08
--------
Quarter Total 1,062.70
========
The Company continues to identify mine production into three categories: Mine
mill and trommel. During the first nine months of 1997, production totaled
5,046.73 troy ounces as follows:
MINE MILL TROMMEL* TOTAL
------ ------ ------- -----
January 46.44 93.12 0.00 139.56
February 0.41 205.73 149.13 395.27
March 161.39 133.93 48.60 343.92
------ ------ ------ ------
Total:
First Qtr 248.24 432.78 197.73 878.75
====== ====== ====== ======
April 409.38 155.19 17.64 582.21
May 1,144.06 100.09 0.00 1,244.15
June 1,044.68 0.00 0.00 1,044.68
-------- ------ ------ --------
Total:
Second Qtr 2,598.12 255.28 17.64 2,871.04
======== ======= ====== ========
July 1,006.85 0.00 0.00 1,006.85
August 0.00 0.00 0.00 0.00
September 160.02 130.07 0.00 290.09
-------- ------- ----- --------
Total:
Third Qtr 1,166.87 130.07 0.00 1,296.94
======== ======= ====== ========
* Note: A trommel is a perforated cylinder used to screen ore. As production
from the mine increased in May 1997, the trommel operation was suspended.
During the second quarter of 1997, the bulk of production came from a recently
developed area known as the 2499-K. This remains an active working heading as
gold is visible in the quartz vein both above and below the excavation. This
area produced approximately 2,900 ounces of gold in both high grade and mill
ore. During the third quarter (July), the bulk of production, 1,006 ounces,
came from a long wing off the 26-105 raise in the south central part of the
mine workings. Mining continues in this area.
The Company's compensation expenses in 1997 increased by $320,688 (35%) through
the first nine months from the $916,018 incurred in 1996 during this same
period primarily because the Company's payroll expanded from 37 full time
employees to 54 full time employees during the course of the 1996 and through
the first nine months of 1997.
Promotion expenses decreased $25,382 (58%) the third quarter due to the need to
conserve working capital. Contract labor and related material expenses
directly related to production of jewelry for the gold sales division has been
reclassified as a cost of goods sold, resulting in a significant decrease in
contract labor for nine months end September 30, 1997, versus September 30,
1996. Office expenses decreased $21,364 (48%) in the nine month comparisons.
To conserve working capital supplies were kept at a minimum.
The $30,298 (33%) decrease in legal and accounting expenses for nine months end
September 30, 1997, versus September 30, 1996, is primarily attributed to
reduced legal issues and the use of in-house employees rather than an outside
accounting firm.
Amortization of development costs of $21,100 was incurred during the third
quarter 1997 as costs associated with exploration and development are now
being amortized over the estimated production from the new headings. There are
no comparisons of expenditures with 1996.
Other expenses increased or decreased only modestly and were not material.
BALANCE SHEET
Inventory continues to show a decrease of $234,123 (21%) from December 31,
1996. Ten percent of this decrease is due to the devaluation of gold from
December 31, 1996, to September 30, 1997.
Accounts receivable increased $25,602 (124%) from December 31, 1996.
Total current liabilities decreased $272,829 (32%) since December 31, 1996, as
accounts payable continued to be reduced and only a small amount was borrowed
against two existing lines of credit.
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity (i.e., its ability to generate adequate amounts of cash
to meet its needs for cash) is substantially dependent upon the results of its
operations. While the Company does maintain a gold inventory which it can
liquidate from time to time to satisfy its working capital needs, there can be
no assurance that such inventory will be adequate to sustain operations if the
Company's gold mining activities are not successful. Because of the
unpredictable nature of the gold mining business, the Company cannot provide
any assurance with respect to long-term liquidity. In addition, if the
Company's mining operation does not produce meaningful additions to inventory,
the Company may determine it is necessary to satisfy its working capital needs
by selling gold in bullion form.
The Company is dependent on continued recovery of gold mined and sales of gold
from inventory to meets its cash needs. Although the Company has historically
located at least $1.2 million of gold in each of the last five years, there
can be no assurance that the Company's efforts in any particular period will
provide sufficient funding for the Company to continue operations. The
Company has a fully extended line of credit with a bank. If the Company's cash
resources are inadequate and its gold inventory is depleted, the Company may
seek debt of equity financing on the most reasonable terms available or may
terminate its operation.
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
From time to time the Original Sixteen to One Mine, Inc. (the Company), will
make written and oral forward-looking statements about matters that involve
risks and uncertainties that could cause actual results to differ materially
from projected results. Important factors that could cause actual results to
differ materially include, among others:
- Fluctuations in the market prices of gold
- General domestic and international economic and political conditions
- Unexpected geological conditions or rock stability conditions
resulting in cave-ins, flooding, rock-bursts or rock slides
- Difficulties associated with managing complex operations in remote
areas
- Unanticipated milling and other processing problems
- The speculative nature of mineral exploration
- Environmental risks
- Changes in laws and government regulations, including those relating
to taxes and the environment
- The availability and timing of receipt of necessary governmental
permits and approval relating to operations, expansion of operations,
and financing of operations
- Fluctuations in interest rates and other adverse financial market
conditions
- Other unanticipated difficulties in obtaining necessary financing
- The failure of equipment of processes to operate in accordance with
specifications or expectations
- Labor relations
- Accidents
- Unusual weather or operating conditions
- Force majeure events
- Other risk factors described from time to time in the Original Sixteen
to One Mine, Inc., filings with the Securities and Exchange
Commission
Many of these factors are beyond the Company's ability to control or predict.
Investors are cautioned not to place undue reliance on forward-looking
statements. The Company disclaims any intent or obligation to update its
forward-looking statements, whether as a result of receiving new information,
the occurrence of future events or otherwise.
SIGNATURE
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, INC.
(Registrant)
/s/Michael M. Miller
President and Director
Dated: November 12, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 29,053
<SECURITIES> 0
<RECEIVABLES> 46,173
<ALLOWANCES> 0
<INVENTORY> 903,918
<CURRENT-ASSETS> 27,306
<PP&E> 2,631,002
<DEPRECIATION> 778,576
<TOTAL-ASSETS> 2,882,543
<CURRENT-LIABILITIES> 578,157
<BONDS> 9,465
0
0
<COMMON> 353,406
<OTHER-SE> 1,941,515
<TOTAL-LIABILITY-AND-EQUITY> 2,882,543
<SALES> 2,201,867
<TOTAL-REVENUES> 2,201,867
<CGS> 149,798
<TOTAL-COSTS> 149,798
<OTHER-EXPENSES> 2,089,271
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 18,954
<INCOME-PRETAX> (100,351)
<INCOME-TAX> (1,000)
<INCOME-CONTINUING> (101,351)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (101,351)
<EPS-PRIMARY> (0.03)
<EPS-DILUTED> (0.03)
</TABLE>
