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 JUNE 30, 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.)
301 Central Ave. #384
Hilton Head, SC 29926
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE)
ISSUER'S TELEPHONE NUMBER: (843) 842-4048
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 JUNE 30, 2004: 35,321,585 SHARES
TREND MINING COMPANY
(AN EXPLORATION STAGE COMPANY)
FINANCIAL STATEMENTS
JUNE 30, 2004
TREND MINING COMPANY
FINANCIAL STATEMENTS
Balance Sheets 1
Statements of Operations 2
Statement of Stockholders' Equity (Deficit) 3
Statements of Cash Flows 9
NOTES TO THE FINANCIAL STATEMENTS 10
MANAGEMENT DISCUSSION AND ANALYSIS 13
ITEM 1. FINANCIAL STATEMENTS AND NOTES
TREND MINING COMPANY
(AN EXPLORATION STAGE COMPANY)
BALANCE SHEETS
June 30,
2004 September 30,
(unaudited) 2003
----------- -----------
ASSETS
CURRENT ASSETS
Cash $ 202,724 $ 2,558
Marketable securities --
----------- -----------
TOTAL CURRENT ASSETS 202,724 2,558
----------- -----------
MINERAL PROPERTIES -- --
----------- -----------
PROPERTY AND EQUIPMENT, net of depreciation 3,103 5,172
----------- -----------
OTHER ASSETS
Investments 25,000 57,300
----------- -----------
TOTAL ASSETS $ 230,827 $ 65,030
=========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable $ 295,367 $ 146,419
Accounts payable- checks in excess of bank balance -- 3,297
Accrued expenses 77,700 --
Interest payable 107,453 135,425
Loans payable to stockholders 1,032,857 1,097,857
----------- -----------
TOTAL CURRENT LIABILITIES 1,513,377 1,382,998
----------- -----------
COMMITMENTS AND CONTINGENCIES -- --
----------- -----------
STOCKHOLDERS' DEFICIT
Preferred stock, $0.01 par value, 20,000,000 shares
authorized; 0 and 1 share issued and outstanding, respectively -- --
Common stock, $0.01 par value, 100,000,000
shares authorized; 35,321,585 and 33,229,085 shares
issued and outstanding, respectively 353,216 332,291
Additional paid-in capital 6,677,498 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 (9,128,767) (8,723,560)
Other comprehesive income -- 1,800
----------- -----------
TOTAL STOCKHOLDERS' DEFICIT (1,282,550) (1,317,968)
----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' DEFICIT $ 230,827 $ 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 Nine Months Nine Months Exploration Stage)
Ended Ended Ended Ended to
June 30, June 30, June 30, June 30, June 30,
2004 2003 2004 2003 2004
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
------------ ------------ ------------ ------------ ----------------
REVENUES $ -- $ -- $ -- $ -- $ --
------------ ------------ ------------ ------------ ------------
EXPENSES
Exploration expense -- -- -- 58,979 2,909,066
General and administrative 107,433 73,267 152,155 303,413 2,416,144
Officers and directors compensation 44,600 11,607 119,700 48,515 1,505,096
Legal and professional 156,380 5,954 234,012 40,706 1,371,790
Depreciation 690 2,628 2,069 8,024 51,045
------------ ------------ ------------ ------------ ------------
Total Expenses 309,103 93,456 507,936 459,637 8,253,141
------------ ------------ ------------ ------------ ------------
OPERATING LOSS (309103) (93,456) (507,936) (459,637) (8,253,141)
------------ ------------ ------------ ------------ ------------
OTHER INCOME (EXPENSE)
Dividend and interest income -- -- -- -- 6,398
Gain (loss) on disposition and impairment
of assets -- -- -- -- (177,519)
Gain (loss) on investments (40,500) 3,666 (40,383) 32,833 (63,463)
Financing expense -- -- -- -- (1,135,113)
Interest expense (22,573) (21,483) (67,221) (62,684) (291,035)
Miscellaneous income (expense) -- -- 210,333 -- 220,678
Forgiveness of debt -- -- -- 122,354 564,428
------------ ------------ ------------ ------------ ------------
Total Other Income (Expense) (63,073) (17,817) 102,729 92,503 (875,626)
------------ ------------ ------------ ------------ ------------
LOSS BEFORE INCOME TAXES (372,176) (111,273) (405,207) (367,134) (9,128,767)
------------ ------------ ------------ ------------ ------------
INCOME TAXES -- -- -- -- --
------------ ------------ ------------ ------------ ------------
NET LOSS (372,176) (111,273) (405,207) (367,134) (9,128,767)
------------ ------------ ------------ ------------ ------------
OTHER COMPREHENSIVE INCOME (LOSS)
Change in market value of investments (33,030) -- (1,800) -- --
------------ ------------ ------------ ------------ ------------
NET COMPREHENSIVE INCOME (LOSS) $ (405,206) $ (111,273) $ (407,007) $ (367,134) (9,128,767)
============ ============ ============ ============ ============
BASIC AND DILUTED NET LOSS PER SHARE $ (0.01) $ nil $ (0.01) $ (0.01)
============ ============ ============ ============
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING BASIC AND DILUTED 34,556,585 30,147,207 33,671,585 27,535,365
============ ============ ============ ============
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 Other
--------------------- Additional Stock Comprehensive
Number Paid-in Options and Accumulated Income
of Shares Amount Capital Warrants Deficit (Loss) Total
---------- --------- ----------- ----------- ------------ --------- ------------
Balance, October 1, 1996 1,754,$42 $ 17,542 $ 663,218 $ -- (5$8,504) $ -- 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
---------- --------- ----------- ----------- ------------ --------- ------------
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 Other
--------------------- Additional Stock Comprehensive
Number Paid-in Options and Accumulated Income
of Shares Amount Capital Warrants Deficit (Loss) Total
---------- --------- ----------- ----------- ------------ --------- ------------
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 $0.07 per share 555,000 5,550 35,450 -- -- -- 41,000
- for prepaid expenses at $0.33 per share 50,000 500 16,000 -- -- -- 16,500
- for consulting services at an average of
$0.20 per share 839,122 8,391 158,761 -- -- -- 167,152
- for mineral property at $0.13 per share 715,996 7,160 82,470 -- -- -- 89,630
- 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
---------- --------- ----------- ----------- ------------ --------- ------------
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 Other
--------------------- Additional Stock Comprehensive
Number Paid-in Options and Accumulated Income
of Shares Amount Capital Warrants Deficit (Loss) Total
---------- --------- ----------- ----------- ------------ --------- ------------
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 $ 3,296,897 $ 118,920 $ (3,709,581) $ (413) $ (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 Other
--------------------- Additional Stock Comprehensive
Number Paid-in Options and Accumulated Income
of Shares Amount Capital Warrants Deficit (Loss) Total
---------- --------- ----------- ----------- ------------ --------- ------------
Balance, September 30, 2000 18,232,776 $ 182,327 $ 3,296,897 $ 118,920 $ (3,709,581) $ (413) $ (111,850)
Common stock and option issuances as follows:
- for cash of $1.00 per share 192,000 1,920 190,080 -- -- -- 192,000
- for cash and consulting services from
options for $0.39 per share 33,333 333 12,737 (3,070) -- -- 10,000
- for services at an average of $0.92 per share 13,700 137 12,463 -- -- -- 12,600
- for officer and employee compensation at
$1.13 per share 5,200 52 5,828 -- -- -- 5,880
- for payment of accrued officer's
compensation at $1.35 per share 10,000 100 13,400 -- -- -- 13,500
- for consulting services at an ave of $0.77
per share 45,461 455 34,247 -- -- -- 34,702
- for directors' compensation at $0.85 per
share 75,000 750 63,000 -- -- -- 63,750
- for modification of contract at $0.78 per
share 3,000 30 2,310 -- -- -- 2,340
- for interest payment on contract
at an average of $0.80 per share 10,000 100 7,900 -- -- -- 8,000
- for mineral property expenses at $0.85 per
share 1,000 10 840 -- -- -- 850
- for debt at $1.00 per share 134,500 1,345 133,155 -- -- -- 134,500
Options issued to officers, directors and
employees for services -- -- -- 354,000 -- -- 354,000
Warrants issued as follows:
- for consulting services -- -- -- 170,521 -- -- 170,521
- for loan agreements -- -- -- 141,547 -- -- 141,547
- for extension of exercise period
on outstanding warrants -- -- -- 608,058 -- -- 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 18,755,970 $ 187,559 $ 3,772,856 $ 1,389,976 $ (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 Other
--------------------- Additional Stock Comprehensive
Number Paid-in Options and Accumulated Income
of Shares Amount Capital Warrants Deficit (Loss) Total
---------- --------- ----------- ----------- ------------ --------- ------------
Balance, September 30, 2001 18,755,970 $ 187,559 $ 3,772,856 $ 1,389,976 $ (7,146,935) $ -- $ (1,796,543)
Common stock issuances as follows:
- for cash at $0.10 per share 2,500,000 25,000 225,000 -- -- -- 250,000
- for a note payable at $1.00 per share 25,000 250 24,750 -- -- -- 25,000
- for consulting fees payable at $0.55 per
share 12,536 126 6,769 -- -- -- 6,895
- for mineral properties at $0.70 per share 1,100,000 11,000 759,000 -- -- -- 770,000
- for services at an average of $0.49 per
share 112,500 1,125 53,625 -- -- -- 54,750
- for financing expense at an average of
$0.44 per share 82,429 824 35,369 -- -- -- 36,193
Options issued to officers, directors and
employees for services -- -- -- 29,528 -- -- 29,528
Warrants issued as follows: --
- for loan agreements -- -- -- 55,352 -- -- 55,352
Expiration of stock options and warrants -- -- 91,814 (91,814) -- -- --
Interest expense forgiven by shareholders -- -- 42,950 -- -- -- 42,950
Net loss for the year ended September 30, 2002 -- -- -- -- (1,168,171) -- (1,168,171)
---------- --------- ----------- ----------- ------------ --------- ------------
Balance, September 30, 2002 22,588,435 225,884 5,012,133 1,383,042 (8,315,106) -- (1,694,046)
Common stock issuances as follows:
- miscellaneous common stock adjustment 29,555 296 -- -- -- -- 296
- for cash at $0.10 per share 5,500,000 55,000 495,000 -- -- -- 550,000
- for consulting services at an average of
$0.15 per share 1,763,779 17,638 243,362 -- -- -- 261,000
- for loans payable at an average of $0.10
per share 369,160 3,692 33,225 -- -- -- 36,917
- for prior period services at an average
of $.13 per share 245,000 2,450 30,550 -- -- -- 33,000
- for investments at $0.21 per share 450,000 4,500 88,668 -- -- -- 93,168
- to officers and directors for services
at $.10 per share 1,423,156 14,231 129,025 -- -- -- 143,256
- penalty shares at $.26 per share 860,000 8,600 215,000 -- -- -- 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 33,229,085 $ 332,291 $ 6,246,963 $ 1,383,042 $ (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 Other
--------------------- Additional Stock Comprehensive
Number Paid-in Options and Accumulated Income
of Shares Amount Capital Warrants Deficit (Loss) Total
---------- --------- ----------- ----------- ------------ --------- ------------
Balance, September 30, 2003 33,229,085 $ 332,291 $ 6,246,963 $ 1,383,042 $ (9,282,064) $ 1,800 $ (1,317,968)
Expiration of stock options and warrants -- -- 9,035 (9,035) -- -- --
Common stock issuances as follows:
- for cash at $0.20 per share 1,625,000 16,250 308,750 -- -- -- 325,000
- for consulting @$0.35 per share 162,500 1,625 54,800 -- -- -- 56,425
- to officers and directors for services at
$0.20 perr share 60,000 600 11,400 -- -- -- 12,000
- for payment of accrued expenses at $0.20
per share 120,000 1,200 22,800 24,000
- for investments at $0.20 per share 125,000 1,250 23,750 -- -- -- 25,000
Change in market value of investments -- -- -- -- -- (1,800) (1,800)
Net loss for the period ended March 31, 2004
(unaudited) -- -- -- -- (405,207) -- (405,207)
---------- --------- ----------- ----------- ------------ --------- ------------
Balance, June 30, 2004 (unaudited) 35,321,585 $ 353,216 $ 6,677,498 $ 1,374,007 $ (9,687,271) $ -- $ (1,282,550)
========== ========= =========== =========== ============ ========= ============
The accompanying condensed notes are an integral part of these financial
statements.
8
TREND MINING COMPANY
(An Exploration Stage Company)
STATEMENT OF CASH FLOWS
- --------------------------------------------------------------------------------
Period from
October 1, 1996
Nine Months Nine Months (Inception of
Ended Ended Exploration
June 30, June 30, Stage) to
2004 2003 June 30, 2004
(unaudited) (unaudited) (unaudited)
----------- ----------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (405,207) $ (367,134) $(9,128,767)
Adjustments to reconcile net loss to net cash used by
operating activities:
Depreciation 2,069 8,024 51,045
(Gain) Loss on investment sales 40,383 (32,833) 68,619
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 68,425 174,645 3,158,746
Common stock issued for accrued expenses 24,000 -- 24,000
Stock options and warrants issued for expenses -- -- 992,778
Changes in assets and liabilities:
Inventory -- -- 3,804
Accounts payable 149,065 (229,706) 388,845
Accounts payable - checks in excess of bank balance (3,297) -- 7
Accrued wages 77,700 (42,042) 3,515
Interest payable (27,972) 61,801 78,557
----------- ----------- -----------
Net cash used by operating activities (285,028) (549,599) (4,444,375)
----------- ----------- -----------
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 15,000 -- 158,515
----------- ----------- -----------
Net cash provided by investing activities 15,000 -- 171,945
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on notes payable and short-term borrowings (112,500) (2,557) (124,556)
Proceeds from internal securities sale 210,194 -- 210,194
Sale of warrants for common stock -- -- 10,000
Proceeds from short-term borrowings 47,500 3,300 1,469,157
Sale of common stock, subscriptions
and exercise of options 325,000 550,000 2,683,151
Issuance of penalty shares -- -- 223,600
----------- ----------- -----------
Net cash provided by financing activities 470,194 550,743 4,471,546
----------- ----------- -----------
NET INCREASE IN CASH 200,166 1,144 199,117
CASH, BEGINNING OF PERIOD 2,558 2,281 3,607
----------- ----------- -----------
CASH, END OF PERIOD $ 202,724 $ 3,425 $ 202,724
=========== =========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 95,194 $ 883 $ 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 and expenses $ 56,425 $ 174,645 $ 2,723,464
Common stock issued for investment $ 25,000 $ 93,168 $ 160,168
Common stock issued for debt $ -- $ 29,500 $ 236,737
Stock options and warrants issued for expenses $ 36,000 $ -- $ 1,028,778
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
JUNE 30, 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 nine-month period ended June 30,
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
$9,687,271. 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.
10
TREND MINING COMPANY
(AN EXPLORATION STAGE COMPANY)
CONDENSED NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2004
- --------------------------------------------------------------------------------
Management believes it can sell additional stock or debt to enable the Company
to continue to fund 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.
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, 2003 $ 1,097,857
Additions 47,500
Repayments (112,500)
-----------
Notes Payable as of June 30, 2004 $ 1,032,857
===========
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 the
Lenders 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 financial statement impact for the
period herein reported.
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 from
sale of securities.
11
TREND MINING COMPANY
(AN EXPLORATION STAGE COMPANY)
CONDENSED NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 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:
June 30, September 30,
2004 2003
----------- -------------
Fair value:
Western Goldfields, Inc. $ -- $ 57,300
Integrated Pharmaceuticals 25,000 --
Gross unrealized loss / (gain) -- (1,800)
----------- -------------
Cost $ 25,000 $ 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 June
30, 2004, the Company has terminated this contract. Approximately $30,000 has
been accrued for services provided under this agreement and the Company expects
to settle this amount through the issuance of common stock at a later date.
12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
Our operating losses for the three-month period ended June 30, 2004, were
$297,103. 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 $156,380 and officer and director compensation of $44,600.
Our operating cash at the end of the quarter totaled $202,724. We also own
equity securities which are of limited liquidity and which we intend to sell
from time-to-time in order to raise additional operating capital. At June 30,
2004, the market value of such securities was approximately $25,000. 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 $40,000 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 sold 1,625,000 shares of common stock at $.20 per share in May, 2004. We
intend to use the proceeds of this private placement for general corporate
purposes, payment of fees on our mining claims and limited exploration work on
our mining properties. 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,
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 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
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.
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 35,321,585 shares of common stock issued and outstanding as of June 30,
2004.
Common Stock
- -------------
During the report period the Company issued 1,625,000 shares for cash at $.20
per share; 162,500 shares valued at $.35 per share for consulting services;
60,000 shares valued at $.20 for officer and director services; 120,000 shares
valued at $.20 per share for accrued expenses; and 125,000 shares at $.20 per
share for investments acquired.
Options
- -------
None issued during the reporting period.
Warrants
- --------
None issued during the reporting 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: August 19, 2004
By: /s/ Thomas Loucks
- -------------------------
Thomas Loucks
President and Chief Executive Officer
(Principal Executive Officer)
Dated: August 19, 2004
By: /s/ John P. Ryan
- -------------------------
John P. Ryan
Chief Financial Officer