10QSB 1 tenqmarchofive.txt FIRST QUARTER FINANCIAL STATEMENT 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 the Quarter Ended March 31, 2005 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 909, 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, 2005, 12,867,250 shares of Common Stock, par value $.03 per share, were issued and outstanding. PART I 1. FINANCIAL INFORMATION Original Sixteen to One Mine, Inc. Condensed Balance Sheet March 31, 2005 and December 31, 2004 March 31, 2005 December 31, 2004 ASSETS Current Assets Cash $ 20,520 $ 9,857 Accounts receivable 3,505 3,966 Inventory 724,529 927,812 Other current assets 774 1,161 ---------- ---------- Total current assets 749,328 942,796 ---------- ---------- Mining Property Real estate and property rights net of depletion of $524,145 181,091 181,091 Real estate and mineral property 473,403 473,403 ---------- ---------- 654,494 654,494 ---------- ---------- Fixed Assets at Cost Equipment 953,515 953,515 Buildings 159,487 159,487 Vehicles 253,128 253,128 ---------- ---------- 1,366,130 1,366,130 Less accumulated depreciation (1,250,268) (1,243,368) ---------- ---------- Net fixed assets 115,862 122,762 ---------- ---------- Other Assets Bonds and misc. deposits 16,185 16,185 ---------- ---------- Total Assets $1,535,869 $1,763,237 ========== ========== LIABILITIES & STOCKHOLDERS' EQUITY Current Liabilities Accounts payable & accrued expenses $ 250,830 256,621 Due to related party 182,925 156,291 Notes payable due within one year 412,462 421,421 ---------- ---------- Total Current Liabilities 846,217 834,333 ---------- ---------- Long Term Liabilities Notes payable due after one year 6,540 7,267 ---------- ---------- Total Liabilities 852,757 841,600 ---------- ---------- Stockholders' Equity Capital stock, par value $.03: 30,000,000 shares authorized: 12,867,250 shares issued and outstanding as of March 31, 2005 and December 31, 2004 428,869 428,869 Additional paid-in capital 1,875,888 1,875,888 (Accumulated deficit) retained earnings (1,621,645) (1,410,120) ---------- ---------- Total Stockholders' Equity 683,112 894,637 ---------- ---------- Total Liabilities and Stockholders' Equity $1,535,869 $1,736,237 ========== ========== See Accompanying Notes Original Sixteen to One Mine, Inc. Statement of Operations and Retained Earnings Three Months Ending March 31, 2005 2004 ------ ------ Revenues: Gold & jewelry sales $ 85,408 $ 245,178 ----------- ----------- Total revenues 85,408 245,178 ----------- ----------- Operating expenses: Salaries and wages 44,213 32,197 Contract Labor 151,989 28,227 Telephone & utilities 27,129 31,601 Taxes - property & payroll 10,292 8,650 Insurance 387 1,925 Supplies 9,306 10,766 Small equipment & repairs 11,898 3,658 Drayage 6,365 3,581 Corporate expenses 1,000 2,600 Compliance/safety 1,531 5,720 Legal and accounting 3,551 4,658 Depreciation & amortization 6,899 7,968 Other expenses 6,609 17,282 ---------- ---------- Total operating expenses 281,169 158,833 ---------- ---------- Profit (Loss) from operations (195,761) 86,345 Other Income & (Expense): Other Income (expense) (15,765) (4,432) ---------- ----------- Profit (Loss) before taxes (211,526) 81,913 ---------- ----------- Net Profit (Loss) $ (211,526) $ 81,913 ============ =========== Basic and diluted (Loss) Gain per share $ (.016) $ .006 ============ ============ Shares used in the calculation of net loss income per share 12,867,250 12,867,250 ============ =========== See Accompanying Notes Original Sixteen to One Mine, Inc. Statement of Cash Flows Three Months Ended March 31, 2005 and March 31, 2004 Three Months Ended March 31, 2005 2004 -------------- -------------- Cash Flows From Operating Activities: Net profit (loss) $ (211,525) $ 81,913 operating activities: Depreciation and amortization 6,899 7,968 (Increase)Decrease in accounts receivable 461 (11,460) Decrease(Increase) in inventory 203,284 11,057 (Increase)Decrease in other current assets 387 1,125 (Decrease) increase in accounts payable and accrued expenses (5,791) 25,220 (Decrease) increase in short term notes 17,675 (29,501) ------------ ---------- Net cash (used) provided by operating activities 11,390 86,322 ------------ ----------- Cash Flows From Investing Activities: Purchase of fixed assets - - Other assets bonds misc. deposits - - ------------- ----------- Net cash (used) provided by investing activities - - ------------- ----------- Cash Flows From Financing Activities Increase (decrease) notes payable (727) (6,981) Proceeds from sale of common stock - - Additional paid-in capital - ------------ ------------ Net cash provided (used) by financing activities (727) (7,062) ------------ ------------ (Decrease) increase in cash 10,663 7,432 Cash, beginning of period 9,857 - ------------ ---------- Cash, end of period $ 20,520 $ 7,432 ============ ============ Supplemental schedule of other cash flows: Cash paid during the period for: Interest expense $ 17,326 $ 14,990 ============ ============ See Accompanying Notes NOTES TO THE FINANCIAL STATEMENTS I. GENERAL NOTES 1. In accordance with directive from the Securities and Exchange Commission (SEC)and Industry Guide 7, reference for all intent and purposes to the Company's employees as miners, its properties as mines or its operation as mining does not diminish the fact that the Company has no proven reserves and is in the "exploration state" as defined in Guide 7(a)(4)(iii). 2. In the opinion of management, the financial statements contain all adjustments (consisting only of normal recurring accruals) necessary to present fairly the Company's financial position at March 31, 2005 and December 31, 2004, the results of operations and cash flows for the three-month periods ended March 31, 2005 and 2004. The unaudited financial statements have been prepared in accordance with Generally Accepted Accounting Principles for interim financial information and with the instructions to Form 10-QSB and Item 310(b) of Regulation S-B. II. MANAGEMENT'S DISCUSSION AND ANALYSIS OF PLAN OF OPERATION The Sixteen to One mine in the Alleghany Mining District is a unique mine and requires a unique operation, which has been recognized by its owners, its miners, geologists, engineers, and some public agencies during the last decade of the twentieth century and to the present. It is a traditional high-grade, hard rock, underground gold mine. According to statement by the federal Mines Safety Health Administration, it is the only underground single product (gold) mine operating in the United States today. The same company owns and operates the mine. Original Sixteen to One Mine Inc, (owner) was incorporated in California in 1911. Experts estimate that less than twenty percent of the proven and probable ore deposit has been mined. Production is approximately 1,500,000 ounces of gold. There are over twenty-eight miles of horizontal workings and millions of cubic feet of vertical excavations called stopes. The entire grounds are not maintained for mining. Once an area is targeted for mining, travel ways and escape routes are brought into safety compliance. Production miners set up a heading (face) and begin a drill-blast-muck sequence into the quartz. Gold is hosted in the quartz vein in exceedingly rich concentrations called "pockets". Metal detectors are regularly used underground as a tool for guiding the direction of the work. Metal detectors are also used as a tool to separate the ore underground. This has the positive affect of reducing the volume of shot rock from the mine, thereby reducing cost. In 1992, the company initiated a gold marketing plan of selling gold as gemstones. This produces revenue significantly greater than selling gold into the spot market. Demand for Sixteen to One mine quartz and gold exceeds supply. Production has been termed a "hit or miss" situation for over 100 years. Reserves in a high-grade gold mine cannot be termed as "proven". The company hoards gold and sells it according to short-term cash needs. This fact requires an operator to manage its cash flow to operate between pockets. It is difficult to undertake major expansion plans with an uncertain supply of capital. The Company has announced general plans to build a new shaft in the northern section of its patented claims. A specific review of the plan will be announced at the annual shareholders' meeting on June 25, 2005, in Alleghany, California. The Company has about 1200 shareholders of record. During the first quarter of 2005, miners spent half of their time with routine maintenance. They spent about a quarter of their time establishing three new underground headings and about one quarter of their time looking for gold. Production results reflect the scaled down operation. BALANCE SHEET COMPARISONS For the three-month period ending March 31, 2005 assets decreased by $227,368 (13%) as gold inventory and jewelry inventory were sold to maintain operations. Liabilities did not change substantially during the same three-month period. STATEMENT OF OPERATIONS Revenues for the three-month period ending March 31, 2005 decreased by $159,770 (65%) compared with the same period for 2004 due to a lack of gold production and a nine dollar per ounce decrease in the gold price during the quarter. Changes in the Company's operating expenses for the three-month period ended March 31, 2005 compared to the same period in 2004 are reflected as follows: 1. Contract labor increased by $123,762 (438%) as the lessee's crew was expanded. 2. Small equipment and repairs increased by $8,240 (225%) due to the cost of replacing some worn out equipment. 3. Drayage increased by $2,784 (77%) for the three-month period ended March 31, 2005, compared with the same period for 2004, due primarily to vehicle repairs that were required. 4. Other expenses decreased by $10,673 (61%) primarily due to refinery fees in the first quarter of 2004 for refining sulfides which were not incurred in the same period of 2005. 5. For the three-month period ended March 31, 2005, the Company recorded a loss of $211,526 (before taxes) compared to a profit of $81,913 (before taxes) for the same period in 2004. The $293,443 (358%) difference is attributed primarily to a lack of gold production in the 2005 quarter. LIQUIDITY AND CAPITAL RESOURCES The Company's liquidity is substantially dependent upon the results of its operations. While the Company does maintain a gold inventory which it can liquidate to satisfy 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 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 and sales of gold from inventory to meet its cash needs. If the Company's cash resources are inadequate and its gold inventory is depleted, the Company may seek debt or equity financing on the most reasonable terms available. PART II LEGAL PROCEEDINGS 1.Petition in United States Court of appeals for the Ninth Circuit, filed March 23, 2004 contesting MSHA's interpretation of its standard. Docket Number 04-71301. 2. Plaintiff in Superior Court of the State of California, County of Sierra against private lawyers and their employer. Case filed February 13, 2004. Case No. 6293, Complaint for Damages (Malicious Prosecution, Intentional Infliction of Emotional Distress, Intentional Interference with Perspective Advantage) OTHER INFORMATION The unaudited interim consolidated financial statements of Original Sixteen to One Mine, Inc. (the Company) have been prepared by management in accordance with generally accepted accounting practices. Such rules allow the omission of certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted audited accounting principles as long as the statements are not misleading. In the opinion of management, verified by signature below, all adjustments necessary for a fair presentation of these interim statements have been included. These adjustments are of a normal recurring nature. The preparation of the Company's financial statements in conformity with accounting principles accepted in the United States requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements, as well as the reported amount of revenues and expenses during the reporting period. On an ongoing basis, management evaluates its estimates and assumptions; however, actual amounts could differ from those based on such estimates and assumptions. No accounting principle upon which the Company's financial status depends, requires estimates of proven and probable reserves and/or assumptions of future gold prices. Commodity prices may significantly affect the company's profitability and cash flow. No independent accounting firm or auditors have any responsibility for the accounting and written statements of the Form 10-QSB. The Company and its president assume responsibility for the accuracy of this filing and certify the financial statements present fairly in all material respects, the financial position of Original Sixteen to One Mine, Inc at March 31, 2005. 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 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 9, 2005