UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_____________________
FORM 10QSB
Under Section 12(b) or Section 12(g) of
The Securities Exchange Act of 1934
for the quarter ended March 31, 2004
TREND MINING COMPANY
(Name of Small Business Issuer in its Charter)
Delaware 81-0304651
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
4881 East Shoreline Drive
Post Falls, Idaho 83854
(Address of principal executive office)
Issuer's telephone number: (208) 773-2250
Securities to be registered under Section 12(b) of the Act:
None
(Title of Class)
Securities to be registered under Section 12(g) of the Act:
Common par value $0.01
(Title of Class)
________________________________________________________________________________
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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 [ ]
The number of shares outstanding at May 14, 2004: 33,229,085 shares
TREND MINING COMPANY
Form 10-QSB
Index
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements and Notes
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Item 3. Controls and Procedures
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities.
Item 4. Submission Of Matters To A Vote Of Security Holders.
Item 5. Other Information.
Item 6. Exhibits and Reports on Form 8-K
ITEM 1. FINANCIAL STATEMENTS AND NOTES
TREND MINING COMPANY
(AN EXPLORATION STAGE COMPANY)
BALANCE SHEETS
- ------------------------------------------------------------------------------------------------------
March 31,
2004 September 30,
(unaudited) 2003
------------------ ------------------
ASSETS
CURRENT ASSETS
Cash $ 3,796 $ 2,558
------------------ ------------------
TOTAL CURRENT ASSETS 3,796 2,558
------------------ ------------------
MINERAL PROPERTIES - -
------------------ ------------------
PROPERTY AND EQUIPMENT, net of depreciation 3,793 5,172
------------------ ------------------
OTHER ASSETS
Investments 24,270 57,300
------------------ ------------------
TOTAL ASSETS $ 31,859 $ 65,030
================== ==================
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable $ 183,051 $ 146,419
Accounts payable - checks in excess of bank balance - 3,297
Accrued wages 75,100 -
Interest payable 84,879 135,425
Loans payable to stockholders 1,072,857 1,097,857
------------------ ------------------
TOTAL CURRENT LIABILITIES 1,415,887 1,382,998
------------------ ------------------
COMMITMENTS AND CONTINGENCIES - -
------------------ ------------------
STOCKHOLDERS' DEFICIT
Preferred stock, $0.01 par value, 20,000,000 shares
authorized; 0 shares issued and outstanding, respectively - -
Common stock, $0.01 par value, 100,000,000
shares authorized; 33,229,085 shares issued
and outstanding, respectively 332,291 332,291
Additional paid-in capital 6,255,998 6,246,963
Stock options and warrants 1,374,007 1,383,042
Pre-exploration stage accumulated deficit (558,504) (558,504)
Accumulated deficit during exploration stage (8,756,590) (8,723,560)
Other comprehensive income (loss) (31,230) 1,800
------------------ ------------------
TOTAL STOCKHOLDERS' DEFICIT (1,384,028) (1,317,968)
------------------ ------------------
TOTAL LIABILITIES AND
STOCKHOLDERS' DEFICIT $ 31,859 $ 65,030
================== ==================
The accompanying condensed notes are an integral part of these financial
statements.
1
TREND MINING COMPANY
(AN EXPLORATION STAGE COMPANY)
STATEMENTS OF OPERATIONS
- ----------------------------------------------------------------------------------------------------------------------------
Period from
October 1, 1996
(Inception of
Three Months Three Months Six Months Six Months Exploration Stage)
Ended Ended Ended Ended to
March 31, March 31, March 31, March 31, March 31,
2004 2003 2004 2003 2004
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
-------------- ------------- ----------- ----------- ------------------
REVENUES $ - $ - $ - $ - $ -
-------------- ------------- ----------- ----------- ------------------
EXPENSES
Exploration expense - 25,852 - 58,979 2,909,066
General and administrative 14,540 113,226 44,720 230,146 2,345,709
Officers and directors compensation 38,100 18,454 75,100 36,908 1,423,496
Legal and professional 54,836 13,366 77,633 34,752 1,215,411
Depreciation 690 2,668 1,379 5,396 50,355
-------------- ------------- ----------- ----------- ------------------
Total Expenses 108,166 173,566 198,832 366,181 7,944,037
-------------- ------------- ----------- ----------- ------------------
OPERATING LOSS (108,166) (173,566) (198,832) (366,181) (7,944,037)
-------------- ------------- ----------- ----------- ------------------
OTHER INCOME (EXPENSE)
Dividend and interest income - - - - 6,398
Gain on sale of internal securities 210,194 - 210,194 - 210,194
Gain (loss) on disposition and impairment of
assets - - - - (177,519)
Gain (loss) on investment sales - 29,167 - 29,167 (23,080)
Financing expense - - - - (1,135,113)
Interest expense (25,629) (19,538) (44,531) (41,201) (268,345)
Miscellaneous income (117) - 139 - 10,484
Forgiveness of debt - - - 122,354 564,428
-------------- ------------- ----------- ----------- ------------------
Total Other Income (Expense) 184,448 9,629 165,802 110,320 (812,553)
-------------- ------------- ----------- ----------- ------------------
INCOME (LOSS) BEFORE INCOME TAXES 76,282 (163,937) (33,030) (255,861) (8,756,590)
INCOME TAXES - - - - -
-------------- ------------- ----------- ----------- ------------------
NET INCOME (LOSS) 76,282 (163,937) (33,030) (255,861) (8,756,590)
-------------- ------------- ----------- ----------- ------------------
OTHER COMPREHENSIVE INCOME (LOSS)
Change in market value of investments (17,130) - (33,030) - (31,230)
-------------- ------------- ----------- ----------- ------------------
NET COMPREHENSIVE INCOME (LOSS) $ 59,152 $ (163,937) $ (66,060) $ (255,861) $ (8,787,820)
============== ============= =========== =========== ==================
BASIC AND DILUTED NET INCOME (LOSS) PER
SHARE $ nil $ (0.01) $ nil $ (0.01)
============== ============= =========== ===========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 33,229,085 29,749,407 33,229,085 26,173,608
============== ============= =========== ===========
The accompanying condensed notes are an integral part of these financial
statements.
2
TREND MINING COMPANY
(AN EXPLORATION STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
- ----------------------------------------------------------------------------------------------------------------------
Common Stock
------------------ Additional Stock
Number Paid-in Options and Accumulated
of Shares Amount Capital Warrants Deficit
--------- -------- ------------ ------------ --------------
Balance, October 1, 1996 1,754,242 $ 17,542 $ 663,218 - $ (558,504)
Common stock issuances as follows:
- for cash at $0.50 per share 200,000 2,000 98,000 - -
- for payment of liabilities and expenses at $0.50
per share 45,511 455 22,301 - -
Net loss for the year ended September 30, 1997 - - - - (128,614)
--------- -------- ------------ ------------ --------------
Balance, September 30, 1997 1,999,753 19,997 783,519 - (687,118)
Issuance of common stock as follows:
- for mineral property at $0.50 per share 150,000 1,500 73,500 - -
- for lease termination at $0.50 per share 12,000 120 5,880 - -
- for debt at $0.50 per share 80,000 800 39,200 - -
- for cash at $0.20 per share 7,500 75 1,425 - -
- for compensation at $0.50 per share 9,000 90 4,410 - -
Issuance of stock options for financing activities - - - 2,659 -
Net loss for the year ended September 30, 1998 - - - - (119,163)
Change in market value of investments - - - - -
--------- -------- ------------ ------------ --------------
Balance, September 30, 1998 2,258,253 $ 22,582 $ 907,934 $ 2,659 $ (806,281)
--------- -------- ------------ ------------ --------------
Other
Comprehensive
Income (Loss) Total
-------------- ----------
Balance, October 1, 1996 - $ 122,256
Common stock issuances as follows:
- for cash at $0.50 per share - 100,000
- for payment of liabilities and expenses at $0.50
per share - 22,756
Net loss for the year ended September 30, 1997 - (128,614)
-------------- ----------
Balance, September 30, 1997 - 116,398
Issuance of common stock as follows:
- for mineral property at $0.50 per share - 75,000
- for lease termination at $0.50 per share - 6,000
- for debt at $0.50 per share - 40,000
- for cash at $0.20 per share - 1,500
- for compensation at $0.50 per share - 4,500
Issuance of stock options for financing activities - 2,659
Net loss for the year ended September 30, 1998 - (119,163)
Change in market value of investments 117,080 117,080
-------------- ----------
Balance, September 30, 1998 $ 117,080 $ 243,974
-------------- ----------
The accompanying condensed notes are an integral part of these financial
statements.
3
TREND MINING COMPANY
(AN EXPLORATION STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
- ----------------------------------------------------------------------------------------------------------------------
Common Stock
------------------ Additional Stock
Number Paid-in Options and Accumulated
of Shares Amount Capital Warrants Deficit
--------- ------- ----------- ----------- --------------
Balance, September 30, 1998 2,258,253 $22,582 $ 907,934 $ 2,659 $ (806,281)
Common stock issuances as follows:
- for cash at an average of $0.07 per share 555,000 5,550 35,450 - -
- for prepaid expenses at $0.33 per share 50,000 500 16,000 - -
- for consulting services at an average of
0.20 per share 839,122 8,391 158,761 - -
- for mineral property at $0.13 per share 715,996 7,160 82,470 - -
- for officers' compensation at an average of
0.24 per share 300,430 3,004 70,522 - -
- for debt, investment and expenses at $0.30 per share 9,210 92 2,671 - -
- for directors' compensation at an average of
0.25 per share 16,500 165 3,960 - -
- for rent at $0.25 per share 1,000 10 240 - -
- for equipment at $0.30 per share 600,000 6,000 174,000 - -
Net loss for the year ended September 30, 1999 - - - - (716,759)
Other comprehensive loss - - - - -
--------- ------- ----------- ----------- --------------
Balance, September 30, 1999 5,345,511 $53,454 $ 1,452,007 $ 2,659 $ (1,523,040)
--------- ------- ----------- ----------- --------------
Other
Comprehensive
Income (Loss) Total
------------- ---------
Balance, September 30, 1998 $ 117,080 $243,974
Common stock issuances as follows:
- for cash at an average of $0.07 per share - 41,000
- for prepaid expenses at $0.33 per share - 16,500
- for consulting services at an average of
0.20 per share - 167,152
- for mineral property at $0.13 per share - 89,630
- for officers' compensation at an average of
0.24 per share - 73,526
- for debt, investment and expenses at $0.30 per share - 2,763
- for directors' compensation at an average of
0.25 per share - 4,125
- for rent at $0.25 per share - 250
- for equipment at $0.30 per share - 180,000
Net loss for the year ended September 30, 1999 - (716,759)
Other comprehensive loss (79,179) (79,179)
------------- ---------
Balance, September 30, 1999 $ 37,901 $ 22,982
------------- ---------
The accompanying condensed notes are an integral part of these financial
statements.
4
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 (Loss)
----------- ------- ----------- ------------ -------------- -------------
Balance, September 30, 1999 5,345,511 $53,454 $ 1,452,007 $ 2,659 $ (1,523,040) $ 37,901
Common stock and option issuances as follows:
- for employee, officer and director
compensation at an average of
0.61 per share 231,361 2,314 140,446 15,820 - -
- for officers' and directors' compensation
at an average of $1.19 per share 11,500 115 13,615 - - -
- for services at an average of $0.47 per share 530,177 5,302 246,333 - - -
- for mineral property at $0.89 per share 1,000,000 1,000 88,000 - - -
- for investments at $0.33 per share 200,000 2,000 64,000 - - -
- for cash at $0.08 per share 456,247 4,562 28,969 - - -
- for cash, options and warrants 100,000 10,000 2,414 87,586 - -
- for incentive fees at $0.33 per share 65,285 653 20,891 - - -
- for deferred mineral property acquisition
costs at $0.13 per share 129,938 1,299 14,943 - - -
- for modification of stockholder agreement
at $0.60 per share 200,000 2,000 118,000 30,000 - -
- for modification of stockholder agreement - - 4,262 10,379 - -
-from exercise of options at $0.12 per share 9,962,762 99,628 1,103,016 (37,524) - -
Cash received for the issuance of common stock
warrants for 7,979,761 shares of stock - - - 10,000 - -
Miscellaneous common stock adjustments (5) - - - - -
Net loss for the year ended September 30, 2000 - - - - (2,186,541) -
Other comprehensive income (loss) - - - - - (38,314)
----------- -------- ----------- ------------ -------------- -------------
Balance, September 30, 2000 18,232,776 $182,327 $ 3,296,897 $ 118,920 $ (3,709,581) $ (413)
----------- -------- ----------- ------------ -------------- -------------
Total
-----------
Balance, September 30, 1999 $ 22,982
Common stock and option issuances as follows:
- for employee, officer and director
compensation at an average of
0.61 per share 158,580
- for officers' and directors' compensation
at an average of $1.19 per share 13,730
- for services at an average of $0.47 per share 251,635
- for mineral property at $0.89 per share 89,000
- for investments at $0.33 per share 66,000
- for cash at $0.08 per share 33,531
- for cash, options and warrants 100,000
- for incentive fees at $0.33 per share 21,544
- for deferred mineral property acquisition
costs at $0.13 per share 16,242
- for modification of stockholder agreement
at $0.60 per share 150,000
- for modification of stockholder agreement 14,641
-from exercise of options at $0.12 per share 1,165,120
Cash received for the issuance of common stock
warrants for 7,979,761 shares of stock 10,000
Miscellaneous common stock adjustments -
Net loss for the year ended September 30, 2000 (2,186,541)
Other comprehensive income (loss) (38,314)
-----------
Balance, September 30, 2000 $ (111,850)
-----------
The accompanying condensed notes are an integral part of these financial
statements.
5
TREND MINING COMPANY
(AN EXPLORATION STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT) (CONTINUED)
- -------------------------------------------------------------------------------------------------------------------
Common Stock
------------------- Additional Stock
Number Paid-in Options and
of Shares Amount Capital Warrants
---------- -------- ------------ -------------
Balance, September 30, 2000 18,232,776 $182,327 $ 3,296,897 $ 118,920
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 ave 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 - - - -
Other comprehensive income - - - -
---------- -------- ------------ -------------
Balance, September 30, 2001 18,755,970 $187,559 $ 3,772,856 $ 1,389,976
---------- -------- ------------ -------------
Other
Accumulated Comprehensive
Deficit Income (Loss) Total
-------------- ------------- ------------
Balance, September 30, 2000 $ (3,709,581) $ (413) $ (111,850)
Common stock and option issuances as follows:
- for cash of $1.00 per share - - 192,000
- for cash and consulting services from
options for $0.39 per share - - 10,000
- for services at 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 ave 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 (3,437,354) - (3,437,354)
Other comprehensive income - 413 413
-------------- ------------- ------------
Balance, September 30, 2001 $ (7,146,935) - $(1,796,543)
-------------- ------------- ------------
The accompanying condensed notes are an integral part of these financial
statements.
6
TREND MINING COMPANY
(AN EXPLORATION STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT) (CONTINUED)
- -------------------------------------------------------------------------------------------------------------------
Common Stock
-------------------- Additional Stock
Number Paid-in Options and
of Shares Amount Capital Warrants
---------- -------- ------------ -------------
Balance, September 30, 2001 18,755,970 $187,559 $ 3,772,856 $ 1,389,976
Common stock issuances as follows:
- for cash at $0.10 per share 2,500,000 25,000 225,000 -
- for a note payable at $1.00 per share 25,000 250 24,750 -
- for consulting fees payable 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 an average of $0.49 per share 112,500 1,125 53,625 -
- 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 - - - 55,352
Expiration of stock options and warrants - - 91,814 (91,814)
Interest expense forgiven by shareholders - - 42,950 -
Net loss for the year ended September 30, 2002 - - - -
---------- -------- ------------ -------------
Balance, September 30, 2002 22,588,435 225,884 5,012,133 1,383,042
Common stock issuances as follows:
- miscellaneous common stock adjustment 29,555 296 - -
- for cash at $0.10 per share 5,500,000 55,000 495,000 -
- for consulting services at an average of $0.15 per share 1,763,779 17,638 243,362 -
- for loans payable at an average of $0.10 per share 369,160 3,692 33,225 -
- for prior period services at an average of $.13 per share 245,000 2,450 30,550 -
- for investments at $0.21 per share 450,000 4,500 88,668 -
- to officers and directors for services at $.10 per share 1,423,156 14,231 129,025 -
- penalty shares at $.26 per share 860,000 8,600 215,000 -
Change in market value of investments - - - -
Net loss for the year ended September 30, 2003 - - - -
---------- -------- ------------ -------------
Balance, September 30, 2003 33,229,085 $332,291 $ 6,246,963 $ 1,383,042
---------- -------- ------------ -------------
Other
Accumulated Comprehensive
Deficit Income (Loss) Total
-------------- ------------- ------------
Balance, September 30, 2001 $ (7,146,935) - $(1,796,543)
Common stock issuances as follows:
- for cash at $0.10 per share - - 250,000
- for a note payable at $1.00 per share - - 25,000
- for consulting fees payable at $0.55 per share - - 6,895
- for mineral properties at $0.70 per share - - 770,000
- for services at an average of $0.49 per share - - 54,750
- 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 - - 55,352
Expiration of stock options and warrants - - -
Interest expense forgiven by shareholders - - 42,950
Net loss for the year ended September 30, 2002 (1,168,171) - (1,168,171)
-------------- ------------- ------------
Balance, September 30, 2002 (8,315,106) - (1,694,046)
Common stock issuances as follows:
- miscellaneous common stock adjustment - - 296
- for cash at $0.10 per share - - 550,000
- for consulting services at an average of $0.15 per share - - 261,000
- for loans payable at an average of $0.10 per share - - 36,917
- for prior period services at an average of $.13 per share - - 33,000
- for investments at $0.21 per share - - 93,168
- to officers and directors for services at $.10 per share - - 143,256
- penalty shares at $.26 per share - - 223,600
Change in market value of investments - 1,800 1,800
Net loss for the year ended September 30, 2003 (966,958) - (966,958)
-------------- ------------- ------------
Balance, September 30, 2003 $ (9,282,064) $ 1,800 $(1,317,968)
-------------- ------------- ------------
The accompanying condensed notes are an integral part of these financial
statements.
7
TREND MINING COMPANY
(AN EXPLORATION STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT) (CONTINUED)
- ---------------------------------------------------------------------------------------------------------------------------
Common Stock
------------------- Additional Stock
Number Paid-in Options and Accumulated
of Shares Amount Capital Warrants Deficit
---------- -------- ------------ ------------- --------------
Balance, September 30, 2003 33,229,085 332,291 6,246,963 1,383,042 (9,282,064)
Change in market value of investments - - - - -
Expiration of stock options and warrants - - 9,035 (9,035) -
Net loss for the period ended March 31, 2004 (unaudited) - - - - (33,030)
---------- -------- ------------ ------------- --------------
Balance, March 31, 2004 (unaudited) 33,229,085 $332,291 $ 6,255,998 $ 1,374,007 $ (9,315,094)
========== ======== ============ ============= ==============
Other
Comprehensive
Income (Loss) Total
------------- ------------
Balance, September 30, 2003 1,800 (1,317,968)
Change in market value of investments (33,030) (33,030)
Expiration of stock options and warrants - -
Net loss for the period ended March 31, 2004 (unaudited) - (33,030)
------------- ------------
Balance, March 31, 2004 (unaudited) $ (31,230) $(1,384,028)
============= ============
The accompanying condensed notes are an integral part of these financial
statements.
8
TREND MINING COMPANY
(AN EXPLORATION STAGE COMPANY)
STATEMENTS OF CASH FLOWS
- -------------------------------------------------------------------------------------------------
Period from
October 1, 1996
(Inception of
Six Months Six Months Exploration Stage)
Ended Ended to
March 31, March 31, December 31,
2004 2003 2003
(unaudited) (unaudited) (unaudited)
----------- ----------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss (33,030) (255,861) (8,756,590)
Adjustments to reconcile net loss to net cash used by
operating activities:
Depreciation 1,379 5,396 50,355
Loss on investment sales - (29,167) 28,236
Gain on sale of internal securities (210,194) - (210,194)
Loss on disposition and impairment of assets - - 185,891
Loss (Gain) on exchange of property and equipment - - (8,372)
Gain on forgiveness of debt and interest - (122,354) (52,849)
Common stock issued for services
and expenses - 149,145 3,090,321
Stock options and warrants issued for expenses - - 992,778
Changes in assets and liabilities:
Inventory - - 3,804
Accounts payable 36,632 (224,603) 276,412
Accounts payable - checks in excess of bank balance (3,297) - 7
Accrued wages 75,100 (75,042) 915
Interest payable (50,546) 41,201 55,983
----------- ----------- -------------
Net cash used by operating activities (183,956) (511,285) (4,343,303)
----------- ----------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of equipment - - 35,125
Proceeds from sale of mineral property - - 20,000
Purchase of furniture and equipment - - (41,695)
Proceeds from investments sold - - 143,515
----------- ----------- -------------
Net cash provided by investing activities - - 156,945
----------- ----------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on notes payable and short-term (65,000) (2,054) (77,056)
borrowings
Proceeds from internal securities sale 210,194 - 210,194
Sale of warrants for common stock - - 10,000
Proceeds from short-term borrowings 40,000 - 1,461,657
Sale of common stock, subscriptions
and exercise of options - 550,000 2,358,151
Issuance of penalty shares - - 223,600
----------- ----------- -------------
Net cash provided by financing activities 185,194 547,946 4,186,546
----------- ----------- -------------
NET INCREASE IN CASH 1,238 36,661 189
CASH, BEGINNING OF PERIOD 2,558 2,281 3,607
----------- ----------- -------------
CASH, END OF PERIOD 3,796 38,942 3,796
=========== =========== =============
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid 95,194 602 3,835
Income taxes paid - - -
NON-CASH FINANCING AND INVESTING ACTIVITIES:
Common stock and warrants issued to acquire
mineral properties and equipment - - 1,369,873
Common stock and options issued for services - 149,145 2,667,039
and expenses
Stock options and warrants issued for expenses - - 992,778
Deferred acquisition costs on mining property - - 46,242
Purchase of equipment with financing agreement - - 21,814
Investments received for mineral property - - 5,500
Investments traded for services - - 45,939
Equipment for loans payable - - 4,500
The accompanying condensed notes are an integral part of these financial
statements.
9
TREND MINING COMPANY
(AN EXPLORATION STAGE COMPANY)
CONDENSED NOTES TO THE FINANCIAL STATEMENTS
MARCH 31, 2004
- --------------------------------------------------------------------------------
NOTE 1 - BASIS OF PRESENTATION OF UNAUDITED INTERIM FINANCIAL INFORMATION
The accompanying unaudited financial statements have been prepared in accordance
with accounting principles generally accepted in the United States of America
for interim financial statements and with instructions to Form 10-QSB pursuant
to the rules and regulations of the Securities and Exchange Commission.
Accordingly, they do not include all of the information required by accounting
principles generally accepted in the United States of America for complete
financial statements.
The accompanying financial statements should be read in conjunction with the
audited financial statements of the Company included in the Company's September
30, 2003 Annual Report on Form 10-KSB.
In the opinion of management, all adjustments, consisting only of normal
recurring accruals considered necessary for a fair presentation, have been
included. The results of operations for the six-month period ended March 31,
2004 are not necessarily representative of operating results to be expected for
the entire fiscal year.
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.
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.
Going Concern
- -------------
As shown in the accompanying financial statements, the Company has limited cash,
has negative working capital, has no revenues, and has an accumulated deficit of
$9,315,094. 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 is actively seeking additional capital. Management's
plans for the next 12 months include, in addition to its annual land payments
and general and administrative expenses, exploration activity on the Lake Owen
and Peter Lake properties totaling approximately $125,000. Management believes
it can sell additional stock or debt to enable the Company to continue to fund
10
TREND MINING COMPANY
(AN EXPLORATION STAGE COMPANY)
CONDENSED NOTES TO THE FINANCIAL STATEMENTS
MARCH 31, 2004
- --------------------------------------------------------------------------------
its operations for the next 12 months. 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
Reclassification
- ----------------
Certain amounts from prior periods have been reclassified to conform to the
current period presentation. These reclassifications have not resulted in any
changes to the Company's accumulated deficit or net losses presented.
NOTE 3 - RELATED PARTY TRANSACTIONS
Notes Payable - Related Parties
- -----------------------------------
The following summarizes activity of loan amounts due to related parties (all of
which are unsecured) since September 30, 2003:
Notes Payable as of September 30, 2002 $ 1,097,857
Additions 40,000
Repayments (65,000)
------------
Notes Payable as of March 31, 2004 $ 1,072,857
============
On February 12, 2004, the Company and Electrum and LCM Holdings (hereinafter
"the Kaplan Parties or "the Lenders") reached an agreement to adjust both the
conversion terms on approximately $900,000 worth of debt outstanding to them and
the exercise prices of related warrants. Per the terms of the agreement, the
Lenders can convert each $1.25 of loans into a unit consisting of one share of
common stock and one warrant. The warrant is exercisable for a period of five
years from the date of conversion and is exercisable at a price of $1.50.
Additionally, terms of existing outstanding warrants were modified which
generally increased the exercise price and shortened the related expiration
dates. These modifications had no impact on net income for the period.
Furthermore, also on February 12, 2004 the Company reached an agreement with the
Lenders concerning certain prior separate stock transactions which had benefited
certain controlling shareholders. In compliance with the Securities and
Exchange Rule 16b, the shareholders remitted the gain of $210,194 to the
Company. This gain is reflected in the income statement as internal gain of
sale of securities.
11
TREND MINING COMPANY
(AN EXPLORATION STAGE COMPANY)
CONDENSED NOTES TO THE FINANCIAL STATEMENTS
MARCH 31, 2004
- --------------------------------------------------------------------------------
NOTE 4 - INVESTMENTS
The Company's securities investments are classified as trading securities and
are recorded at fair value as of the balance sheet date, with the change in fair
value during the period included in earnings.
The Company's investments are summarized as follows:
March 31, September 30,
2004 2003
----------- ---------------
Fair value:
Western Goldfields, Inc. $ 24,270 $ 57,300
Gross unrealized loss / (gain) 31,230 (1,800)
----------- ---------------
Cost $ 55,500 $ 55,500
=========== ===============
NOTE 5 - COMMITMENTS AND CONTINGENCIES
Consulting Agreement
- --------------------
On November 17, 2003, the Company entered into a 12-month business consulting
agreement with LYONS CAPITAL, LLC (hereinafter "Lyons"). Under this term of the
agreement, the Company is required to issue 40,000 shares of restricted common
stock for each month of service plus pay Lyons a cash finder's fee equaling 10%
of sums received from investors whom Lyons introduces to the Company. As of
March 31, 2004, the Company has accrued approximately $18,000 for services under
this agreement. These services are expected to be paid through the issuance of
common stock at a later date. The Company and Lyons are currently in
negotiations regarding the continuation of this agreement.
NOTE 6 - SUBSEQUENT EVENTS
In May 2004, the Company raised $300,000 through a private placement of the
Company's restricted common stock at $0.20 per share.
12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
Our operating losses for the three-month period ended March 31, 2004, were
$108,166. However, due to a one-time gain as a result of a legal settlement, the
Company recorded a profit of $76,282. Overall, our Company continues to incur
losses. Our accumulated deficit since inception of the current exploration stage
is $8,756,590. Our total loss since inception of the company is $9,315,094. Our
third quarter operating loss is due primarily to legal and professional fees of
$54,836 and officer and director compensation of $38,100.
Our operating cash at the end of the quarter totaled $3,796. We also own equity
securities which are of limited liquidity and which we have been selling from
time-to-time in order to raise additional operating capital. At March 31, 2004,
the market value of such securities was $24,270. We intend to sell the balance
of these securities over the next three months to assist with funding the
operations of the Company.
The Company needs approximately $30,000 per month to cover its general and
administrative expenses, accounting and legal fees, as well as payments made to
creditors pursuant to payment arrangement plans. Our long record of losses and
inability to obtain substantial financing for the Company raises a question of
whether the Company will continue as an ongoing business.
We intend to 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. We currently have no
preferred shares issued and outstanding.
Although we intend to continue to seek additional financing through sales of
common stock or other means, there can be no assurance that our efforts to
obtain additional financing will be Successful, or that additional financing
will be available on terms acceptable to the Company.
Without additional substantial financing the Company will not be able to execute
its business plan of exploring for platinum and palladium deposits on its
mineral properties. Further, without additional substantial financing, the
Company will be unable to continue to make the required minimum payments and
perform the minimum work requirements on the mineral properties it now controls.
If the Company loses control of its existing properties due to non-payment or
non- performance, it would likely cease to do business.
ITEM 3. CONTROLS AND PROCEDURES.
(a) Evaluation of disclosure controls and procedures. Within the 90 days prior
to the filing of this Quarterly Report on Form 10-Q (the "Evaluation Date"), the
Company carried out an evaluation, under the supervision and with the
participation of its management, including its Chief Executive Officer and its
Chief Financial Officer, of the effectiveness of the design and operation of the
Company's disclosure controls and procedures (as defined in Rules 13a-14(c) and
15d-14(c) under the Exchange Act). Based upon that evaluation, the Company's
Chief Executive Officer and its Chief Financial Officer concluded that the
Company's disclosure controls and procedures are effective to ensure that
material information required to be disclosed by it in the reports that it files
or submits under the Exchange Act is recorded, processed, summarized and
reported within the time periods specified in the Securities and Exchange
Commission rules and forms. It should be noted, however, that the design of any
system of controls is based in part upon certain assumptions about the
likelihood of future events, and there can be no assurance that any design will
succeed in achieving its stated goals under all potential future conditions,
13
regardless of how remote.
(b) Changes in internal controls. The Company evaluates its internal controls
for financial reporting purposes on a regular basis. Based upon the results of
these evaluations, the Company considers what revisions, improvements and/or
corrective actions are necessary in order to ensure that its internal controls
are effective. The Company is currently in the process of improving internal
controls relating to transmittal of its financial information to its accountants
in a more timely manner. To achieve this goal, the Company is implementing on a
company-wide basis a computerized system which will automate the process of
collection of financial data. The Company maintains separate bank accounts in
two locations and is implementing changes to allow consolidation of its banking
accounts to one location, which will also allow the use of tighter security
standards with respect to signing of company checks. Pending full implementation
of these improvements, the Company has instituted additional procedures and
policies to maintain its ability to accurately record, process and summarize
financial data and prepare financial statements that fully present its financial
condition, results of operations and cash flows.
The Company has not made any other significant changes in the Company's internal
controls or in other factors that could significantly affect these controls
subsequent to the date of their last evaluation.
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.
PART II
ITEM 1. LEGAL PROCEEDINGS.
Nevada Southwest Investments LLC, dba Reno Business Park, obtained a judgment
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 did not contest this action since
it had no basis to do so. This court judgment, unless paid, may ultimately
14
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. The Company
is currently negotiating with the counsel of the creditor to make suitable
payment arrangements to pay this judgment over time. The creditor is seeking to
schedule a debtors exam hearing in the State of Idaho at the time of this
report.
We are unaware of any other legal proceedings involving the Company at this
time. However, because we have accounts payable, some of which are overdue, it
is possible that at anytime creditors of the Company could take action to
collect such amounts due.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
We had 33,229,085 shares of common stock issued and outstanding as of March 31,
2004.
Common Stock
- ------------
None issued during the reporting period
Options
- -------
None issued during the reporting period.
Warrants
- --------
None issued during the reporting period. Pursuant to an agreement with a major
shareholder, terms of existing outstanding warrants were modified which
generally increased the exercise price and shortened the related expiration
dates. These modifications had no impact on net income for the period.
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
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 19, 2004
By: /s/ Kurt J. Hoffman
- ---------------------------
Kurt J. Hoffman
President and Chief Executive Officer
(Principal Executive Officer)
Dated: May 19, 2004
By: /s/ John P. Ryan
- -------------------------
John P. Ryan
Chief Financial Officer