SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2001
COMMISSION FILE NO. 0-31159
TREND MINING COMPANY
(Exact Name of Small Business Issuer as Specified in its Charter)
DELAWARE 81-0304651
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
401 FRONT AVENUE
SUITE 1, SECOND FLOOR
COEUR D'ALENE, IDAHO 83814
(Address of principal executive offices) (Zip Code)
(208) 664-8095
(Issuer's telephone number)
Check whether the issuer (1) has 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 / /
There were 18,617,770 shares of the Registrant's no par value common stock
outstanding as of August 13, 2001.
Transitional Small Business Disclosure: Yes / / No /X/
PART 1
ITEM 1. FINANCIAL STATEMENTS
The Board of Directors
Trend Mining Company
(Formerly Silver Trend Mining Company)
Coeur d'Alene, Idaho
ACCOUNTANT'S REVIEW REPORT
--------------------------
We have reviewed the accompanying balance sheet of Trend Mining Company
(formerly Silver Trend Mining Company) (an exploration stage company) as of June
30, 2001 and the related statements of operations and comprehensive loss,
stockholders' equity (deficit), and cash flows for the nine months ended June
30, 2001 and 2000, and for the period from October 1, 1996 (inception of
exploration stage) to June 30, 2001. All information included in these
financial statements is the representation of the management of Trend Mining
Company.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit in accordance with
auditing standards generally accepted in the United States of America, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying financial statements in order for them to be in
conformity with accounting principles generally accepted in the United States of
America.
The financial statements for the year ended September 30, 2000 were audited by
us and we expressed an unqualified opinion on them in our report dated December
15, 2000 and May 17, 2001. We have not performed any auditing procedures since
those dates.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company's significant operating losses raise
substantial doubt about its ability to continue as a going concern.
Management's plans regarding the resolution of this issue are also discussed in
Note 2. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
Williams & Webster, P.S.
Certified Public Accountants
Spokane, Washington
August 10, 2001
2
TREND MINING COMPANY
(FORMERLY SILVER TREND MINING COMPANY)
(AN EXPLORATION STAGE COMPANY)
BALANCE SHEETS
June 30, September 30,
2001 2000
(Unaudited)
----------------- ---------------
ASSETS
CURRENT ASSETS
Cash $ 3,628 $ 102,155
Prepaid expenses - 1,725
Equipment held for resale 4,000 4,000
----------------- ---------------
Total Current Assets 7,628 107,880
----------------- ---------------
MINERAL PROPERTIES - -
----------------- ---------------
PROPERTY AND EQUIPMENT, net of depreciation 26,716 40,177
----------------- ---------------
OTHER ASSETS
Investments - 107,250
----------------- ---------------
TOTAL ASSETS $ 34,344 $ 255,307
================= ===============
LIABILITIES AND STOCKHOLDERS' EQUITY(DEFICIT)
CURRENT LIABILITIES
Accounts payable $ 1,029,372 $ 323,228
Accounts payable to directors and officers 83,798 11,100
Accrued expenses 29,591 17,489
Accured interest payable 16,059 1,958
Note payable to stockholder 535,000 -
Current portion of long-term debt 3,308 2,992
----------------- ---------------
Total Current Liabilities 1,697,128 356,767
----------------- ---------------
LONG-TERM DEBT, net of current portion 7,943 10,389
----------------- ---------------
COMMITMENTS AND CONTINGENCIES - -
----------------- ---------------
STOCKHOLDERS' EQUITY(DEFICIT)
Preferred stock, .01 par value, 20,000,000
shares authorized; 1 and none shares
issued and outstanding, respectively - -
Common stock, .01 par value, 100,000,000
shares authorized; 18,565,803 and
18,232,776 shares issued and outstanding,
respectively 185,727 182,328
Additional paid-in capital 3,601,677 3,292,635
Stock options and warrants 1,342,672 123,182
Pre-exploration stage accumulated deficit (558,504) (558,504)
Accumulated deficit during exploration stage (6,242,299) (3,151,077)
Accumulated other comprehensive income (loss) - (413)
----------------- ---------------
TOTAL STOCKHOLDERS' EQUITY(DEFICIT) (1,670,727) (111,849)
----------------- ---------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY(DEFICIT) $ 34,344 $ 255,307
================= ===============
See accompanying notes and accountant's review report.
2
TREND MINING COMPANY
(FORMERLY SILVER TREND MINING COMPANY)
(AN EXPLORATION STAGE COMPANY)
STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
Period from
October 1, 1996
(Inception of
Three Months Ended Nine Months Ended Exploration
-------------------------- -------------------------- Stage) to
June 30, June 30, June 30, June 30, June 30,
2001 2000 2001 2000 2001
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
------------ ------------ ------------ ------------ ------------
REVENUES $ - $ - - - -
------------ ------------ ------------ ------------ ------------
EXPENSES
Mineral property expense 25,838 409,238 247,988 584,232 1,727,802
General and administrative 125,542 79,713 812,607 347,142 1,446,006
Officers and directors compensation 79,738 84,752 680,532 207,266 1,076,590
Legal and professional 184,403 34,605 539,669 111,843 924,349
Depreciation 4,487 3,105 13,461 3,980 24,572
------------ ------------ ------------ ------------ ------------
Total Expenses 420,008 611,413 2,294,257 1,254,463 5,199,319
------------ ------------ ------------ ------------ ------------
OPERATING LOSS (420,008) (611,413) (2,294,257) (1,254,463) (5,199,319)
------------ ------------ ------------ ------------ ------------
OTHER INCOME (EXPENSE)
Dividend and interest income 16 773 244 927 6,583
Loss on disposition and impairment
of assets - - - - (188,226)
Gain (loss) on investment sales - - (78,033) 5,420 (76,724)
Financing expense - (36,185) (698,039) (36,185) (768,403)
Interest expense (13,545) (618) (21,273) (618) (22,924)
Miscellaneous income 136 - 136 100 6,714
------------ ------------ ------------ ------------ ------------
Total Other Income (Expense) (13,393) (36,030) (796,965) (30,356) (1,042,980)
------------ ------------ ------------ ------------ ------------
INCOME TAXES - - - - -
NET LOSS (433,401) (647,443) (3,091,222) (1,284,819) (6,242,299)
------------ ------------ ------------ ------------ ------------
OTHER COMPREHENSIVE LOSS
Change in market value of investments - 21,750 413 27,436 -
------------ ------------ ------------ ------------ ------------
NET COMPREHENSIVE LOSS $ (433,401) $ (625,693) $(3,090,809) $(1,257,383) $ 6,242,299
============ ============ ============ ============ ============
BASIC AND DILUTED NET LOSS PER SHARE $ (0.02) $ (0.06) $ (0.17) $ (0.17) (0.52)
============ ============ ============ ============ ============
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 18,387,661 10,829,671 18,454,459 7,628,199 11,919,983
============ ============ ============ ============ ============
See accompanying notes and accountant's review report.
3
TREND MINING COMPANY
(FORMERLY SILVER TREND MINING COMPANY)
(AN EXPLORATION STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY(DEFICIT)
Common Stock
-------------------- Additional Stock
Number Paid-in Options and Accumulated
of Shares Amount Capital Warrents Deficit
--------- --------- ------------- ------------- --------------
Balance, October 1, 1996 1,754,242 $ 17,542 $ 663,218 - $ (558,504)
Common stock issuances as follows:
- for cash at $0.50 per share 200,000 2,000 98,000 - -
- for payment of liabilities and expenses at $0.50
per share 45,511 455 22,301 - -
Net loss for the year ended September 30, 1997 - - - - (128,614)
--------- --------- ------------- ------------- --------------
Balance, September 30, 1997 1,999,753 19,997 783,519 - (687,118)
Issuance of common stock as follows:
- for mineral property at $0.50 per share 150,000 1,500 73,500 - -
- for lease termination at $0.50 per share 12,000 120 5,880 - -
- for debt at $0.50 per share 80,000 800 39,200 - -
- for cash at $0.20 per share 7,500 75 1,425 - -
- for compensation at $0.50 per share 9,000 90 4,410 - -
Issuance of stock options for financing activities - - - 2,659 -
Net loss for the year ended September 30, 1998 - - - - (119,163)
Change in market value of investments - - - - -
--------- --------- ------------- ------------- --------------
Balance, September 30, 1998 2,258,253 22,582 907,934 2,659 (806,281)
Common stock issuances as follows:
- for cash at an average of $0.07 per share 555,000 5,550 35,450 - -
- for prepaid expenses at $0.33 per share 50,000 500 16,000 - -
- for consulting services at an average of -
$0.20 per share 839,122 8,391 158,761 - -
- for mineral property at $0.13 per share 715,996 7,160 82,471 - -
- for officers' compensation at an average of -
$0.24 per share 300,430 3,004 70,522 - -
- for debt, investment and expenses at $0.30 per share 9,210 92 2,671 - -
- for directors' compensation at an average of -
$0.25 per share 16,500 165 3,960 - -
- for rent at $0.25 per share 1,000 10 240 - -
- for equipment at $0.30 per share 600,000 6,000 174,000 - -
Net loss for the year ended September 30, 1999 - - - - (716,759)
Other comprehensive loss - - - - -
--------- --------- ------------- ------------- --------------
Balance, September 30, 1999 5,345,511 $ 53,454 $ 1,452,008 2,659 $ (1,523,040)
--------- --------- ------------- ------------- --------------
Other
Comprehensive
Income Total
------------ -------------
Balance, October 1, 1996 $ - $ 122,256
Common stock issuances as follows:
- for cash at $0.50 per share - 100,000
- for payment of liabilities and expenses at $0.50
per share - 22,756
Net loss for the year ended September 30, 1997 - (128,614)
------------ -------------
Balance, September 30, 1997 - 116,398
Issuance of common stock as follows:
- for mineral property at $0.50 per share - 75,000
- for lease termination at $0.50 per share - 6,000
- for debt at $0.50 per share - 40,000
- for cash at $0.20 per share - 1,500
- for compensation at $0.50 per share - 4,500
Issuance of stock options for financing activities - 2,659
Net loss for the year ended September 30, 1998 - (119,163)
Change in market value of investments 117,080 117,080
------------ -------------
Balance, September 30, 1998 117,080 243,974
Common stock issuances as follows:
- for cash at an average of $0.07 per share - 41,000
- for prepaid expenses at $0.33 per share - 16,500
- for consulting services at an average of
$0.20 per share - 167,152
- for mineral property at $0.13 per share - 89,631
- for officers' compensation at an average of
$0.24 per share - 73,526
- for debt, investment and expenses at $0.30 per share - 2,763
- for directors' compensation at an average of
$0.25 per share - 4,125
- for rent at $0.25 per share - 250
- for equipment at $0.30 per share - 180,000
Net loss for the year ended September 30, 1999 - (716,759)
Other comprehensive loss (79,179) (79,179)
------------ -------------
Balance, September 30, 1999 $ 37,901 $ 22,983
------------ -------------
See accompanying notes and accountant's review report.
4
(FORMERLY SILVER TREND MINING COMPANY)
(AN EXPLORATION STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY(DEFICIT)
Common Stock
------------------------- Additional Stock
Number Paid-in Options and
of Shares Amount Capital Warrants
----------- ------------ -------------- ---------------
Balance, October 1, 1999 5,345,511 $ 53,454 $ 1,452,008 $ 2,659
Common stock and option issuances as follows:
- for employee, officer and director
compensation at an average of
$0.61 per share 231,361 2,314 140,446 15,820
- for officers' and directors' compensation
at an average of $1.19 per share 11,500 115 13,615 -
- for services at an average of $0.47 per share 530,177 5,302 246,333 -
- for mineral property at $0.89 per share 100,000 1,000 88,000 -
- for investments at $0.33 per share 200,000 2,000 64,000 -
- for cash at $0.08 per share 456,247 4,562 28,969 33,531
- for cash, options and warrants 100,000 10,000 2,414 87,586
- for incentive fees at $0.33 per share 65,285 653 20,891 -
- for deferred mineral property acquisition
costs at $0.13 per share 129,938 1,299 14,943 -
- for modification of stockholder agreement
at $0.60 per share 200,000 2,000 118,000 30,000
- for modification of stockholder agreement - - - 14,641
- from exercise of options at $0.12 per share 9,962,762 99,628 1,103,016 (37,524)
Cash received for the issuance of common stock -
warrants for 7,979,761 shares of stock - - - 10,000
Miscellaneous common stock adjustments (5) - - -
Net loss for the year ended September 30, 2000 - - - -
Other comprehensive income - - - -
----------- ------------ -------------- ---------------
Balance, September 30, 2000 18,232,776 182,327 3,292,635 132,182
Common stock and option issuances as follows:
- for cash of $1.00 per share 192,000 1,920 190,080 -
- for cash and consulting services from
options for $0.39 per share 33,333 333 12,737 (3,070)
- for services at $1.15 per share 10,000 100 11,400 -
- for officer and employee compensation at
$1.13 per share 5,200 52 5,828 -
- for payment of accrued officer's compensation
at $1.35 per share 10,000 100 13,400 -
- for consulting services at $0.99 per share 5,461 55 5,347 -
- for directors' compensation at $0.85 per share 75,000 750 63,000 -
- for modification of contract at $0.78 per share 3,000 30 2,310 -
- for interest payment on contract at $0.83 per share 5,000 50 4,100 -
- for mineral property expenses at $0.85 per share 1,000 10 840 -
Options issued to officers, directors and employees - - - 354,000
Warrants issued as follows:
- warrants issued for consulting services - - - 170,521
- warrants issued for loan agreements - - - 89,981
- extension of exercise period on outstanding
warrants - - - 608,058
Net loss for the nine month period ended June 30,
2001 (unaudited) - - - -
Other comprehensive loss - - - -
----------- ------------ -------------- ---------------
Balance, June 30, 2001 (unaudited) 18,572,770 $ 185,727 $ 3,601,677 $ 1,342,672
=========== ============ ============== ===============
Other
Accumulated Comprehensive
Deficit Income Total
--------------- ------------------ ---------------
Balance, October 1, 1999 $ (1,523,040) $ 37,901 $ 22,982
Common stock and option issuances as follows:
- for employee, officer and director
compensation at an average of
$0.61 per share - - 158,580
- for officers' and directors' compensation
at an average of $1.19 per share - - 13,730
- for services at an average of $0.47 per share - - 251,635
- for mineral property at $0.89 per share - - 89,000
- for investments at $0.33 per share - - 66,000
- for cash at per share
- for cash, options and warrants 100,000
- for incentive fees at $0.33 per share - - 21,544
- for deferred mineral property acquisition
costs at $0.13 per share - - 16,242
- for modification of stockholder agreement
at $0.60 per share - - 150,000
- for modification of stockholder agreement - - 14,641
- from exercise of options at $0.12 per share - - 1,165,120
Cash received for the issuance of common stock
warrants for 7,979,761 shares of stock - - 10,000
Miscellaneous common stock adjustments - - -
Net loss for the year ended September 30, 2000 (2,186,541) - (2,186,541)
Other comprehensive income - (38,314) (38,314)
--------------- ------------------ ---------------
Balance, September 30, 2000 (3,709,581) (413) (111,850)
Common stock and option issuances as follows:
- for cash of $1.00 per share - - 192,000
- for cash and consulting services from
options for $0.39 per share - - 10,000
- for services at $1.15 per share - - 11,500
- for officer and employee compensation at
$1.13 per share - - 5,880
- for payment of accrued officer's compensation
at $1.35 per share - - 13,500
- for consulting services at $0.99 per share - - 5,402
- for directors' compensation at $0.85 per share - - 63,750
- for modification of contract at $0.78 per share - - 2,340
- for interest payment on contract at $0.83 per share - - 4,150
- for mineral property expenses at $0.85 per share - - 850
Options issued to officers, directors and employees - - 354,000
Warrants issued as follows:
- warrants issued for consulting services - - 170,521
- warrants issued for loan agreements - - 89,981
- extension of exercise period on outstanding
warrants - - 608,058
Net loss for the nine month period ended June 30,
2001 (unaudited) (3,091,222) - (3,091,222)
Other comprehensive loss - 413 413
--------------- ------------------ ---------------
Balance, June 30, 2001 (unaudited) $ (6,800,803) $ - $ (1,670,727)
=============== ================== ===============
See accompanying notes and accountant's review report.
5
(FORMERLY SILVER TREND MINING COMPANY)
(AN EXPLORATION STAGE COMPANY)
STATEMENTS OF CASH FLOWS
Period from
Ocotber 1, 1996
(Inception of
Nine Months Ended Exploration
------------------------------------- Stage) to
June 30, June 30, June 30,
2001 2000 2001
(Unaudited) (Unaudited) (Unaudited)
------------------ ----------------- --------------------
Cash flows from operating activities:
Net loss $ (3,091,222) $ (1,284,819) $ (6,242,299)
Adjustments to reconcile net income (loss) to
net cash used by operating activities:
Depreciation 13,461 3,980 24,572
Loss (gain) on investment sales 78,033 (2,263) 81,880
Loss on disposition and impairment of assets - - 188,226
Common stock issued for services
and expenses 19,788 178,735 504,002
Common stock and options issued as compensation 429,884 157,860 684,345
Stock options and warrants issued for financing activities 698,039 14,641 715,339
Common stock and warrants issued to acquired mineral
property options - 127,742 344,873
Warrants issued for consulting fees 170,521 170,521
Common stock issued for incentive fees - 21,544 21,544
Changes in assets and liabilities:
Accounts receivable - - -
Related party receivable - (3,056) -
Inventory - - 3,805
Prepaid expenses 1,725 1,000 -
Accounts payable 778,842 63,395 1,102,907
Accrued expenses 26,112 16,824 45,559
------------------ ----------------- --------------------
Net cash used in operating activities (874,817) (704,417) (2,354,726)
------------------ ----------------- --------------------
Cash flows from investing activities:
Payment of deposit - (1,000) (1,000)
Return of deposit - - 1,000
Proceeds from sale of equipment - - 33,926
Proceeds from sale of mineral property - - 20,000
Purchase of furniture and equipment - (18,425) (37,195)
Proceeds from investments sold 41,420 18,923 112,707
------------------ ----------------- --------------------
Net cash provided by investing activities 41,420 (502) 129,438
------------------ ----------------- --------------------
Cash flows from financing activities:
Payments on notes payable and short term borrowings (2,130) (1,769) (4,842)
Sale of warrants for common stock - 10,000 10,000
Proceeds from short-term borrowings 535,000 577,000
Sale of common stock, subscriptions
and exercise of options 202,000 723,531 1,643,151
------------------ ----------------- --------------------
Net cash provided by financing activities 734,870 731,762 2,225,309
------------------ ----------------- --------------------
NET INCREASE (DECREASE) IN CASH (98,527) 26,843 21
CASH, BEGINNING OF YEAR 102,155 8,998 3,607
------------------ ----------------- --------------------
CASH, END OF YEAR $ 3,628 $ 35,841 $ 3,628
================== ================= ====================
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 559 $ - $ 2,210
Taxes paid $ - $ - $ -
NON-CASH FINANCING ACTIVITIES:
Common stock and warrants issued to acquire
mineral properties $ - $ 127,742 $ 344,873
Common stock issued to acquire mineral property $ - $ - $ 75,000
Common stock issued for acquisition of
mining equipment $ - $ $ 180,000
Common stock issued for services and expenses $ 19,788 $ 178,735 $ 501,662
Common stock issued for investment $ - $ 66,000 $ 67,000
Common stock issued for debt $ - $ - $ 40,842
Common stock issued to pay accrued fees $ 11,800 $ - $ 11,800
Deferred acquisition costs on mining property $ - $ - $ 46,242
Stock options and warrants issued for financing activities $ 698,039 $ 14,641 $ 715,339
Warrants issued for consulting fees $ 170,521 $ - $ 170,521
Common stock issued for incentive fees $ - $ 21,544 $ 21,544
Common stock and options issued as compensation $ 429,884 $ 157,860 $ 684,345
Purchase of equipment with financing agreement $ - $ 14,093 $ 14,093
Investments received for mineral property $ - $ - $ 5,000
See accompanying notes and accountant's review report.
6
TREND MINING COMPANY
(FORMERLY SILVER TREND MINING COMPANY)
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2001
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
Trend Mining Company (formerly Silver Trend Mining Company) ("the Company") was
originally incorporated on September 7, 1968 under the laws of the State of
Montana for the purpose of acquiring, exploring and developing mining
properties. From 1984 to late 1996, the Company was dormant. In November 1998,
the Company changed its focus to exploration for platinum and palladium related
metals. In February 1999, the Company changed its name from Silver Trend Mining
Company to Trend Mining Company to better reflect the Company's change of focus
to platinum group metals. The Company conducts operations primarily from its
offices in Coeur d'Alene, Idaho. The Company has elected a September 30 fiscal
year-end.
In March 28, 2001, the Company reincorporated in Delaware. Under its amended
certificate of incorporation, Trend has 100,000,000 shares of authorized common
stock with a par value of $0.01 per share, and 20,000,000 shares of authorized
preferred stock with a par value of $0.01, with rights and preferences to be
determined by the Company's Board of Directors. One share of Series A preferred
stock has been created and issued to Thomas S. Kaplan and requires the holder's
approval for all stock and equity issuances (See Note 4).
The Company is actively seeking additional capital, and management believes that
additional stock can be sold to enable the Company to continue to fund its
property acquisition and platinum group metals exploration activities. However,
management is unable to provide assurances that it will be successful in
obtaining sufficient sources of capital.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies is presented to assist in
understanding the Company's financial statements. The financial statements and
notes rely on the integrity and objectivity of the Company's management. These
accounting policies conform to accounting principles generally accepted in the
United States of America and have been consistently applied in the preparation
of the financial statements.
Accounting Method
- ------------------
The Company's financial statements are prepared using the accrual method of
accounting.
Basic and Diluted Loss per Share
- -------------------------------------
Basic and diluted loss per share is computed by dividing the net loss by the
weighted average number of shares outstanding during the year or period. The
weighted average number of shares is calculated by taking the number of shares
outstanding and weighting them by the length of time that they were outstanding.
Outstanding options and warrants as of June 30, 2001 and 2000 representing
10,239,261 shares and 13,101,094 shares, respectively, have been excluded from
the calculation of diluted loss per share as they would be antidilutive.
7
TREND MINING COMPANY
(FORMERLY SILVER TREND MINING COMPANY)
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2001
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Cash and Cash Equivalents
- ----------------------------
For purposes of the Statement of Cash Flows, the Company considers all
short-term debt securities purchased with a maturity of three months or less to
be cash equivalents.
Compensated Absences
- ---------------------
The Company's employees are entitled to paid vacation, paid sick days and
personal days off depending on job classification, length of service and other
factors. The Company estimates that the amount of compensation for future
absences is minimal and immaterial for the period ended June 30, 2001 and the
year ended September 30, 2000 and, accordingly, no liability has been recorded
in the financial statements. The Company's policy is to recognize the cost of
compensated absences when compensation is actually paid to employees.
Comprehensive Income (Loss)
- -----------------------------
The Company reports comprehensive income (loss) in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive
Income." Accordingly, accumulated other comprehensive income or loss is
included in the stockholders' equity section of the balance sheets. Amounts are
reported net of tax and include unrealized gains or losses on available for sale
securities.
Derivative Instruments
- -----------------------
The Financial Accounting Standards Board issued SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities" in June 1998 and SFAS No. 138
"Accounting for Derivative Instruments and Certain Hedging Activities" in June
2000. This standard establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments embedded in
other contracts, and for hedging activities. It requires that an entity
recognize all derivatives as either assets or liabilities on the balance sheet
and measure those instruments at fair value, at the appropriate date.
At June 30, 2001, the Company had not engaged in any transactions that would be
considered derivative instruments or hedging activities.
Estimates
- ---------
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Employee and Non-Employee Stock Compensation
- ------------------------------------------------
The Company values common stock issued to employees and other than employees for
services, property and investments at the fair market value of the common stock,
which is the closing price of Company stock on the day of issuance. If no
trading occurred on that day, then the fair market value is the lower of the
closing prices on the first previous day and the first following day on which
the Company's stock was traded.
8
TREND MINING COMPANY
(FORMERLY SILVER TREND MINING COMPANY)
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2001
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Exploration Costs
- ------------------
In accordance with accounting principles generally accepted in the United States
of America, the Company expenses exploration costs as incurred. Exploration
costs expensed during the period ended June 30, 2001 and 2000 were $25,838 and
$409,238, respectively. In the nine month periods ending June 30, 2001 and
2000, exploration expenses amounted to $247,988 and $584,232, respectively. As
of June 30, 2001, the exploration costs expensed during the Company's
exploration stage were $1,727,802.
Exploration Stage Activities
- ------------------------------
The Company has been in the exploration stage since October 1, 1996, when the
Company emerged from a period of dormancy, and has no revenues from operations.
The Company is primarily engaged in the acquisition and exploration of mineral
properties. Should the Company locate a commercially viable reserve, the
Company would expect to actively prepare the site for extraction. The Company's
accumulated deficit prior to the exploration stage was $558,504.
Fair Value of Financial Instruments
- ---------------------------------------
The carrying amounts for cash, accounts payable, notes payable and accrued
liabilities approximate their fair value.
Going Concern
- --------------
As shown in the accompanying financial statements, the Company has no revenues,
has incurred a net loss of $3,091,222 for the nine month period ended June 30,
2001 and has an accumulated deficit during the exploration stage of $6,242,299.
These factors indicate that the Company may be unable to continue in existence
in the absence of receiving additional funding.
The financial statements do not include any adjustments related to the
recoverability and classification of recorded assets, or the amounts and
classification of liabilities that might be necessary in the event the Company
cannot continue in existence.
The Company's management believes that it will be able to generate sufficient
cash from public or private debt or equity financing for the Company to continue
to operate based on current expense projections.
Impaired Asset Policy
- -----------------------
In March 1995, the Financial Accounting Standards Board issued a statement SFAS
No. 121 titled "Accounting for Impairment of Long-lived Assets." In complying
with this standard, the Company reviews its long-lived assets quarterly to
determine if any events or changes in circumstances have transpired which
indicate that the carrying value of its assets may not be recoverable. The
Company determines impairment by comparing the undiscounted future cash flows
estimated to be generated by its assets to their respective carrying amounts
whenever events or changes in circumstances indicate that an asset may not be
recoverable. Properties are acquired and recorded at fair values negotiated in
arm's length transactions. Although the Company expenses as costs the
exploration and maintenance of its properties and claims, if results of
exploration warrant an assessment of the carrying value of a mineral property's
acquisition cost, or if the Company has an indication that the recorded fair
value has declined, such costs will be reviewed and any impairment will be
recognized at that time.
9
TREND MINING COMPANY
(FORMERLY SILVER TREND MINING COMPANY)
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2001
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Interim Financial Statements
- ------------------------------
The interim financial statements for the period ended June 30, 2001, included
herein have not been audited. The financial statements reflect all adjustments
which are, in the opinion of management, necessary to present fairly the results
of operations for the period. All such adjustments are normal recurring
adjustments. The results of operations for the period presented are not
necessarily indicative of the results expected for the full fiscal year.
Investment Policies
- --------------------
The Company uses the average cost method to determine the gain or loss on
investment securities held as available-for-sale based upon the accumulated cost
bases of specific investment accounts.
Mineral Properties
- -------------------
The Company capitalizes only amounts paid in cash or stock as consideration for
the acquisition of real property (see Note 3). Properties are acquired and
recorded at fair values negotiated in arm's length transactions. Costs and fees
paid to locate and maintain mining claims, to acquire options to purchase claims
or properties, and to maintain the mineral rights and leases, are expensed as
incurred. When a property reaches the production stage, the related capitalized
costs will be amortized, using the units of production method on the basis of
periodic estimates of ore reserves.
Mineral properties are periodically assessed for impairment of value and any
diminution in value is charged to operations at the time of impairment. Should
a property be abandoned, its unamortized capitalized costs are charged to
operations. The Company charges to operations the allocable portion of
capitalized costs attributable to properties sold. Capitalized costs are
allocated to properties abandoned or sold based on the proportion of claims
abandoned or sold to the claims remaining within the project area.
Option and Warrant Fair Value Calculations
- -----------------------------------------------
The Company utilizes the Black-Scholes valuation model to calculate the fair
value of options and warrants issued for financing, acquisition, compensation
and payment for services purposes. The parameters used in such valuations
include a risk free rate of 5.5%, the assumption that no dividends are paid,
exercise periods ranging from 1 week to 5.5 years, depending upon the terms of
the instrument issued, and a volatility factor calculated annually based on
estimates of expected volatility, as per SFAS 123. The Company used its
historic volatility data to develop the 1998 estimate of 30%, consistent with
its limited public trading in 1998. The volatility estimates for 1999, 2000 and
2001 reflect an average of Company data and volatility factors reported by two
other mining companies at comparable stages in their respective public trading
histories, resulting in expected volatilities of 55.12% in 1999, 48.05% in 2000
and 46.4% in 2001.
Reclassifications
- -----------------
Certain amounts from prior periods have been reclassified to conform to the
current period presentation. This reclassification has resulted in no changes
to the Company's total accumulated deficit or net losses presented.
10
TREND MINING COMPANY
(FORMERLY SILVER TREND MINING COMPANY)
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2001
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Reverse Stock Split
- ---------------------
The Company's board of directors authorized a 1 for 10 reverse stock split of
its no par value common stock. (See Note 4.) All references in the
accompanying financial statements to the number of common shares outstanding and
per share amounts have been restated to reflect the reverse stock split.
Segment Reporting
- ------------------
The Company adopted SFAS No. 131, "Disclosures about Segments of an Enterprise
and Related Information," in the fiscal year ended September 30, 1999. SFAS No.
131 requires disclosures about products and services, geographic areas and major
customers. The adoption of SFAS No. 131 did not affect the Company's results of
operations or financial position. The Company's mining properties were not
engaged in any business activity. The Company had no segments engaged in
business activities at June 30, 2001 and, therefore, no segment reporting is
required.
NOTE 3 - MINERAL PROPERTIES
The following describes the Company's significant mineral properties:
Wyoming Properties
- -------------------
During the year ended September 30, 1999, the Company entered into an option
agreement with General Minerals Corporation (GMC) to acquire the Lake Owen
Project located in Albany County, Wyoming. The agreement with GMC entitled the
Company to receive 104 unpatented mining claims in exchange for 715,996 shares
of common stock, $40,000 in cash to be paid in four quarterly payments of
$10,000 and $750,000 in exploration expenditure commitments to be incurred over
a three-year option period. In May 2000, the Company issued an additional
129,938 shares of common stock under this agreement for the acquisition of the
Lake Owen Project.
The Company and GMC subsequently entered into an amendment to the agreement
under which (i) the Company issued 416,961 shares of common stock to GMC upon
GMC's exercise of preemptive rights, (ii) the Company agreed to perform an
additional $15,000 of geophysical work on the Lake Owen Project prior to
December 31, 2000, (iii) the Company issued 200,000 additional shares and
warrants exercisable until June 2002 to purchase 200,000 shares at $0.70 per
share, and (iv) GMC agreed to terminate its antidilution and preemptive rights
as provided in the original agreement. The Company has expensed $295,873 for
cash paid and common stock issued to acquire this Project.
The Company has located an additional 509 unpatented mining claims in an agreed
area of interest near the Lake Owen Project.
The Company also staked and claimed six claims known as the Albany Project
during the year ended September 30, 1999. These claims are located in Albany
County, Wyoming.
The Company also staked and claimed 42 unpatented mining claims known as the
Spruce Mountain claims and 179 unpatented mining claims known as the Centennial
West claims. These claims are also located in Albany County, Wyoming.
11
TREND MINING COMPANY
(FORMERLY SILVER TREND MINING COMPANY)
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2001
NOTE 3 - MINERAL PROPERTIES (CONTINUED)
In the fiscal year to date, the Company located and staked 155 unpatented mining
claims in Albany County, Wyoming, including 34 and 121 claims, which were staked
at the Douglas Creek and Keystone properties, respectively.
Montana Properties
- -------------------
In March 2000, the Company entered into a three year lease and option agreement
under which it has the right to acquire a 100% interest in the Intrepid claims.
Upon entering into the agreement, the Company paid the claim owners $5,800 in
cash and 100,000 shares of common stock. In the Company's acquisition of this
option, it has expensed $97,140 for cash paid and common stock issued.
Under the agreement, the Company is obligated to incur exploration expenditures
of not less than $10,000 by September 30, 2001, $15,000 by March 4, 2002 and
$15,000 by March 4, 2003. In addition, the Company must make advance royalty
payments of $10,000 by March 4, 2001, $25,000 by March 4, 2002 and $35,000 each
year thereafter. In March 2001, the Company and the claim holders agreed to
replace the March $10,000 advance royalty payment with a $9,000 payment due May
11, 2001. In connection with this agreement, the Company issued to the holders
3,000 shares of common stock on March 11, 2001 with an aggregate value of
$2,340.
Following this agreement the Company was unable to make the May 11th payment. On
May 24, the claim holders agreed to a modification to continue to extend this
payment initially to June 5th, but this payment was also not made as scheduled.
The Company also issued an additional 1,000 shares of common stock with value of
$850 and paid $1,000 in cash per the terms of the modification, which reduced
the outstanding $9000 payment to $8000.
During the option period, the Intrepid claims are subject to a net smelter
royalty of 3% of all ores produced and sold from the Intrepid claims. The
Company has the right to exercise the purchase option at any time for a total
purchase price of $320,000, with any advance royalty payments credited against
the purchase price, and the claim holders retaining a 0.5% net smelter royalty.
The Company has agreed to issue an additional 100,000 shares to the claim
holders if the Company has not terminated the agreement by November 2001.
Also in Montana during 2000, the Company staked 121 claims for the Vanguard
Project. The Company explored and staked 36 claims known as the McCormick Creek
Project in Missoula County.
During the year ended September 30, 2000, the Company located and staked 211
claims in Stillwater County Montana. In the fiscal year to date, an additional
222 claims were staked and added, and 38 claims were abandoned, resulting in a
net total of 395 claims.
Oregon Property
- ----------------
During the year ended September 30, 1999, the Company entered into an agreement
in which it would explore and stake five claims located in Jackson County,
Oregon known as the Shamrock property. All transactions have been completed and
the Company has acquired title to these claims.
12
TREND MINING COMPANY
(FORMERLY SILVER TREND MINING COMPANY)
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2001
NOTE 3 - MINERAL PROPERTIES (CONTINUED)
Nevada Properties
- ------------------
During the year ended September 30, 1999, the Company entered into an agreement
whereby Mountain Gold Exploration would explore and stake claims, transferring
title to the Company upon completion thereof. Transactions were finalized for
13 claims known as the Hardrock Johnson Property located in Clark County,
Nevada. During the fiscal year to date, the Company located and staked 31
unpatented claims known as the Willow Springs Claims. These claims are located
in Nye County, Nevada.
California Properties
- ----------------------
In mid-2000, the Company located 79 unpatented mining claims, known as the Pole
Corral property, in Tehema County, California. In September 2000, the Company
located 33 unpatented mining claims known as the Cisco Butte property in Placer
County, California.
Canadian Property
- ------------------
In August 2000, the Company entered into an agreement whereby Spectra Management
Corporation would explore and stake five claims representing about 67,000 acres
for the Company in northern Saskatchewan. This property is now known as the
Peter Lake Claims. The Company is obligated to complete work requirements of
$212,000 U.S. by June 1, 2002.
Nevada Property
- ----------------
In 1979, the Company acquired the Pyramid Mine, which consists of five
unpatented lode mining claims near Fallon, Nevada. This property is scheduled
for disposal pursuant to the Company's new focus on platinum and palladium
related metals exploration. The claims are within the Walker Indian Reservation
and located on the site of a U.S. Department of Defense bombing range. As of
the date of these financial statements, no clean up has commenced on these
claims. The Company is not aware of any pending requirements for clean up of
hazardous materials. Pursuant to an impairment analysis performed by the
Company, the Company wrote off the $70,333 book value of cash paid and common
stock issued to acquire the Pyramid Mine, effective prior to the inception of
the Exploration Stage. This write-off resulted in a corresponding increase in
accumulated deficit prior to the Exploration Stage.
Idaho Property
- ---------------
The Company owned the Silver Strand Mine in Idaho until it was disposed of in
July 2001. The Company initially entered into an agreement with New Jersey
Mining Company (New Jersey) whereby the Company received 50,000 shares of New
Jersey's restricted common stock in exchange for New Jersey's opportunity to
earn a 100% interest less a net smelter royalty in the Company's unpatented
claims in Kootenai County, Idaho. Subsequent to the end of the reporting period,
in July, 2001 the Company quitclaimed any remaining interest in the Silver
Strand property to Mine Systems Design, Inc. in exchange for cancellation of
$22,539 of outstanding invoices due Mine Systems. The Company also transferred
50,000 shares of New Jersey stock to Mine Systems Design as part of this
settlement.
The Company wrote off the $104,753 book value of the property, effective prior
to the inception of the Exploration Stage. This write-off resulted in a
corresponding increase in accumulated deficit prior to the Exploration Stage.
The Company also expensed $19,000 in previously capitalized costs as mineral
property expenses in 1997. The value of the securities received upon
disposition of the property was $5,000, which the Company recognized as a gain
on disposition in the year ended September 30, 2000.
13
TREND MINING COMPANY
(FORMERLY SILVER TREND MINING COMPANY)
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2001
NOTE 4 - CAPITAL STOCK
Common Stock
- -------------
On March 28, 2001, the Company completed its reincorporation in Delaware. Under
its amended certificate of incorporation, Trend has 100,000,000 shares of
authorized common stock with a par value of $0.01 per share.
On February 16, 1999, the Company's board of directors authorized a 1 for 10
reverse stock split of the Company's no par value common stock. As a result of
the split, 26,356,430 shares were retired. All references in the accompanying
financial statements to the number of common shares and per-share amounts for
the period ended June 30, 2001 and the year ended September 30, 2000 have been
restated to reflect the reverse stock split.
The Company from time to time issues common stock in exchange for services, as
compensation or for the acquisition of assets. Such stock is recorded at the
fair market value on, or as near as possible to, the date of the transaction.
During the year ended September 30, 2000, the Company issued 226,194 shares of
common stock, valued at $145,490 to officers and directors, as compensation;
530,177 shares of common stock valued at $251,635 for services provided to the
Company; 100,000 shares of common stock valued at $89,000 in exchange for the
option to acquire a mineral property; 200,000 shares of common stock valued at
$66,000 for New Jersey Mining Company common stock; 65,285 shares of common
stock valued at $21,544 as incentive fees and 11,419,009 shares of common stock,
options and warrants for cash of $1,298,651. The Company issued 16,667 shares
of common stock valued at $11,000 to an employee as part of his employment
agreement. The Company also issued to General Minerals Corporation (GMC) an
additional 129,938 shares valued at $16,242 as part of the deferred cost of
acquiring the Lake Owen option. In addition, the Company issued 200,000 shares
of common stock valued at $120,000 as partial consideration for the termination
of certain preemptive rights held by GMC.
During the nine-month period ended June 30, 2001, the Company issued 25,461
shares of common stock valued at $30,502 for services, 5,200 shares of common
stock valued at $5,880 as compensation, 33,333 shares of common stock from
options exercised by an employee for cash of $10,000, 75,000 shares valued at
$63,750 to directors as compensation, 3,000 shares valued at $2,340 to modify an
agreement, 5000 shares valued at $4,150 in lieu of interest on an unpaid
invoice, 1,000 shares valued at $850 for mineral property expenses, and 92,000
shares of common stock sold for $192,000 cash as a private placement
See Note 6 regarding future loan repayments in units of Trend securities.
14
TREND MINING COMPANY
(FORMERLY SILVER TREND MINING COMPANY)
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2001
NOTE 4 - CAPITAL STOCK (CONTINUED)
Preferred Stock
- ----------------
Under its amended Delaware certificate of incorporation, Trend also has
20,000,000 shares of authorized preferred stock with a par value of $0.01 per
share, with rights and preferences to be determined by the Company's Board of
Directors.
One share of Series A preferred stock has been created and issued to Thomas S.
Kaplan and requires the holder's approval of all stock and equity issuances
until such time as none of Mr. Kaplan, Electrum LLC or Asher B. Edelman
beneficially owns more than twenty percent of the Company's outstanding stock.
Holders of the Company's common stock will vote on the continued existence of
the Series A preferred stock at each subsequent annual meeting. If the Series A
preferred stock is not continued, the outstanding share of Series A preferred
stock will convert to one share of common stock.
The following table discloses the Company's stock and equity transactions during
the Exploration Stage. This information meets the disclosure requirements of
SFAS No. 7 for development and exploration stage disclosures. The following
abbreviations are used in the table: CS for Common Stock; OPT for Options; and
WAR for Warrants.
TREND MINING COMPANY
(FORMERLY SILVER TREND MINING COMPANY)
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2001
COMMON ADDITIONAL VALUE OF
NUMBER OF PRICE PER STOCK PAID-IN TOTAL NUMBER OF NUMBER OF OPTIONS/
ISSUE DATE SHARES SHARE AMOUNT CAPITAL AMOUNT OPTIONS WARRANTS WARRANTS
- ----------------------------- ---------- --------- ---------- ------- ----------- --------- --------- --------- --------
BALANCE, OCTOBER 1, 1996 1,754,242 $17,542 $ 663,218 $ 680,760
Common stock, options
- ---------------------
and warrants activity as
- ------------------------
follows:
- -------
CS for Cash 03/25/1997 200,000 $ 0.50 2,000 98,000 100,000
CS for Payment of liabilities
and expenses 09/30/1997 45,511 0.50 455 22,301 22,756
BALANCE SEPTEMBER 30,
1997 1,999,753 $19,998 $ 783,518 $ 803,516 -
Common stock, options
- ---------------------
and warrants activity as
- ------------------------
follows:
- -------
CS for Mineral property 07/23/1998 150,000 $ 0.50 1,500 73,500 75,000
CS for Cash 07/23/1998 7,500 0.20 75 1,425 1,500
CS for Lease termination 07/23/1998 12,000 0.50 120 5,880 6,000
CS for Debt 07/23/1998 80,000 0.50 800 39,200 40,000
OPT for Financing 09/24/1998 180,000 2,659
CS for Compensation 09/30/1998 9,000 0.50 90 4,410 $4,500.00
BALANCE SEPTEMBER 30,
1998 2,258,253 $22,583 $ 907,933 $ 930,516 180,000 - $ 2,659
15
TREND MINING COMPANY
(FORMERLY SILVER TREND MINING COMPANY)
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2001
NOTE 4 - CAPITAL STOCK (CONTINUED)
COMMON ADDITIONAL VALUE OF
NUMBER OF PRICE PER STOCK PAID-IN TOTAL NUMBER OF NUMBER OF OPTIONS/
ISSUE DATE SHARES SHARE AMOUNT CAPITAL AMOUNT OPTIONS WARRANTS WARRANTS
- ---------------------------- ---------- --------- ---------- ------- ----------- ---------- --------- --------- --------
BALANCE SEPTEMBER 30,
1998 2,258,253 $22,583 $ 907,933 $ 930,516 180,000 - $ 2,659
Common stock, options
- ---------------------
and warrants activity as
- ------------------------
follows:
- -------
CS for Debt, investment
and expenses 10/12/1998 9,210 $ 0.30 92 2,671 2,763
CS for Equipment 10/30/1998 600,000 0.30 6,000 174,000 180,000
CS for Cash 11/28/1998 5,000 0.20 50 950 1,000
CS for Officers'
compensation 12/31/1998 30,858 0.44 309 13,191 13,500
CS for Directors'
compensation 01/25/1999 16,500 0.25 165 3,960 4,125
CS for Officers'
compensation 01/31/1999 8,572 0.35 86 2,914 3,000
CS for Officers'
compensation 03/31/1999 24,000 0.25 240 5,760 6,000
CS for Consulting services 03/31/1999 6,000 0.25 60 1,440 1,500
CS for Consulting services 04/30/1999 32,000 0.28 320 8,640 8,960
CS for Officers'
compensation 04/30/1999 12,000 0.28 120 3,240 3,360
CS for Consulting services 05/31/1999 73,333 0.25 733 17,600 18,333
CS for Consulting services 06/30/1999 34,353 0.25 344 8,244 8,588
CS for Officers'
compensation 06/30/1999 50,000 0.16 500 7,500 8,000
CS for Consulting services 06/30/1999 95,833 0.16 958 14,375 15,333
CS for Consulting services 07/06/1999 5,000 0.25 50 1,200 1,250
OPT for Financing activities 07/22/1999 50,000 -
CS for Mineral property
option 07/27/1999 715,996 0.13 7,160 82,471 89,631
CS for Cash 07/29/1999 33,333 0.15 333 4,667 5,000
CS for Consulting services 07/30/1999 146,603 0.12 1,466 16,126 17,592
CS for Consulting services 07/31/1999 133,697 0.12 1,337 14,707 16,044
CS for Officers'
compensation 07/31/1999 41,667 0.12 417 4,583 5,000
CS for Cash 08/04/1999 16,667 0.15 167 2,333 2,500
CS for Rent 08/09/1999 1,000 0.25 10 240 250
OPT for Financing activities 08/13/1999 100,000 -
CS for Cash 08/15/1999 50,000 0.05 500 2,000 2,500
CS for Consulting services 08/17/1999 5,000 0.25 50 1,200 1,250
CS for Cash 08/17/1999 100,000 0.05 1,000 4,000 5,000
CS for Cash 08/26/1999 100,000 0.10 1,000 9,000 10,000
CS for Consulting services 08/31/1999 159,750 0.25 1,598 38,341 39,938
CS for Prepaid expenses 09/10/1999 50,000 0.33 500 16,000 16,500
CS for Cash 09/10/1999 50,000 0.10 500 4,500 5,000
CS for Cash 09/13/1999 200,000 0.05 2,000 8,000 10,000
CS for Consulting services 09/30/1999 80,053 0.26 801 20,013 20,814
CS for Officers'
compensation 09/30/1999 133,333 0.26 1,333 33,334 34,667
CS for Consulting services 09/30/1999 67,500 0.26 675 16,875 17,550
BALANCE SEPTEMBER 30,
1999 5,345,511 $53,455 $ 1,452,009 $1,505,464 300,000 - $ 2,659
16
TREND MINING COMPANY
(FORMERLY SILVER TREND MINING COMPANY)
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2001
NOTE 4 - CAPITAL STOCK (CONTINUED)
COMMON ADDITIONAL VALUE OF
NUMBER OF PRICE PER STOCK PAID-IN TOTAL NUMBER OF NUMBER OF OPTIONS/
ISSUE DATE SHARES SHARE AMOUNT CAPITAL AMOUNT OPTIONS WARRANTS WARRANTS
- --------------------------- ---------- --------- ---------- ------- ----------- ---------- ----------- --------- --------
BALANCE SEPTEMBER 30,
1999 5,345,511 $53,455 $ 1,452,009 $1,505,464 330,000 - $ 2,659
Common stock, options
and warrants activity as
follows:
CS for Consulting services 10/04/1999 50,000 $ 0.26 500 12,500 13,000
CS for Cash 10/22/1999 25,000 0.20 250 4,750 5,000
CS for Consulting services 10/31/1999 273,675 0.31 2,737 82,103 84,840
CS for Officers'
compensation 11/30/1999 52,694 0.31 527 15,807 16,334
CS for Consulting services 11/30/1999 4,327 0.31 43 1,298 1,341
CS, OPT & WAR for Cash 12/31/1999 1,000,000 0.012 10,000 2,414 12,414 8,108,000 6,250,000 87,586
CS for Consulting services 12/31/1999 1,200 0.35 12 408 420
CS for Consulting services 01/04/2000 15,000 0.28 150 4,050 4,200
CS for Investments 01/15/2000 200,000 0.33 2,000 64,000 66,000
CS for Incentive fees 01/17/2000 65,285 0.33 653 20,891 21,544
OPT Expiration 01/22/2000 (50,000) -
CS for Cash 01/25/2000 14,286 0.35 143 4,857 5,000
CS for Cash from options 02/22/2000 1,000,000 0.142 10,000 131,900 141,900 (1,000,000) (1,900)
CS & OPT for Employees'
compensation 02/25/2000 16,667 0.66 167 10,833 11,000 33,333 3,070
CS for Consulting services 02/29/2000 10,000 0.72 100 7,100 7,200
CS for Mineral property 03/24/2000 50,000 1.03 500 51,000 51,500
CS for Cash from options 03/27/2000 2,500,000 0.142 25,000 329,750 354,750 (2,500,000) (4,750)
CS for Consulting services 03/31/2000 75,000 0.81 750 60,000 60,750
CS for Officers'
compensation 03/31/2000 3,000 0.81 30 2,400 2,430
CS for Mineral property 04/04/2000 50,000 0.75 500 37,000 37,500
CS & OPT for Directors'
compensation 04/11/2000 150,000 0.70 1,500 103,500 105,000 67,000 12,750
CS for Deferred mineral
property acquisition costs 05/08/2000 129,938 0.125 1,299 14,943 16,242
CS for Consulting services 05/15/2000 9,975 0.63 100 6,184 6,284
CS for Cash 06/26/2000 416,961 0.056 4,170 19,361 23,531
CS & WAR for Modification
of stockholder agreement 06/26/2000 200,000 0.60 2,000 118,000 120,000 200,000 30,000
OPT & WAR for
Modification of stockholder
agreement 06/27/2000 1,729,762 1,729,761 14,641
CS for Cash from options 06/29/2000 1,597,588 0.064 15,976 86,740 102,716 (1,597,588) (2,716)
CS for Officers'
compensation 06/30/2000 9,000 0.81 90 7,185 7,275
CS for Consulting services 06/30/2000 1,000 0.70 10 690 700
OPT Agreement
Modification 07/07/2000 (127,500) -
CS for Cash from options 07/14/2000 10,000 0.30 100 2,900 3,000 (10,000)
CS for Cash from options 07/21/2000 1,800,000 0.122 18,000 201,060 219,060 (1,800,000) (12,060)
CS for Cash from options 07/26/2000 650,000 0.122 6,500 72,605 79,105 (650,000) (4,355)
CS for Officers'
compensation 07/31/2000 3,000 1.24 30 3,690 3,720
CS for Cash from options 08/01/2000 50,000 0.15 500 7,000 7,500 (50,000)
CS for Cash from options 08/01/2000 50,000 0.30 500 14,500 15,000 (50,000)
CS for Cash from options 08/14/2000 90,000 0.122 900 10,053 10,953 (90,000) (633)
CS for Cash from options 08/24/2000 1,000,000 0.122 10,000 111,700 121,700 (1,000,000) (6,700)
CS for Directors'
compensation 08/25/2000 1,500 1.00 15 1,485 1,500
CS for Cash from options 08/31/2000 15,000 0.30 150 4,350 4,500 (15,000)
CS for Officers'
compensation 08/31/2000 1,000 1.13 10 1,120 1,130
17
TREND MINING COMPANY
(FORMERLY SILVER TREND MINING COMPANY)
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2001
NOTE 4 - CAPITAL STOCK (CONTINUED)
COMMON ADDITIONAL
NUMBER OF PRICE PER STOCK PAID-IN TOTAL NUMBER OF NUMBER OF
ISSUE DATE SHARES SHARE AMOUNT CAPITAL AMOUNT OPTIONS WARRANTS
CS for Cash from options 09/22/2000 1,200,174 0.122 12,002 134,720 146,722 (1,200,174)
CS for Consulting services 09/22/2000 90,000 1.45 900 72,000 72,900
CS for Officers'
compensation 09/30/2000 6,000 1.35 60 8,040 8,100
Cash for Warrants 09/30/2000
CS Adjustment 09/30/2000 (5)
BALANCE SEPTEMBER 30,
2000 18,232,776 $182,328 $ 3,296,897 $3,479,225 127,833 8,179,761
Common stock, options
and warrants activity as
follows:
CS for Cash from options 10/10/2000 33,333 $ 0.39 333 12,737 13,070 (33,333)
CS for Consulting services 10/15/2000 10,000 1.15 100 11,400 11,500
CS for Officers'
compensation 10/31/2000 3,000 1.30 30 3,870 3,900
WAR for Consulting
services 11/01/2000 250,000
CS for Employees'
compensation 12/06/2000 2,200 0.90 22 1,958 1,980
CS for Cash 12/20/2000 100,000 1.00 1,000 99,000 100,000
WAR for Consulting
services 12/31/2000 180,000
CS for Consulting services 01/02/2001 10,000 $ 1.35 100 13,400 13,500
CS for Cash 01/11/2001 47,000 1.00 470 46,530 47,000
CS for Consulting services 01/11/2001 3,407 1.00 34 3,373 3,407
CS for Consulting services 01/23/2001 604 1.10 6 658 664
CS for Cash 01/24/2001 25,000 1.00 250 24,750 25,000
WAR for Loan agreements 02/01/2001 285,000
CS for Cash 02/06/2001 20,000 1.00 200 19,800 20,000
CS for Consulting services 02/06/2001 483 1.00 5 478 483
CS for Directors'
compensation 02/23/2001 75,000 0.85 750 63,000 63,750
OPT for Director, officer
and employee
compensation 02/23/2001 1,200,000
WAR for Loan agreements 03/12/2001 50,000
WAR Extension of exercise
period 03/12/2001
CS for Modification of
contract 03/22/2001 3,000 0.78 30 2,310 2,340
CS for Interest payments 04/03/01 5000 .83 50 4,100 4,150
CS for Consulting Services 04/13/01 967 .98 10 938 948
CS for Mineral Property
Expense 05/11/01 1000 .85 10 840 850
BALANCE JUNE 30, 2001 18,572,770 $185,728 $ 3,606,039 $3,791,767 1,294,500 8,944,761
VALUE OF
OPTIONS/
WARRANTS
CS for Cash from options (8,702)
CS for Consulting services
CS for Officers'
compensation
Cash for Warrants 10,000
CS Adjustment
BALANCE SEPTEMBER 30,
2000 $ 118,920
Common stock, options
and warrants activity as
follows:
CS for Cash from options (3,070)
CS for Consulting services
CS for Officers'
compensation
WAR for Consulting
services 123,775
CS for Employees'
compensation
CS for Cash
WAR for Consulting
services 46,746
CS for Consulting services
CS for Cash
CS for Consulting services
CS for Consulting services
CS for Cash
WAR for Loan agreements 76,551
CS for Cash
CS for Consulting services
CS for Directors'
compensation
OPT for Director, officer
and employee
compensation 354,000
WAR for Loan agreements 13,430
WAR Extension of exercise
period 608,058
CS for Modification of
contract
CS for Interest payments
CS for Consulting Services
CS for Mineral Property
Expense
BALANCE JUNE 30, 2001 $1,338,410
18
TREND MINING COMPANY
(FORMERLY SILVER TREND MINING COMPANY)
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2001
NOTE 5 - COMMON STOCK OPTIONS AND WARRANTS
The Company had a Stock Option Plan, (the "Old Plan") which was initiated to
encourage and enable qualified officers, directors and other key employees to
acquire and retain a proprietary interest in the Company by ownership of its
common stock. A total of ten percent of the currently issued and outstanding
shares of the Company's common stock may be subject to, or issued pursuant to
the terms of the plan. No options were issued under the Plan, and the Plan has
been terminated.
On February 23, 2001, the Company's shareholders approved the adoption of the
2000 Equity Incentive Plan and the reservation of 5,000,000 shares of Common
Stock for distribution under the plan. These shares and options to acquire
those shares may be granted to the Company's employees (including officers),
directors and consultants. The plan will terminate on January 4, 2011. The
exercise price of options granted under this plan will not be less than the fair
market price on the date of grant and in some cases not less than 110% of the
fair market price. The term, vesting schedule, transfer restrictions and
termination are to be determined by the Company's Board of Directors.
In the Black-Scholes Option Price Calculations below, the Company used the
following assumptions to estimate fair value: the risk-free interest rate was
5.5%, volatility was 30.0% in 1998, 55.12% in 1999, 48.05% in 2000 and 46.4% in
2001, and the expected life of the options and warrants varied from one week to
5.5 years. The Company also assumed that no dividends would be paid on common
stock.
On February 23, 2001, the Company issued under the plan to its five non-employee
directors an aggregate of 75,000 shares of common stock and options to acquire
75,000 shares with an exercise price of $0.80 per share exercisable until
February 23, 2004. The Company also issued under the plan to its employees
(including officers) options to acquire 1,125,000 shares with an exercise price
of $0.80 per share exercisable until February 23, 2004. The total fair value of
the options issued to directors and employees, estimated on the grant date using
the Black-Scholes Option Price Calculation, was $354,000. The fair value was
charged as a compensation expense.
During 1999, the Company granted various stockholders options to acquire 150,000
shares of common stock at prices varying from $0.15 to $0.35 per share as
additional incentives for various stock purchases. At the respective grant
dates, these options were each determined to have no appreciable fair value
using the Black-Scholes Option Price Calculation.
In February 2000, the Company granted an employee options until February 25,
2002 to acquire 33,333 shares of common stock at an exercise price of $0.30 per
share as compensation. The fair value of these options estimated on the grant
date using the Black-Scholes Option Price Calculation was $3,070. The employee
exercised these options in October 2000.
During the fiscal year ended September 30, 2000, the Company's board of
directors issued options to purchase 67,000 shares of its common stock at $0.50
per share to six retired directors. The options issued to each director were
based on years of service and are exercisable from April 15, 2000 to April 15,
2003. The fair value of these options estimated on the grant date using the
Black-Scholes Option Price Calculation was $12,750.
19
TREND MINING COMPANY
(FORMERLY SILVER TREND MINING COMPANY)
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2001
NOTE 5 - COMMON STOCK OPTIONS AND WARRANTS (CONTINUED)
As partial consideration for an amendment to the GMC option agreement, the
Company granted to GMC in June 2000 a warrant to purchase 200,000 shares for
$0.70 per share exercisable until June 12, 2002. The fair value of this warrant
estimated on the date of issuance using the Black-Scholes Options Price
Calculation was $30,000.
On November 17, 2000, the Company entered into a consulting agreement with R. H.
Barsom Company, Inc., under which the consultant would perform certain services
for the Company until June 30, 2001, for an advance fee of $100,000 and 180,000
shares of common stock. In early January 2001, the Company and the consultant
agreed to terminate the agreement. In connection with the termination, the
consultant surrendered the 180,000 shares of common stock and received warrants
to purchase 180,000 shares of the Company's common stock at $1.50 per share,
exercisable over approximately two years. The fair value of these warrants
estimated on the grant date using the Black-Scholes Option Price Calculation was
$46,746, which was included in consulting expenses for the quarter ended
December 31, 2000.
On November 8, 2000, effective November 1, 2000, the Company entered into a
24-month agreement with Eurofinance Inc. under which the entity would assist the
Company with certain investment community matters in return for a monthly fee of
$5,000, plus expenses, and warrants to purchase 820,000 shares of common stock
at $1.50 per share. The warrants were exercisable until November 1, 2005. In
early January 2001, this agreement was terminated, with the Company no longer
obligated for the remaining monthly fees, and only the warrant for 250,000
shares that vested on November 1, 2000 remains outstanding. The fair value of
this warrant estimated on the grant date using the Black-Scholes Option Price
Calculation was $123,775 which was included in consulting expenses for the
quarter ended December 31, 2000.
Tigris Financial Group Ltd./Electrum LLC
- --------------------------------------------
On December 29, 1999, the Company entered into a stock purchase agreement with
Tigris Financial Group Ltd. under which Tigris purchased 1,000,000 shares of the
Company's common stock for $100,000, was granted an option until March 28, 2000
to acquire up to an additional 3,500,000 shares of common stock for an exercise
price of $0.14 per share, (or $490,000 in the aggregate), and was granted an
option to purchase, for $10,000, warrants to purchase an additional 6,250,000
shares of the Company's common stock at an exercise price of $0.40 per share.
The Company used the Black-Scholes Option Price Calculation effective as of the
transaction date and estimated the fair values to be $37,524 for the option and
$50,062 for the warrants. On March 8, 2000, Tigris assigned its rights under
the stock purchase agreement to Electrum LLC, an affiliate.
Electrum exercised its option and acquired 3,500,000 shares of the Company's
common stock in February and March 2000. Pursuant to the terms of the stock
purchase agreement, upon exercise in full of this first option, Electrum's
option until September 25, 2000 to purchase up to an additional 4,608,000 shares
of common stock at an exercise price of $0.14 per share, or $645,120 in the
aggregate, became exercisable.
On June 27, 2000, the Company and Electrum entered into an amendment to the
stock purchase agreement under which the option to purchase 4,608,000 shares was
modified. As modified, Electrum had an option until July 5, 2000 to acquire up
to an additional 1,597,588 shares at $0.062 per share or $100,000 in the
aggregate and, upon exercise in full of this option, an option became
exercisable
20
TREND MINING COMPANY
(FORMERLY SILVER TREND MINING COMPANY)
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2001
NOTE 5 - COMMON STOCK OPTIONS AND WARRANTS (CONTINUED)
until September 25, 2000 to acquire up to 4,740,174 shares at an exercise price
of $0.115 per share, or $545,120 in the aggregate. In addition, the option to
purchase warrants was modified and, as modified, Electrum had an option to
purchase, for $10,000, warrants to buy up to 7,979,761 shares at an exercise
price of $0.40 per share until September 20, 2003. The Company utilized the
Black-Scholes Option Price Calculation to estimate the fair value of the
modifications as of the grant date and recorded $4,262 for the options and
$10,379 for the warrants. The $14,641 total amount was charged as a financing
expense.
Electrum has exercised all of its options to purchase the Company's common stock
and its option to purchase the warrant. In connection with its acquisition of
those shares, Electrum assigned 3,530,174 shares and 500,000 warrants to third
parties. Subsequently, Electrum has assigned an additional 2,000,000 shares and
500,000 warrants.
Pursuant to loan agreements between the Company and Electrum LLC, the Company
issued warrants to acquire 285,000 shares at $1.50 per share in February 2001,
exercisable through September 30, 2003, and warrants to acquire 50,000 shares at
$1.50 per share in March 2001, exercisable through September 30, 2006. The
Company also extended through September 30, 2006 the expiration dates of the
285,000 warrants, together with the warrants to acquire 7,979,761 shares. The
fair values of the newly issued 285,000 warrants and 50,000 warrants, estimated
on their respective grant dates, as modified for the expiration date extension
in the case of the 285,000 warrants, using the Black-Scholes Option Price
Calculation, were $76,551 and $13,430, respectively. The fair value of the
modification to extend the expiration date, estimated as of the date of the
modification for the 7,979,761 warrants, using the Black-Scholes Option Price
Calculation, was $608,058.
As of June 30, 2001, Tigris and Electrum own approximately 29% of the Company's
outstanding common stock and, assuming that Electrum exercises its warrants and
that the Company has issued no other shares, would own nearly 49% of the
Company's then outstanding common stock.
Electrum had certain preemptive rights, which were not exercised and have been
subsequently terminated. Tigris and Electrum have the right to proportional
representation on the Company's board of directors and registration rights for
all of the Company's common stock acquired through this agreement held by them.
As of June 30, 2001 and 2000, the Company had warrants outstanding as described
representing 8,944,761 and 8,179,761 shares of common stock, respectively.
21
TREND MINING COMPANY
(FORMERLY SILVER TREND MINING COMPANY)
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2001
NOTE 5 - COMMON STOCK OPTIONS AND WARRANTS (CONTINUED)
Following is a summary of the status of the options during the year ended
September 30, 2000 and the period ended June 30, 2001:
Weighted Average
Number of Shares Exercise Price
----------------- -----------------
Outstanding at October 1, 1999 330,000 $ 0.32
Granted 9,938,095 0.12
Exercised (9,962,762) 0.12
Forfeited - -
Revised (127,500) 0.36
Expired (50,000) 0.35
----------------- -----------------
Outstanding at September 30, 2000 127,833 $ 0.51
================= =================
Options exercisable at September 30, 2000 127,833 $ 0.51
================= =================
Outstanding at October 1, 2000 127,833 $ 0.51
Granted 1,200,000 0.80
Exercised (33,333) 0.30
Forfeited - -
Revised - -
Expired - -
----------------- -----------------
Outstanding at June 30, 2001 1,294,500 $ 0.79
================= =================
Options exercisable at June 30, 2001 1,294,500 $ 0.79
================= =================
On or before July 19, 2001 15,000 $ 0.50
On or before July 19, 2002 12,500 $ 1.00
On or before April 14, 2003 67,000 $ 0.50
On or before February 23, 2004 1,200,000 $ 0.80
22
TREND MINING COMPANY
(FORMERLY SILVER TREND MINING COMPANY)
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2001
NOTE 6 - RELATED PARTY TRANSACTIONS
The Company has accrued director and officer fees in the amounts of $83,798 at
June 30, 2001. As of June 30, 2000, the Company owed fees to officers and
directors of $10,000.
In June 2000, the Company and GMC amended the Lake Owen option agreement.
Pursuant to the amendment, the Company issued 416,961 shares at an average price
of $0.06 per share to GMC in connection with the exercise by GMC of preemptive
rights. In addition, the Company agreed to perform an additional $15,000 of
geophysical survey work on the Lake Owen project prior to December 31, 2000,
issued 200,000 additional shares of common stock to GMC and granted to GMC a
warrant to purchase 200,000 shares for $0.70 per share exercisable until June
12, 2002 in exchange for GMC's agreement to terminate its antidilution and
preemptive rights as provided in the original Lake Owen option agreement. The
geophysical survey work period has been extended beyond December 31, 2000.
Related Party Loans
- ---------------------
In November 2000, the Company borrowed $135,000 from Electrum. The loan bears
interest at an annual rate of 5% and is due either on December 1, 2005 or upon
the Company's completion of a public or private debt or equity financing.
In December 2000, the Company entered into an agreement with Electrum to provide
the right to borrow an additional $250,000. The funds obtained under this
agreement bear interest at 8%, and repayment is due on June 30, 2001 or upon the
Company's completion of a public or private debt or equity financing. The
Company borrowed $200,000 under this agreement, and no additional funds are
available under this agreement.
The loan agreement provides that if these loans are not paid by February 1,
2001, the Company is required to grant Electrum warrants to purchase 285,000
shares of the Company's common stock at $1.50 per share exercisable through
September 30, 2003. The loans were not repaid by February 1, 2001, and the
warrants have been issued. Electrum may also elect to be repaid part or all the
total principal and interest outstanding under both loans in "units" of Trend
securities, at the rate of one unit per each $1.25 owed. Each unit would
consist of one share of common stock and a warrant to purchase one share of
common stock at $1.50 per share, originally exercisable through September 30,
2003. Electrum has agreed that at least $100,000 of the November 2000 loan will
be repaid in units. This conversion of debt to equity has not been
accomplished, and was not reflected in the financial statements as of June 30,
2001.
On March 12, 2001, the Company entered into an agreement with Electrum under
which the Company borrowed an additional $50,000 to fund its operating costs, on
the same interest and repayment terms as the loans under the December 2000 loan
agreement. Under this agreement, in March 2001, the Company granted to Electrum
warrants to purchase an additional 50,000 shares of its common stock at $1.50
per share, exercisable through September 30, 2006. The Company also agreed to
extend through September 30, 2006, the expiration dates of the warrants to
acquire 7,979,761 shares issued under the stock purchase agreement and the
warrants to acquire 285,000 shares issued under the December 2000 agreement.
23
TREND MINING COMPANY
(FORMERLY SILVER TREND MINING COMPANY)
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2001
NOTE 6 - RELATED PARTY TRANSACTIONS (CONTINUED)
In the quarter ended March 31, 2001, the Company recorded a financing charge of
$608,058 related to the extension of the 7,979,761 warrants granted under the
stock purchase agreement and recorded a financing charge totaling $89,981 for
the grant and extension of the 285,000 warrants issued under the December 2000
loan agreement and the grant of the 50,000 warrants issued under the March 2001
loan agreement. These financing costs represent the fair value of the equity
issuances under the Company's Black-Scholes Option Price Calculation.
On April 11, 2001, the Company entered into an agreement with Electrum under
which the Company may borrow additional funds from Electrum under the terms of
December 2000 loan agreement to fund its operating costs if Electrum elects, in
its sole discretion, to lend such funds. During the period from April 10, 2001
through June 30, 2001 the Company borrowed $150,000 under this agreement. The
funds borrowed under this agreement bear interest at 8%, and repayment is due on
the earlier of June 30, 2001 or completion of any private placement of the
Company's shares. At Electrum's option, the Company may repay part or all of
the principal and interest outstanding under the loan in units as described
above.
Employment Agreement
- ---------------------
In July 2000, the Company entered into an employment agreement with John Ryan,
then the Chief Financial Officer, Secretary and Treasurer of the Company, under
which Mr. Ryan received 3,000 shares per month of Trend common stock as
compensation for his services. Mr. Ryan resigned in December 2000, and this
agreement was terminated. No amounts were owed to Mr. Ryan as of June 30, 2001.
In August 2001, Mr. Ryan was again designated as the Company's Chief Financial
Officer, Secretary and Treasurer.
NOTE 7 - PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Major additions and improvements
are capitalized. Minor replacements, maintenance and repairs that do not
increase the useful lives of the assets are expensed as incurred. Depreciation
of property and equipment, including vehicles, is being calculated using the
straight-line method over the expected useful lives of five years of the assets.
Depreciation expense for the nine month period ended June 30, 2001 and the year
ended September 30, 2000 was $13,461 and $10,823, respectively.
The following is a summary of property, equipment, and accumulated depreciation.
June 30, September 30,
2001 2000
---------- ---------------
Furniture and Equipment $ 51,288 $ 51,288
Less: Accumulated Depreciation (24,572) (11,111)
---------- ---------------
$ 26,716 $ 40,177
========== ===============
24
TREND MINING COMPANY
(FORMERLY SILVER TREND MINING COMPANY)
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2001
NOTE 8 - INVESTMENTS
The Company's securities investments are classified as available-for-sale
securities which are recorded at fair value in investments and other assets on
the balance sheet, with the change in fair value during the period excluded from
earnings and recorded net of tax as a component of other comprehensive income.
The Company has no securities, which are classified, as trading securities.
The Company recognized a charge for other comprehensive loss of $38,314 for the
year ended September 30, 2000. In the nine month periods ended June 30, 2001
and June 30, 2000, the Company recognized income of $413 and $5,686,
respectively, for the change in the market value of investments. The investment
in New Jersey Mining Company was liquidated during the period ended March 31,
2001 and the Company realized a loss of $74,533.
Subsequent to the end of the reporting period, the Company disposed of its last
50,000 shares of New Jersey Mining Company stock to Mine Systems Design, Inc. in
settlement of a consulting invoice of $22, 539. The Company realized a gain of
$22,539 on this transaction.
NOTE 9 - NOTES PAYABLE
Following is a summary of long-term debt as of June 30, 2001 and September 30,
2000:
June 30, September 30,
2001 2000
---------- ---------------
Note payable to First Security Bank, N.A.
Interest at 14.99%, secured by vehicle, payable in monthly
installments of $179 through February 28, 2003 $ 3,306 $ 4,339
Note payable to First Security Bank, N.A.
Interest at 14.99%, secured by vehicle, payable in monthly
installments of $231 through April 7, 2005 8,051 9,042
---------- ---------------
Total notes payable 11,251 13,381
Less: Current maturities included in current liabilities (3,308) (2,992)
---------- ---------------
$ 7,943 $ 10,389
========== ===============
Following are the maturities of long-term debt for the current year and each of
the next four years ending on September 30:
2001 $ 1,062
2002 3,408
2003 2,884
2004 2,345
2005 1,552
----------
$ 11,251
==========
25
TREND MINING COMPANY
(FORMERLY SILVER TREND MINING COMPANY)
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2001
NOTE 10 - INCOME TAXES
At June 30, 2001, the Company has accumulated operating losses approximating
$5.5 million. These operating losses may be offset against future taxable
income, however there is no assurance that the Company will have income in the
future. Accordingly, the potential tax benefit of the net operating loss
carryforward is offset by a valuation allowance of the same amount. The
Company's ability to utilize these net operating loss carryforwards may be
limited by ownership changes. No provision for the recoverability of tax
benefits has been reported in the financial statements of the Company, due to
their uncertainty. The Company also owes to the Internal Revenue Service
employment taxes of $87,616 as of June 30, 2001.
NOTE 11 - COMMITMENTS AND CONTINGENCIES
Lake Owen Option Agreement
- -----------------------------
In July 1999, the Company executed an option agreement with General Minerals
Corporation (hereinafter "GMC") wherein the Company may earn a 100% interest in
a mineral property in Albany County, Wyoming in exchange for its payment of
exploration expenditures during the three-year option period, which commenced on
July 27, 1999. Under the agreement, the Company is obligated to spend $750,000
on exploration expenditures for this project, commonly known as the Lake Owen
property, during the option period, with no less than $150,000 of such
expenditures to be made within the first year. The agreement was amended in
June 2000 to include $15,000 of geophysical survey work.
In consideration for the aforementioned option, the Company paid GMC $40,000 in
cash and issued to GMC 715,996 shares in 1999 and 129,938 shares in 2000. The
Company and GMC subsequently entered into an amendment to the agreement under
which (i) the Company issued 416,961 shares of common stock to GMC upon GMC's
exercise of preemptive rights, (ii) the Company agreed to perform an additional
$15,000 of geophysical work on the Lake Owen Project prior to December 31, 2000,
(iii) the Company issued 200,000 additional shares and warrants exercisable
until June 2002 to purchase 200,000 shares at $0.70 per share, and (iv) GMC
agreed to terminate its antidilution and preemptive rights as provided in the
original agreement.
Peter Lake Property
- -------------------
The Company is committed to making exploration expenditures of approximately
$225,000 between September 1, 2001 and September 2, 2002 on this property in
order to retain its interest.
Intrepid Option Agreement
- ---------------------------
In May 2000, the Company entered into a three year lease and option agreement
under which it has the right to acquire a 100% interest in the eight Intrepid
claims. Upon entering the agreement, the Company paid the claim owners $5,800
and 100,000 shares of common stock. The Company is obligated to make
exploration expenditures of at least $10,000 by September 30, 2001, $15,000 by
March 4, 2002 and $15,000 by March 4, 2003. In addition, the Company must make
advance royalty payments of $10,000 by March 4, 2001, $25,000 by March 4, 2002
and $35,000 for each year thereafter.
During the option period, the Intrepid claims are subject to a net smelter
royalty of 3% on all ores produced and sold from the Intrepid claims. The
Company has the right to exercise the purchase option at any time for a total
purchase price of $320,000, with any advance royalty payments to be credited
against the purchase price, and the claim holders retaining a 0.5% net smelter
royalty. The Company has agreed to issue an additional 100,000 shares to the
claim holders if it has not terminated the agreement by November 2001.
26
TREND MINING COMPANY
(FORMERLY SILVER TREND MINING COMPANY)
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2001
NOTE 11 - COMMITMENTS AND CONTINGENCIES (CONTINUED)
In March 2001, the Company and the claim holders agreed to replace the March
$10,000 advance royalty payment with a $9,000 payment due May 11, 2001. In
connection with this agreement, the Company issued to the claim holders 3,000
shares of common stock on March 11, 2001 with an aggregate value of $2,340. The
May 11 payment has not been made and the Company is seeking to modify this
agreement further. In May 2001, the Company issued 1,000 shares of common stock
with a value of $850 and paid $1,000 in cash per terms of the agreement
modification, which reduced the outstanding $9,000 payment to $8,000. (See Note
3.)
Lease Agreements
- -----------------
Through the year ended September 30, 2000, the Company rented office facilities
in Coeur d'Alene, Idaho on a month-to-month basis. Total rents paid during the
year ended September 30, 2000 were $5,530.
During the period ended December 31, 2000, the Company entered into a lease for
its executive offices in Coeur d'Alene. The lease has a three-year term with
monthly rent of $2,656 in addition to a $2,656 security deposit. The Company
has the option to extend the lease for an additional two years at a monthly rent
of $2,921. The Company's rent expense reflects a reduction for payments for
improvements that were considered to be in lieu of lease expense. Total rents
expensed during the nine month period ended June 30, 2001 were $24,468. As of
June 30, 2001 $2656 was still outstanding.
In July 2000, the Company entered into a new lease agreement for additional
office facilities in Reno, Nevada. The agreement is a two year lease and calls
for monthly payments of $1,725 during the first year and $1,775 during the
second year in addition to a $350 security deposit. Prior to the signing of
this lease, the Company had occupied the facilities on a month-to-month basis
for $1,714 per month. Total rents during the nine month period ended June 30,
2001 and the year ended September 30, 2000 were $15,595 and $3,438,
respectively.
The minimum lease payments as of June 30, 2001, for the nine months ending
September 30, 2001 and for fiscal years 2002 and 2003, are as follows:
2001 $ 15,949
2002 47,847
2003 31,872
-------------
Total $ 106,155
=============
Consulting Agreements
- ----------------------
On November 17, 2000, the Company entered into a consulting agreement with R. H.
Barsom Company, Inc., under which the consultant would perform certain services
for the Company until June 30, 2001, for an advance fee of $100,000 and 180,000
shares of common stock. In early January 2001, the Company and the consultant
agreed to terminate the agreement. In connection with the termination, the
consultant surrendered the 180,000 shares of common stock and received warrants
to purchase 180,000 shares of the Company's common stock at $1.50 per share,
exercisable until January 2003.
27
TREND MINING COMPANY
(FORMERLY SILVER TREND MINING COMPANY)
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2001
NOTE 11 - COMMITMENTS AND CONTINGENCIES (CONTINUED)
On November 8, 2000, effective November 1, 2000, the Company entered into a
24-month agreement with Eurofinance Inc. under which the entity would assist the
Company with certain investment community matters in return for a monthly fee of
$5,000, plus expenses, and warrants to purchase 820,000 shares of common stock
at $1.50 per share. The warrants were exercisable until November 1, 2005. In
early January 2001, this agreement was terminated, with the Company no longer
obligated for the remaining monthly fees, and only the warrant for 250,000
shares that vested on November 1, 2000 remains outstanding.
On October 31, 2000, the Company entered into a consulting agreement with Brian
Miller under which Mr. Miller performed certain services for the Company. Under
this agreement, Mr. Miller was to have received cash for his consulting
services and was granted 10,000 shares of common stock effective January 2,
2001. On February 23, 2001 Mr. Miller was also granted an option to purchase
107,800 shares at $.80 . On July 20, 2001 and subsequent to the end of this
reporting period, Mr. Miller was informed that the Company would no longer
require his services. The Company is currently negotiating with Mr. Miller
regarding outstanding invoices due to him.
NOTE 12 - DISPOSAL AND IMPAIRMENT OF ASSETS
In late 1998, the Company acquired mining equipment valued at $180,000 in
exchange for 600,000 shares of common stock with a value of $0.30 per share.
Most of this equipment was sold during the year ending September 30, 1999 for
$32,300, resulting in a realized loss of $129,700. In addition, an impairment
of $14,000, representing the excess of the $18,000 carrying value of the
remaining equipment over its fair value of $4,000, was included in the loss on
disposition and impairment of assets charged to operations in the year ended
September 30, 1999. The Company also recognized a loss of $55,000 on the sale
of the Rae Wallace Mine, which had been acquired during 1998 for $75,000 in
common stock and was sold in 1999 for $20,000. In addition, the Company sold
miscellaneous equipment in 1999, recognizing $7,026 in additional gains. (See
Note 3.)
During the year ended September 30, 2000, the Company recognized a gain of
$5,000 on the sale of the Silver Strand Mine, for which it received New Jersey
Mining Company stock valued at $5,000 and retained a royalty. The mine had been
acquired for common stock in 1984. This New Jersey Mining Company stock was
subsequently transferred to a consultant in settlement of outstanding invoices.
(See Notes 3, 8 and 13.)
NOTE 13 - SUBSEQUENT EVENTS
Settlement with Mine Systems Design, Inc.
- ----------------------------------------------
The Company owed invoices of $22,539 for consulting services rendered. In
settlement of this invoice, on July 24, 2001 the Company quitclaimed any
remaining interest in the Silver Strand property to Mine Systems Design, Inc.
and transferred 50,000 shares of New Jersey stock to Mine Systems Design.
28
TREND MINING COMPANY
(FORMERLY SILVER TREND MINING COMPANY)
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2001
NOTE 13 - SUBSEQUENT EVENTS (CONTINUED)
Loans to Company
- ------------------
On July 3, 2001 the Company borrowed from Electrum, LLC $85,000 pursuant to the
loan agreement dated April 11, 2001 and further described in Note 6 above.
Effective July 30, 2001 the Company entered into a loan facility with an Officer
of the Company entitling the Company to borrow up to $85,000. On July 30, 2001
the Company borrowed $24,000 pursuant to this loan facility. This loan bears
interest at 8% annually. The Company issued a warrant to the Officer for 85,000
shares exercisable at $1.50 until September 30, 2003 as additional compensation
for entering this loan facility.
29
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
Our losses for the quarter and nine months ended June 30, 2001, were
$433,401 and $3,091,222, respectively. These losses increased our accumulated
deficit as of June 30, 2001 to $6,800,803. Our third quarter loss is due
primarily to professional services fees of $184,403, and general operating
expenses of $125,542. We incurred increased legal and accounting expenses in
connection with our Form 10SB registration statement process. These expenses
should be greatly reduced in the future as the Company progresses in its ongoing
financial reporting requirements, much of which will now be handled internally
by Company staff. Our operating cash deficit totaled $151,767 during the
quarter. We have inadequate cash to fund our planned acquisition and exploration
activities and other operations during the next 12 months. Such funding
uncertainty raises substantial doubts about our ability to continue as a going
concern without raising significant additional capital.
Since February 2000, the exercise by Electrum LLC of its options to acquire
our common stock and other private financing have generated approximately
$1,381,000 in funds to finance our planned activities. As of June 30, 2001, we
have borrowed approximately $535,000 from Electrum LLC, our largest stockholder,
to fund our activities pursuant to certain financial arrangements. Electrum has
agreed to convert at least $100,000 of the debt to "units," at $1.25 per unit.
A unit is comprised of one share of our common stock and a warrant to acquire
one share of common stock at an exercise price of $1.50, exercisable through
September 30, 2006. In connection with the loan agreements with Electrum, we
have granted Electrum warrants to purchase 335,000 shares of our common stock at
$1.50 per share, exercisable through September 30, 2006, and we have extended
for three years through September 30, 2006 the expiration date of additional
warrants to acquire 7,979,761 shares.
We must seek additional financing from the public or private debt or equity
markets to continue our business activities. Under our new Delaware certificate
of incorporation, we have 100,000,000 authorized shares of common stock and are
authorized to issue 20,000,000 shares of preferred stock. The holder of our
Series A preferred stock, currently Mr. Kaplan, has the right to approve all
issuances of equity securities. There can be no assurance that Electrum will
continue to advance funds to us or that our efforts to obtain additional
financing will be successful. If we are unable to raise additional capital, we
may have to suspend or cease operations.
During July and August 2001, we have implemented plans to close the Reno,
Nevada office and reduce staff. We will also continue to review the Company's
mineral properties and the expenses associated with their exploration and
development with an eye towards further cost-cutting and a focus on the mineral
properties which we view as having the greatest potential to host economic
mineralization.
If we are able to raise additional capital on acceptable terms, our primary
business objective for the remainder of 2001 and into 2002 will be to focus on
the evaluation of the mineral properties we now control. We will focus on
satisfying the work commitments that are required on the Lake Owen property
under the Lake Owen option agreement. During the remainder of 2001 we plan to
spend from $200,000 to $300,000 on land payments, scientific analyses of
existing geologic data, and general exploration activities on the Lake Owen
property. In addition, depending on the timing of raising additional funds, we
30
may spend from $50,000 to $100,000 on a selected basis on our other existing
properties for reconnaissance and other exploration work, which may include
geological mapping, geo-chemical sampling, and/or geophysical surveys. During
the quarter ended June 30, 2001, our exploration expenditures totaled $25,838
and have amounted to $247,988 during the fiscal year to date.
As of June 30, 2001, we had a net operating loss for federal income tax
purposes of approximately $5.5 million. A significant portion of this net
operating loss may expire without its being utilized, as we may be unable to
begin profitable operations, which would involve moving from being an
exploration stage company to a development stage company and finally an
operating entity, before its expiration. The net operating loss may be further
limited under Internal Revenue Service rules concerning limitations from
ownership changes. Our management believes there is no current basis for the
recognition of the value of the deferred tax assets derived from the net
operating loss. At such time that our management believes that profitable
operations are imminent, the value of any net operating loss then available will
be used to determine the net deferred tax asset, if any, to be recognized.
FORWARD-LOOKING STATEMENTS
This Form 10-QSB contains forward-looking statements that involve
substantial risks and uncertainties. Investors and prospective investors in our
common stock can identify these statements by forward-looking words such as
"may," "will," "expect," "intend," "anticipate," "believe," "estimate,"
"continue" and other similar words. Statements that contain these words should
be read carefully because they discuss our future expectations, make projections
of our future results of operations or of our financial condition or state other
"forward-looking" information. We believe that it is important to communicate
our future expectations to our investors. However, there may be events in the
future that we are not able to predict accurately or control. The factors
listed in the section captioned "Management's Discussion and Analysis or Plan of
Operation," as well as any cautionary language in this Form 10-QSB, provide
examples of risks, uncertainties and events that may cause our actual results to
differ materially from the expectations we describe in our forward-looking
statements. Investors and prospective investors in our common stock should be
aware that the occurrence of the events described in the "Management's
Discussion and Analysis or Plan of Operation" section and elsewhere in this Form
10-QSB could have a material adverse effect on our business, operating results
and financial condition.
31
PART II
ITEM 1. LEGAL PROCEEDINGS.
None.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
RECENT SALES OF UNREGISTERED SECURITIES
We had 18,617,770 shares of common stock issued and outstanding as of
August 13, 2001. Of these shares, approximately 2.8 million shares may be sold
without limitation under Rule 144, adopted under the Securities Act of 1933 (the
"Securities Act"), and approximately 8.2 million shares can only be resold in
compliance with Rule 144 limitations.
Effective February 16, 1999, we completed a 1 for 10 reverse stock split of
our common stock. Unless otherwise stated, all share amounts set forth in this
Form 10-QSB are presented on a post-split basis.
In general, under Rule 144, a person who has beneficially owned shares
privately acquired directly or indirectly from us or from one of our affiliates,
for at least one year, or who is an affiliate, is entitled to sell, within any
three-month period, a number of shares that do not exceed the greater of 1% of
the then outstanding shares or the average weekly trading volume in our shares
during the four calendar weeks immediately preceding such sale. Sales under
Rule 144 are also subject to certain manner of sale provisions, notice
requirements and the availability of current public information about us. A
person who is not deemed to have been an affiliate at any time during the 90
days preceding a sale, and who has beneficially owned restricted shares for at
least two years, is entitled to sell all such shares under Rule 144 without
regard to the volume limitations, current public information requirements,
manner of sale provisions or notice requirements.
The issuances discussed under this section are exempted from registration
under Rule 506 of the Securities Act ("Rule 504") or Section 4(2) of the
Securities Act ("Section 4(2)"), as provided. All purchasers of the following
securities acquired the shares for investment purposes only and all stock
certificates reflect the appropriate legends. No underwriters were involved in
connection with the sales of securities referred to in this section.
Common Stock
-------------
1. On April 3, 2001, we issued 5,000 shares, valued at $4,150 pursuant to
Section 4(2) to a consultant as payment for interest charges on a consulting
agreement.
2. On April 13, 2001 we issued 967 shares, valued at $948 pursuant to Section
4(2) to a consultant as payment for consulting services.
3. On May 11, 2001, we issued 1,000 shares valued at $850 pursuant to
Section 4(2) to three investors in connection with the modification of an option
agreement concerning mineral property expenses.
32
4. On July 6, 2001, we issued 40,000 shares valued at $29,200 pursuant to
Section 4(2) as compensation for consulting services of Thomas K. Mancuso.
5. On August 9, 2001, we issued 5,000 shares, valued at $3,850, pursuant to
Section 4(2) for interest charges on a consulting agreement.
Options
-------
No additional options were issued during the quarter ended June 30, 2001 or
subsequent to that date and the date of this report.
Warrants
--------
No additional warrants were issued during the quarter ended June 30, 2001 or
subsequent to that date and the date of this report.
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
None.
-------------
(b) Reports on Form 8-K.
On April 16, 2001, the Company filed a Form 8-K, dated March 28,
2001, regarding its reincorporation in Delaware.
33
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
caused this Report to be signed on its behalf by the undersigned, thereunto duly
authorized.
TREND MINING COMPANY
Dated: August 14, 2001 By: /s/ Kurt J. Hoffman
--------------------------------------------
Kurt J. Hoffman
President and Chief Executive Officer
(Principal Executive Officer)
Dated: August 14, 2001 By: /s/ John P. Ryan
--------------------------------------------
John P. Ryan
Chief Financial Officer
34