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 March 31, 1998 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 March 31, 1998, 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.
Statement of Operations and Retained Earnings
For the Three Months Ended March 31, 1998 and 1997
Three Months Ended March 31,
1998 1997
-------- --------
Revenues:
Gold & jewelry sales $ 362,435 $ 445,230
Operating expenses:
Salaries and wages 426,243 417,219
Depreciation & amortization 24,750 35,637
Amortization of
development costs 10,992 -
Contract labor 2,762 8,243
Telephone & utilities 32,179 29,015
Taxes - property & payroll 12,862 12,201
Insurance 12,766 12,866
Supplies 54,098 63,535
Drayage 16,071 17,429
Promotion 1,370 1,783
Office expenses 2,790 8,261
Legal and accounting 19,503 31,426
Other expenses 20,249 4,048
----------- -----------
Total operating expenses 636,635 641,663
----------- -----------
Income (loss)
from operations (274,200) (196,433)
Other Income & (Expense):
Other Income 23,080 7,704
Other Expenses (1,382) (21,358)
----------- -----------
Total Other Income
(Expense) 21,698 (13,654)
----------- -----------
Income (loss) before taxes (252,502) (210,087)
Provision for income taxes (500) (1,000)
----------- -----------
Net income (loss) (253,002) (211,087)
===========
Retained earnings (12/31/97) 391,846
-----------
Retained earnings (03/31/98) $ 138,844
===========
Earnings (loss) per share
of common stock ($0.07) ($0.06)
----------- ------------
See Accompanying Notes
<PAGE>
PART I: FINANCIAL INFORMATION
Original Sixteen to One Mine, Inc.
Condensed Balance Sheet
March 31, 1998 and December 31, 1997
ASSETS
March 31, 1998 December 31, 1997
Current Assets
Cash $ 20,203 $ 64,452
Accounts receivable 62,192 97,098
Inventory 536,823 632,676
Other current assets 42,639 22,581
----------- -----------
Total current assets 661,857 816,807
----------- -----------
Mining Property
Real estate and property rights
net of depletion of $523,145 182,091 182,091
Mineral Property 415,263 415,263
Development costs, net amortization
of $91,520 and $81,965 in 1998 and
1997, respectively 807,465 817,020
----------- -----------
1,404,819 1,414,374
----------- -----------
Fixed Assets at Cost
Equipment 859,864 859,864
Building and Mill 164,546 164,546
Vehicles 188,541 188,541
----------- -----------
1,212,951 1,212,951
Less accumulated depreciation (824,352) (799,601)
----------- -----------
Net fixed assets 388,599 413,350
----------- -----------
Other assets, net of accumulated
amortization of $48,198 and
$46,760 in 1998 and 1997, respectively 22,622 24,060
----------- -----------
Total Assets $ 2,477,897 $ 2,668,591
=========== ===========
See Accompanying Notes
<PAGE>
PART I: FINANCIAL INFORMATION
Original Sixteen to One Mine, Inc.
Condensed Balance Sheet
March 31, 1998 and December 31, 1997
LIABILITIES & STOCKHOLDERS' EQUITY
March 31, 1998 December 31, 1997
Current Liabilities
Accounts payable and
accrued compensation $ 195,554 $ 168,782
Related party advances - 23,000
Notes payable due within one year 358,412 298,931
Deferred income taxes 94,000 94,000
----------- -----------
Total Current Liabilities 647,966 584,713
----------- -----------
Noted payable due after one year 6,476 7,421
----------- -----------
Total Liabilities 654,442 592,134
Stockholders' Equity
Capital Stock, par value $.10 -
10,000,000 shares authorized:
3,534,065 and 3,534,065 shares issued
and outstanding as of March 31, 1998
and December 31, 1997, respectively 353,407 353,407
Additional paid-in capital 1,357,204 1,357,204
Notes receivable from employees (26,000) (26,000)
Retained earnings 138,844 391,846
----------- -----------
Total Stockholders' Equity 1,823,455 2,076,457
----------- -----------
Total Liabilities and
Stockholders' Equity $ 2,477,897 $ 2,668,591
=========== ===========
See Accompanying Notes
<PAGE>
PART I: FINANCIAL INFORMATION
Original Sixteen to One Mine, Inc.
Statement of Cash Flows
Three Months Ended
March 31, 1998 March 31, 1997
-------------- --------------
Cash Flows From Operating Activities:
Net loss $ (253,002) $ (211,087)
Adjustments to reconcile net loss
to net cash provided by operating
activities:
Depreciation and amortization 35,745 29,840
Decrease (Increase)in accounts
receivable 34,906 (32,410)
Decrease in inventory 95,853 196,832
Increase in other current assets (20,058) (1,165)
Increase (Decrease) in accounts payable
and accrued compensation 11,076 (32,658)
Increase in accrued expenses 15,696 14,021
------------ ------------
Net cash provided (used) by
operating activities (79,784) (36,627)
------------ ------------
Cash Flows From Investing Activities:
Proceeds from sale of fixed assets - 28,987
Purchase of fixed assets - (255)
----------- -----------
Net cash provided by
investing activities - 28,732
----------- -----------
Cash Flows From Financing Activities:
Payments made on notes payable (945) -
Payments received on notes receivable
from employees - (20,427)
Payments made to employees for advances
made to the Company (23,000) -
Proceeds from additional borrowings 59,480 15,698
----------- -----------
Net cash provided (used) by
financing activities 35,535 (4,729)
----------- -----------
Decrease in Cash (44,249) (12,624)
Cash, beginning of year 64,452 31,640
----------- -----------
Cash, end of period $ 20,203 $ 19,016
=========== ===========
Supplemental schedule of other cash flows:
Cash paid during the period for:
Interest expense $ 6,538 $ 7,056
=========== ===========
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. Jewelry
and gold specimen sales may include a premium over the quoted market price of
gold. Such premiums are recognized at the date of sale.
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. Development was complete at December 1996. Based upon previous
mine experience, management estimates that gold production from the new winze
will approximate 50,000 ounces. Accordingly, capitalized development costs
are being amortized using the units of production method.
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 March 31, 1998, the Company has two fully extended revolving lines of
credit with a bank in the amount of $275,000, expiring June 30, 1998.
PART II: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATION
Comparison of First Three Months of 1998 with 1997
STATEMENT OF INCOME AND RETAINED EARNINGS
The Company's revenues decreased $61,859 (13.89%) the first three months of
1998 compared with the same period of 1997 although gold production increased
170 troy ounces during the first quarter of 1998. The spot price of gold has
continued to decline from $369.60 per troy ounce on January 1, 1997 to $350.50
by the end of the first quarter of 1997 compared with the price per troy ounce
of $301.30 on March 31, 1998, which had a direct impact on the ratio of gold
to revenue and inventory.
Gold production is measured in fine troy ounces. During the first three
months of 1998, production from the mine totaled 1,050.57 troy ounces as
follows:
MINE MILL TROMMEL* TOTAL
------ ------ ------- -----
January 402.98 201.52 0.00 604.50
February 60.54 46.79 0.00 107.33
March 36.68 302.06 0.00 338.74
------ ------ ------ ------
Total:
First Qtr 500.20 550.37 0.00 1,050.57
====== ====== ====== ========
The Company continues to identify mine production into three categories: Mine
mill and trommel. During the first three months of 1997, production totaled
881.11 troy ounces as follows:
MINE MILL TROMMEL* TOTAL
------ ------ ------- -----
January 46.44 93.12 0.00 139.56
February 40.41 205.73 149.13 395.27
March 163.75 133.93 48.60 346.28
------ ------ ------ ------
Total:
First Qtr 250.60 432.78 197.73 881.11
====== ====== ====== ======
* 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.
Mill tonnage for the first quarter totaled 3,542.29 ton as follows:
January 1,333.26 February 491.17 March 1,717.86
The Company's compensation expenses increased $9,024 (2.16%) the first three
months of 1998 compared with the same period in 1997 which reflects merit pay
increases among the miners.
Contract labor decreased $2,762 (66.49%) as the Company utilized more of its
own work force. The $11,923 (37.97) decrease in legal and accounting expenses
for the three months ended March 31, 1998, compared with the same period in
1997, is primarily attributed to the use of in-house employees rather than an
outside accounting firm.
Depreciation and amortization of fixed assets decreased $10,887 in the first
quarter of 1998 versus the first quarter of 1997 as costs associated with
exploration and development have been reclassified for 1998 as amortization of
development costs.
The Company continued to conserve working capital on discretionary expenses,
thereby reflecting a decrease in Office expense of $5,471 (66.23%) and
Supplies in the amount of $9,437 (14.85%).
Other expenses increased or decreased only modestly and were not material.
BALANCE SHEET
Inventory decreased $95,853 (15.15%) from December 31, 1997 to March 31, 1998.
Gold specimens and gold and quartz slab were sold to provide for operating
capital. Accounts receivable decreased $34,906 (35.95%) as debt due the
Company is paid.
Total current liabilities increased $62,308 (10.52%) from December 31, 1997 as
the Company chose to borrow money to satisfy its cash flow rather than
liquidate inventory.
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: May 15, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 20,203
<SECURITIES> 0
<RECEIVABLES> 62,192
<ALLOWANCES> 0
<INVENTORY> 536,823
<CURRENT-ASSETS> 65,261
<PP&E> 2,617,770
<DEPRECIATION> 824,352
<TOTAL-ASSETS> 2,477,897
<CURRENT-LIABILITIES> 654,442
<BONDS> 0
0
0
<COMMON> 353,407
<OTHER-SE> 1,470,048
<TOTAL-LIABILITY-AND-EQUITY> 2,477,897
<SALES> 362,435
<TOTAL-REVENUES> 362,435
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 636,635
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,538
<INCOME-PRETAX> (252,502)
<INCOME-TAX> 500
<INCOME-CONTINUING> (253,002)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (253,002)
<EPS-PRIMARY> (0.07)
<EPS-DILUTED> (0.07)
</TABLE>
