SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB/A
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended September 30, 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 September 30, 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.
Condensed Balance Sheet
September 30, 1998 and December 31, 1997
ASSETS
September 30, 1998 December 31, 1997
------------------ -----------------
Current Assets
Cash $ 9,658 $ 64,452
Accounts receivable 32,723 97,098
Inventory 469,409 632,676
Other current assets 41,270 22,581
----------- -----------
Total current assets 553,060 816,807
----------- -----------
Mining Property
Real estate and property rights
net of depletion of $524,145 182,091 182,091
Mineral Property 415,263 415,263
Development costs, net amortization
of $109,468 and $81,965 in 1998 and
1997, respectively 789,517 817,020
----------- -----------
1,386,871 1,414,374
----------- -----------
Fixed Assets at Cost
Equipment 861,857 859,864
Building and Mill 170,722 164,546
Vehicles 188,541 188,541
----------- -----------
1,221,120 1,212,951
Less accumulated depreciation (895,625) (799,601)
----------- -----------
Net fixed assets 325,495 413,350
----------- -----------
Other assets, net of accumulated
amortization of $49,163 and
$46,760 in 1998 and 1997, respectively 21,657 24,060
----------- -----------
Total Assets $ 2,287,083 $ 2,668,591
=========== ===========
See Accompanying Notes
<PAGE>
PART I: FINANCIAL INFORMATION
Original Sixteen to One Mine, Inc.
Condensed Balance Sheet
September 30, 1998 and December 31, 1997
LIABILITIES & STOCKHOLDERS' EQUITY
September 30, 1998 December 31, 1997
------------------ -----------------
Current Liabilities
Accounts payable and
accrued compensation $ 227,100 $ 168,782
Related party advances 302,600 23,000
Notes payable due within one year 219,473 298,931
Accrued expenses 11,261 -
Deferred income taxes 94,000 94,000
----------- -----------
Total Current Liabilities 854,434 584,713
----------- -----------
Noted payable due after one year 83,046 7,421
----------- -----------
Total Liabilities 937,480 592,134
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 September 30, 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 (deficit) (335,008) 391,846
----------- -----------
Total Stockholders' Equity 1,349,603 2,076,457
----------- -----------
Total Liabilities and
Stockholders' Equity $ 2,287,083 $ 2,668,591
=========== ===========
See Accompanying Notes
PART I: FINANCIAL INFORMATION
Original Sixteen to One Mine, Inc.
Statement of Operations and Retained Earnings
For the Three Months and Nine Months Ended September 30, 1998 and 1997
Three Months Ended Nine Months Ended
9/30/98 9/30/97 9/30/98 9/30/97
------- ------- ------- -------
Revenues:
Refined gold specimen &
jewelry sales $ 376,640 $ 591,652 $1,033,637 $2,052,069
Operating expenses:
Salaries and wages 321,290 468,299 1,095,837 1,236,706
Depreciation & amortization 33,234 64,222 96,024 123,617
Amortization of
development costs 10,763 21,100 29,905 56,900
Contract labor 18,497 12,193 23,228 25,086
Telephone & utilities 29,246 26,709 97,434 85,606
Taxes - property & payroll 13,589 33,176 38,026 58,934
Insurance 5,610 8,535 75,157 32,802
Supplies 51,295 120,558 149,842 259,796
Drayage 13,392 23,591 42,115 54,805
Promotion 2,389 3,144 5,631 18,660
Office expenses 5,219 5,008 13,800 23,496
Legal and accounting 5,028 9,207 46,626 62,610
Other expenses 14,796 16,479 59,842 50,253
----------- ---------- ---------- ----------
Total operating expenses 524,348 812,221 1,773,467 2,089,271
----------- ---------- ---------- ----------
Income (loss)
from operations (147,708) (220,569) (739,830) (37,202)
Other Income & (Expense):
Other Income 6,043 2,815 9,823 16,444
Other Expenses (7,182) (10,113) 6,241 (79,593)
---------- ---------- ---------- ----------
Total Other Income
(Expense) (1,139) (7,298) 16,064 (63,149)
----------- ---------- ---------- ----------
(Loss) before taxes (148,847) (227,867) (723,766) (100,351)
Provision (benefit) for
income taxes 917 - 3,088 (1,000)
----------- ---------- ---------- ----------
Net income (loss) (149,764) (227,867) (726,854) $ (101,351)
=========== ========== ==========
Retained earnings (12/31/97) 391,846
----------
Retained deficit (09/30/98) $ (335,008)
==========
(Loss) per share
of common stock ($0.04) ($0.07) ($0.21) ($0.03)
----------- ---------- ---------- ----------
See Accompanying Notes
<PAGE>
PART I: FINANCIAL INFORMATION
Original Sixteen to One Mine, Inc.
Statement of Cash Flows
Nine Months Ended September 30,
1998 1997
-------------- --------------
Cash Flows From Operating Activities:
Net loss $ (726,854) $ (101,351)
Adjustments to reconcile net loss
to net cash provided by operating
activities:
Depreciation and amortization 125,930 174,719
(Increase) decrease in accounts
receivable 64,375 (25,602)
Decrease in inventory 163,267 234,123
Decrease in other current assets (18,689) (2,250)
Increase in accounts payable
and accrued compensation 58,318 (7,800)
Increase in accrued expenses 11,261 10,292
------------ ------------
Net cash provided (used) by
operating activities (322,392) 282,131
------------ ------------
Cash Flows From Investing Activities:
Proceeds from sale of fixed assets - -
Purchase of fixed assets (8,169) (48,395)
------------ ----------
Net cash provided by
investing activities (8,169) (48,395)
------------ -----------
Cash Flows From Financing Activities:
Payments made on notes payable (3,833) (238,493)
Payments made to employees for advances
made to the Company - (54,000)
Proceeds from additional borrowings 279,600 17,170
Proceeds from sale of common stock - 39,000
------------ ----------
Net cash provided (used) by
financing activities 275,767 (236,323)
------------ ----------
Decrease in Cash (54,794) (2,587)
Cash, beginning of year 64,452 31,640
------------ -----------
Cash, end of period $ 9,658 $ 29,053
============= ===========
Supplemental schedule of other cash flows:
Cash paid during the period for:
Interest expense $ 24,100 $ 18,954
============ ===========
Income Expense $ 3,088 $ 22,007
============ ===========
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 create 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
may 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
At September 30, 1998, the Company has a fully extended revolving line of
credit with a bank in the amount of $200,000. The credit line bears interest
at 10.5% and is due in full in January, 1999.
Long term debt consists of the following:
Note payable to bank bearing interest at 9.95% due
in 60 monthly installments of $442. The note is
secured by a vehicle. $ 8,681
Note payable to bank with a variable interest rate
currently at 11.5%. The note is due in 60 monthly
installments of $2,089 through August, 2003. 93,838
--------
102,519
Less Current Maturities 19,473
--------
$ 83,046
========
Maturities of long term debt are as follows:
Period Ended September 30, Amount
-------------------------- --------
1999 $ 19,416
2000 21,227
2001 18,933
2002 21,229
2003 21,714
--------
$102,519
========
PART II: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATION
STATEMENT OF INCOME AND RETAINED EARNINGS
Third Quarter Comparisons:
The Company's revenues decreased $215,012 (36.34%) the third quarter of 1998
compared with the same period of 1997. The combined gold production of the
mine and the mill decreased 324.77 troy ounces in this quarter's comparisons
with 1997. Lack of discovery of any significant pockets of gold in the months
of July and September contributed to the decrease over the 1997 comparisons.
The mill ran on a very limited basis in August and was not in production
during September of the third quarter.
Gold production is measured in fine troy ounces. During the first nine months
of 1998, production from the mine totaled 2,810.35 troy ounces as follows:
MINE MILL TOTAL
------ ------ -----
January 402.98 201.52 604.50
February 60.54 46.79 107.33
March 36.68 302.06 338.74
------ ------ ------
Total:
First Qtr. 500.20 550.37 1,050.57
====== ====== ========
April 97.59 31.81 129.40
May 221.36 7.63 228.99
June 334.73 29.50 364.23
------ ------ ------
Total:
Second Qtr. 653.68 68.94 722.62
====== ====== ======
July 186.06 113.51 299.57
August 658.41 41.46 699.87
September 37.72 0.00 37.72
------- ------- --------
Total:
Third Qtr. 882.19 154.97 1,037.16
======= ======= ========
The Company continues to identify mine production into three categories: Mine
mill and trommel. During the first nine months of 1997, production totaled
4,998.49 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
====== ====== ====== ======
April 374.68 155.19 17.64 547.51
May 1,105.01 100.09 36.41 1,241.51
June 1,061,33 0.00 0.00 1,061.33
-------- ------- ------- --------
Total:
Second Qtr. 2,541.02 255.28 54.05 2,850.35
======== ======= ======= ========
July 1,036.24 0.00 0.00 1,036.24
August 10.70 0.00 0.00 10.70
September 160.02 130.07 0.00 290.09
-------- ------- ------ --------
Total:
Third Qtr. 1,206.96 130.07 0.00 1,337.03
======== ======= ====== ========
* 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.
Total operating expenses for the three months ended September 30, 1998
compared with September 30, 1997 decreased $287,873 (35.45%). Significant
areas of change are as follows:
The decrease in the Company's compensation expenses represents over half of
the total decrease in operating expense, decreasing $147,009 (31.40%) the
third three months of 1998 compared with the same period in 1997. This change
occurred as the labor force went from a high during the third quarter of 1997
of 54 employees to 37 full time employees on September 30, 1998. Accordingly,
taxes (property and other), inclusive of payroll taxes also showed a decrease
of $19,487 (58.74%) for this same period.
The Company continues to conserve working capital on discretionary expenses,
thereby reflecting a decrease in Supplies of $69,263 (57.46%), Drayage expense
of $10,299 (43.48%),and Legal and Accounting expense of $4,179 (45.39%).
Nine Month Comparisons:
Revenues decreased $1,018,432 (49.63%) for the nine months ended September 30,
1998 compared with the same period of 1997. The Company recorded 5,068.46 fine
troy ounces sold in 1997 and 2,810.35 fine troy ounces sold in 1998. The
difference is 2,258.11 fine troy ounces. The average price per ounce received
in 1997 was $398.86. The average price received for the nine months ending
September 30, 1998, was $385.37 per ounce.
Total expenses decreased $315,804 (15.12%) for the first nine months of 1998
compared with the same nine month period of 1997. Compensation decreased
$140,869 (11.39%) for the first nine months of 1998 compared with the same
period of 1997 reflecting a the reduction in work force from 54 full time
employees to 37 full time employees on September 30, 1998. This reduction
simultaneously has an impact on wage related expenses of payroll taxes and
worker's compensation costs.
The $15,984 (25.53%) decrease in legal and accounting expenses for the nine
months ended September 30, 1998, compared with the same period in 1997, is
primarily attributed to the use of in-house employees rather than an outside
accounting firm.
The Company continues to conserve working capital on discretionary expenses,
thereby reflecting a decrease in Supplies of $109,954 (42.33%) and Drayage or
$12,690 (23.16%).
Other expenses increased or decreased only modestly and were not material.
BALANCE SHEET
Inventory decreased $163,267 (25.81%) from December 31, 1997, to September 30,
1998. Gold specimens and gold and quartz slab were sold to provide for
operating capital. Accounts receivable decreased $64,375 (66.30%) as debt due
the Company is paid.
Total current liabilities increased $345,326 (58.32%) from December 31, 1997,
to September 30, 1998. Related party advances increased $279,600 during the
first nine months of 1998 over the same period in 1997. To alleviate the
continuing drain on cash, the Company during the second quarter sold
approximately $300,000 of one year notes due May 1, 1999, which bear interest
of 10% per annum and are convertible into unregistered shares of its common
stock at $1.75 per share. The terms of the transaction were negotiated with a
significant shareholder, who is not a Director, in an arms length transaction.
Following his commitment to purchase $100,000 of such notes, other purchases
were made by some, but not all of the Directors. All purchasers are
accredited investors. Terms were agreed to in a conference call during May
1998. The Directors ratified the approximate $300,000 of outstanding notes
and unanimously approved the following resolution:
BE IT RESOLVED, that the Company is authorized to sell up to $500,000 of notes
due May 1, 1999, bearing interest at 10% per annum from date of issuance and
convertible into unregistered shares of the Company's common stock at $1.75
per share. The notes may be sold only to accredited investors in a
transaction exempt from registration.
As of September 30, 1998, no additional notes have been issued to accredited
investors.
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.
YEAR 2000 IMPACT
The Year 2000 (Y2K) problem arises as a result of the way most computer and
process control systems handle dates. Most systems only store the last two
digits of the year. This equipment will not be able to differentiate between
years at the turn of the century and, if the problem is left uncorrected, may
result in malfunctions of the equipment.
The use of computers is limited to Windows operating systems on personal
computers linked to an internal network throughout the Company. Software
consists of standardized packages from major developers. The greatest
internal impact is anticipated with the Company's accounting software. The Y2K
issue also relates to other office equipment, such as telephones, voice mail
and the security system. The Company is in the process of contacting all
affected vendors and manufacturers to determine where any updates of
replacements will be required. The cost of the project to date has not been
material and the Company does not expect future costs of the project to be
material. An entire system replacement and software programs would total
approximately $10,000. Companies providing banking, insurance and other
administrative services to the Company are being contacted for Year 2000
compliance.
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 17, 1998
