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 June 30, 2006 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 June 30, 2006, 12,883,387 shares of Common Stock, par value $.03 per
share, were issued and outstanding.
<page>
PART I
1. FINANCIAL INFORMATION
Original Sixteen to One Mine, Inc.
Condensed Balance Sheet
June 30, 2006 and December 31, 2005
June 30, 2006 December 31, 2005
ASSETS
Current Assets
Cash $ 6,862 $ 0
Accounts receivable 8,440 247
Inventory 698,374 626,649
Other current assets 492 1,476
---------- ----------
Total current assets 714,168 628,372
---------- ----------
Mining Property
Real estate and property rights
net of depletion of $524,145 216,895 217,591
Real estate and mineral property 502,099 501,403
---------- ----------
718,994 718,994
---------- ----------
Fixed Assets at Cost
Equipment 982,515 982,515
Buildings 209,487 209,487
Vehicles 253,128 253,128
---------- ----------
1,445,130 1,445,130
Less accumulated depreciation (1,291,300) (1,272,241)
---------- ----------
Net fixed assets 153,830 172,889
---------- ----------
Other Assets
Bonds and misc. deposits 16,185 16,185
---------- ----------
Total Assets $1,603,177 $1,536,440
========== ==========
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable &
accrued expenses $ 236,693 270,635
Due to related party 300,052 235,614
Notes payable due within one year 433,797 435,366
---------- ----------
Total Current Liabilities 970,542 941,615
---------- ----------
Long Term Liabilities
Notes payable due after one year 93,784 107,952
---------- ----------
Total Liabilities 1,064,326 1,049,567
---------- ----------
Stockholders' Equity
Capital stock, par value $.03:
30,000,000 shares authorized:
12,883,387 shares issued and
outstanding as of June 30, 2006 and
12,867,250 shares issued and
outstanding as of December 31, 2005 429,413 428,869
Additional paid-in capital 1,890,307 1,875,888
(Accumulated deficit)
retained earnings (1,780,869) (1,817,884)
---------- ----------
Total Stockholders' Equity 538,851 486,873
---------- ----------
Total Liabilities and
Stockholders' Equity $1,603,177 $1,536,440
========== ==========
See Accompanying Notes
<page>
Original Sixteen to One Mine, Inc.
Statement of Operations and Retained Earnings
Three Months Ending June 30, Six Months Ending June 30,
2006 2005 2006 2005
------ ------ ------ -----
Revenues:
Gold & jewelry sales $ 203,329 $ 192,076 $ 379,169 $ 277,484
----------- ----------- -------- --------
Total revenues 203,329 192,076 379,169 277,484
----------- ----------- -------- --------
Operating expenses:
Salaries and wages 18,184 47,318 36,141 91,530
Contract Labor 64,605 82,479 140,519 234,468
Telephone & utilities 7,655 18,368 16,513 45,497
Taxes - property & payroll 8,126 9,803 16,130 20,095
Insurance 492 657 984 1,044
Supplies 12,819 3,596 16,729 12,902
Small equipment & repairs 2,571 14,799 3,000 26,697
Drayage 13,240 8,618 25,666 14,983
Corporate expenses 10,488 6,263 11,488 7,263
Legal and accounting 1,270 2,077 3,350 5,720
Compliance/Safety 10,009 2,533 12,493 3,378
Depreciation & amortization 8,169 7,324 19,060 14,224
Other expenses 8,123 10,701 11,543 17,904
---------- ---------- ------- -------
Total operating expenses 165,751 214,536 313,616 495,705
---------- ---------- -------- --------
Loss from operations 37,578 (24,460) $ 65,553 $(218,221)
Other Income & (Expense):
Other income (expense) (13,171) (11,133) (27,738) (26,898)
---------- ----------- ------- --------
Profit (Loss) before taxes 24,407 (33,593) 37,815 (245,119)
---------- ----------- --------- ----------
Income tax benefit (expense) (800) (800) (800) (800)
---------- ----------- --------- ----------
Net profit (loss) $ 23,607 $ (34,393) $ 37,015 $ (245,919)
============ =========== ========== ==========
Basic and diluted (loss)
Gain per share $ .002 $ (.003) $ .003 $ (.019)
============ ============ ========= =========
Shares used in the
calculation of net
loss income per share 12,883,387 12,867,250 12,883,387 12,867,250
============ =========== ========== ===========
See Accompanying Notes
<page>
Original Sixteen to One Mine, Inc.
Statement of Cash Flows
Six Months Ended June 30,2006 and June 30, 2005
Six Months Ended June 30,
2006 2005
-------------- --------------
Cash Flows From Operating Activities:
Net (loss) profit $ 37,015 $ (245,919)
operating activities:
Depreciation and amortization 19,060 14,224
(Increase)Decrease in
accounts receivable (8,193) (13,989)
Decrease(Increase) in inventory (71,725) 302,534
(Increase)Decrease in other
current assets 984 (1,438)
(Decrease) increase in accounts payable
and accrued expenses (33,742) (1,535)
(Decrease) increase in short term notes 62,868 (4,417)
------------ ----------
Net cash (used) provided by
operating activities 6,267 49,460
------------ -----------
Cash Flows From Investing Activities:
Purchase of mining property - (124,750)
Purchase of fixed assets - (18,750)
Other assets bonds misc. deposits - -
------------- -----------
Net cash used by
investing activities - (143,500)
------------- -----------
Cash Flows From Financing Activities
Increase (decrease) in bank overdraft -200 -
Increase (decrease) notes payable -14,168 113,898
Proceeds from sale of common stock 544
Additional paid-in capital 14,419
------------ ------------
Net cash provided (used) by
financing activities 595 113,898
------------ ------------
(Decrease) increase in cash 6,862 19,858
Cash, beginning of period 0 9,857
------------ ----------
Cash, end of period $ 6,862 $ 29,715
============ ============
Supplemental schedule of other cash flows:
Cash paid during the period for:
Interest expense $ 32,065 $ 17,326
============ ============
Income taxes $ 800 $ 800
============ ============
See Accompanying Notes
<page>
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 June 30, 2006 and December 31,
2005, the results of operations for the three-month & six-month periods ended
June 30, 2006 and 2005 and cash flows for the six month periods ended June 30,
2006 and 2005. 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 in quartz as a gemstone. This produces
revenue significantly greater than selling gold into the spot market. Demand
for the Sixteen to One gold-in-quartz gemstone exceeds supply.
Production has been termed a "feast or famine" 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.
During the first half of 2006 the price of gold increased by $100.50 per
ounce to $613.50 per ounce (P.M. London fix) on June 30, 2006.
BALANCE SHEET COMPARISONS
Current Assets increased by $85,796 (14%) primarily due an increase in the
value of gold inventory and an increase in cash as a result of gold sales.
Fixed Assets, Liabilities and Equity did not change substantially.
STATEMENT OF OPERATIONS
Revenues for the three-month period ended June 30, 2006 increased by $11,253
(6%) compared to the same period in 2005 primarily due to increased sales as
well as a higher gold price during the period. Revenues for the six-month
period ended June 30, 2006 increased by $101,685 (37%) compared with the same
period for 2005 for the same reasons listed for the three month period.
Changes in the Company's operating expenses are reflected as follows:
1. For the three and six-month periods ended June 30, 2006 wages & salaries
decreased by $29,134 (62%) and $55,389 (61%) respectively compared to the same
periods in 2005 due to the conversion of the office staff and gold sales staff
to employment with sub-contractor Morning Glory Gold Mines.
2. Contract labor decreased by $17,874 (22%) for the three-month period
ended June 30, 2006 compared the same period in 2005 and decreased $93,949
(40%) for the six month period compared to the same period in 2005 as the mine
operation was minimal.
3. Telephone and utilities decreased $10,713 (58%) for the three-month period
ended June 30, 2006 and decreased $28,984 (64%) for the six-month period ended
June 30, 2006 compared to the same periods in 2005 due to no pumping to-date
for 2006.
4. For the three and six-month periods ended June 30, 2006 supplies increased
by $9,223 (256%) and $3,827 (30%) respectively compared to the same periods in
2005 due to increased prices and restocking depleted inventory.
5. For the three and six-month periods ended June 30, 2006 small equipment and
repairs decreased $12,228 (83%) and $23,697 (89%) respectively compared to the
same periods in 2005 due to a decrease in equipment repairs and purchases.
6. For the three and six-month periods ended June 30, 2006 drayage increased
$4,622 (54%) and $10,683 (71%) respectively compared to the same periods in
2005 due to the increase in gas prices.
7. Corporate expenses increased by $4,225 (67%)for the three months ended
June 30, 2006 and $4,225 (58%) for the six months ended June 30, 2006 compared
to the same periods in 2005 primarily due to an increase in the cost of mailing
the Company's annual report and increases in other expenses related to the
annual meeting.
8. For the three-month period ended June 30, 2006, the Company recorded a
profit of $24,407 (before taxes) compared to a loss of $33,593 for same period
in 2005. The $58,000 (173%) difference is due to an increase in the price of
gold and decreased expenses. For the six-month period ended June 30, 2006, the
Company recorded a profit of $37,815 (before taxes) compared to a loss of
$245,119 for the same period in 2005. The $282,934 difference (115%) is also
due to the increase in the price of gold and decreased expenses.
SUBSEQUENT EVENTS
None
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity is substantially dependent upon the results of its
operations. 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. Although the Company has historically
located an annual average of $848,000 of gold over a five year period, there
can be no assurance that the Company's efforts in any particular period will
provide sufficient funding for the Company to continue operations.
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. 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). Defendants appealed their loss of an anti slap motion to the
California Appeals Court, Third District.
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 June
30, 2006.
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: August 14, 2006