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 March 31, 2004
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.
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)
3399 Peachtree Rd. NE, Suite 810, Atlanta, Georgia 30326
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(Address of Principal Executive Offices)
Issuers Telephone Number (404) 231-8500
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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 March 31, , 2003
----- -------------------------------
Common Stock, $.001 Par Value 51,180,009 shares
Transitional Small Business Disclosure Format: YES NO X
----- -----
RUBY MINING COMPANY AND SUBSIDIARIES
Form 10-QSB
Index
PART I FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets as of March 31,2004
and December 31, 2003 3
Condensed Consolidated Statements of Operations for the
Three Months Ended March 31, 2004 and 2003, and for the
period from inception through March 31, 2004 4
Condensed Consolidated Statements of Cash Flows for the Three
Months Ended March 31, 2004 and 2003, and for the
period from inception through March 31, 2004 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 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 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 13
Exhibit Index 14
2
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
RUBY MINING COMPANY AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 31, 2004 AND DECEMBER 31, 2003
(UNAUDITED)
MARCH 31, DECEMBER 31,
2004 2003
ASSETS
CURRENT ASSETS
Cash in bank $ 63,331 $ 352,037
Expense and employee receivable 217,049
173,976
Other 10,368 11,368
------------ ------------
TOTAL CURRENT ASSETS 290,748 537,381
Fixed assets, net of accumulated depreciation
699 758
New World Legacy - vessel 779,472 --
------------ ------------
Other assets 37,714 47,714
------------ ------------
TOTAL ASSETS $ 1,108,633 $ 585,853
============ ============
LIABILITIES AND STOCKHOLDERS' DEFICIT
LIABILITIES
Current liabilities
Accounts payable $ 182,635 $ 640,326
Accrued compensation and consulting fees 286,100 202,000
Short-term advances 487,719 212,000
------------ ------------
TOTAL CURRENT LIABILITIES 956,454 1,054,526
Long-term debt, net of discount 3,653,605 3,557,193
Interest payable 2,619,577 2,513,441
------------ ------------
TOTAL LIABILITIES 7,229,636 7,125,160
------------ ------------
Stockholders' deficit
Common stock 51,180 45,966
Paid-in capital 9,660,871 8,223,032
Subscribed shares -- 274,975
Receivable for exercised options (237,175) (237,175)
Development stage deficit (15,595,879) (14,846,105)
------------ ------------
Total stockholders' deficit (6,121,003) (6,539,307)
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS'
DEFICIT $ 1,108,633 $ 585,853
============ ============
See notes to condensed consolidated financial statements.
3
RUBY MINING COMPANY AND SUBSIDIARIES
(A Development Stage Company)
Condensed Consolidated Statements of Operations
(Unaudited)
THREE MONTHS ENDED
FROM INCEPTION MARCH 31,
THROUGH ------------------------------
MARCH 31, 2004 2004 2003
-------------- ------------ ------------
Revenues $ 199,927 $ -- $ --
------------ ------------ ------------
Operating expenses
Compensation and benefits 3,130,596 108,746 47,470
Forgiveness of salaries (663,625) -- --
Research and development 1,840,423 250,000 --
General and administrative 3,742,012 88,918 55,627
Depreciation and amortization 149,696 59 2,890
Professional fees 3,523,237 134,057 25,105
------------ ------------ ------------
Total operating expenses 11,722,339 581,780 131,092
------------ ------------ ------------
Operating (loss) (11,522,412) (581,780) (131,092)
Other income (expense) 671,432 50,226 5,529
Interest expense (4,744,899) (218,220) (201,541)
------------ ------------ ------------
Net (loss) $(15,595,879) $ (749,774) $ (327,104)
============ ============ ============
Net (loss) per common share:
Basic and diluted $ (0.02) $ (0.01)
============ ============
See notes to condensed consolidated financial statements.
4
RUBY MINING COMPANY AND SUBSIDIARIES
(A Development Stage Company)
Condensed Consolidated Statements of Cash Flows
(Unaudited)
FROM INCEPTION
THREE MONTHS ENDED THROUGH
MARCH 31, MARCH 31, 2003
------------------------------ ---------------
2004 2003
------------- ------------
Operating activities
Net loss $ (749,774) $ (327,104) $(15,595,879)
Adjustments to reconcile net loss
to net cash used in operating activities:
Depreciation and amortization 59 2,890 148,478
Discount amortization 96,412 86,726 1,749,463
Equity-based professional services 177,000 -- 1,055,960
(Decrease) Increase in accounts
payable and accruals (374,039) 13,549 716,744
Increase in interest payable 106,136 109,934 2,621,795
Other, net 56,564 35,018 162,043
Net cash used in operating activities (687,642) (78,987) (9,141,396)
------------ ------------ ------------
Investing activities
Advances under expense receivable (42,623) (1,044) (186,658)
Purchase of fixed assets -- -- (149,177)
Purchase of vessel (429,472) -- (429,472)
------------ ------------ ------------
Net cash used in investing activities (472,095) (1,044) (765,307)
------------ ------------ ------------
Financing activities
Issuance of common stock and warrants 575,000 15,001 7,002,686
Short-term advances 296,031 50,000 787,231
Stock subscription -- 15,000 275,975
Issuance of debentures -- -- 1,904,142
------------ ------------ ------------
Net cash provided by financing activities 871,031 80,001 9,970,034
------------ ------------ ------------
Net increase (decrease) in cash
(288,706) (30) 63,331
Cash at beginning of period
352,037 1,606 --
------------ ------------ ------------
Cash at end of period $ 63,331 $ 1,576 $ 63,331
============ ============ ============
See notes to condensed consolidated financial statements.
5
RUBY MINING COMPANY AND SUBSIDIARIES
(A Development Stage Company)
Notes to Condensed Consolidated Financial Statements
March 31, 2004
(Unaudited)
NOTE 1 - NATURE OF OPERATIONS AND BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements include the
accounts of Ruby Mining Company (the "Company") and its wholly-owned
subsidiaries, Admiralty Corporation ("Admiralty"), and Admiralty Marine
Operations, LTD. ("AMO"). Significant inter-company transactions and accounts
are eliminated in consolidation.
The financial statements as of March 31, 2004 and for the three months ended
March 31, 2004 and 2003 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 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 subsidiaries are a development stage company and have had
only minimal revenues. The consolidated development stage deficit of the
entities is $15,595,879. 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.
During the quarter ending March 31, 2004, the Company organized AMO as a
wholly-owned subsidiary. AMO, through capitalization from the Company, acquired
the New World Legacy, a research vessel for cash consideration of $429,472, and
for equity instruments of the Company valued at $350,00.
During the quarter ending March 31, 2004, the Company issued 5,213,865 shares of
common stock. Of these shares, 3,200,000 shares were issued for cash of $850,000
of which $274,975 was subscribed for at December 31, 2003. The Company issued
1,000,000 shares for the acquisition of the research vessel. The remaining
shares were issued in satisfaction of certain payable, and other obligations. In
addition, the Company issued 800,000 common stock warrants during the current
quarter. The warrants were issued to a lien-holder of the research vessel in
satisfaction of the lien. The warrants convert to one share of common stock, are
exercisable over five years, with an exercise price of $0.25.
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RUBY MINING COMPANY AND SUBSIDIARIES
(A Development Stage Company)
Notes to Condensed Consolidated Financial Statements
March 31, 2004
(Unaudited)
NOTE 2 - STOCK BASED COMPENSATION
The Company accounts for stock-based compensation utilizing the intrinsic value
method. Presented below is certain financial information of the Company with
comparative proforma information determined as if the Company had accounted for
the stock-based compensation utilizing the fair-value method
March 31, 2003 March 31, 2004
-------------- --------------
Net Loss as reported $ (327,104) $ (749,774)
Basic and diluted loss per share
As reported $ (0.01) $ (0.02)
Stock-based employee compensation
cost included in net loss as reported $ - $ -
Stock based employee compensation
cost based on fair-value method $ - $ -
Proforma net loss including stock-based
compensation cost based on fair-value method $ (327,104) $ (749,774)
Proforma basic and diluted loss per share
including stock-based compensation
cost based on fair-value method $ (0.01) $ (0.02)
NOTE 3 - 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 March
31, 2004 the Company had outstanding 3,967,376 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:
7
RUBY MINING COMPANY AND SUBSIDIARIES
(A Development Stage Company)
Notes to Condensed Consolidated Financial Statements
March 31, 2004
(Unaudited)
NOTE 3 - EARNINGS PER SHARE (CONTINUED)
For the Three Months Ended March 31, 2004
--------------------------------------------
Weighted
Average Shares Per-Share
(Numerator) (Denominator) Amount
----------- -------------- ----------
BASIC EPS
Income (loss) available to
common shareholders' $ (749,774) $ 48,573,077 $ (0.02)
=========== ============= ==========
For the Three Months Ended March 31, 20043
--------------------------------------------
Weighted
Average Shares Per-Share
(Numerator) (Denominator) Amount
----------- -------------- ----------
BASIC EPS
Income (loss) available to common
shareholders' $ (327,104) $ 30,286,836 $ (0.01)
============ ============= ========
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
Ruby Mining Company (the "Company") and its wholly owned subsidiaries Admiralty
Corporation ("Admiralty"), and Admiralty Marine Operations, LTD. ("AMO"), are a
development stage company and have had only minimal revenues from operations.
The consolidated Company satisfied liquidity and capital requirements during the
three months ended March 31, 2004 through the issuance of 5,213,865 shares of
common stock for a consideration of $1,218,520 from 36 individuals. The
certificates representing these shares were issued on or about March 31, 2004.
In addition, employees of the Company have partially deferred payments of
compensation to provide liquidity for the company.
The Company entered into a Conditional Bill of Sale dated February 7, 2004 with
Caribbean Treasure Hunters, Inc. to acquire the marine research vessel the New
World Legacy for 1,000,000 shares of common stock of the Company. The shares are
"restricted securities" under Rule 144 issued by the Securities and Exchange
Commission. The conditions of the acquisition of the vessel were payment of all
liens and custody expenses. At March 31, 2004, $779,472.31 total consideration
had been paid for the New World Legacy. $250,000 of this amount was in the form
of the shares issued to Caribbean Treasure Hunters, Inc., and $100,000 was
recorded in exchange for 800,000 five year warrants exercisable at $0.25 each in
satisfaction of an outstanding lien on the vessel. The remainder, $429,472.31
was paid by the Company in cash, in part from cash proceeds received by the
Company from the issuance of promissory notes totaling $310,819 (with 7-year
terms and annual interest rates of 6.75%) provided by two individuals (one an
executive officer of the Company). Upon satisfaction of the conditions of the
conditional Bill of Sale, one five-year warrant exercisable at $0.25 per share
will be issued to these individuals for each principal dollar loaned.
PLAN OF OPERATION
As the Company has commenced operations on the Pedro Bank in Jamaican waters,
management believes that the Company has enhanced access to investments of
capital. Management is utilizing existing relationships and business advisors to
seek additional opportunities for capital investments. Currently, Management is
seeking to privately place $1,750,000 worth of restricted stock and warrants at
a price of $0.70 per Unit (with each Unit consisting of one share of common
stock and two warrants)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 three months ended March 31, 2004, the
Company satisfied liquidity needs through short-term borrowings and the sale of
equity securities.
9
RESULTS OF OPERATIONS
The Company had no revenue from operations during the three months ended March
31, 2004. For the three months ended March 31, 2004,the Company incurred a net
loss of $(749,774) compared to a net loss of $(327,104) for the three months
ended March 31, 2003. The increase was primarily due to an increase in research
and development costs of $250,000 for ATLISTM construction costs, an increase of
$61,276 in salaries, and an increase of $108,952 in professional services. Each
of these related to the increased activities of the Company. 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. Additionally, the Company acquired a search and recovery ship, the
New World Legacy (the "Ship"), which it has deployed on the Pedro Bank, and the
Company continues building the first ATLIS field units to be used in the search
efforts on the Pedro Bank.
For the three months ended March 31, 2004, depreciation and amortization have
declined from the three months ending March 31, 2003 due to declining
depreciable basis of the fixed assets. This number should, however, increase in
the future with the acquisition of the research vessel and equipment thereon and
the building of the ATLIS field units. Professional fees for the three months
ended March 31, 2004 have increased 235.7% from the three months ended March 31,
2003 due to an increase in survey and archaeological research services
contracted by the Company, and other professional services.
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.
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. G. Howard Collingwood, Chief Executive
Officer and Murray D. Bradley, Jr., Chief Financial Officer, reviewed and
participated in this evaluation. Base on this evaluation, Messrs. Collingwood
and Bradley concluded that, as of the date of their evaluation, the Company's
disclosure controls and procedures were effective.
10
(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.
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 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 is attempting
to settle the judgment for a lesser amount.
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. Previously, approximately $14,000 had been
applied to the judgment amount. In January, 2004, the Company entered into a
settlement agreement for which the company paid $40,000.00 as a final
settlement. All claims related to this matter were dismissed by mutual agreement
of the parties.
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 complaint 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 proceeding with these actions.
The Company may also be 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.
Item 2. Changes in Securities and Use of Proceeds
None
11
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 Certification of President and Chief Executive
Officer pursuant to Section 302 of Sarbanes-Oxley
Act of 2002.
Certification of Chief Financial Officer pursuant to
Section 302 of Sarbanes-Oxley Act of 2002.
Exhibit 32 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 April 21,
2004, regarding the change in the Company's Chief Executive Officer and Chairman
of the Board of Directors from Herbert C. Leeming to G. Howard Collingwood, the
arrival of the New World Legacy in Jamaica to begin work on the Pedro Bank, and
the sending of a demand letter to attorneys representing Ocean Resources
demanding payment of a $1,000,000 licensing fee owed to the Company.
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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 May 20, 2004.
Ruby Mining Co.,
a Colorado corporation
By: /s/ G. Howard Collingwood
---------------------------------
Name: G. Howard Collingwood
Title: Chief Executive Officer
By: /s/ Murray D. Bradley, Jr.
---------------------------------
Name: Murray D. Bradley, Jr.
Title: Chief Financial Officer
13
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION OF EXHIBIT
Exhibit 31 Certification of President and Chief Executive
Officer pursuant to Section 302 of Sarbanes-Oxley
Act of 2002.
Certification of Chief Financial Officer pursuant to
Section 302 of Sarbanes-Oxley Act of 2002.
Exhibit 32 Certifications pursuant to Section 906 of Sarbanes-
Oxley Act of 2002.
14