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 September 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.
- --------------------------------------------------------------------------------
(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
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 September 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 September 30, 2003
and December 31, 2002 1
Condensed Consolidated Statements of Operations for the Three
Months Ended September 30, 2003 and 2002, and for the period
from inception through September 30, 2003 2
Condensed Consolidated Statements of Operations for the Nine
Months Ended September 30, 2003 and 2002 3
Condensed Consolidated Statements of Cash Flows for the Nine
Months Ended September 30, 2003 and 2002, and for the period
from inception through September 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 12
Item 3. Defaults Upon Senior Securities 12
Item 4. Submission of Matter to a Vote of Security Holders 12
Item 5. Other Information 12
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
SEPTEMBER 30, 2003 AND DECEMBER 31, 2002
(UNAUDITED)
SEPTEMBER 30, DECEMBER 31,
2003 2002
------------- ------------
ASSETS
CURRENT ASSETS
Cash in bank $ 27,732 $ 1,606
Expense and employee receivable 101,222 98,091
Other 11,368 10,368
------------ ------------
TOTAL CURRENT ASSETS 140,322 110,065
Fixed assets, net of accumulated depreciation 3,470 11,962
Other assets 41,204 40,579
------------ ------------
TOTAL ASSETS $ 184,996 $ 162,606
============ ============
LIABILITIES AND STOCKHOLDERS' DEFICIT
LIABILITIES
Current liabilities
Accounts payable $ 870,544 $ 842,934
Accrued compensation and consulting fees 800,125 698,124
Shares to be issued for converted debt -- 20,000
Short-term advances 417,200 206,900
------------ ------------
TOTAL CURRENT LIABILITIES 2,087,869 1,767,958
Long-term debt, net of discount 3,500,522 3,233,165
Interest payable 2,412,093 2,070,968
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TOTAL LIABILITIES 8,000,484 7,072,091
------------ ------------
Stockholders' deficit
Common stock 30,820 29,820
Paid-in capital 7,022,840 6,988,839
Subscribed shares 250,700 90,000
Receivable for exercised options (315,862) (302,896)
Development stage deficit (14,803,986) (13,715,248)
------------ ------------
Total stockholders' deficit (7,815,488) (6,909,485)
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS'
DEFICIT $ 184,996 $ 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 September 30,
through ------------------------------
September 30, 2003 2002
2003
------------- ------------ ------------
Revenues $ 199,927 $ -- $ 83,333
------------- ------------ ------------
Operating expenses
Compensation and employee benefits 2,955,381 63,000 46,500
Research and development 1,440,423 -- --
General and administrative 3,455,543 91,392 13,821
Depreciation and amortization 146,925 2,712 3,497
Professional fees 3,239,272 27,305 135,066
------------- ------------ ------------
11,237,544 184,409 198,884
------------- ------------ ------------
Operating (loss) (11,037,617) (184,409) (115,551)
Other income (expense) 521,781 4,123 17,658
Interest (expense) (4,288,150) (216,581) (193,741)
------------- ------------ ------------
Net (loss) $ (14,803,986) $ (396,867) $ (291,634)
============= ============ ============
Net (loss) per common share:
Basic and diluted $ (0.01) $ (0.01)
============ ============
See notes to condensed consolidated financial statements.
2
RUBY MINING COMPANY AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Nine Months Ended
September 30,
----------------------------
2003 2002
----------- -----------
Revenues $ -- $ 194,444
----------- -----------
Operating expenses
Compensation and employee benefits 139,500 156,617
Research and development -- --
General and administrative 203,270 147,817
Depreciation and amortization 8,492 11,622
Professional fees 126,379 646,781
----------- -----------
477,641 962,837
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Operating (loss) (477,641) (768,393)
Other income (expense) 15,226 26,392
Interest (expense) (626,323) (588,265)
----------- -----------
Net (loss) $(1,088,738) $(1,330,266)
=========== ===========
Net (loss) per common share:
Basic and diluted $ (0.04) $ (0.05)
=========== ===========
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
Nine Months Ended Through
September 30, September 30, 2003
------------------------------- ------------------
2003 2002
------------- -------------
Operating activities
Net loss $ (1,088,738) $ (1,330,266) $(14,803,986)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 8,492 11,622 145,707
Discount amortization 267,357 240,371 1,596,380
Equity-based professional services -- 697,547 878,960
Increase in accounts payable 27,610 54,866 913,581
Increase in interest payable 341,125 315,234 2,412,093
Other, net 87,410 (106,490) 703,138
------------ ------------ ------------
Net cash used in operating activities (356,744) (117,116) (8,154,127)
------------ ------------ ------------
Investing activities
Advances under notes receivable (3,131) (2,939) (142,992)
Purchase of fixed assets -- -- (149,177)
------------ ------------ ------------
Net cash used in investing activities (3,131) (2,939) (292,169)
------------ ------------ ------------
Financing activities
Issuance of common stock and warrants 15,001 58,000 5,826,986
Short-term advances 210,300 75,000 492,200
Stock subscription 160,700 -- 250,700
Issuance of debentures -- -- 1,904,142
------------ ------------ ------------
Net cash provided by financing activities 386,001 133,000 8,474,028
------------ ------------ ------------
Net increase (decrease) in cash 26,126 12,945 27,732
Cash at beginning of period 1,606 728 --
------------ ------------ ------------
Cash at end of period $ 27,732 $ 13,673 $ 27,732
============ ============ ============
See notes to condensed consolidated financial statements.
4
RUBY MINING COMPANY AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 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 September 30, 2003, and for the nine months ended
and three months ended September 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
$14,803,986. 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 Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
September 30, September 30, September 30, September 30,
2003 2002 2003 2002
------------- ------------- ------------- -------------
Net loss as reported $ (396,867) $ 291,634) $ (1,088,738) $ (1,330,266)
Loss per share as reported,
basic and diluted $ (0.01) $ (0.01) $ (0.04) $ (0.05)
Stock-based employee
compensation cost included
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 $ (396,867) $ (291,634) $ (1,088,738) $ (1,330,266)
Pro forma loss per share
including stock-based
compensation cost based on
fair-value method, basic
and diluted $ (0.01) $ (0.01) $ (0.04) $ (0.05)
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
September 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:
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------------------------------------------------------
2003 2002
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Basic and Diluted Earnings Per Share:
Weighted average common shares outstanding 30,570,169 25,943,269
=========== ===========
Net income $(1,088,738) $(1,330,266)
=========== ===========
Basic and diluted earnings per share $ (0.04) $ (0.05)
=========== ===========
THREE MONTHS ENDED SEPTEMBER 30,
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2003 2002
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Basic and Diluted Earnings Per Share:
Weighted average common shares outstanding 30,820,169 28,840,169
=========== ===========
Net income $ (396,867) $ (291,634)
=========== ===========
Basic and diluted earnings per share $ (0.01) $ (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 nine months ended September 30, 2003 through
the issuance of 1,821,250 shares of common stock for a consideration of $147,500
from 9 individuals. The certificates were issued in the first week of October
2003. 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. Currently, Management is seeking to
privately place $1,200,000 worth of restricted stock at a price of $0.25 per
share to accredited investors. 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 nine months ended September 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 nine months ended
September 30, 2003.
For the three months ended September 30, 2003, the Company incurred a net loss
of $396,867 compared to a net loss of $291,634 for the three months ended
September 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 September 30, 2003 depreciation and amortization,
have declined from the three months ending September 30, 2002 due to the limited
activities of the Company, and due to the declining depreciable basis of the
fixed assets. General and administrative costs for the three months ended
September 30, 2003, has increased from the costs for the three months ended
September 30, 2002, due to increased activities related to obtaining funding.
Professional fees for the three months ended September 30, 2003 has decreased
from the three months ended September 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 for the
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. Admiralty,
through a friendly shareholder, has proposed to compromise and settle this
matter for less than the $66,000 judgment and is waiting for a response from the
Trustee.
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. However, the Company is
currently in negotiations with the former landlord to compromise and settle the
judgment for an amount less than the unsatisfied balance.
The Company filed a Complaint against two individuals who had been engaged by
the Company to provide consulting services ("Consultants") on October 24, 2003
in the Superior Court of Fulton County, Georgia. The compliant alleges that the
Consultants breached their respective Consulting Agreements with the Company and
wrongfully converted the 2,350,000 shares of common stock (the "Consulting
Shares") and $20,000 of cash ("Consulting Cash") received by them from the
Company as consulting fees and fraudulently induced the Company to enter into
the Consulting Agreements. The Complaint seeks a judgment compelling the
Consultants to return the Consulting Shares or the cash equivalent thereof and
the Consulting Cash and for punitive damages, attorneys' fees and all costs of
court.
The Company is also engaged in various other litigation matters from time to
time in the ordinary course of business. The Company will vigorously defend or
prosecute its position, as the case may be, and believes the outcome of any
litigation will not have a material effect on the Company.
11
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
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
Reports on Form 8-K. The Company filed a Current Report on Form 8-K on July 8,
2003 with respect to its licensing agreement with Georgia Tech Research
Corporation. Additionally, the Company filed a current report on form 8-K on
November 10, 2003 with respect to the nullification, cancellation and
discontinuation of International Recovery Group, LLC.
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 November 11, 2003.
Ruby Mining Co.,
a Colorado corporation
By: /s/ Herbert C. Leeming
------------------------------------------
Name: Herbert C. Leeming
Title: Chief Executive Officer
By: /s/ Murray D. Bradley, Jr.
------------------------------------------
Name: Murray D. Bradley, Jr.
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.
14