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 MARCH 31, 2002
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 I.D. No.)
incorporation or organization)
401 FRONT AVENUE
SUITE 1, SECOND FLOOR
COEUR D'ALENE, IDAHO
83814
(Address of principal executive offices)
(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 / /
Transitional Small Business Disclosure: Yes / / No /X/
There were 20,055,935 shares of the Registrant's $.01 par value common stock
outstanding as of March 31, 2002.
================================================================================
TREND MINING COMPANY
(AN EXPLORATION STAGE COMPANY)
FINANCIAL STATEMENTS
MARCH 31, 2002
WILLIAMS & WEBSTER, P.S.
CERTIFIED PUBLIC ACCOUNTANTS
BANK OF AMERICA FINANCIAL CENTER
601 W RIVERSIDE - SUITE 1940
SPOKANE, WASHINGTON 99201
(509) 838-5111
================================================================================
TREND MINING COMPANY
ACCOUNTANT'S REVIEW REPORT 1
FINANCIAL STATEMENTS
Balance Sheets 2
Statements of Operations and Comprehensive Loss 3
Statement of Stockholders' Deficit 4
Statements of Cash Flows 6
NOTES TO THE FINANCIAL STATEMENTS 7
Board of Directors
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
March 31, 2002, and the related statements of operations and comprehensive loss,
stockholders' equity (deficit), and cash flows for the three and six months
ended March 31, 2002 and 2001 and for the period from October 1, 1996 (inception
of exploration stage) to March 31, 2002. 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, 2001 were audited by
us and we expressed an unqualified opinion on them in our report dated December
19, 2001, except for Note 12, as to which the date is February 1, 2002. 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
May 9, 2002
TREND MINING COMPANY
(AN EXPLORATION STAGE COMPANY)
BALANCE SHEETS
March 31,
2002 September 30,
(unaudited) 2001
------------ ---------------
ASSETS
CURRENT ASSETS
Cash $ 7,830 $ 24,954
Equipment held for resale 4,000 4,000
------------ ---------------
Total Current Assets 11,830 28,954
------------ ---------------
MINERAL PROPERTIES - -
------------ ---------------
PROPERTY AND EQUIPMENT, net of depreciation 19,332 22,362
------------ ---------------
OTHER ASSETS
Investments 500 -
------------ ---------------
TOTAL ASSETS $ 31,662 $ 51,316
============ ===============
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable $ 1,151,105 $ 1,125,646
Accounts payable to directors and officers - 8,122
Accrued expenses - 5,312
Interest payable 7,625 29,143
Notes payable to stockholders 953,445 669,000
Current portion of long-term debt 2,996 3,564
------------ ---------------
Total Current Liabilities 2,115,171 1,840,787
------------ ---------------
LONG-TERM DEBT, net of current portion 6,315 7,072
------------ ---------------
COMMITMENTS AND CONTINGENCIES - -
------------ ---------------
STOCKHOLDERS' DEFICIT
Preferred stock, $0.01 par value, 20,000,000
shares authorized; 1 share issued and outstanding - -
Common stock, $0.01 par value, 100,000,000
shares authorized; 20,055,935 and
18,755,970 shares issued and outstanding, respectively 200,559 187,559
Additional paid-in capital 4,734,708 3,772,857
Stock options and warrants 1,389,227 1,389,976
Pre-exploration stage accumulated deficit (558,504) (558,504)
Accumulated deficit during exploration stage (7,855,814) (6,588,431)
------------ ---------------
TOTAL STOCKHOLDERS' DEFICIT (2,089,824) (1,796,543)
------------ ---------------
TOTAL LIABILITIES AND
STOCKHOLDERS' DEFICIT $ 31,662 $ 51,316
============ ===============
2
TREND MINING COMPANY
(AN EXPLORATION STAGE COMPANY)
STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
Period from
October 1, 1996
(Inception of
Exploration Stage)
Three Months Ended Six Months Ended to
---------------------------- ----------------------------
March 31, March 31, March 31, March 31, March 31,
2002 2001 2002 2001 2002
(unaudited (unaudited (unaudited (unaudited (unaudited)
------------- ------------- ------------- ------------- -------------
REVENUES $ - $ - $ - $ - $ -
------------- ------------- ------------- ------------- -------------
EXPENSES
Exploration expense 778,883 118,106 782,953 222,150 2,673,320
General and administrative 145,431 220,950 280,368 687,065 1,705,791
Officers and directors compensation 37,157 527,774 59,407 600,794 1,193,512
Legal and professional 6,117 197,591 28,001 355,266 1,044,582
Depreciation 2,419 4,487 3,030 8,974 31,956
------------- ------------- ------------- ------------- -------------
Total Expenses 970,007 1,068,908 1,153,759 1,874,249 6,649,161
------------- ------------- ------------- ------------- -------------
OPERATING LOSS (970,007) (1,068,908) (1,153,759) (1,874,249) (6,649,161)
------------- ------------- ------------- ------------- -------------
OTHER INCOME (EXPENSE)
Dividend and interest income - 120 - 228 6,398
Gain (loss) on disposition and impairment of assets - - 500 - (187,726)
Loss on investment sales - (74,533) - (78,033) (53,772)
Financing expense (57,853) (698,039) (67,729) (698,039) (887,698)
Interest expense (12,442) (5,770) (48,411) (7,728) (95,130)
Miscellaneous income 2,016 - 2,016 - 11,275
------------- ------------- ------------- ------------- -------------
Total Other Income (Expense) (68,279) (778,222) (113,624) (783,572) (1,206,653)
------------- ------------- ------------- ------------- -------------
LOSS BEFORE INCOME TAXES (1,038,286) (1,847,130) (1,267,383) (2,657,821) (7,855,814)
INCOME TAXES - - - - -
NET LOSS (1,038,286) (1,847,130) (1,267,383) (2,657,821) (7,855,814)
------------- ------------- ------------- ------------- -------------
OTHER COMPREHENSIVE LOSS
Change in market value of investments - 10,688 - 413 -
------------- ------------- ------------- ------------- -------------
NET COMPREHENSIVE LOSS $ (1,038,286) $ (1,836,442) $ (1,267,383) $ (2,657,408) $ (7,855,814)
============= ============= ============= ============= =============
BASIC AND DILUTED NET LOSS PER SHARE $ - $ - $ - $ -
============= ============= ============= =============
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 19,045,473 18,501,226 18,882,276 18,394,823
============= ============= ============= =============
See accompanying notes and accountant's review report.
3
TREND MINING COMPANY
(AN EXPLORATION STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
Common Stock
--------------------- Additional Stock Other
Number Paid-in Options and Accumulated Comprehensive
of Shares Amount Capital Warrants Deficit Income Total
----------- -------- ------------ ------------- -------------- --------- ------------
Balance, October 1, 1996 1,754,242 $ 17,542 $ 663,218 $ - $ (558,504) $ - $ 122,256
Common stock issuances as follows:
- for cash at $0.50 per share 200,000 2,000 98,000 - - - 100,000
- for payment of liabilities and
expenses at $0.50 per share 45,511 455 22,301 - - - 22,756
Net loss for the year ended
September 30, 1997 - - - - (128,614) - (128,614)
----------- -------- ------------ ------------- -------------- --------- ------------
Balance, September 30, 1997 1,999,753 19,997 783,519 - (687,118) - 116,398
Issuance of common stock as follows:
- for mineral property at
'$0.50 per share 150,000 1,500 73,500 - - - 75,000
- for lease termination at
$0.50 per share 12,000 120 5,880 - - - 6,000
- for debt at $0.50 per share 80,000 800 39,200 - - - 40,000
- for cash at $0.20 per share 7,500 75 1,425 - - - 1,500
- for compensation at
$0.50 per share 9,000 90 4,410 - - - 4,500
Issuance of stock options for
financing activities - - - 2,659 - - 2,659
Net loss for the year ended
September 30, 1998 - - - - (119,163) - (119,163)
Change in market value
of investments - - - - - 117,080 117,080
----------- -------- ------------ ------------- -------------- --------- ------------
Balance, September 30, 1998 2,258,253 22,582 907,934 2,659 (806,281) 117,080 243,974
Common stock issuances as follows:
- for cash at an average of 555,000 5,550 35,450 - - - 41,000
$0.07 per share
- for prepaid expenses at 50,000 500 16,000 - - - 16,500
$0.33 per share
- for consulting services at an
average of $0.20 per share 839,122 8,391 158,761 - - - 167,152
- for mineral property at 715,996 7,160 82,470 - - - 89,630
$0.13 per share
- for officers' compensation at
an average of $0.24 per share 300,430 3,004 70,522 - - - 73,526
- for debt, investment and
expenses at $0.30 per share 9,210 92 2,671 - - - 2,763
- for directors' compensation at
an average of $0.25 per share 16,500 165 3,960 - - - 4,125
- for rent at $0.25 per share 1,000 10 240 - - - 250
- for equipment at $0.30 per share 600,000 6,000 174,000 - - - 180,000
Net loss for the year ended
September 30, 1999 - - - - (716,759) - (716,759)
Other comprehensive loss - - - - - (79,179) (79,179)
----------- -------- ------------ ------------- -------------- --------- ------------
Balance, September 30, 1999 5,345,511 53,454 1,452,007 2,659 (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 231,361 2,314 140,446 15,820 - - 158,580
- for officers' and directors'
compensation at an average
of $1.19 per share 11,500 115 13,615 - - - 13,730
- for services at an average of
$0.47 per share 530,177 5,302 246,333 - - - 251,635
- for mineral property at
$0.89 per share 1,000,000 1,000 88,000 - - - 89,000
- for investments at
$0.33 per share 200,000 2,000 64,000 - - - 66,000
- 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 87,586 100,000
- for incentive fees at
$0.33 per share 65,285 653 20,891 - - - 21,544
- for deferred mineral property
acquisition costs at
$0.13 per share 129,938 1,299 14,943 - - - 16,242
- for modification of stockholder
agreement at $0.60 per share 200,000 2,000 118,000 30,000 - - 150,000
- for modification of stockholder
agreement - - 4,262 10,379 - - 14,641
-from exercise of options at
$0.12 per share 9,962,762 99,628 1,103,016 (37,524) - - 1,165,120
Cash received for the issuance of
common stock warrants for
7,979,761 shares of stock - - - 10,000 - - 10,000
Miscellaneous common stock
adjustments (5) - - - - - -
Net loss for the year ended
September 30, 2000 - - - - (2,186,541) - (2,186,541)
Other comprehensive income (loss) - - - - - (38,314) (38,314)
----------- -------- ------------ ------------- -------------- --------- ------------
Balance, September 30, 2000 18,232,776 $182,327 $ 3,296,896 $ 118,920 $ (3,709,581) $ (413) $ (111,850)
----------- -------- ------------ ------------- -------------- --------- ------------
See accompanying notes and accountant's review report.
4
TREND MINING COMPANY
(AN EXPLORATION STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT) (CONTINUED)
Common Stock
-------------------- Additional Stock Other
Number Paid-in Options and Accumulated Comprehensive
of Shares Amount Capital Warrants Deficit Income
---------- -------- ------------ ------------- -------------- --------
Balance, September 30, 2000 18,232,776 $182,327 $ 3,296,897 $ 118,920 $ (3,709,581) $ (413)
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 an average
of $0.92 per share 13,700 137 12,463 - - -
- 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 an
average of $0.77 per share 45,461 455 34,247 - - -
- 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 an average of $0.80 per share 10,000 100 7,900 - - -
- for mineral property expenses
at $0.85 per share 1,000 10 840 - - -
- for debt at $1.00 per share 134,500 1,345 133,155 - - -
Options issued to officers, directors and
employees for services - - - 354,000 - -
Warrants issued as follows:
- for consulting services - - - 170,521 - -
- for loan agreements - - - 141,547 - -
- for extension of exercise period
on outstanding warrants - - - 608,058 - -
Net loss for the year ended
September 30, 2001 (restated) - - - - (3,437,354) -
Other comprehensive income - - - - - 413
---------- -------- ------------ ------------- -------------- --------
Balance, September 30, 2001 (restated) 18,755,970 187,559 3,772,857 1,389,976 (7,146,935) -
Common stock and option issuances as follows:
- for a note payable at $1.00 per share 25,000 250 24,750 - - -
- for consuting fees payable at $0.55 per share
at $0.55 per share 12,536 126 6,769 - - -
- for mineral properties at $0.70 per share 1,100,000 11,000 759,000 - - -
- for services at $0.40 per share 80,000 800 31,200 - - -
- for financing expense at an
average of $0.44 per share 82,429 824 35,369 - - -
Options issued to officers, directors
and employees for services - - - 29,528 - -
Warrants issued as follows: -
- for loan agreements - - - 31,536 - -
Expiration of stock options and warrants - - 61,813 (61,813) - -
Interest expense forgiven by shareholders - - 42,950 - - -
Net loss for the six months
ended March 31, 2002 - - - - (1,267,383) -
---------- -------- ------------ ------------- -------------- --------
Balance, March 31, 2002 (unaudited) 20,055,935 $200,559 $ 4,734,708 $ 1,389,227 $ (8,414,318) $ -
========== ======== ============ ============= ============== ========
Total
------------
Balance, September 30, 2000 $ (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 an average
of $0.92 per share 12,600
- 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 an
average of $0.77 per share 34,702
- 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 an average of $0.80 per share 8,000
- for mineral property expenses
at $0.85 per share 850
- for debt at $1.00 per share 134,500
Options issued to officers, directors and
employees for services 354,000
Warrants issued as follows:
- for consulting services 170,521
- for loan agreements 141,547
- for extension of exercise period
on outstanding warrants 608,058
Net loss for the year ended
September 30, 2001 (restated) (3,437,354)
Other comprehensive income 413
------------
Balance, September 30, 2001 (restated) (1,796,543)
Common stock and option issuances as follows:
- for a note payable at $1.00 per share 25,000
- for consuting fees payable at $0.55 per share
at $0.55 per share 6,895
- for mineral properties at $0.70 per share 770,000
- for services at $0.40 per share 32,000
- for financing expense at an
average of $0.44 per share 36,193
Options issued to officers, directors
and employees for services 29,528
Warrants issued as follows:
- for loan agreements 31,536
Expiration of stock options and warrants -
Interest expense forgiven by shareholders 42,950
Net loss for the six months
ended March 31, 2002 (1,267,383)
------------
Balance, March 31, 2002 (unaudited) ($2,089,824)
============
See accompanying notes and accountant's review report.
5
TREND MINING COMPANY
(AN EXPLORATION STAGE COMPANY)
STATEMENTS OF CASH FLOWS
Period from
October
(Inception of
Exploration Stage)
Six Months Ended to
---------------------------
March 31, March 31, March 31,
2002 2001 2002
(unaudited (unaudited (unaudited)
------------- ------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(1,267,383) $(2,657,821) $(7,855,814)
Adjustments to reconcile net loss to net cash used by operating activities:
Depreciation 3,030 8,974 31,956
Loss on investment sales - 78,033 58,928
Loss on disposition and impairment of assets - - 188,226
Gain on sale of mineral property claims for securities (500) - (500)
Interest expense forgiven by shareholders 13,807 - 13,807
Common stock issued for services
and expenses 68,193 13,840 610,799
Common stock issued for payables 31,895 - 31,895
Common stock and options issued as compensation 29,528 429,884 721,119
Stock options and warrants issued for financing activities 31,536 698,039 798,441
Common stock and warrants issued to acquire mineral
property options 770,000 - 1,114,873
Warrants issued for consulting fees - 170,521 170,521
Common stock issued for incentive fees - - 21,544
Investment traded for services - - 22,539
Changes in assets and liabilities:
Inventory - - 3,805
Prepaid expenses - 1,725 -
Accounts payable 17,337 545,664 1,140,842
Accrued expenses (5,312) (11,909) 29,142
Interest payable 7,625 - 7,625
------------- ------------- -------------
Net cash used in operating activities (300,244) (723,050) (2,890,252)
------------- ------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payment of deposit - - (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 - - (37,195)
Proceeds from investments sold - 41,420 101,430
------------- ------------- -------------
Net cash provided by investing activities - 41,420 118,161
------------- ------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on notes payable and short term borrowings (1,325) (1,380) (6,782)
Sale of warrants for common stock - - 10,000
Proceeds from short-term borrowings 284,445 385,000 1,129,945
Sale of common stock, subscriptions
and exercise of options - 202,000 1,643,151
------------- ------------- -------------
Net cash provided by financing activities 283,120 585,620 2,776,314
------------- ------------- -------------
NET DECREASE IN CASH (17,124) (96,010) 4,223
CASH, BEGINNING OF PERIOD 24,954 102,155 3,607
------------- ------------- -------------
CASH, END OF PERIOD $ 7,830 $ 6,145 $ 7,830
============= ============= =============
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 687 $ 559 $ 2,897
Income taxes paid $ - $ - $ -
NON-CASH FINANCING ACTIVITIES:
Common stock and warrants issued to acquire
mineral properties $ - $ - $ 1,114,873
Common stock issued to acquire mineral property $ 770,000 $ - $ 845,000
Common stock issued for acquisition of
mining equipment $ - $ - $ 180,000
Common stock issued for services and expenses $ 68,193 $ 13,840 $ 611,949
Common stock issued for investment $ - $ - $ 67,000
Common stock issued for debt $ 31,895 $ 11,800 $ 207,237
Common stock issued for incentive fees $ - $ - $ 21,544
Common stock and options issued as compensation $ - $ 429,884 $ 691,591
Options issued to officers, directors and employees for services $ 29,528 $ - $ 383,528
Stock options and warrants issued for financing activities $ 31,536 $ 698,039 $ 798,441
Warrants issued for consulting fees $ - $ 170,521 $ 170,521
Deferred acquisition costs on mining property $ - $ - $ 46,242
Purchase of equipment with financing agreement $ - $ - $ 14,093
Investments received for mineral property $ 500 $ - $ 5,500
Investments traded for services $ - $ - $ 22,539
See accompanying notes and accountant's review report.
6
TREND MINING COMPANY
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
MARCH 31, 2002
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 authorized the issuance of 100,000,000
shares of 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 Mr. 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. 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 are 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 representing 10,339,943 and 10,239,361 shares
as of March 31, 2002 and 2000, respectively, have been excluded from the
calculation of diluted loss per share as they would be antidilutive.
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.
7
TREND MINING COMPANY
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
MARCH 31, 2002
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 periods ended March 31, 2002 and
2000. 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 March 31, 2002, 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 used 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.
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 periods ended March 31, 2002 and 2001 were $782,953
and $222,150, respectively. As of March 31, 2002, the exploration costs
expensed during the Company's exploration stage were $2,673,320.
8
TREND MINING COMPANY
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
MARCH 31, 2002
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 $1,267,383 for the six month period ended March 31,
2002 and has an accumulated deficit during the exploration stage of $8,414,318.
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
- -----------------------
The Company adopted Financial Accounting Standards Board statement SFAS No. 121
titled "Accounting for Impairment of Long-Lived Assets," which has been replaced
by SFAS No. 144, "Accounting for Impairment or Disposal of Long-Lived Assets."
In complying with these standards, 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.
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.
9
TREND MINING COMPANY
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
MARCH 31, 2002
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 calculation
purposes 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, 46.4% in 2001 and 50% in 2002.
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.
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 March 31, 2002 and, therefore, no segment reporting is
required.
10
TREND MINING COMPANY
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
MARCH 31, 2002
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Accounting Pronouncements
- --------------------------
In September 2000, the FASB issued SFAS No. 140 "Accounting for Transfers and
Servicing of Financial Assets and Extinguishment of Liabilities." This
statement provides accounting and reporting standards for transfers and
servicing of financial assets and extinguishment of liabilities and also
provides consistent standards for distinguishing transfers of financial assets
that are sales from transfers that are secured borrowings. SFAS No. 140 is
effective for recognition and reclassification of collateral and for disclosures
relating to securitization transactions and collateral for fiscal years ending
after December 15, 2000, and is effective for transfers and servicing of
financial assets and extinguishments of liabilities occurring after March 31,
2001. The Company believes that the adoption of this standard will not have a
material effect on the Company's results of operations or financial position.
In June 2001, the FASB issued SFAS No. 141, "Business Combinations" and SFAS No.
142, "Goodwill and Other Intangible Assets". SFAS No. 141 provides for the
elimination of the pooling-of-interests method of accounting for business
combinations with an acquisition date of July 1, 2001 or later. SFAS No. 142
prohibits the amortization of goodwill and other intangible assets with
indefinite lives and requires periodic reassessment of the underlying value of
such assets for impairment. SFAS No. 142 is effective for fiscal years beginning
after December 15, 2001. An early adoption provision exists for companies with
fiscal years beginning after March 15, 2001. The Company adopted SFAS No. 142.
Application of the nonamortization provision of SFAS No. 142 will have no effect
on the Company's financial statements as the Company does not currently have
amortizable assets.
In October 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 143, "Accounting for Asset Retirement
Obligations" (SFAS No. 143). SFAS No. 143 establishes guidelines related to the
retirement of tangible long-lived assets of the Company and the associated
retirement costs. This statement requires that the fair value of a liability
for an asset retirement obligation be recognized in the period in which it is
incurred if a reasonable estimate of fair value can be made. The associated
asset retirement costs are capitalized as part of the carrying amount of the
long -lived assets. This statement is effective for financial statements issued
for the fiscal years beginning after June 15, 2002 and with earlier application
encouraged. The Company adopted SFAS No. 143 and does not believe that the
adoption will have a material impact on the financial statements of the Company
at March 31, 2002.
In October 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets" (SFAS No. 144). SFAS 144 replaces SFAS 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of." This new standard establishes a single accounting model for
long-lived assets to be disposed of by sale, including discontinued operations.
Statement 144 requires that these long-lived assets be measured at the lower of
carrying amount or fair value less cost to sell, whether reported in continuing
operations or discontinued operations. This statement is effective beginning
for fiscal years after December 15, 2001, with earlier application encouraged.
The Company adopted SFAS 144 and does not believe that the adoption will have a
material impact on the financial statements of the Company at March 31, 2002.
11
TREND MINING COMPANY
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
MARCH 31, 2002
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Provision for Taxes
- ---------------------
Income taxes are provided based upon the liability method of accounting pursuant
to SFAS No. 109 "Accounting for Income Taxes." Under this approach, deferred
income taxes are recorded to reflect the tax consequences on future years of
differences between the tax basis of assets and liabilities and their financial
reporting amounts at each year end. A valuation allowance is recorded against
deferred tax assets if management does not believe the Company has met the "more
likely than not" standard imposed by SFAS No. 109 to allow recognition of such
an asset.
At March 31, 2002, the Company had net deferred tax assets of approximately
$1,400,000, principally arising from net operating loss carryforwards for income
tax purposes. As management of the Company cannot determine that it is more
likely than not that the Company will realize the benefit of the net deferred
tax asset, a valuation allowance equal to the net deferred tax asset has been
established at March 31, 2002.
At March 31, 2002, the Company has net operating loss carryforwards of
approximately $7,000,000, which expire in the years 2001 through 2021. The net
operating loss carryforwards do not include expenses that are not deductible for
tax purposes, such as compensation expense, in the amount of $1,401,064
attributable to options and warrants issued to employees and consultants. The
Company also owes to the Internal Revenue Service employment taxes of
approximately $90,000 as of March 31, 2002.
Interim Financial Statements
- ------------------------------
The interim financial statements as of and for the six months ended March 31,
2002 included herein have been prepared for the Company without audit. They
reflect all adjustments which are, in the opinion of management, necessary to
present fairly the results of operations for these periods. All such
adjustments are normal recurring adjustments. The results of operations for the
periods presented are not necessarily indicative of the results to be expected
for the full fiscal year.
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 (subsequently modified), (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
12
TREND MINING COMPANY
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
MARCH 31, 2002
NOTE 3 - MINERAL PROPERTIES (CONTINUED)
Wyoming Properties (continued)
- --------------------------------
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 497 unpatented mining claims in an agreed
area of interest near the Lake Owen Project.
In March 2002, the Company issued 1,100,000 shares, valued at $770,000 in full
satisfaction of cash commitments relating to exploration activities. The
issuance of these shares resulted in the full ownership of the Lake Owen Project
property.
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 159 unpatented mining claims known as the Centennial
West claims. These claims are also located in Albany County, Wyoming.
As of March 31, 2002, the Company has 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 had 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 expensed $97,140 for cash paid and common stock issued.
Under the agreement, the Company was 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 issued an additional 1,000 shares with value of $850 and paid $1,000
in cash per the terms of the modification, which reduced the outstanding $9,000
payment to $8,000. By September 30, 2001, the Company abandoned all of its
interests in the Intrepid claims.
Other properties in Montana include the Vanguard Project and the McCormick Creek
Project, which is in Missoula County. In 2000, the Company staked 121 claims in
regards to the Vanguard Project and explored and staked 36 claims for the
McCormick Creek Project. By September 30, 2001, the Company had abandoned all
of its interests in the Vanguard Project.
13
TREND MINING COMPANY
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
MARCH 31, 2002
NOTE 3 - MINERAL PROPERTIES (CONTINUED)
Montana Properties (continued)
- --------------------------------
During the year ended September 30, 2000, the Company located and staked 211
claims in Stillwater County Montana. During the year ended September 30, 2001,
172 claims were staked and added, and 304 claims were abandoned.
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.
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 March of 2000, the Company located and staked 31 unpatented
claims known as the Willow Springs Claims. These claims are located in Nye
County, Nevada.
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 its $70,333 investment in the Pyramid Mine,
effective prior to the inception of the Company's exploration stage. This
write-off resulted in a corresponding increase in accumulated deficit prior to
the Company's entering the exploration stage.
The Pyramid Mine claims were sold by the Company on November 12, 2001 to Calumet
Mining Company for 50,000 shares of common stock of Calumet Mining Company, a
related party. The Company retained a 1.5% net smelter return production
royalty interest in the Pyramid Mines. See Notes 6 and 8.
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. By September 30, 2001, the Company had abandoned all of its
interests in the Cisco Butte property.
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.
14
TREND MINING COMPANY
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
MARCH 31, 2002
NOTE 3 - MINERAL PROPERTIES (CONTINUED)
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. 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 its 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.
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 authorized the issuance of
100,000,000 shares of 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 periods presented 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 period ended March 31, 2002, the Company issued 25,000 shares of
common stock valued at $25,000 for a note payable, 12,536 shares of common stock
valued at $6,895 for accounts payable, 1,100,000 shares of common stock valued
at $770,000 for mineral property, 80,000 shares of common stock valued at
$32,000 for services and 82,429 shares of common stock valued at $36,193 for
financing expense.
During the year ended September 30, 2001, the Company issued 69,161 shares of
common stock valued at $60,802 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, 10,000
shares valued at $8,000 in lieu of interest on unpaid invoices, 1,000 shares
valued at $850 for mineral property expenses, 92,000 shares of common stock sold
for $192,000 cash as a private placement and 134,500 shares of common stock
valued at $134,500 for loans payable.
See Note 6 regarding future loan repayments in units of Trend securities.
15
TREND MINING COMPANY
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
MARCH 31, 2002
NOTE 4 - CAPITAL STOCK (CONTINUED)
Preferred Stock
- ---------------
Under its amended Delaware certificate of incorporation, Trend has authorized
the issuance of 20,000,000 shares of 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 Mr. Thomas
S. Kaplan under an agreement which requires the holder's approval of all common
and preferred stock and equity issuances until such time as Mr. Kaplan, Electrum
LLC or Mr. Asher B. Edelman no longer beneficially own 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
its 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.
ADDITIONAL NUMBER NUMBER VALUE OF
NUMBER OF PRICE PER COMMON PAID-IN TOTAL OF OF OPTIONS/
ISSUE DATE SHARES SHARE STOCK 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
- --------------------------- ---------- --------- ---------- ------------- --------- --------- ------- -------- ---------
16
TREND MINING COMPANY
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
MARCH 31, 2002
NOTE 4 - CAPITAL STOCK (CONTINUED)
VALUE
NUMBER PRICE COMMON ADDITIONAL NUMBER NUMBER OF
OF PER STOCK PAID-IN TOTAL OF 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
- ----------------------------- ---------- --------- ------ ------- ----------- ---------- ------- -------- ---------
17
TREND MINING COMPANY
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
MARCH 31, 2002
NOTE 4 - CAPITAL STOCK (CONTINUED)
NUMBER PRICE COMMON ADDITIONAL NUMBER NUMBER VALUE OF
ISSUE OF PER STOCK PAID-IN TOTAL OF OF OPTIONS/
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) (603)
- ----------------------------- ---------- --------- ------ ------- ----------- ---------- ----------- --------- ----------
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
- ----------------------------- ---------- --------- ------ ------- ----------- ---------- ----------- --------- ----------
18
TREND MINING COMPANY
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
MARCH 31, 2002
NOTE 4 - CAPITAL STOCK (CONTINUED)
NUMBER PRICE COMMON ADDITIONAL NUMBER NUMBER
ISSUE OF PER STOCK PAID-IN TOTAL OF OF
DATE SHARES HARE 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/ WAR 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 5,000 0.83 50 4,100 4,150
- ----------------------------- ---------- ----------- ------ -------- ----------- ---------- ----------- ----------
CS for Consulting Services 04/13/01 967 0.98 10 938 948
- ----------------------------- ---------- ----------- ------ -------- ----------- ---------- ----------- ----------
CS for Mineral Property
Expense 05/11/01 1,000 0.85 10 840 850
- ----------------------------- ---------- ----------- ------ -------- ----------- ---------- ----------- ----------
WAR for loan agreement 07/01/01 185,000
- ----------------------------- ---------- ----------- ------ -------- ----------- ---------- ----------- ----------
CS for services 07/31/01 40,000 0.73 400 28,800 29,200
- ----------------------------- ---------- ----------- ------ -------- ----------- ---------- ----------- ----------
CS for interest payments 08/08/01 5,000 0.77 50 3,800 3,850
- ----------------------------- ---------- ----------- ------ -------- ----------- ---------- ----------- ----------
WAR attached to note 08/16/01 90,000
- ----------------------------- ---------- ----------- ------ -------- ----------- ---------- ----------- ----------
CS for services 08/28/01 3,700 0.30 37 1,063 1,100
- ----------------------------- ---------- ----------- ------ -------- ----------- ---------- ----------- ----------
CS for loans payable 08/31/01 92,000 1.00 920 91,080 92,000
- ----------------------------- ---------- ----------- ------ -------- ----------- ---------- ----------- ----------
CS for loans payable 09/28/01 42,500 1.00 425 42,075 42,500
- ----------------------------- ---------- ----------- ------ -------- ----------- ---------- ----------- ----------
Options expired (319,700)
- ----------------------------- ---------- ----------- ------ -------- ----------- ---------- ----------- ----------
BALANCE SEPTEMBER 30, 2001 18,755,970 187,559 3,772,857 3,960,416 974,800 9,219,761
- ----------------------------- ---------- ----------- ------ -------- ----------- ---------- ----------- ----------
CS for note payable 10/08/01 25,000 1.00 250 24,750 25,000
- ----------------------------- ---------- ----------- ------ -------- ----------- ---------- ----------- ----------
CS for payable 10/24/01 12,536 0.55 126 6,769 6,895
- ----------------------------- ---------- ----------- ------ -------- ----------- ---------- ----------- ----------
WAR for loan agreements 11/01/01 129,445
- ----------------------------- ---------- ----------- ------ -------- ----------- ---------- ----------- ----------
WAR cancelled 11/15/01 2,750 (275,000)
- ----------------------------- ---------- ----------- ------ -------- ----------- ---------- ----------- ----------
CS for financing expense 1/25/02 64,429 0.45 644 28,349 28,993
- ----------------------------- ---------- ----------- ------ -------- ----------- ---------- ----------- ----------
Interest expense forgiven by
shareholders 1/30/02 42,950
- ----------------------------- ---------- ----------- ------ -------- ----------- ---------- ----------- ----------
WAR issued 1/30/02 180,000
- ----------------------------- ---------- ----------- ------ -------- ----------- ---------- ----------- ----------
CS for financing expense 2/8/02 18,000 0.40 180 7,020 7,200
- ----------------------------- ---------- ----------- ------ -------- ----------- ---------- ----------- ----------
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/ WAR 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
- ----------------------------- -----------
WAR for loan agreement 45,079
- ----------------------------- -----------
CS for services
- ----------------------------- -----------
CS for interest payments
- ----------------------------- -----------
WAR attached to note 6,487
- ----------------------------- -----------
CS for services
- ----------------------------- -----------
CS for loans payable
- ----------------------------- -----------
CS for loans payable
- ----------------------------- -----------
Options expired
- ----------------------------- -----------
BALANCE SEPTEMBER 30, 2001 1,389,976
- ----------------------------- -----------
CS for note payable
- ----------------------------- -----------
CS for payable
- ----------------------------- -----------
WAR for loan agreements 9,876
- ----------------------------- -----------
WAR cancelled (2,750)
- ----------------------------- -----------
CS for financing expense
- ----------------------------- -----------
Interest expense forgiven by
shareholders
- ----------------------------- -----------
WAR issued 21,660
- ----------------------------- -----------
CS for financing expense
- ----------------------------- -----------
19
TREND MINING COMPANY
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
MARCH 31, 2002
NOTE 4 - CAPITAL STOCK (CONTINUED)
NUMBER PRICE COMMON ADDITIONAL NUMBER NUMBER VALUE OF
ISSUE OF PER STOCK PAID-IN TOTAL OF OF OPTIONS/
DATE SHARES SHARE AMOUNT CAPITAL AMOUNT OPTIONS WARRANTS WARRANTS
- ----------------------------- ------- ---------- ----- -------- ----------- ---------- ---------- --------- -----------
CS for services 2/8/02 60,000 0.40 600 23,400 24,000
- ----------------------------- ------- ---------- ----- -------- ----------- ---------- ---------- --------- -----------
CS for services 2/22/02 20,000 0.40 200 7,800 8,000
- ----------------------------- ------- ---------- ----- -------- ----------- ---------- ---------- --------- -----------
OPT for Director, officer and
employee compensation 3/12/02 307,800 29,528
- ----------------------------- ------- ---------- ----- -------- ----------- ---------- ---------- --------- -----------
Options expired 3/12/02 59,063 (196,863) (59,063)
- ----------------------------- ------- ---------- ----- -------- ----------- ---------- ---------- --------- -----------
CS for mineral properties 3/20/02 1,100,000 0.70 11,000 759,000 770,000
- ----------------------------- ------- ---------- ----- -------- ----------- ---------- ---------- --------- -----------
BALANCE MARCH 31, 2002 20,055,935 $200,559 $ 4,734,708 $4,935,267 1,085,737 9,254,206 $1,389,227
- ----------------------------- ------- ---------- ----- -------- ----------- ---------- ---------- --------- -----------
NOTE 5 - COMMON STOCK OPTIONS AND WARRANTS
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, 46.4% in
2001 and 50% in 2002, 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.
During 2002, the Company granted an officer 107,800 options until February 23,
2004 and a consultant 200,000 options until March 3, 2006 with exercise prices
of $0.80 per share as compensation. The fair value of these options estimated
on the grant date using the Black-Scholes Option Price Calculation was $29,528.
On January 8, 2002, a stockholder loaned the Company $30,000. This loan bears
interest at 8% per annum and is due upon the Company's completion of a private
equity placement and concurrently and proportionally with any amounts repaid to
Electrum LLC or any others having provided loan facilities of this type to the
Company. One warrant is attached to each dollar of debt, with a strike price of
$1.50, exercisable through January 9, 2004. The lender may also elect to be
repaid partially or completely in regards to the total principal and interest
outstanding under the loan 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, 2006. On January 30, 2002, this
stockholder forgave interest due in the amount of $138 in exchange for the
adjustment to the conversion feature, such as Electrum was granted.
20
TREND MINING COMPANY
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
MARCH 31, 2002
NOTE 5 - COMMON STOCK OPTIONS AND WARRANTS (CONTINUED)
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.
In a note dated August 16, 2001, a stockholder loaned the Company $90,000. One
warrant is attached to each dollar of debt, with a strike price of $1.50,
exercisable through June 9, 2004. The fair value of these warrants, estimated
on the grant date using the Black-Scholes Option Price Calculation, was $6,487.
This same stockholder, on October 2, 2001, loaned the Company an additional
$10,000 under the same terms as the $90,000 loan. The warrants attached to the
October loan are exercisable until January 9, 2004. The fair value of these
warrants, estimated on the grant date using the Black-Scholes Option Price
Calculation, was $840. See Note 6. On January 30, 2002, this stockholder
forgave interest due her in the amount of $3,299 in exchange for the adjustment
to the conversion feature, such as Electrum was granted.
LCM Holdings, LLC loaned the Company $119,445 in a note dated October 22, 2001.
One warrant is attached to each dollar of debt, with a strike price of $1.50,
exercisable through January 9, 2004. The fair value of these warrants,
estimated on the grant date using the Black-Scholes Option Price Calculation,
was $9,036. On January 30, 2002, LCM Holdings, LLC forgave interest due in the
amount of $2,129 for the adjustment to the conversion feature, such as Electrum
was granted.
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.
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 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 warrants for 250,000
shares that vested on November 1, 2000 remained outstanding. The fair value of
these warrants were estimated on the grant date using the Black-Scholes Option
Price Calculation, which was $123,775. This amount was included in general and
administrative expenses for the year ended September 30, 2001.
21
NOTE 5 - COMMON STOCK OPTIONS AND WARRANTS (CONTINUED)
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 12, 2003. 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.
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.
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, ("Electrum") an affiliate.
Electrum exercised its option and acquired 3,500,000 shares of the Company's
common stock in February and March of 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 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 has assigned 5,530,174 shares and 1,000,000 warrants to
third parties.
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, warrants to acquire 50,000 shares at
$1.50 per share in March 2001, exercisable through September 30,
22
TREND MINING COMPANY
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
MARCH 31, 2002
NOTE 5 - COMMON STOCK OPTIONS AND WARRANTS (CONTINUED)
Tigris Financial Group Ltd./Electrum LLC (continued)
- ---------------------------------------------------------
2006, and warrants to acquire 185,000 shares at $1.50 per share in July 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 285,000
warrants, 50,000 warrants, and the 185,000 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, $13,430 and $45,079, 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.
Pursuant to an agreement to readjust certain terms of loans and warrants dated
January 30, 2002, the Company borrowed an additional $150,000 from Electrum and
Electrum waived accrued interest owed by the Company as of January 29, 2002
totaling $37,384. In consideration of the additional loan and waiver, the
Company issued to Electrum additional warrants to purchase 150,000 shares of
common stock for $1.00 per share through January 30, 2007. Electrum may, in its
sole discretion, elect to be repaid the $150,000 loan by converting the amount
outstanding in units of the Company's securities, at the rate of one unit per
$0.50 of loans converted. Each unit consists of one share of common stock and
a warrant to purchase one share of common stock at a price of $0.50 per share,
exercisable though January 30, 2007. In addition, the Company and Electrum
agreed to amend the prior loan agreements to reduce the conversion rate of the
existing units, previously at a rate of one unit per $1.25 of loans converted to
a rate of one unit per $0.50 of loans converted and to reduce the exercise price
of the warrants included in the units from $1.50 to $1.00 per share. In
addition, the exercise price of warrants included in the units to purchase a
total of 520,000 shares of common stock, owned by Electrum, was reduced from a
price of $1.50 per share to $1.00 per share and the exercise term of each such
warrant was extended for a period of one year.
As of March 31, 2002, Tigris and Electrum own approximately 30% 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 approximately 50% 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.
Warrants for 250,000 shares of common stock with a strike price of $1.50 and
warrants for 25,000 shares of common stock with a strike price of $0.40 were
cancelled in a letter dated November 15, 2001. Prior to cancellation, these had
been assigned by Electrum LLC to Eurofinance, who in turn assigned them to a
third party who was the holder at the time of cancellation.
23
TREND MINING COMPANY
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
MARCH 31, 2002
NOTE 5 - COMMON STOCK OPTIONS AND WARRANTS (CONTINUED)
Following is a summary of the status of the options during the year ended
September 30, 2001 and the period ended March 31, 2002:
Weighted Average
Number of Shares Exercise Price
----------------- -----------------
Outstanding at October 1, 2000 127,833 $ 0.51
Granted 1,200,000 0.80
Exercised (33,333) 0.30
Expired (319,700) 0.79
----------------- -----------------
Outstanding at September 30, 2001 974,800 $ 0.86
================= =================
Options exercisable at September 30, 2001 974,800 $ 0.86
================= =================
Outstanding at October 1, 2001 974,800 $ 0.86
Granted 307,800 -
Exercised - -
Expired (196,863) -
----------------- -----------------
Outstanding at March 31, 2002 1,085,737 $ 0.86
================= =================
Options exercisable at March 31, 2002 1,085,737 $ 0.86
================= =================
Options exercisable:
-On or before July 19, 2002 12,500 $ 1.00
-On or before April 15, 2003 67,000 $ 0.50
-On or before February 23, 2004 806,237 $ 0.80
-On or before March 3, 2006 200,000 $ 0.80
NOTE 6 - RELATED PARTY TRANSACTIONS
The Pyramid Mine claims were sold by the Company on November 12, 2001 to Calumet
Mining Company for 50,000 shares of common stock of Calumet Mining Company, a
related party. The CFO of the Trend Mining Company is also the president of
Calumet Mining Company. See Notes 3 and 8.
Related Party Loans
- ---------------------
In November 2000, the Company borrowed $135,000 from Electrum, LLC, an
affiliated company. The loan bears interest at an annual rate of 5% and is due
upon the earlier of either the Company's completion of a public or private debt
or equity financing or December 1, 2005.
In December 2000, the Company entered into an agreement with Electrum to provide
the right to borrow additional funds. The funds obtained under this agreement
bear interest at 8%, and repayment is due 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 Electrum 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 partially
or completely in regards to 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
24
TREND MINING COMPANY
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
MARCH 31, 2002
NOTE 6 - RELATED PARTY TRANSACTIONS (CONTINUED)
Related Party Loans (continued)
- ----------------------------------
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 March
31, 2002.
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.
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 September 30, 2001, the Company borrowed $135,000 under this agreement.
The funds borrowed under this agreement bear interest at 8%, and repayment is
due upon the Company's completion of a private or public debt or equity
financing. 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.
On July 1, 2001, the Company issued 185,000 warrants to Electrum, strike price
$1.50, exercisable through September 30, 2006. These were issued per Electrum's
request, and the board of directors' approval, that Electrum should possess one
warrant for every dollar of debt outstanding. This brought the total warrants
issued related to notes payable to Electrum to 520,000 as of September 30, 2001.
See Note 12.
Pursuant to an agreement to readjust certain terms of loans and warrants dated
January 30, 2002, the Company borrowed an additional $150,000 from Electrum and
Electrum waived accrued interest owed by the Company as of January 29, 2002
totaling $37,384. In consideration of the additional loan and waiver, the
Company issued to Electrum additional warrants to purchase 150,000 shares of
common stock for $1.00 per share through January 30, 2007. Electrum may, in its
sole discretion, elect to be repaid the $150,000 loan by converting the amount
outstanding in units of the Company's securities, at the rate of one unit per
$0.50 of loans converted. Each unit consists of one share of common stock and
a warrant to purchase one share of common stock at a price of $0.50 per share,
exercisable though January 30, 2007. In addition, the Company and Electrum
agreed to amend the prior loan agreements to reduce the conversion rate of the
existing units, previously at a rate of one unit per $1.25 of loans converted to
a rate of one unit per $0.50 of loans converted and to reduce the exercise price
of the warrants included in the units from $1.50 to $1.00 per share. In
addition, the exercise price of warrants included in the units to purchase a
total of 520,000 shares of common stock, owned by Electrum, was reduced from a
price of
25
TREND MINING COMPANY
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
MARCH 31, 2002
NOTE 6 - RELATED PARTY TRANSACTIONS (CONTINUED)
Related Party Loans (continued)
- ----------------------------------
$1.50 per share to $1.00 per share and the exercise term of each such warrant
was extended for a period of one year.
A stockholder loaned the Company $90,000 in a note dated August 16, 2001. This
loan bears interest at 8% per annum and is due upon the Company's completion of
a private equity placement and concurrently and proportionally with any amounts
repaid to Electrum LLC or any others having provided loan facilities of this
type to the Company. This same stockholder, on October 2, 2001, loaned the
Company an additional $10,000 under the same terms as the $90,000 loan. These
notes carry the same conversion feature as Electrum's, exercisable through
September 30, 2006. See Note 5.
On January 8, 2002, a stockholder loaned the Company $30,000. This loan bears
interest at 8% per annum and is due upon the Company's completion of a private
equity placement and concurrently and proportionally with any amounts repaid to
Electrum LLC or any others having provided loan facilities of this type to the
Company. One warrant is attached to each dollar of debt, with a strike price of
$1.50, exercisable through January 9, 2004. The lender may also elect to be
repaid partially or completely in regards to the total principal and interest
outstanding under the loan 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, 2006. On January 30, 2002, this
stockholder forgave interest due in the amount of $138 in exchange for the
adjustment to the conversion feature, such as Electrum was granted.
During the quarter ended September 30, 2001, other related parties loaned the
Company a total of $193,500. Of this amount, $134,500 was converted to common
stock by September 30, 2001 at $1 per share. See Note 5. The remaining amount
of $59,000 has been recorded as short-term, uncollateralized loans, bearing no
interest and having no specific due date. On October 8, 2001, $25,000 of the
remaining $59,000 was converted to common stock shares in the Company.
LCM Holdings, LLC loaned the Company $119,390 in a note dated October 22, 2001.
This loan bears interest at 8% per annum and is due upon the Company's
completion of a private equity placement and concurrently and proportionally
with any amounts repaid to Electrum LLC or any others having provided loan
facilities of this type to the Company. One warrant is attached to every dollar
of this debt, with a strike price of $1.50, exercisable until January 9, 2004.
LCM's note carries the same conversion feature as Electrum's, exercisable
through September 30, 2006.
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. In July 2001, Mr. Ryan was again designated as the
Company's chief financial officer, secretary and treasurer. A revised
employment agreement was reached under which Mr. Ryan is receiving 7,500 shares
per month. As of March 31, 2002, 7,500 shares were owed Mr. Ryan.
26
TREND MINING COMPANY
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
MARCH 31, 2002
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
double-declining balance method over the expected useful lives of three to seven
years. Depreciation expense for the periods ending March 31, 2002 and 2000 was
$3,030 and $8,974, respectively.
The following is a summary of property, equipment, and accumulated depreciation.
March 31, March 31,
2002 2001
---------- ------------
Furniture, Equipment, and Vehicles $ 51,288 $ 51,258
Less: Accumulated Depreciation (31,956) (20,055)
---------- ------------
$ 19,332 $ 31,203
========== ============
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 year ended September 30, 2001, the
Company recognized income of $413 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 $78,033.
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.
The Company sold the Pyramid Mine claims on November 12, 2001 to Calumet Mining
Company, a related party, for 50,000 shares of Calumet Mining Company's $0.01
par value common stock. These shares are currently being carried at $500. They
will be reevaluated at each reporting period and adjustments, if appropriate,
will be made to the carrying value of these securities.
27
TREND MINING COMPANY
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
MARCH 31, 2002
NOTE 9 - NOTES PAYABLE
Following is a summary of long-term debt as of March 31, 2002 and 2001:
March 31,
------------------
2002 2001
-------- --------
Note payable to Wells Fargo
Interest at 14.99%, secured by vehicle, payable in monthly
installments of $179 through February 28, 2003 $ 2,221 $ 3,954
Note payable to Wells Fargo
Interest at 14.99%, secured by vehicle, payable in monthly
installments of $231 through April 7, 2005 7,090 8,683
-------- --------
Total notes payable 9,311 12,637
Less: Current maturities included in current liabilities (2,996) (3,166)
-------- --------
$ 6,315 $ 9,471
======== ========
Following are the maturities of long-term debt for the next three years:
2003 $ 2,881
2004 2,419
2005 1,015
--------
$ 6,315
========
NOTE 10 - COMMITMENTS AND CONTINGENCIES
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.
Lease Agreements
- -----------------
During the period ended December 31, 2000, the Company entered into a lease for
its executive offices in Coeur d'Alene, Idaho. 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. In January 2002, the Company decreased their occupancy
space resulting in a new monthly payment of $1,422. The Company's rent expense
reflects a reduction for payments for improvements that were considered to be in
lieu of lease expense. Total rent expense, relating to this lease, for the
period ended March 31, 2002 was $12,234.
Future minimum lease payments under this operating lease are as follows at March
31, 2002:
Year Ending:
September 30, 2002 $ 8,532
September 30, 2003 $ 14,408
28
TREND MINING COMPANY
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
MARCH 31, 2002
NOTE 10 - COMMITMENTS AND CONTINGENCIES (CONTINUED)
Lease Agreements (continued)
- ------------------------------
In July 2000, the Company entered into a 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. As of September 30, 2001, the Company no longer occupied
these facilities in Nevada. Management is currently carrying on negotiations
with the leassor as to whether the Company will be liable for the remainder of
the lease.
On August 2, 2001, the Company signed a month-to-month rental agreement for
storage space in Coeur d'Alene, ID. The monthly payment is $425. Delinquent
rental payments are subject to a 12% per annum interest charge. The space is
being used by the Company to store core from the Lake Owen property.
Consulting Agreement
- ---------------------
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, 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. The
107,800 options have expired because they were not exercised within 90 days of
termination of his consulting agreement.
Mr. Sharratt has an agreement with the Company that compensates him with 5,000
shares per month, as of February 1, 2002 in return for executive services
performed.
Mr. Ryan also has an agreement with the Company, as discussed in Note 6.
29
TREND MINING COMPANY
(AN EXPLORATION STAGE COMPANY)
MARCH 31, 2002
NOTE 13 - SUBSEQUENT EVENT
On May 7, 2002, LCM Holdings, LDC, a stockholder, loaned the Company
$60,000. This loan bears interest at 8% per annum and is due upon the Company's
completion of a private equity placement and concurrently and proportionally
with any amounts repaid to Electrum LLC or any others having provided loan
facilities of this type to the Company. One warrant is attached to each dollar
of debt, with a strike price of $1.00, exercisable through May 7, 2007. The
lender may also elect to be repaid partially or completely in regards to the
total principal and interest outstanding under the loan in "units" of Trend
securities, at the rate of one unit per each $.50 owed. Each unit would consist
of one share of common stock and a warrant to purchase one share of common stock
at $1.00 per share, exercisable through May 7, 2007.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
Our losses for the six month period ended March 31, 2002, were $1,267,383.
These losses increased our accumulated deficit as of March 31, 2002 to
$8,039,832. Our third quarter loss is due primarily to exploration expenses of
$782.953 and general operating expenses of $280,368.
Our operating cash deficit totaled $2,107,341 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 2001, we have borrowed funds principally from the major
shareholder of the Company to fund the minimum activities of the Company. As of
March 31, 2002, we have borrowed approximately $670,000 from Electrum LLC, our
largest stockholder pursuant to certain financial arrangements. Subsequent to
the end of the reporting period but prior to the date of this report, LCM
Holdings, LDC, a major stockholder of the Company loaned an additional $60,000
to the Company.
The loans from Electrum LLC and several other major shareholders are
convertible into "units" of the Company at $0.50 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 $1.00, exercisable through September 30, 2006. In
connection with such loan agreements with Electrum, we have granted Electrum
warrants to purchase 670,000 shares of our common stock at $1.00 per share that
begin to expire 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.
Pursuant to an agreement made as of January 30, 2002, the Company agreed to
adjust the conversion terms of the loans provided by Electrum and affiliated
parties. This adjustment also included redefining the terms of the warrants
previously granted to Electrum and others.
We must seek additional financing from the public or private debt or equity
markets to continue our business activities. Under our 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 the one
issued share of our Series A preferred stock, currently Mr. Kaplan, has the
right to approve or disapprove 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. Further, there can be
no assurance that additional financing will be available on terms acceptable to
the Company and/or Mr. Kaplan.
30
TREND MINING COMPANY
(AN EXPLORATION STAGE COMPANY)
MARCH 31, 2002
IF WE ARE UNABLE TO RAISE ADDITIONAL CAPITAL, WE MAY HAVE TO SUSPEND OR
---------------------------------------------------------------------------
CEASE OPERATIONS.
- ------------------
During July and August 2001, we implemented plans to close the Reno, Nevada
office and reduce staff. Since then we have continued to review the Company's
mineral properties and the expenses associated with holding such properties as
well as their exploration and development. We have implemented plans 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 2002 will be to focus on the evaluation of the mineral
properties we now control. We have satisfied the work commitments on Lake Owen,
but it is highly unlikely that we will be able to satisfy the work commitments
at Peter Lake, Saskatchewan due to our current funding constraints. Therefore,
we may subsequently lose control of this property and which represents a very
sizable portion of our total acreage.
During the remainder of 2002 we plan to spend from $500,000 to $800,000 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 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 six months ended March 31, 2002, our
exploration expenditures totaled $782,953.
As of March 31, 2002, we had a net operating loss for federal income tax
purposes of approximately $7,000,000. 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
TREND MINING COMPANY
(AN EXPLORATION STAGE COMPANY)
MARCH 31, 2002
PART II
ITEM 1. LEGAL PROCEEDINGS.
Several vendors of the Company have threatened to take legal action to
recover sums owed to them. Additionally, one vendor, Nevada Southwest
Investments LLC, dba Reno Business Park, has filed an action against the Company
in the Second Judicial District, Washoe County, Nevada to collect the amount of
$17,608.29 due under a rental lease agreement for office space the Company chose
to vacate. The Company does not intend to contest this action since it has no
basis to do so. A court judgment imposed against the Company, which is highly
likely, may result in liens against the Company bank account, other Company
assets, or the mineral properties held by the Company. Such liens may have the
impact of reducing the capability of the Company to remain as a going concern.
Additionally, both the State of Idaho and the Internal Revenue Service have
threatened to impose liens against the Company bank account, other assets, or
the Company mineral properties unless the Company adheres to a rigorous payment
schedule imposed by these entities to repay past due withholding taxes. The
Company may be unable to comply with this schedule due to funding constraints,
in which case, actions by these entities may severely hamper the ability of the
Company to maintain itself as a going concern.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
RECENT SALES OF UNREGISTERED SECURITIES
- ---------------------------------------
We had 20,055,935 shares of common stock issued and outstanding as of March
31, 2002. 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.
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.
Common Stock
-------------
During the six month period ended March 31, 2002, the Company issued 25,000
shares of common stock valued at $25,000 for a note payable, 12,536 shares of
common stock valued at $6,895 for accounts payable, 1,100,000 shares valued at
$770,000 in lieu of and in satisfaction of mineral property work commitments,
80,000 shares valued at $32,000 for services rendered, and 82,429 shares valued
at $36,193 for financing expenses.
32
TREND MINING COMPANY
(AN EXPLORATION STAGE COMPANY)
MARCH 31, 2002
Options
-------
During the reporting period the Company granted an officer 107,800 options
until February 23, 2004 and a consultant 200,000 options until March 3, 2006
with exercise prices of $0.80 per share as compensation. The fair value of these
options estimated on the grant date using the Black-Scholes Option Price
Calculation was $29,528.
Warrants
--------
On October 2, 2001, a stockholder loaned the Company $10,000 which resulted
in the issuance of an additional 10,000 warrants with a strike price of $1.50
exercisable until January 9, 2004. The fair value of these warrants, estimated
on the grant date using the Black-Scholes Option Price Calculation, was $840.
The lender may also elect to be repaid partially or completely in regards to the
total principal and interest outstanding under the loan 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, 2006.
LCM Holdings, LLC loaned the Company $119,445 in a note dated October 22,
2001. One warrant is attached to each dollar of debt, with a strike price of
$1.50, exercisable through January 9, 2004. The fair value of these warrants,
estimated on the grant date using the Black-Scholes Option Price Calculation,
was $9,036. The lender may also elect to be repaid partially or completely in
regards to the total principal and interest outstanding under the loan 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, 2006.
On January 8, 2002, a stockholder loaned the Company $30,000. One warrant
is attached to each dollar of debt, with a strike price of $1.50, exercisable
through January 9, 2004. The lender may also elect to be repaid partially or
completely in regards to the total principal and interest outstanding under the
loan 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, 2006.
Pursuant to an agreement to readjust certain loan terms and strike prices
of certain warrants dated January 30, 2002, the Company borrowed an additional
$150,000 from Electrum and Electrum waived accrued interest owed by the Company
as of January 29, 2002 totaling $42,950. In consideration of the additional loan
and waiver, the Company issued to Electrum additional warrants to purchase
150,000 shares of Common Stock for $1.00 per share through January 30, 2007.
Electrum may, in its sole discretion, elect to be repaid the $150,000 loan by
converting the amount outstanding in Units of the Company's securities, at the
rate of one Unit per $0.50 of loans converted. Each Unit consists of one share
of Common Stock and a warrant to purchase one share of Common Stock at a price
of $0.50 per share, exercisable though January 30, 2007. In addition, the
Company and Electrum agreed to amend the prior loan agreements to reduce the
conversion rate of the existing Units, previously at a rate of one Unit per
$1.25 of loans converted to a rate of one Unit per $0.50 of loans converted and
to reduce the exercise price of the warrants included in the Units from $1.50 to
$1.00 per share. In addition, the exercise price of warrants included in the
Units to purchase a total of 520,000 shares of Common Stock, owned by Electrum,
was reduced from a price of $1.50 per share to $1.00 per share and the exercise
term of each such warrant was extended for a period of one year.
33
TREND MINING COMPANY
(AN EXPLORATION STAGE COMPANY)
MARCH 31, 2002
Subsequent to the end of the reporting period, on May 7, 2002, LCM
Holdings, LDC, a stockholder, loaned the Company $60,000. This loan bears
interest at 8% per annum and is due upon the Company's completion of a private
equity placement and concurrently and proportionally with any amounts repaid to
Electrum LLC or any others having provided loan facilities of this type to the
Company. One warrant is attached to each dollar of debt, with a strike price of
$1.00, exercisable through May 7, 2007. The lender may also elect to be repaid
partially or completely in regards to the total principal and interest
outstanding under the loan in "units" of Trend securities, at the rate of one
unit per each $.50 owed. Each unit would consist of one share of common stock
and a warrant to purchase one share of common stock at $1.00 per share,
exercisable through May 7, 2007.
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.
None
34
TREND MINING COMPANY
(AN EXPLORATION STAGE COMPANY)
MARCH 31, 2002
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: May 14, 2002
By: /s/ Kurt J. Hoffman
-------------------------
Kurt J. Hoffman
President and Chief Executive Officer
(Principal Executive Officer)
Dated: May 14, 2002
By: /s/ John P. Ryan
-------------------------
John P. Ryan
Chief Financial Officer
35