History
North Bay Resources bought the Ruby Mine in 2011, funded itself with ever-more dilutive convertible notes, and lost the mine to foreclosure in January 2017.
2011-2012: Buying the Ruby Mine
North Bay Resources was a small gold and silver explorer. Its main project was the Ruby Mine in California, which it held under an option, a right to buy. On 4 January 2011 it borrowed $50,000 from Tangiers Investors on a convertible note earmarked for Ruby Mine option payments and permit costs. The note could be turned into shares at 70% of the lowest recent trading price, the first of many such loans.
In April 2011 the option was amended so that it had to be exercised by 1 June 2011, with a final payment of $85,000 in return for lower monthly carrying costs. North Bay made that payment on 31 May and opened escrow. On 1 July 2011 the purchase was completed. Ruby Gold, Inc. became a wholly-owned subsidiary after North Bay paid Ruby Development Company (RDC) an aggregate $510,000. The mortgage on the mine stayed with RDC.
Borrowing needs then grew. In July 2012 JMJ Financial lent $550,000 on a note with a 10% original issue discount, meaning it was issued below face value. In October Tangiers added a $750,000 note funded in $50,000 tranches. In November Tangiers waived default and conversion rights on several notes and extended their maturities by 24 months. In December North Bay paid $50,000 off the Ruby mortgage and extended it to June 2013, still owing $1,774,822. Shares on issue rose from 80,186,434 at the end of 2010 to 97,485,130 at the end of 2012.
2013: Restatements and a mortgage that kept growing
In February 2013 North Bay doubled its Tangiers equity line from $5 million to $10 million and lengthened its term from three to five years. The same month it restated its third-quarter 2012 results after an SEC review found it had wrongly counted Ruby Mine tunnel and access-road costs as assets when they should have been expensed.
In March the Ruby mortgage was extended to December 2015, but the balance rose by $160,000 and a $1 million payment fell due by year-end. In June North Bay received a $150,000 advance for up to 2,120 ounces of specimen gold from the Ruby Mine, to be delivered at a 10% discount to spot price. This was non-dilutive but pledged future output.
In July it disclosed a second problem: it had inadvertently sold unregistered securities from October 2011 to April 2013 because its resale prospectus had gone stale. A second restatement reclassified the affected shares as temporary equity. In October Typenex Co-Investment lent $280,000 on a secured convertible note with a $25,000 original issue discount and 10% annual interest. In November the looming $1 million payment was replaced by smaller monthly instalments to December 2015, with warrants paid to RDC. The year-end share count shown, 639,485, is far below earlier figures, and the beats do not explain it.
2014-2016: Conversions at ever-smaller prices
In April 2014 two Tangiers notes from 2012, together $850,000 in face value, were repriced to a fixed $0.02 conversion price and their warrants dropped. In May Typenex made a second $280,000 loan, and in September JMJ made a second $550,000 loan with a 24-month term.
By now conversions were large. In November 2014 pieces of the JMJ and LG Capital notes turned about $9,200 of debt into roughly 78 million shares. In December nine Tangiers notes, about $794,000 of principal, were folded into a single Master Loan agreement. Maturity was extended to November 2015, Tangiers got better conversion terms, and a $150,000 forbearance fee was added. Later that month Typenex and Tangiers conversions produced roughly 236 million more shares. The year-end share count shown for 2014, 9,163,491, looks inconsistent with these conversions, and the beats do not explain it. Shares on issue were 1,062,057,813 at the end of 2015. In May 2016 a filing showed more than 1.3 billion shares outstanding after further Tangiers conversions. The record for 2015 and most of 2016 contains no major beats beyond these.
2017-2018: Foreclosure and deregistration
North Bay defaulted on the Ruby mortgage. On 20 January 2017 RDC foreclosed on its security interest in Ruby Gold, Inc. and took all of its assets and liabilities, so North Bay lost the Ruby Mine entirely. On 7 April 2017 it was still issuing shares on conversions of KBM, Typenex and Tangiers notes, with no remaining core operating asset. On 9 February 2018 North Bay deregistered its securities, ending its obligation to file reports with the SEC.
Written from the 25 story beats below (2011 to 9 Feb 2018), which come from the company's own announcements and filings.