U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
x Quarterly Report Under Section 13 or 15(d) of the Securities Exchange
- --- Act of 1934
For the quarterly period ended June 30, 2003
Transition Report Pursuant to 13 or 15(d) of the Securities Exchange
- --- Act of 1934
For the transition period of __________ to __________
Commission File Number 0-7501.
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RUBY MINING COMPANY.
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(Exact name of small business issuer as specified in its charter)
Colorado 83-0214117
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(State or other Jurisdiction of (I.R.S. Employer Identification Number)
Incorporation or Organization)
3490 Piedmont Rd., Suite 304, Atlanta, Georgia 30305
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(Address of Principal Executive Offices)
Issuers Telephone Number (404) 231-8500
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3399 Peachtree Rd. NE, Suite 810, Atlanta, Georgia 30326
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(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Year)
Check whether the Issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act 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 requirements for the past 90 days.
YES X NO
----- -----
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date.
Class Outstanding at June 30, 2003
----- ----------------------------
Common Stock, $.001 Par Value 30,820,169 shares
Transitional Small Business Disclosure Format: YES NO X
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RUBY MINING COMPANY AND SUBSIDIARY
Form 10-QSB
Index
PART I FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets as of June 30, 2003
and December 31, 2002 1
Condensed Consolidated Statements of Operations for the Three
Months Ended June 30, 2003 and 2002, and for the period from
inception through June 30, 2003 2
Condensed Consolidated Statements of Operations for the Six
Months Ended June 30, 2003 and 2003 3
Condensed Consolidated Statements of Cash Flows for the Six
Months Ended June 30, 2003 and 2002, and for the period
from inception through June 30, 2003 4
Notes to Condensed Consolidated Financial Statements 5-7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8-9
Item 3. Controls and Procedures 10
PART II OTHER INFORMATION
Item 1. Legal Proceedings 11
Item 2. Changes in Securities and Use of Proceeds 11
Item 3. Defaults Upon Senior Securities 11
Item 4. Submission of Matter to a Vote of Security Holders 11
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 12
Signatures
Exhibit Index
Part I
FINANCIAL INFORMATION
Item 1. Financial Statements
RUBY MINING COMPANY AND SUBSIDIARY
(A Development Stage Company)
Condensed Consolidated Balance Sheets
June 30, 2003 and December 31, 2002
(unaudited)
June 30, December 31,
2003 2002
------------ -------------
ASSETS
Current Assets
Cash in bank $ 1,538 $ 1,606
Expense and employee receivable 100,177 98,091
Other 11,367 10,368
------------ ------------
Total current assets 113,082 110,065
Fixed assets, net of accumulated depreciation 6,182 11,962
Other assets 41,080 40,579
------------ ------------
Total assets $ 160,344 $ 162,606
============ ============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Liabilities
Current liabilities
Accounts payable $ 878,335 $ 842,934
Accrued compensation and consulting fees 767,625 698,124
Shares to be issued for converted debt -- 20,000
Short-term advances 370,200 206,900
------------ ------------
Total current liabilities 2,016,160 1,767,958
Long-term debt, net of discount 3,409,081 3,233,165
Interest payable 2,295,053 2,070,968
------------ ------------
Total liabilities 7,720,294 7,072,091
------------ ------------
Stockholders' deficit
Common stock 30,820 29,820
Paid-in capital 7,022,840 6,988,839
Subscribed shares 105,000 90,000
Receivable for exercised options (311,491) (302,896)
Development stage deficit (14,407,119) (13,715,248)
------------ ------------
Total stockholders' deficit (7,559,950) (6,909,485)
------------ ------------
Total liabilities and stockholders'
Deficit $ 160,344 $ 162,606
============ ============
See notes to condensed consolidated financial statements.
1
RUBY MINING COMPANY AND SUBSIDIARY
(A Development Stage Company)
Condensed Consolidated Statements of Operations
(Unaudited)
Three Months Ended
From Inception June 30,
through --------------------------------
June 30, 2003 2003 2002
------------- ------------- -------------
Revenues $ 199,927 $ -- $ 83,333
------------- ------------- -------------
Operating expenses
Compensation and employee benefits 2,892,381 29,030 56,184
Research and development 1,440,423 -- --
General and administrative 3,364,151 56,251 72,234
Depreciation and amortization 144,213 2,890 3,906
Professional fees 3,211,967 73,969 180,181
------------- ------------- -------------
11,053,135 162,140 312,505
------------- ------------- -------------
Operating (loss) (10,853,208) (162,140) (229,172)
Other income (expense) 517,658 5,574 6,045
Interest (expense) (4,071,569) (208,201) (211,962)
------------- ------------- -------------
Net (loss) $ (14,407,119) $ (364,767) $ (435,089)
============= ============= =============
Net (loss) per common share:
Basic and diluted $ (0.01) $ (0.02)
============= =============
See notes to condensed consolidated financial statements.
2
RUBY MINING COMPANY AND SUBSIDIARY
(A Development Stage Company)
Condensed Consolidated Statements of Operations
(Unaudited)
Six Months Ended
June 30,
-----------------------------
2003 2002
------------ ------------
Revenues $ -- $ 111,111
------------ ------------
Operating expenses
Compensation and employee
Benefits 76,500 110,117
Research and development -- --
General and administrative 111,878 133,996
Depreciation and amortization 5,780 8,125
Professional fees 99,074 511,715
----------- ------------
293,232 763,953
----------- ------------
Operating (loss) (293,232) (652,842)
Other income (expense) 11,103 8,734
Interest (expense) (409,742) (394,524)
----------- ------------
Net (loss) $ (691,871) $ (1,038,632)
=========== ============
Net (loss) per common share:
Basic and diluted $ (0.02) $ (0.04)
=========== ============
See notes to condensed consolidated financial statements.
3
RUBY MINING COMPANY AND SUBSIDIARY
(A Development Stage Company)
Condensed Consolidated Statements of Cash Flows
(Unaudited)
From Inception
Six Months Ended Through
June 30, June 30,2003
------------------------------- --------------
2003 2002
------------- -------------
Operating activities
Net loss $ (691,871) $ (1,038,632) $(14,407,119)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 5,780 8,125 142,995
Discount amortization 175,916 158,118 1,504,939
Equity-based professional services -- 360,000 878,960
Increase in accounts payable 35,402 79,950 921,373
Increase in interest payable 224,085 208,607 2,295,053
Other, net 59,405 144,293 675,133
------------ ------------ ------------
Net cash used in operating activities (191,283) (79,539) (7,988,666)
------------ ------------ ------------
Investing activities
Advances under notes receivable (2,086) (1,104) (141,947)
Purchase of fixed assets -- -- (149,177)
------------ ------------ ------------
Net cash used in investing activities (2,086) (1,104) (291,124)
------------ ------------ ------------
Financing activities
Issuance of common stock and warrants 15,001 18,000 5,826,986
Short-term advances 163,300 75,000 445,200
Stock subscription 15,000 -- 105,000
Issuance of debentures -- -- 1,904,142
------------ ------------ ------------
Net cash provided by financing activities 193,301 93,000 8,281,328
------------ ------------ ------------
Net increase (decrease) in cash (68) 12,357 1,538
Cash at beginning of period 1,606 728 --
------------ ------------ ------------
Cash at end of period $ 1,538 $ 13,085 $ 1,538
============ ============ ============
See notes to condensed consolidated financial statements.
4
RUBY MINING COMPANY AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2003
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements include the
accounts of Ruby Mining Company (the "Company") and its wholly-owned subsidiary,
Admiralty Corporation ("Admiralty"). Significant intercompany transactions and
accounts are eliminated in consolidation.
The financial statements as of June 30, 2003 and for the six months ended and
three months ended June 30, 2003 and 2002 are unaudited and have been prepared
pursuant to the rules and regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with accounting principles generally accepted
in the United States have been condensed or omitted pursuant to such rules and
regulations. These condensed consolidated financial statements should be read in
conjunction with the audited financial statements and notes thereto included in
the Company's annual report. The balance sheet as of December 31, 2002 has been
derived from the balance sheet included in the Company's Form 10KSB for the year
ended December 31, 2002.
The financial information included herein reflects all adjustments (consisting
of normal recurring adjustments) which are, in the opinion of management,
necessary to a fair presentation of the financial position and results of
operations for interim periods.
The preparation of financial statements requires management to make estimates
and assumptions that affect the reported amounts of assets, liabilities and
income and expense amounts. Actual results could differ from those estimates.
The Company and its subsidiary are a development stage company and have had only
minimal revenues. The consolidated development stage deficit of the entities is
$14,407,119. These matters indicate substantial doubt about the ability of the
Company to continue as a going concern. Management of the Company recognizes
that additional capital will be needed to continue operations and is seeking to
establish arrangements for capital or financing. The success of the Company is
dependent upon management's ability to implement plans for capital and
financing.
5
RUBY MINING COMPANY AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - STOCK BASED COMPENSATION
The Company accounts for stock-based compensation utilizing the intrinsic value
method. Presented below is certain actual financial information of the Company
with comparative pro forma information determined as if the Company had
accounted for the stock-based compensation for the periods presented utilizing
the fair-value method .
Three Three Six Six
Months Months Months Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
2003 2002 2003 2002
------------- ------------ ------------ --------------
Net loss as reported $ (364,767) $ (435,089) $ (691,871) $ (1,038,632)
Loss per share as reported,
basic and diluted $ (0.01) $ (0.02) $ (0.02) $ (0.04)
Stock-based employee
compensation cost in net
loss as reported $ -- $ -- $ -- $ --
Stock-based employee
compensation cost based on fair-
value method $ -- $ -- $ -- $ --
Pro forma net loss including stock-
based compensation cost based on
fair-value method $ (364,767) $ (435,089) $ (691,871) $ (1,038,632)
Pro forma loss per share including
stock-based compensation cost
based on fair-value method, basic
and diluted $ (0.01) $ (0.02) $ (0.02) $ (0.04)
6
RUBY MINING COMPANY AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - EARNINGS PER SHARE
Earnings per share are calculated on the basis of the weighted average number of
shares outstanding. As the Company has granted stock options and other equity
instruments to officers and others associated with the Company, earnings per
share may be diluted by these instruments. As these equity instruments would be
anti-dilutive, diluted earnings per share separate from basic earnings per share
has not been presented in the accompanying statements of operations. At June 30,
2003 the Company had outstanding 3,031,340 warrants and 768,200 options on
common stock, each convertible to one share of the Company's common stock. The
options exercised to common stock and shown as a reduction of equity have been
presented in the outstanding shares presentation and in the earnings per share
presentation.
The following presents the calculation of basic earnings per share:
For the six months ended June 30, 2003
-----------------------------------------------
Weighted
Average Shares Per-Share
(Numerator) Denominator) Amount
------------ -------------- ------------
Basic EPS
Income (loss) available to common
shareholders' $ (691,871) $ 30,553,503 $ (0.02)
============ ============= ============
For the three months ended June 30, 2003
-----------------------------------------------
Weighted
Average Shares Per-Share
(Numerator) Denominator) Amount
------------ -------------- ------------
Basic EPS
Income (loss) available to common
shareholders' $ (364,767) $ 30,820,169 $ (0.01)
============ ============= ============
7
RUBY MINING COMPANY AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
Ruby Mining Company (the "Company") and it's wholly owned subsidiary Admiralty
Corporation ("Admiralty") are a development stage company and have had only
minimal revenues from operations. The consolidated Company satisfied liquidity
and capital requirements during the six months ended June 30, 2003 through the
issuance of common stock and warrants, and through short-term borrowings. In
addition, employees of the entity have partially deferred payments of
compensation to provide liquidity for the company.
PLAN OF OPERATION
As the Company has completed the reorganization of the entities, management
believes that the Company has enhanced access to investments of capital.
Management is utilizing existing relationships and business advisors to seek
opportunities for capital investments. With the Company's current cash level,
operations of the Company would be limited over the next twelve months without
an additional capital investment to satisfy existing liabilities and to fund
future operations. During the six months ended June 30, 2003, the Company
satisfied liquidity needs through short-term borrowings and the sale of equity
instruments.
RESULTS OF OPERATIONS
The Company had no revenue from operations during the six months ended June 30,
2003.
For the three months ended June 30, 2003, the Company incurred a net loss of
$364,767, compared to a net loss of $435,089 for the three months ended June 30,
2002. The Company's present activities consist of establishing and maintaining
financing and funding sources and opportunities and establishing and maintaining
relationships and arrangements that will enhance the Company's ability to pursue
the historic shipwrecks.
For the three months ended June 30, 2003 compensation costs and depreciation and
amortization, have declined from the three months ending June 30, 2002 due to
the limited activities of the Company, and to the declining depreciable basis of
the fixed assets. General and administrative costs for the three months ended
June 30, 2003, has decreased from the costs for the three months ended June 30,
2002, due to the limited activities of the Company. Professional fees for the
three months ended June 30, 2003has decreased from the three months ended June
30, 2002 due to a decrease in services contracted by the Company.
8
RUBY MINING COMPANY AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
- ----------------------------------------------------
The Company may, from time to time, make written or oral forward-looking
statements, including statements contained in the Company's filings with the
Securities and Exchange Commission (the "Commission") and its reports to
stockholders. Such forward-looking statements are made based on management's
belief as well as assumptions made by, and information currently available to,
management pursuant to "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995. The Company's actual results may differ
materially from the results anticipated in these forward-looking statements due
to a variety of factors, including governmental monetary and fiscal policies,
the ability of the Company to obtain funding or financing for operations, the
ability of the Company to establish and maintain relationships with foreign
countries, and the successful utilization of the Company's developed technology.
The Company cautions that such factors are not exclusive. The Company does not
undertake to update any forward-looking statements that may be made from time to
time by, or on behalf of, the Company.
9
RUBY MINING COMPANY AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
ITEM 3. CONTROLS AND PROCEDURES
(a) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. Within 90 days
before filing this report, the Company evaluated the effectiveness of
the design and operation of its disclosure controls and procedures. The
Company's disclosure controls and procedures are the controls and other
procedures that the Company has designed to ensure that it records,
processes, summarizes and reports in a timely manner the information
the Company must disclose in its reports filed under the Securities
Exchange Act. Herbert C. Leeming, Chief Executive Officer and Murray D.
Bradley, Chief Financial Officer, reviewed and participated in this
evaluation. Base on this evaluation, Messrs. Leeming and Bradley
concluded that, as of the date of their evaluation, the Company's
disclosure controls and procedures were effective.
(b) INTERNAL CONTROLS. Since the date of the evaluation described
above, there have not been any significant changes in the Company's
internal controls or in other factors that could significantly affect
those controls, including any corrective actions with regard to
significant deficiencies and material weaknesses.
10
RUBY MINING COMPANY AND SUBSIDIARY
(A Development Stage Company)
PART II
OTHER INFORMATION
PART II OTHER INFORMATION
Item 1. Legal Proceedings
A Complaint for Turnover was filed in the United States Bankruptcy Court
Northern District of Georgia Atlanta Division against Admiralty Corporation by
Dale R. F. Goodman, Trustee for the Bankruptcy Estate of Ralph Franklin Ketchum,
Jr. and Patsy Sue Ketchum on April 19, 2002. The Trustee obtained a judgment
against Admiralty in the amount of $66,000 for back salary allegedly due to the
Debtor Ralph Franklin Ketchum, Jr. for the years 1999 and 2000.
A Complaint was filed in the State Court of Fulton County Georgia against
Admiralty Corporation by Kritzer & Levick, P.C. on October 2, 2002. The
Complaint alleges that Kritzer & Levick, P.C. is owed monies from Admiralty
Corporation for legal services rendered in the amount of $50,000, which has been
accrued by the Company.
The Company previously occupied office space pursuant to a Lease Agreement upon
which it defaulted. The landlord under that lease was granted a Consent Judgment
on March 1, 2002 for past due rent, expenses and interest in the aggregate
amount of approximately $108,000. To date, approximately $14,000 has been
applied to the judgment amount, leaving an unsatisfied balance of $94,000. The
Company vacated the leased premises and the balance of the Judgment remains
outstanding and has been accrued by the Company
The Company is engaged in various other litigation matters from time to time in
the ordinary course of business. The Company will vigorously defend its position
and believes the outcome of any litigation will not have a material effect on
the Company.
Item 2. Changes in Securities and Use of Proceeds
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
11
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit 31.1 Certification of President and Chief Executive Officer Pursuant
to Section 302 of Sarbanes-Oxley Act of 2002.
Exhibit 31.2 Certification of Chief Financial Officer Pursuant to Section
302 of Sarbanes-Oxley Act of 2002.
Exhibit 32.1 Certifications Pursuant to Section 906 of Sarbanes-Oxley Act
of 2002.
(b) Form 8-K
The Company filed no reports on Form 8-K during the quarter ended June 30, 2003.
12
RUBY MINING COMPANY AND SUBSIDIARY
(A Development Stage Company)
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 on August 18, 2003.
Ruby Mining Co.,
a Colorado corporation
By: /s/ Herbert Leeming
-------------------------------------
Name: Herbert C. Leeming
Title: Chief Executive Officer
By: /s/Murray Bradley
-------------------------------------
Name: Murray D. Bradley
Title: Chief Financial and
Accounting Officer
13
EXHIBIT INDEX
Exhibit No. Description of Exhibit
Exhibit 31.1 Certification of President and Chief Executive Officer Pursuant
to Section 302 of Sarbanes-Oxley Act of 2002.
Exhibit 31.2 Certification of Chief Financial Officer Pursuant to Section
302 of Sarbanes-Oxley Act of 2002.
Exhibit 32.1 Certifications Pursuant to Section 906 of Sarbanes-Oxley Act
of 2002.