SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended June 30, 20182019 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.
N/A Voluntary Filer
Indicate by check mark whether the registrant is a large accelerated
filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company. See
the definitions of "large accelerated filer,""accelerated "accelerated filer" and
"smaller
reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] (do not check if smaller reporting company)
Smaller reporting company [X]
Indicate by check mark whether the registrant is a shell company (as
defined in
Rule 12b-d of the Exchange Act). Yes [ ] NoN0 [X]
As of June 30, 2018, 14,338,8552019, 14,342,097 shares of Common Stock, par value $.03$.033
per
share, were issued and outstanding.
Item 1. PART I
ITEM 1. FINANCIAL INFORMATION
Original Sixteen to One Mine, Inc.
Condensed Balance Sheet
Original Sixteen to One Mine, Inc.
Condensed Balance Sheet
June 30, 20182019 & December 31, 20172018
ASSETS
2019 2018
Current Assets
Cash $ 8,1882,273 $ 6,9863,296
Accounts receivable 84,075 79,91766,925 67,175
Inventory 555,732 652,228(see Note 1) 306,933 429,329
Other current assets -1,000 -
------- -------
Total current assets 647,995 739,131377,131 499,800
------- -------
Mining Property
Real estate and property rights
net of depletion of $524,145 230,401 230,401
Mineral property 47,976 47,976
------- -------
Total Mining Property (see Note 2) 278,377 278,377
------- -------
Fixed Assets at Cost
Equipment 885,307 885,307597,602 594,152
Buildings 209,487 209,487
Vehicles 171,522 171,522168,924 168,925
--------- ---------
Total fixed assets at cost 1,266,316 1,266,316976,013 972,564
--------- ---------
Less accumulated depreciation (1,190,156) (1,177,471)(918,920) (909,387)
----------- -----------
Net fixed assets 76,160 88,84557,093 63,177
----------- -----------
Other Assets
Bonds and misc. deposits 21,460 21,460
--------- -------
Total Assets $1,123,992 $1,127,813
===========$ 734,061 $ 862,814
========== ==========
Original sixteen to One Mine, Inc.
Condensed Balance Sheet Continued
LIABILITIES & STOCKHOLDERS' EQUITY
June 30,2019 2018 & December 31, 2017
Current Liabilities
Accounts payable & accrued expenses $1,235,526 1,197,026(see Note 3)$ 1,282,545 1,274,559
Due to related party 213,243 200,882(see Note 4) 238,885 229,472
Notes payable Short-term (see Note 6) 538,558 537,276538,558
-------- -------
Total Current Liabilities 1,987,327 1,935,1842,059,988 2,042,589
-------- -------
Long Term Liabilities
Notes payable due after one year 118,186 127,743(see Note 7) 105,731 110,323
-------- -------
Total Liabilities 2,105,513 2,062,927
-------- -------2,165,719 2,152,912
---------- ---------
Stockholders' Equity
Capital stock, par value $.03:$.033:
30,000,000 shares authorized: 14,338,85514,342,097
issued and outstanding as of March 31,2017Dec. 31, 2018
and as of December 31, 2016 468,836 468,836June 30, 2019
(see Note 8) 473,289 473,289
Additional paid-in capital 2,222,892 2,222,892
(Accumulated deficit)
Retained earnings (3,773,249) (3,626,842)(4,127,839) (3,986,279)
------------ -----------
Total Stockholders' Equity (1,081,521) (935,114)(1,431,658) (1,290,098)
------------ -----------
Total Liabilities and Stockholders' Equity $1,023,992 $1,127,813$ 734,061 $ 862,814
============ ============
See Accompanying Notes
Original Sixteen to One Mine, Inc.
Statement of Operations and Retained Earnings
Three Months Ending June. 30, Six Months Ending
June. 30,
2019 2018 20172019
2018 2017
------ ------ ------
-----
Revenues:
Gold & Jewelry Sales 6,227 12,809 156,999122,678
90,097 101,171
Other Revenue 24,000 24,000 48,000
48,000
--------- --------- -------- ----------
------
Total revenues $ 6,227 $ 36,809 $ 180,999122,678 $
138,097 $ 149,171
--------- --------- -------- ----------
------
Operating expenses:
Salaries and wages 15,000 15,000 30,000
30,000
Contract Labor 56,637 62,512 72,962111,924
130,177
141,930
Utilities 22,954 22,900 25,21742,270
41,193 41,938
Taxes - property & payroll 4,492 4,512 4,0288,871
9,025
8,084
Supplies 6,368 6,741 10,86210,095
11,719
20,110
Insurance 1,064 616 1,0912,939
2,518 2,127
Small equipment & repairs 3,964 622 3,0526,475
4,642
21,466
Drayage 5,694 9,104 5,1168,205
10,764 7,325
Corporate expenses 2,145 4,815 7,3413,510
7,174 9,181
Legal and Compliance 5,879 1,248 1,4046,756
1,882 7,322
Mine Maintenance 6,700 3,118 23,33510,111
7,504 42,702
Depreciation & amortization 4,520 6,343 5,5429,533
12,686 11,084
Other expenses 2,513 1,183 1,9283,984
2,072 2,821
---------- ---------- ------- --------
------
Total operating expenses 137,930 138,714 176,878254,673
271,356 346,090
---------- ---------- -------- ----------
------
Profit (Loss) from operations (131,703) (101,905) 4,121(131,995)
(133,259) (196,919)
Other Income: 1,174 1,099 1,6422,694
1,970 3,229
Other Expense: 4,875 7,084 7,13310,159
13,517 13,330
-------- --------- --------- ------------
------
Total Other income(expense) (3,701) (5,985) (5,491)(7,465)
(11,547) (10,101)
-------- ---------- ------- ----------
------
Profit (Loss) before taxes (135,404) (107,890) (1,370)(139,460)
(144,806) (207,020)
-------- ---------- --------- ------------
------
Income tax benefit (expense) (800) (1,600) (800)
(1,600)
(800)
-------- ---------- --------- ----------
------
Net profit (loss) $ (136,204) $ (109,490) $ (2,170)(140,260) $
(146,406) $ (207,820)
============ =========== ==========
==========
Basic and diluted (loss)
earnings per share $ (.008)(.009) $ (.0002)(.008) $ (.01) $
(.015)(.01)
============ ============ =========
=========
Shares used in the
calculation of net
(loss) income per share 14,338,855 14,338,855 14,338,855
14,338,855
============ =========== ==========
===========
See Accompanying Notes
Original Sixteen to One Mine, Inc.
Statement of Cash Flows
Six Months Ended June 30, 20172018 and June 30, 20182019
Six Months Ended June 30,
2019
2018
2017
-------------- ------------------
------
Net profit (loss) $ (146,406)(140,260) $
(207,820)(146,406)
Cash Flows From Operating Activities:
Depreciation and amortization 9,533
12,686 11,084
(Increase)Decrease in
accounts receivable (750)
(4,158) 36,142
Decrease(Increase) in inventory 122,396
96,496 194,680
(Increase)Decrease in other
current assets -
-
(Decrease) increase in accounts payable
and accrued expenses 6,686
38,499 (7,255)
(Decrease) increase in related party loans 9,413
12,360 12,925
(Decrease) increase in short term notes -
1,282
1,281
------------ --------------
------
Net cash (used) provided by
operating activities 7,018
10,759
41,037
------------ --------------
------
Cash Flows From Investing Activities:
Fixed Asset Purchases _(3,450)
-
Proceed from sale real estate -
-
Other assets bonds misc. deposits -
-
----------- ------------ ----
------
Net cash (used) provided by
investing activities -
-
----------- ----------------
------
Cash Flows From Financing Activities
Increase (decrease) notes payable (4,592)
(9,557) (8,607)
Proceeds from sale of common stock -
-
Additional paid-in capital -
-
----------- ----------------
------
Net cash provided (used) by
financing activities (4,592)
(9,557)
(8,607)
------------ ------------------
------
(Decrease) increase in cash (1,024)
1,202 32,430
Cash, beginning of period 3,296
6,986
6,956
------------ --------------
------
Cash, end of period $ 8,1882,272 $
39,3868,188
============
============
Supplemental schedule of other cash flows:
Cash paid during the period for:
Interest expense $ 13,0918,973 $
13,091
============
===========
Income taxes $ 800 $
800
============
===========
See Accompanying Notes
I.NOTES TO THE FINANCIAL STATEMENTS
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business: Original Sixteen to One Mine, Inc. (the Company) was
incorporated in 1911, and is actively involved in operating Theoperates the Sixteen to One mine in
Alleghany, California.
Inventory: Inventory consists of gold bullion, specimens and jewelry.
Gold
bullion and specimens are quoted at the market price for gold bullion.
Jewelry
is quoted at the market price for gold content plus labor cost.
Due to limitations of the Company's accounting software all inventoryInventory is
accounted for using the average cost.cost method.
Fixed Assets: Fixed assets are stated at historical cost. Depreciation
is
calculated using straight-line and accelerated methods over the following
useful lives: Vehicles 3 to 5 years, Equipment 5 to 7 years, Buildings 18
to
31.5 years. Company does not capitalize underground expenses or
exploration.
Depletion Policy: Because of the geological formation in the Alleghany
Mining
District, estimates of ore reserves cannot be calculated, and
accordingly, a
cost per unit depletion factor cannot be determined. Should estimates of ore
reserves become available, the units of production method of depletion will be
used. Until such time, noNo depletion
deduction will beis
recorded.
Revenue Recognition: As they are mined, gold specimens are recorded in
inventory and revenueRevenue is recognized using quoted market prices
for gold.gold
when mined. For income tax purposes revenues are not recognized until the
gold
is sold.
Use of Estimates: The preparationPreparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates
and assumptions. These estimatesEstimates and assumptions affect the reported amounts of
assets
and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results
couldmay differ from these estimates.
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 financialFinancial statements contain all adjustments (consisting only of normal
recurring accruals) necessary to present fairly the Company's financial
position at June 30, 20182019 and December 31, 2017,2018, the results of
operations and
cash flows for the three-month and six-
month periods ended June 30, 20182019 and 2017. The unaudited2018.
Unaudited
financial statements have beenare prepared in accordance with Generally Accepted
Accounting Principles for interim financial information and with
the instructions
to Form 10-Q and Item 310(b) of Regulation S-B.
II.Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF PLAN OF OPERATION
The Sixteen to One Minemine 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
California
high-grade, hard rock, underground gold mine. The Company celebrated its
100
year anniversary on Oct. 9, 2011. It is the oldest gold mining
corporation in
the United States. The same company owns and operates (maintains) the
mine. Original Sixteen to One Mine Inc, (owner) was
incorporated in California in 1911.
Experts estimate that less than twenty percent of the deposit has been
mined.
Production is approximately 1,500,000 ounces of gold.
The Company began a new exploration program this quarter led by a California
registered geologist. The basis is strictly geology: identifying hydrothermal
solution pathways, evaluating the ore potential and mining environment.
There are overOver thirty miles of horizontal workings and millions of cubic feet of
vertical
excavations called stopes.stopes exist. 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 classify the ore
underground. This has thea positive affecteffect of reducing the volume of rock
taken
from the mine, thereby reducing costs.
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". By industry
wide definition of phases of a mine operation, the operation during this
quarter is rehabilitation. Due to the extensive workings and small size of the
crew, maintenance and rehabilitation must periodically be prioritized over
exploration, development and production. Exploration aims at locating the
presence of economic deposits and establishing their nature, shape and grade.
The investigation may be divided into (1) initial and (2) final. At the
Sixteen to oneOne the search for gold or ore embraces: (1) geological surveys;historical maps;
(2) geophysical prospecting; (3) boreholes; (4) surface or underground headings, drifts or tunnels.
When
operations detect the presence of gold, the Company evaluates the
indicators and if warranted, moves itsindicators.
Its operation changes from exploration to development.development to production
rapidly.
When the presence of gold is evaluated, the Company moves its operation
into
production. 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.
Balance Sheet notes:
Gold inventory is recorded at spot price despite proven additional value
for
specimen and gem-stone material which is substantially greater than spot
price.
Jewelry inventory is recorded at labor plus gold cost.
No value is recorded on the balance sheet for timber reserves. The
company
owns 470 acres of prime forested timberland. No value is recorded on the
balance sheet for the Company owned water-rights. Reduced value is
recorded on
the balance sheet for buildings, equipment and land. No value is
recorded on
the balance sheet for marketable aggregate and decorative stone currently
stockpiled. No value is recorded on the balance sheet for goodwill.
Fixed
assets are recorded at historic cost less depreciation.
BALANCE SHEET COMPARISONS
Assets:
For the six-month period from December 31, 2017 toended June 30, 2018 current
assets decreased by $91,135 (12%) primarily due2019 there was no significant
changes
to the decrease in inventory
as gold was sold to cover operating expenses.
Other than depreciation expense, fixed assets remained the same.
Liabilities:
Liabilities did not change significantly.balance sheet.
STATEMENT OF OPERATIONS
Revenues
Gold revenues for the three-month and six-month periods endedperiod ending June 30, 2018 were
$144,190 (80%2019 decreased by
$$6,582 (50%) and $11,074 (7%)lower respectively than the same periods in
2017 primarily due to lower gold sales in the second quarter of 2018.
Operating expenses for both the three-month and six-month periods ended
June 30,2018 decreased overall by 22% compared towith the same period in 20172018 due to less activitythe emphasis
on
development instead of production in 2018.2019.
Expenses
For the three-month period ended June 30, 2019 compared to the same
period in
2018 total operating expenses decreased by $784 or a negligable percent
due to the in-place managment program.
For the three-month period ended June 30, 2019 compared to the same
period in
2018 the company showed a lossan increase of $109,490 compared to a loss of $2,170 for the same period in 2017.$26,714. The 5,000% differenceincrease is due less goldto
decreased revenue from the shift in 2018. For the six-month
period ended June 30,2018 the company showed a lossobjectives of $146,406 comparedproduction to
a
loss of $207,820 for the same period in 2017. The 30% difference is
primarily due to the lower operating expenses in 2018.
ITEM 3maintenance
and development.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
From time to time the Original Sixteen to One Mine, Inc. (the Company), will
makemakes
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, political and politicalgovernmental
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 theseThese 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 obligationwill to update its forward-looking statements, whether as a
result of
receiving new information, the occurrence of future events or otherwise.otherwise
if
significant.
ITEM 44: CONTROLS AND PROCEDURES
See notesSecurity procedures include multiple levels of gold custody, from the
mine to
financial statements.sales. Inventory control procedures were set up by an SEC certified
auditing
firm and continue to be followed.
PART II
ITEMItem 1 LEGAL PROCEEDINGS
The State Water Resources Control Board issued Adminstrative Civil Liability
Order R5-2017-0115 on Dec. 8, 2017. The Company filed a timely Petition for
Review. No decision has been issued in this matter.
ITEM 1ANone
Item 1a RISK FACTORS
(a) Price of Gold
The daily spot price of gold has a modest effect on gross revenue if it's
between $1,300 and $1,700 an ounce. A significant drop below $1,000 may
have
an adverse effect on the Company's operation. The Company's liquidityrealized gold
values usually exceed the bullion price due to the jewelry and specimen
markets
which are not affected by the spot price of gold.
(b) Lack of Proven Reserves
Because proven reserves are not utilized as a component for evaluating
future
earnings or ore values, a sense of uncertainty of existence is substantially dependent uponperceived
by
some. Caution is always recommended in using the resultsdoctrines of reserves
as an
economic tool for valuing a mining company. While (i) the Company has
recovered
over one million ounces of gold and (ii) management knows that
substantial
additional virgin veins exists in the Sixteen to One mine, the Company
has no
ability to measure potential gold production using the mathematical tools
generally recognized in the mining industry; however, the company can
prove
that approximately seventy percent (70%) of its vein systems have not
been
developed.
(c) Governmental Regulation
The attached financial statements have not been audited by a Securities
Exchange Commission (SEC) accounting firm. Therefore, the Company is not
in
full compliance with this SEC regulation for companies listed on an
exchange.
State and federal statutes regulate environmental quality, safety,
exploration
procedures, reclamation, employees health and safety, use of explosives,
air
quality standards, pollution of stream and fresh water sources, noxious
odors,
noise, dust, and other environmental protection controls as well as the
rights
of adjoining property owners. Laws may change preventing or delaying the
commencement or continuance of given operations.
The Company maintains a gold inventory whichis substantially in compliance with all known safety and
environmental standards and regulations, however; it liquidatesfaces reoccurring
unreasonable and illegal demands from the Central Valley Regional Water
Quality
Control Board (CVRWCB) or its staff. The Company is forced to satisfyexpend
working
capital needs.and time defending this excessive and punitive behavior. There
iscan be
no assurance that future changes in the laws, regulations or reckless
interpretations thereof will not have a material adverse effect; however
during
2018, CVRWCB staff was invited and accepted invitations to visit the mine
property. A definitive plan is under mutual development to re-write the
mine's
discharge permit during 2019.
(d) Liquidity
Gold inventory at June 30, 2019, was $306,933 primarily as specimens or
gold
held as jewelry. While history of actual cash sales supports an inventory
value exceeding the spot price, no such increases are used to compute the
inventory. All inventory of raw material is adequaterecorded at spot price per
troy
ounce. In addition, contract manufacturing costs of jewelry are included
in
the finished jewelry inventory. Periodic shortfalls in liquidity occur
which
are not likely to sustainbe bridged by institutional debt financing. Management
addresses these issues as they arise.
(e) Price of Stock
Bids and offers are publicly recorded on the Company.
ITEMstock page of the Company's
web
site and a gray market. Exposure is limited. The price of stock may not
accurately reflect its fair market value because of the limited
marketplace and
the existence of a wild and free gray market. The company deferred
programs to
support or promote its stock until joining a suitable public marketplace.
There are conflicting bids, offers and trades between the Company's
website and
the unregulated Pink Sheet Gray Market, ticker symbol OSTO. Because of
these
discrepancies the market price is unreliable.
Item 2 UNREGISTERED SALES OF EQUITY
None
ITEM 3Item 3. DEFAULTS UPON SENIORON SECURITIES
None
ITEM 4Item 4. MINE SAFETY DISCLOSURES
For the three-month periodthree-months ended June 30,2018 8 citations under Section 104(a)
were issued. Five of them were30, 2019, the Mine Safety and Health
Administration (MSHA) issued asno 104 (a) S&S.No citations under 104(b) Orders,&S or 104 (d)(b) orders.
Additionally, ALL eight S&S Citations Section 110 (b)(2) Violations or Section 107 (a) Ordersissued in calendar year 2018 were
issued.
All of these citations have been contested.
ITEM 5down-graded to non- S&S violations during informal hearing procedures in
2019.
Item 5. OTHER INFORMATION
The unaudited interim consolidated financial statements of Original Sixteen to
One Mine, Inc. (the Company) have beenthe Company
are
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 amountamounts 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.may
differ. 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-Q.
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, 2018.
ITEM 62019.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrantRegistrant 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: Sept. 28, 2018June 30, 2019