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, 1999 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, 1999, 3,547,765 shares of Common Stock, par value $.10 per
share, were issued and outstanding.
PART I: FINANCIAL INFORMATION
Original Sixteen To One Mine, Inc.
Condensed Balance Sheet
March 31, 1999 and December 31, 1998
March 31, 1999 December 31, 1998
ASSETS
Current Assets
Cash $ 26,312 $ 25,338
Accounts receivable 38,136 49,913
Inventory 467,841 414,246
Other current assets 14,002 14,677
---------- ----------
Total current assets 546,291 504,174
---------- ----------
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 of amortization
of $101,107 and $81,965 in 1999 and
1998, respectively 799,144 799,144
---------- ----------
1,396,498 1,396,498
---------- ----------
Fixed Assets at Cost
Equipment 861,657 861,857
Buildings 170,721 170,721
Vehicles 188,540 188,540
---------- ----------
1,221,118 1,221,118
Less accumulated depreciation (943,229) (916,229)
---------- ----------
Net fixed assets 277,889 304,889
---------- ----------
Other Assets
Net of accumulated amortization of
$50,611 and $49,163 in 1999 and
1998, respectively 20,209 21,657
---------- ----------
Total Assets $2,240,887 $2,227,218
========== ==========
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable & accrued compensation $ 234,297 $ 201,206
Related party advances 302,600 302,600
Notes payable, due within one year 203,982 294,027
Accrued expenses 17,084 -
Deferred income taxes - -
---------- ----------
Total Current Liabilities 797,833
---------- ----------
Notes payable, due after one year 87,799 2,501
---------- ----------
Total Liabilities 845,762 800,334
---------- ----------
Stockholers' Equity
Capital stock, par value $.10 -
10,000,000 shares authorized:
3,547,765 and 3,544,065 shares
issued and outstanding as of
March 31, 1999 and December 31,
1998, respectively 354,777 354,407
Additional paid-in capital 1,373,170 1,373,540
Notes receivable from employees (26,000) (26,000)
Retained earnings (309,822) (275,063)
---------- ----------
Total Stockholders' Equity 1,395,125 1,426,884
---------- ----------
Total Liabilities and
Stockholders' Equity $2,240,887 $2,227,218
========== ==========
See Accompanying Notes
<PAGE>
Original Sixteen to One Mine, Inc.
Statement of Operations and Retained Earnings
For the Three Months Ended March 31, 1999 and 1998
Three Months Ended March 31,
1999 1998
Revenues:
Gold & jewelry sales $ 420,209 $ 362,435
Operating expenses:
Salaries and wages 211,457 426,243
Depreciation & amortization 28,448 24,750
Amortization of
development costs - 10,992
Contract labor 35,332 2,762
Telephone & utilities 26,931 32,179
Taxes - property & payroll 36,349 12,862
Insurance 34,568 12,766
Supplies 18,929 54,098
Drayage 6,351 16,071
Promotion 514 1,370
Office expenses 6,462 2,790
Legal and accounting 10,446 19,503
Other expenses 20,660 20,249
---------- -----------
Total operating expenses 436,447 636,635
---------- -----------
Income (loss)
from operations (17,038) (274,200)
Other Income & (Expense):
Other Income 4,505 23,080
Other Expenses (19,226) (1,380)
---------- -----------
Total Other Income
(Expense) (14,721) 21,700
---------- -----------
Loss before taxes (30,959) (252,500)
Provision for income taxes (800) (500)
---------- -----------
Net Loss (31,759) $ (253,000)
==========
Retained earnings
(December 31, 1998) (275,063)
----------
Retained earnings
(March 31, 1999) $ (306,822)
==========
Loss per share of common stock ($0.01) ($0.07)
------ ------
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 $5,588, bearing
interest at 9.95% and secured by a vehicle. The note is payable in 60 monthly
installment of $442.
At March 31, 1999, the Company has a fully extended revolving lines of credit
with a bank in the amount of $200,000, expiring July 1, 1999. The Company
also has a note payable to a bank with a variable interest rate currently at
11.5%. The note is due in 60 monthly installments of $2,089 through August
2003.
PART II: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATION
BALANCE SHEET COMPARISONS: FIRST THREE MONTHS OF 1999 WITH YEAR-END 1998
STATEMENT OF INCOME AND RETAINED EARNINGS
The Company's revenues increased $57,774 (15.94%) the first three months of
1999 compared with the same period of 1998. Although gold production
decreased 364 troy ounces during the first quarter of 1999, sale of slab
increased to show an overall increase in revenues of $57,774. The spot price
of gold has continued to decline from $301.30 per troy ounce on March 31,
1998, to $279.45 per troy ounce on March 31, 1999 which has a direct impact on
the ratio of gold to revenue and inventory.
Gold is measured in fine troy ounces and production is categorized as high
grade ore from the mine or mill rock (low grade ore). The first quarter
production totaled 686.73 troy ounces as followings:
MINE MILL TOTAL
------ ------ -----
January 22.76 160.98 183.74
February 188.18 104.65 292.83
March 149.93 60.23 210.16
------ ------ ------
Total:
First Qtr 360.87 325.86 686.73
====== ====== ======
Comparatively, the first three months of 1998, production from the mine
totaled 1,050.57 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
====== ====== ========
The Company's compensation expenses decreased $214,786 (50.39%) for the period
ending March 31, 1999 compared with the same period in 1998. Contract labor
increased $32,570 ( ) for the first three months of 1999 compared with the
first three months of 1998. On February 12, 1999, all miners were laid off.
A group of miners entered into a contractual labor agreement and continued to
work the mine focusing on immediate gold production. As of March 31, 1999,
ten miners continued to mine the Sixteen to One vein.
The $9,057 (46.34%) decrease in legal and accounting expenses for the three
months ended March 31, 1999, compared with the same period in 1998, is
primarily attributed to the use of in-house employees rather than an outside
accounting firm.
Telephone and utilities expense decreased $5,248 (16.31%) for the three month
period ending March 31, 1999 compared with the same period for 1998. Supplies
decreased $35,169 (169.90%) from $54,098 for the three month period ending
March 31, 1998 to $18,929 for the period ending March 31, 1999. These
decreases are due to the reduction of mining associated with the lay-off of
February 12, 1999.
Other expenses increased or decreased only modestly and were not material.
BALANCE SHEET
The Company's current assets increased $42,117 (8.36%) at March 31, 1999
compared with December 31, 1998. The Company has stockpiled sixty tons of
gold bearing concentrates from its mill. Approximately forty tons were
sampled and assayed by an independent assayer. These estimated minimum net
recovery from these concentrates has been included in the 1999 operations.
The Company's current liabilities increased $45,428 (5.68%). The primary
increase is due to an increase in accounts payable and accrued compensation.
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 17, 1999
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<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 26,312
<SECURITIES> 0
<RECEIVABLES> 38,136
<ALLOWANCES> 0
<INVENTORY> 487,841
<CURRENT-ASSETS> 14,002
<PP&E> 2,637,825
<DEPRECIATION> 943,229
<TOTAL-ASSETS> 2,240,887
<CURRENT-LIABILITIES> 845,762
<BONDS> 0
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<COMMON> 354,777
<OTHER-SE> 1,040,348
<TOTAL-LIABILITY-AND-EQUITY> 2,240,887
<SALES> 420,209
<TOTAL-REVENUES> 420,209
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 436,447
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,048
<INCOME-PRETAX> (30,959)
<INCOME-TAX> 800
<INCOME-CONTINUING> (31,759)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (31,759)
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