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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 3
TO
FORM 10-SB
General Form for Registration of Securities
of Small Business Issuers
Under Section 12(b) or Section 12(g) of
The Securities Exchange Act of 1934
TREND MINING COMPANY
(Name of Small Business Issuer in its Charter)
Montana 81-0304651
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
401 Front Avenue, Suite 1, Second Floor
Coeur d'Alene, Idaho 83814
(Address of principal executive office)
Issuer's telephone number: (208) 664-8095
Copies to:
Deborah J. Friedman, Esq.
Randall E. Hubbard, Esq.
Michelle H. Shepston, Esq.
Davis Graham & Stubbs LLP
1550 Seventeenth Street, Suite 500
Denver, Colorado 80202
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 Stock
(Title of Class)
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
Trend Mining Company, incorporated in Montana in 1968, has been engaged
since 1998 in the acquisition and exploration of platinum group metals
properties, primarily in the United States. From 1968 through 1982, our
activities consisted primarily of acquiring and exploring properties with silver
potential and developing and operating two silver mines. From 1982 to 1998, we
were largely inactive, although we did acquire, explore and maintain silver
properties from time to time during this period. We are an exploration stage
company, and our activities have been limited to exploring and acquiring rights
to explore, develop and mine properties which we believe may be suitable for
development into platinum group metal mines. We have identified and commenced
prospecting efforts in several areas in favorable geologic terrain in Wyoming,
Montana, Nevada, Oregon, California and Saskatchewan, Canada. There can be no
assurance that any of our properties contain a commercially viable ore body or
reserves until additional exploration work is done and an evaluation based on
such work concludes that development of and production from the ore body is
technically, economically and legally feasible. None of our properties are in
production, and consequently we have no operating income or cash flow.
We intend to reincorporate in Delaware in the near future, subject to the
approval of our Board of Directors and our stockholders. In connection with
reincorporation, we would amend our charter to increase substantially the number
of authorized shares of common stock, to authorize the issuance of preferred
stock by action of the Board of Directors without stockholder approval, and to
eliminate cumulative voting for directors.
As used in this registration statement, TREND MINING, OUR COMPANY, WE and
OUR refer to Trend Mining Company. Prior to February 1999, our corporate name
was Silver Trend Mining Company.
Six metals comprise the platinum group metals: platinum, palladium,
rhodium, iridium, ruthenium and osmium. Platinum group metals are rare precious
metals with unique physical properties that are used in diverse industrial
applications and in the jewelry industry. The largest and fastest growing use
for platinum group metals is in the automotive industry for the production of
catalysts that reduce automobile emissions. Palladium is also used in the
production of electronic components for personal computers, cellular telephones,
facsimile machines and other devices, as well as dental applications and
jewelry. Platinum's largest use is for jewelry. Industrial uses for platinum
include the production of data storage disks, glass, paints, nitric acid,
anti-cancer drugs, fiber optic cables, fertilizers, unleaded and high-octane
gasolines and fuel cells.
According to publications of the CPM Group, approximately 6.9 million
ounces of palladium and 5.1 million ounces of platinum were consumed in 1999,
with less than five percent of palladium and slightly less than one third of
platinum used for jewelry manufacture. CPM Group reports that palladium prices
averaged approximately $359 per ounce in 1999, an increase of approximately 29
percent over the previous year, and have averaged $585 per ounce
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in the first five months of 2000. Platinum prices averaged approximately $373
per ounce in 1999, a slight increase over 1998 prices, and have averaged
approximately $475 in the first five months of 2000, their highest levels since
1990.
EXPLORATION PROPERTIES
We currently own or have the right to acquire fourteen platinum group
metals mineral exploration properties, ten of which are described below.
LAKE OWEN, WYOMING
LOCATION AND ACCESS. The Lake Owen platinum group metals property is
located in Albany County, Wyoming, in the Medicine Bow-Routt National Forest.
The Lake Owen property is approximately 40 miles southwest of Laramie, Wyoming
and can be reached by paved highways and gravel roads.
LAND STATUS. In July 1999, we entered into a three-year option agreement
with General Minerals Corporation, owner of a block of unpatented mining claims
comprising a portion of the Lake Owen property, that gives us the option to earn
a 100% interest in 104 unpatented claims. General Minerals acquired some of
these unpatented mining claims from Chevron Minerals in the early 1990's, and
subsequently located additional claims. Terms of that agreement (as subsequently
amended) include the following:
- To keep the option in effect, we were required to pay General
Minerals a total of $40,000 during 1999 and 2000. All of those
payments have been made.
- To keep the option in effect, we are obligated to incur exploration
expenditures of not less than $750,000 by July 27, 2002, with no less
than $150,000 in exploration expenditures being completed by July 27,
2000. The expenditures required by July 27, 2000 have been completed.
- On the effective date of the option agreement, we issued to General
Minerals 715,996 shares of our common stock, and in May 2000, we issued
an additional 129,938 shares to General Minerals, giving it
approximately 25% of our outstanding common stock at that time. We
have subsequently issued an additional 200,000 shares of our common
stock to General Minerals pursuant to an amendment to the option
agreement and have issued 416,961 shares to General Mineral Minerals
upon exercise of their preemptive rights under the original option
agreement. The shares owned by General Minerals now represent
approximately 9% of our outstanding common stock.
- If we exercise the option to acquire a 100% interest in these
104 unpatented mining claims by completing the exploration
expenditures described above, those claims will be subject to
a 4% net profits interest with respect to ore mined from
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the property payable to either Chevron Minerals, which originally
located certain of the claims, or to General Minerals.
We located an additional 502 unpatented mining claims in an agreed area of
interest near the Lake Owen property in the first half of 2000. We are obligated
to pay to Chevron Minerals or General Minerals a 4% net profits interest with
respect to these claims and any other claims we acquire in an area of interest.
EXPLORATION HISTORY. Chevron Minerals initiated geological reconnaissance
exploration at Lake Owen in 1982, which included detailed surface geologic
mapping, geochemical sampling, and geophysical surveys. Chevron Minerals later
completed thirteen diamond-drill holes totaling approximately 5,200 feet in the
1980s and early 1990s. Drilling consisted of relatively shallow angle holes
generally less than 250 feet in vertical depth, and encountered several zones of
platinum group metals mineralization, ranging from anomalies to ore-grade
mineralization.
EXPLORATION PLANS. The exploration program for the Lake Owen property has
been divided into three phases that we currently plan to conduct over a
three-year period which began in March 2000. In phase one, we plan to focus on
the evaluation of existing geologic data generated by Chevron Minerals, and on
geologic logging and assaying of existing drill core. Phase two is expected to
involve continued field exploration, including geologic mapping, geochemical
sampling, and geophysical surveys to define drill targets. We expect phase three
to consist of a diamond drilling program intended to better delineate known
precious metal anomalies and to include exploration for new zones of
higher-grade platinum group metals mineralization.
GEOLOGY AND MINERALIZATION. The Lake Owen property is a platinum-gold-
palladium occurrence hosted in an extensive layered igneous intrusive complex
with a lateral dimension of approximately four by six miles. The complex is
about 1.4 billion years old and occurs as a steeply dipping body of rock along
the margin of the Archean Wyoming Province. The exposed stratigraphic thickness
of these rock units is approximately 20,000 feet.
Four separate zones of anomalous platinum group metals mineralization have
been identified at Lake Owen. The upper zone has been traced for about six miles
along strike. The middle zone is about 1,500 feet stratigraphically below the
upper zone, while the lower zone is situated approximately 5,500 feet
stratigraphically below the upper zone. Surface geochemical sampling identified
one additional platinum group metal zone, although the outcrop exposure in this
fourth zone is limited and the extent of the anomaly has not yet been defined.
Drill intercepts encountered to date at the Lake Owen property contain
encouraging mineralization of combined platinum group metals and gold. The
majority of the platinum group metals mineralization encountered in the Chevron
Minerals drilling program remains untested along both strike and dip.
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ALBANY, WYOMING
LOCATION AND ACCESS. The Albany platinum group metals property is also
located in southwest Albany County, Wyoming, approximately 35 miles southwest of
Laramie in the Medicine Bow-Routt National Forest. The Albany property is
accessible by an unimproved dirt road.
LAND STATUS. We located six unpatented mining claims in this area in
mid-1999 and own a 100% interest in the claim block.
EXPLORATION HISTORY. Minor exploration for platinum group metals has been
conducted previously in the Albany property area. We have no specific data
regarding previous exploration activities or results.
GEOLOGY AND MINERALIZATION. The Albany property is a platinum-palladium-
rhodium occurrence hosted along the contact of dark-colored dikes and a
lighter-colored granite stock on the northern edge of a large iron-magnesium-
rich complex. Our limited geochemical sampling program conducted in 1999
returned platinum group metal values, ranging from anomalies to ore-grade
mineralization.
SPRUCE MOUNTAIN, WYOMING
LOCATION AND ACCESS. The Spruce Mountain platinum group metals property is
located in Albany County, Wyoming, in the Medicine Bow-Routt National Forest.
The Spruce Mountain property is approximately 35 miles southwest of Laramie,
Wyoming and can be reached by paved highways and gravel roads.
LAND STATUS. We have staked 42 unpatented mining claims in this area in
mid-2000 and own a 100% interest in the claim block.
EXPLORATION HISTORY. Spruce Mountain is situated near our Lake Owen
property and the northwestern margin of the Lake Owen layered ultramafic/mafic
intrusive complex and is surrounded to the north by the New Rambler and
Centennial West platinum group metals districts, and to the west by the Mullen
Creek layered ultramafic/mafic intrusion. Historically, exploration has been
conducted in the region for gold, silver, base metals and platinum group metals.
GEOLOGY AND MINERALIZATION. Our claims are located on a platinum group
metals occurrence within mafic intrusives along an interpreted northwest to
east-west trending structural zone. The area is characterized by intense
shearing and hydrothermal alteration, which apparently concentrated the platinum
group metals that were present in the surrounding mafic host rocks.
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CENTENNIAL WEST, WYOMING
LOCATION AND ACCESS. The Centennial West platinum group metals property is
located in Albany County, Wyoming, in the Medicine Bow-Routt National Forest.
The Centennial West property is approximately 35 miles southwest of Laramie,
Wyoming and can be reached by paved highways and gravel roads.
LAND STATUS. We have staked approximately 200 unpatented mining claims in
this area in September 2000 and own a 100% interest in the claim block.
EXPLORATION HISTORY. Exploration has occurred throughout this area
historically, and small amounts of platinum group metals were produced by placer
mining from drainages.
GEOLOGY. Mafic, ultramafic and metamorphic rocks overlie and host several
known hydrothermal platinum group metal occurrences in dikes, veins and shear
zones. Placer gold and platinum group metals are present in several streams that
drain the area.
VANGUARD, MONTANA
LOCATION AND ACCESS. The Vanguard platinum group metals property, formerly
named Lady of the Lake, is located on Bureau of Land Management land in Madison
County, Montana. The property is approximately 12 miles northeast of Sheridan
and is accessible only by helicopter or trail.
LAND STATUS. In early 2000, we entered into an option agreement to acquire
eight unpatented mining claims and located an additional 121 unpatented mining
claims in the Lady of the Lake layered iron-magnesium-rich complex. We own a
100% interest in the claim block.
EXPLORATION HISTORY. The Vanguard area was initially mapped and
geochemically sampled in the mid 1980s by a small exploration company. Our
review of the results of that program indicates the existence of anomalous
platinum, palladium and gold values throughout the district. In 1987, that
company staked unpatented mining claims, which covered the known anomalous
mineralization. Shortly thereafter, a third party who had leased the claim group
began a surface mapping and sampling program. After approximately one year, the
lease was terminated, and the original locator continued to perform exploration
work on the claims sporadically during the 1990's. The claims were abandoned
prior to the location of our claims. Our claim block covers the same ground that
had been covered by the previous claims.
GEOLOGY AND MINERALIZATION. The Vanguard property is a platinum-palladium-
gold occurrence hosted in an iron-magnesium-rich layered intrusive complex that
is approximately 1,500 feet thick. Three zones, from bottom to top, characterize
this layered complex. The lowermost zone is formed of coarse-grained, dark,
chrome-iron-magnesium-rich rocks, and the rocks become progressively lighter
in color, less rich in iron and magnesium and more soda and lime enriched
towards the top.
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A large body of granite of Cretaceous age intersects portions of the
complex, and geologic mapping evidence suggests that this intrusive may
represent a possible border phase of the granite itself. Sulfides in the layered
intrusive complex consist of pyrite and chalcopyrite, which were probably formed
with the rocks. These sulfides are also concentrated in younger hydrothermal
veins. A third type of sulfide occurrence is observed as a "reef" zone. The
highest platinum group metals values are associated with the middle portion of
the complex and the sulfide reef. The reef is poorly exposed, but where it crops
out, the zone ranges in thickness from five to ten feet. Select samples
collected from the sulfide reef showed encouraging platinum and gold
mineralization.
MCCORMICK CREEK, MONTANA
LOCATION AND ACCESS. The McCormick Creek platinum group metals property is
located in northwest Missoula County, Montana, approximately 34 miles northwest
of Missoula. McCormick Creek can be reached by public highways and access roads,
and an unimproved dirt road.
LAND STATUS. We located 46 unpatented mining claims in the McCormick Creek
area in 2000 and own a 100% interest in the claim block.
EXPLORATION HISTORY. The history of mineral exploration in the McCormick
Creek area is currently unknown.
GEOLOGY AND MINERALIZATION. The dark-colored dikes and/or sills that occur
in the McCormick Creek region are located due south of the past producing Green
Mountain copper-gold-platinum mine, which is situated on the Flathead Indian
Reservation. The dark-colored dikes/sills in this region intrude Burke Formation
sediments and may be similar to, or an extension of, the Green Mountain dike,
which has a known strike length of more than five miles.
Rocks in the prospect area are comprised of altered sediments of the Burke
Formation, which is the lowermost of the Ravalli Group of the Belt Supergroup. A
sub-parallel, repetitious series of dikes, which includes the Green Mountain
dike, intruded the Ravalli quartzites throughout the district. The Green
Mountain dike commonly contains visible disseminations of secondary copper
minerals, which may be associated with platinum group and precious metals. The
extension of this dike, and/or other parallel dikes or sills, may be
geologically similar with respect to primary sulfide mineralogy and associated
platinum group and precious metal mineralization.
REINDEER LAKE, SASKATCHEWAN, CANADA
LOCATION AND ACCESS. The Reindeer Lake platinum group metals property is
located near Peter Lake in northern Saskatchewan, Canada, approximately 190 air
miles north/northeast from La Ronge, Saskatchewan. The property is accessible
only by airplane or helicopter.
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LAND STATUS. The Reindeer Lake property consists of 5 mining claim units
covering approximately 27,000 hectares, or 66,000 acres, or about 100 square
miles. We own 100% of the mining claim units.
EXPLORATION HISTORY. The Reindeer Lake claims are a portion of the Peter
Lake intrusive complex. In 1982, exploration geologists discovered platinum and
palladium-bearing sulfides in this area. During the mid-1980's, additional
exploration revealed that the lower gabbroic sequence contained platinum-
palladium-copper-nickel occurrences spread over approximately 81 miles of
strike. Additional exploration work was completed this year by another
company.
GEOLOGY AND MINERALIZATION. The Peter Lake complex, with a length of 180
kilometers (approximately 112 miles) and a width of 30 kilometers (approximately
19 miles) is one of the largest layered complexes in the world. The Peter Lake
complex represents reef type platinum group metals mineralization that has
undergone some metamorphism and hydrothermal remobilization. Two types of
mineralization are present in the Archaean aged Peter Lake layered complex. The
lowermost sequence of the complex consists of primarily cumulate layering of
anorthosite and pyroxenite with sulfides concentrated at the lithological
boundaries. Metamorphism has altered pyroxenes to amphiboles and obliterated
much of the layering. The thickness of this zone is approximately 2 kilometers.
An upper sequence separated by a gneissic and granitic zone shows, in its basal
part, textures that include marginal mixed magma textures, inclusion breccia
zones and plagioclase-hornblende veinlets, as well as hosting ultramafic and
mafic dykes. The upper sequence has a width of over 1.5 kilometers.
HARD ROCK JOHNSON, NEVADA
LOCATION AND ACCESS. The Hard Rock Johnson platinum group metals property
is located on Bureau of Land Management land in Clark County, Nevada,
approximately 25 miles southwest of the town of Mesquite. The property is
accessible by a gravel road.
LAND STATUS. We located 13 unpatented mining claims in this area in 1999
and early 2000 and own a 100% interest in the claim block.
EXPLORATION HISTORY. The Hard Rock Johnson property is located along the
northern flank of the Virgin Mountains within the Bunkerville (Copper King)
Mining District. Two principal copper and precious metals mines, the Key West
and Great Eastern, have been worked sporadically from the 1890s, when copper was
discovered in the area. A third party currently controls the 140 acres of
patented land and eight unpatented lode claims that encompass the Key West and
Great Eastern mines, adjoining our mining claims. Our claims cover the on-strike
extension of the mineralized zone to the northeast.
GEOLOGY AND MINERALIZATION. The Hard Rock Johnson property is located
within the historic Bunkerville Mining district, which produced platinum,
palladium, gold, silver, copper, lead, nickel, tungsten and cobalt. The claims
are situated within a northeast-trending belt of gneiss and schist that is
crosscut by fault zone. Scattered throughout the gneiss are dikes and irregular
coarse-grained bodies of rock, as well as layers of highly altered rock.
Precious and base metal mineralization is hosted within dikes that occur
throughout the project area.
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The zone of mineralization is over 2,000 feet wide and extends at least two
miles in strike length along a north 70 degrees east structural zone that is
parallel to the regional metamorphic foliation. The primary sulfides associated
with platinum group metals are chalcopyrite, pyrite, pyrrhotite, and magnetite,
which occur as disseminated grains and pods throughout the dikes. Platinum and
nickel are most likely associated with the magnetic pyrite.
POLE CORRAL, CALIFORNIA
LOCATION AND ACCESS. The Pole Corral platinum group metals property is
located on Bureau of Land Management land in Tehema County, California,
approximately 18 miles southwest of Platina, California. The property is
accessible by paved highways and unimproved dirt roads.
LAND STATUS. We located 72 unpatented mining claims in this area in
mid-2000 and own a 100% interest in the claim block.
EXPLORATION HISTORY. Pole Corral is situated within the Rattlesnake Terrain
of the Klamath Mountains geologic province. Within the Pole Corral project area,
sporadic exploration and mining have occurred throughout the 1900's, as
indicated by the prospect pits and small mines which we encountered. During our
preliminary geochemical sampling program, we found encouraging platinum group
metals mineralization, ranging from anomalies to ore-grade mineralization.
GEOLOGY AND MINERALIZATION. The Pole Corral property is a
platinum-rhodium-ruthenium-iridium occurrence hosted in mafic rocks of the
Rattlesnake Terrain. In addition to podiform chromite, cumulate-textured
disseminated chromite have been encountered. Zoned felsic intrusives comprise
the margins of the mafic rocks and are also manifest as pegmatoids within the
project area.
SHAMROCK, OREGON
LOCATION AND ACCESS. The Shamrock platinum group metals property is located
on Bureau of Land Management land in Jackson County, Oregon, approximately 21
miles northwest of the city of Medford. The property is accessible by unimproved
dirt roads.
LAND STATUS. We located five unpatented mining claims in this area in
mid-1999 and own a 100% interest in the claim block.
EXPLORATION HISTORY. During the first half of the 20th century, the
Shamrock property area was explored for mercury and its copper and nickel
potential.
The U.S. Bureau of Mines conducted extensive exploration and development of
the nickel-copper-cobalt mineralization in 1949 and 1950. This work included the
construction of 4,000 feet of mine access roads, rehabilitating two adits,
driving approximately an additional 400 feet of drifts and crosscuts, drilling
eleven diamond core drill holes totaling approximately
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3,400 feet, excavating five exploration bulldozer trenches, and conducting
extensive auger-hole sampling and metallurgical testing.
The U.S. Bureau of Mines encountered anomalous platinum group metals
mineralization in drill hole composite samples and delineated two small, near
surface base metal ore deposits. The Bureau reported a bulk metallurgical sample
containing 0.030 ounce per ton platinum, 1.3% nickel, 1.1% copper, and 0.07%
cobalt.
The U.S. Bureau of Mines mapped the surface exposure of sulfide
mineralization, which extends for at least 200 feet long and 200 feet deep, and
ranges from about five to 38 feet wide. The Bureau also discovered a four foot
wide zone of nickel sulfide mineralization at the base of a road cut 500 feet
southwest from the main norite dike. This sulfide zone may represent a parallel,
mineralized mafic dike that has not yet been evaluated.
During the mid 1980s, Freeport Exploration investigated the Shamrock
property for its platinum group metals potential. Freeport staked approximately
40 lode claims, conducted geologic mapping, surface and underground sampling,
and completed about nine miles of ground magnetic surveys. In June 1999, we
staked our five lode claims on ground where Freeport had located its drill
holes, and we conducted limited surface and underground geologic mapping and
sampling. All of our underground samples returned anomalous to ore-grade
precious and base metals.
GEOLOGY AND MINERALIZATION. The Shamrock property is a platinum group
metals, gold, copper, nickel, and cobalt occurrence associated with dikes that
intrude rocks of the May Creek Formation. The May Creek Formation is composed of
quartz-mica schist, iron-magnesium-rich schist/gneiss, and highly altered
quartzite. Various intrusive rocks are also present on the property.
Platinum group metals, gold, nickel, copper, and cobalt are probably hosted
in magnetic pyrite and other sulfide minerals. These sulfides may comprise as
much as 40% of the rock and occur as disseminations, blebs, and masses within
the tabular, course-grained, highly altered dikes. Weak but pervasive sulfide
mineralization is also disseminated throughout most of the adjacent May Creek
Formation.
OTHER PROPERTIES
We have recently sold, or are holding for sale the properties described
below, which had been acquired for their potential for minerals other than
platinum group minerals.
- In July 2000, we sold 15 unpatented mining claims in Kootenai
County, Idaho, comprising the Silver Strand property to another
exploration company in exchange for the purchaser's commitment to
spend a total of $200,000 on exploration of the property over the
three year period ending in July 2003. We also retained a 1.5% net
smelter return production royalty, decreasing to 0.5% once we have
received payments totaling $50,000, on the production of minerals
from the Silver Strand property. During the three year period, we
may reacquire the property if the
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purchaser does not complete the required expenditures or chooses to
terminate the purchase agreement.
- In May 1999, we sold the Rae-Wallace Company, which owned four
patented mining claims in Alaska, to another exploration company
in exchange for a 2.5% net smelter return production royalty on
the production of minerals from the property.
- We are holding the Pyramid property, consisting of five unpatented
mining claims in Churchill County, Nevada, for sale. From time to
time, we conduct discussions regarding the sale of the property
with parties who have expressed an interest or whom we believe may
have an interest in the property.
OUR EXPLORATION PROCESS
Our exploration program is designed to acquire, explore and evaluate
exploration properties in an economically efficient manner. We have not at this
time identified or delineated any platinum group metals reserves on any of our
properties.
Our current focus is primarily on the acquisition of additional exploration
properties. As indicated above, we have formulated specific exploration plans
for our Lake Owen property. Subject to our ability to raise the necessary funds,
we intend to implement an exploration program that may cover some or all of our
other properties at various times as we deem prudent.
We expect our exploration work on a given property to proceed generally in
three phases. Our first phase typically begins with research of the available
geologic literature, as well as personal interviews with geologists, mining
engineers and others familiar with the prospect sites. When the research is
completed, we augment this initial work with geologic mapping, geophysical
testing and geochemical testing of our claims. We examine any existing workings,
such as trenches, prospect pits, shafts or tunnels. If we identify an apparent
mineralized zone and are able to narrow it down to a specific area, we begin
trenching the area. Trenches are generally approximately 150 feet in length and
10 to 20 feet wide. These dimensions allow for a thorough examination of the
surface of the vein structure types that we would expect to encounter at our
properties. They also allow for efficient reclamation, re-contouring and
re-seeding of disturbed areas. Once excavation of a trench is completed, samples
are taken and analyzed for economically potential minerals that are known to
have occurred in the area in question. Careful interpretation of the data
collected from the various tests assists us in determining whether a prospect
has current economic potential and whether further exploration is warranted.
Subject to obtaining the necessary permits in a timely manner, the first
phase can typically be completed on an individual property in several months at
a cost of less than $300,000. We have completed research on and examination of
each of our properties, and have commenced geophysical work and sampling on our
Lake Owen property.
Our second phase would involve an initial examination of the underground
characteristics of mineralization that has been identified at any particular
property during the first phase of the
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exploration program. This phase is intended to identify any mineral deposits of
potential economic importance. The methods employed would include:
- more detailed geologic mapping;
- more advanced geochemical and geophysical surveys;
- more extensive trenching; and
- exploration drilling.
Subject to obtaining the necessary permits in a timely manner, the second
phase can typically be completed on an individual property in six to nine months
at a cost of less than $1 million. None of our properties has reached the second
phase.
Our third phase would be aimed at precisely defining depth, width, length,
tonnage and value per ton of any deposit that has been identified. We would
accomplish this through development drilling, metallurgical testing, and
obtaining other pertinent technical information required to define an ore
reserve and complete a feasibility study. Depending upon the nature of the
particular deposit, the third phase on any one property could take 1 to 5 years
or more and cost up to $20,000,000 or more.
We intend to explore and develop our properties ourselves, although our
plans could change depending on the terms and availability of financing and the
terms or merits of any joint venture proposals.
ENVIRONMENTAL COMPLIANCE
Our primary cost of complying with applicable environmental laws during
exploration is likely to arise in connection with the reclamation of drill holes
and access roads. Drill holes typically can be reclaimed for nominal costs,
although the Bureau of Land Management recently promulgated new surface
management regulations which may significantly increase those costs on Bureau of
Land Management lands. Access road reclamation may cost up to $50,000 to
$100,000 if roadbuilding has been done, and those costs too are likely to
increase as the result of the new Bureau of Land Management regulations. As we
are currently in the exploration stage on all of our properties, reclamation
costs have not yet been incurred.
EMPLOYEES
Currently, we have five employees, all of whom are full time.
RISK FACTORS
An investment in Trend Mining involves a high degree of risk. Investors and
prospective investors should consider carefully the following risk factors, in
addition to all of the other information in this registration statement.
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NO PRODUCTION HISTORY SINCE THE 1980'S - WE HAVE NOT MINED ANY PLATINUM GROUP
METALS.
While we were incorporated in 1968, our company has no history of producing
platinum group metals. We have not developed or operated a mine since the 1980s,
and we have no operating history upon which an evaluation of our future success
or failure can be made. Our ability to achieve and maintain profitable mining
operations is dependent upon a number of factors, including:
- our ability to locate an economically feasible mineral property; and
- our ability to successfully build and operate mines, processing plants
and related infrastructure.
We are subject to all the risks associated with establishing new mining
operations and business enterprises. There can be no assurance that we will
successfully establish mining operations or profitably produce platinum group or
other metals at any of our properties.
HISTORY OF LOSSES - WE EXPECT LOSSES TO CONTINUE FOR AT LEAST THE NEXT THREE
YEARS.
As an exploration company that has no recent production history, we have
incurred losses since the inception of our current exploration activities in
1998. We expect to continue to incur additional losses for at least the next
three years due to expenses associated with the research, exploration and
development of our mineral properties. As of June 30, 2000, we had an
accumulated deficit of approximately $2.0 million. There can be no assurance
that we will achieve or sustain profitability in the future.
WE ARE SUBJECT TO ALL OF THE RISKS INHERENT IN THE MINING INDUSTRY.
As an exploration stage company, our work is highly speculative and
involves unique and greater risks than are generally associated with other
businesses. There can be no assurance that any of our properties contain a
commercially viable ore body or reserves until additional exploration work is
done and an evaluation based on such work concludes that development of and
production from the ore body is technically, economically and legally feasible.
We are subject to all of the risks inherent in the mining industry, including,
without limitation, the following (some of which we discuss in more detail
below):
- Success in discovering and developing commercially viable
quantities of minerals is the result of a number of factors,
including the quality of management, the interpretation of
geological data, the level of geological and technical
expertise and the quality of land available for exploration;
- Exploration for minerals is highly speculative and involves
substantial risks, even when conducted on properties known to
contain significant quantities of mineralization, and most
exploration projects do not result in the discovery of
commercially mineable deposits of ore;
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- Operations are subject to a variety of existing laws and
regulations relating to exploration and development,
permitting procedures, safety precautions, property
reclamation, employee health and safety, air and water quality
standards, pollution and other environmental protection
controls, all of which are subject to change and are becoming
more stringent and costly to comply with;
- A large number of factors beyond our control, including
fluctuations in metal prices and production costs, inflation,
the proximity and liquidity of precious metals markets and
processing equipment, government regulations, including
regulations relating to prices, taxes, royalties, land tenure,
land use, importing and exporting of minerals and
environmental protection, and other economic conditions, will
affect the economic feasibility of mining;
- Once mineralization is discovered, it may take several years
from the initial phases of drilling until production is
possible, during which time the economic feasibility of
production may change;
- Substantial expenditures are required to establish proven and
probable ore reserves through drilling, to determine
metallurgical processes to extract the metals from the ore
and, in the case of new properties, to construct mining and
processing facilities; and
- If we proceed to development of a mining operation, our mining
activities would be subject to substantial operating risks and hazards,
including metal bullion losses, environmental hazards, industrial
accidents, labor disputes, encountering unusual or unexpected geologic
formations or other geological or grade problems, encountering
unanticipated ground or water conditions, cave-ins, pit-wall failures,
flooding, rock falls, periodic interruptions due to inclement
weather conditions or other unfavorable operating conditions and other
acts of God. Some of these risks and hazards are not insurable or may
be subject to exclusion or limitation in any coverage which we obtain
or may not be insured due to economic considerations.
OUR ACTIVITIES ARE SUBJECT TO ENVIRONMENTAL LAWS AND REGULATIONS WHICH MAY
MATERIALLY AFFECT OUR FUTURE Operations.
We, like other exploration companies doing business in the United States
and Canada, are subject to a variety of federal, provincial, state and local
statutes, rules and regulations designed:
- to protect the environment, including the quality of the air and water
in the vicinity of exploration, development and mining operations;
- to remediate the environmental impacts of those exploration, development
and mining operations;
- to protect and preserve wetlands and endangered species; and
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- to mitigate negative impacts on certain archeological and cultural
sites.
We are required to obtain various governmental permits to conduct
exploration at our properties. Obtaining the necessary governmental permits is
often a complex and time-consuming process involving numerous U.S. or Canadian
federal, provincial, state and local agencies. The duration and success of each
permitting effort are contingent upon many variables not within our control. In
the context of permitting, including the approval of reclamation plans, we must
comply with known standards, existing laws and regulations that may entail
greater or lesser costs and delays depending on the nature of the activity to be
permitted and the interpretation of the laws and regulations implemented by the
permitting authority. Currently, three or four months are generally required to
obtain the necessary permits required to conduct small-scale drilling
operations. New surface management regulations recently finalized by the Bureau
of Land Management will increase this period on Bureau of Land Management lands.
The failure to obtain certain permits, the adoption of more stringent permitting
requirements or the imposition of extensive conditions upon the implementation
of certain permits could have a material adverse effect on our business,
operations and prospects.
Federal legislation and implementing regulations adopted and administered
by the U.S. Environmental Protection Agency, Forest Service, Bureau of Land
Management, Fish and Wildlife Service, Army Corps of Engineers, Mine Safety and
Health Administration, and other federal agencies, and legislation such as the
federal Clean Water Act, Clean Air Act, National Environmental Policy Act,
Endangered Species Act and Comprehensive Environmental Response, Compensation
and Liability Act, have a direct bearing on U.S. exploration, development and
mining operations. For example, on November 20, 2000 the Bureau of Land
Management finalized new surface management regulations applicable to activities
and operations on unpatented mining claims. Those new regulations make
small-scale (disturbing less than 5 acres of surface) exploration activities
more expensive, by requiring bonding in the amount of 100% of the anticipated
reclamation costs. Larger-scale exploration activities (disturbing 5 acres of
surface or more) would require the preparation and approval of a formal plan of
operations. The enactment of these new regulations will make the process for
preparing and obtaining approval of a plan of operations much more time
consuming, expensive, and uncertain. New plans of operation will be required to
(i) include detailed baseline environmental information, (ii) address how
detailed reclamation performance standards will be met, (iii) go through the
environmental assessment or impact process required under the National
Environmental Policy Act (which could cost $80,000 or more per large-scale
exploration program), and (iv) go through a 30-day public comment period prior
to approval. In addition, all activities for which plans of operation are
required will be subject to a new standard of review by the Bureau of Land
Management, which must make a finding that the conditions, practices or
activities do not cause substantial irreparable harm to significant scientific,
cultural, or environmental resource values that cannot be effectively mitigated.
This standard has never before been applied to activities involving unpatented
mining claims on public lands. Due to the uncertainties inherent in the
permitting process, and particularly as a result of the enactment of the new
regulations, we cannot be certain that we will be able to timely obtain required
approvals for proposed activities at any of our properties in a timely manner,
or that our proposed activities will be allowed at all.
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These federal initiatives are often administered and enforced through state
agencies operating under parallel state statutes and regulations. Although some
mines continue to be approved for development in the United States, the process
is increasingly cumbersome, time-consuming, and expensive, and the cost and
uncertainty associated with the permitting process could have a material effect
on exploring, developing or mining our properties. We expect that laws and
regulations designed to minimize the impact of exploration, development and
mining activities on the environment and human health and safety will likely
have a similar effect on any activities we undertake in Canada.
Compliance with statutory environmental quality requirements described
above may require significant capital outlays, significantly affect our earning
power, or cause material changes in our intended activities. No assurance can be
given that environmental standards imposed by either federal, state or local
governments will not be changed or become more stringent, which could materially
and adversely affect our proposed activities.
TITLE TO OUR MINERAL PROPERTIES MAY BE DEFECTIVE AND MAY BE CHALLENGED.
Our interests in our properties located in the United States are in the
form of unpatented mining claims. Unpatented mining claims are unique property
interests, in that they are subject to the paramount title of the United States
of America and rights of third parties to certain uses of the surface and to
non-locatable minerals within their boundaries, and are generally considered to
be subject to greater title risk than other real property interests. The
validity of all unpatented mining claims is dependent upon inherent
uncertainties and conditions. These uncertainties relate to matters such as:
- The existence and sufficiency of a discovery of valuable minerals,
required under the U.S. 1872 Mining Law to establish and maintain a
valid unpatented mining claim;
- Proper posting and marking of boundaries in accordance with the 1872
Mining Law and applicable state statutes;
- Whether the minerals discovered were properly locatable as a lode claim
or a placer claim;
- Whether sufficient annual assessment work has been timely and properly
performed; and
- Possible conflicts with other claims not determinable from descriptions
of record.
The validity of an unpatented mining claim also depends on the claim having
been located on unappropriated federal land open to appropriation by mineral
location, compliance with the 1872 Mining Law and applicable state statutes in
terms of the contents of claim location notices or certificates and the timely
filing and recording of the same, and timely payment of annual claim maintenance
fees (and the timely filing and recording of proof of such payment).
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In the absence of a discovery of valuable minerals, the ground covered by an
unpatented mining claim is open to location by others unless the owner is in
actual possession of and diligently working the claim. There can be no assurance
that the unpatented mining claims we own or control are valid or that the title
to those claims is free from defects. There also can be no assurance that the
validity of our claims will not be contested by the federal government or
challenged by third parties.
LEGISLATIVE AND ADMINISTRATIVE CHANGES TO THE MINING LAWS COULD MATERIALLY
ADVERSELY AFFECT OUR FUTURE EXPLORATION, DEVELOPMENT OR MINING ACTIVITIES.
New laws and regulations, amendments to existing laws and regulations,
administrative interpretation of existing laws and regulations, or more
stringent enforcement of existing laws and regulations, could have a material
adverse impact on our ability to conduct exploration, development and mining
activities. For example, during the 1999 legislative session, legislation was
considered in the U. S. Congress which proposed a number of modifications to the
Mining Law of 1872, which governs the location and maintenance of unpatented
mining claims and related activities on federal land. Among these modifications
were proposals which would have imposed a royalty on production from unpatented
mining claims, increased the cost of holding and maintaining such claims, and
imposed more specific reclamation requirements and standards for operations on
such claims. None of these proposed modifications was enacted into law. The same
or similar proposals may be considered by Congress this year or in the future.
In addition, as discussed above, on November 20, 2000 the Bureau of Land
Management finalized revised federal regulations which govern surface activities
(including reclamation and financial assurance requirements) on unpatented
mining claims (other than those located in a National Forest, which are governed
by separate, but similarly stringent, Forest Service regulations). Those
regulations are more stringent than current regulations, and may result in a
more detailed analysis of and more challenges to the validity of existing mining
claims, will impose more complex permitting requirements earlier in the
exploration process, and will be more costly and time-consuming to comply with
than existing regulations.
USE OF THE SURFACE OF OUR UNPATENTED MINING CLAIMS IS SUBJECT TO REGULATION
WHICH COULD MATERIALLY ADVERSELY AFFECT OUR ACTIVITIES.
Any activities we conduct on the surface of our unpatented mining claims
are subject to compliance with and may be constrained or limited by Bureau of
Land Management or Forest Service surface management regulations (in addition to
the environmental and other statutes and regulations discussed above). In
addition, there are limits to the uses of the surface of unpatented mining
claims, particularly for the types of facilities which would be ancillary to our
mining operations, and both the Bureau of Land Management and the Forest Service
have some degree of discretion in allowing the use of federal lands that might
adjoin any of our unpatented mining claims for surface activities which we would
need for exploration, development and mining operations. Recently, for example,
the Forest Service adopted a "Roadless Initiative" which prohibits the
construction of new roads or the re-construction of existing roads in 43 million
acres of inventoried roadless areas within the National Forest System. All of
our Wyoming properties (Lake Owen, Spruce Mountain, Albany and Centennial West)
are located in the National Forest and may be impacted by this new policy. As a
result, there can be no guarantee
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that we will be able to obtain the access necessary to conduct required
exploration, development or ultimately mining activities on those properties. In
addition, to the extent we progress towards the development of a mine at any of
our properties, there can be no assurance that sufficient surface land will be
available for the ancillary facilities necessary to develop the mine.
WE CANNOT INSURE AGAINST ALL OF THE RISKS ASSOCIATED WITH MINING.
We currently are not insured against most commercial losses or liabilities
which may arise from our exploration and other activities. Even if we obtain
additional insurance in the future, we may not be insured against all losses and
liabilities which may arise from our activities, either because such insurance
is unavailable or because we have elected not to purchase such insurance due to
high premium costs or for other reasons.
WE MAY NOT BE ABLE TO RAISE THE FUNDS NECESSARY TO EXPLORE AND DEVELOP OUR
MINERAL PROPERTIES.
We need to seek additional financing from the public or private debt or
equity markets to continue our business activities. We have borrowed from our
principal shareholder to fund certain of our activities. There can be no
assurance that our principal shareholder will continue to advance funds to us
or that our efforts to obtain financing will be successful. We will need to
seek additional financing to complete our exploration and development of any
target properties, should the exploration program prove a property to be
worth developing. Sources of such external financing include future debt and
equity offerings, and possible joint ventures with another exploration or
mining company. There can be no assurance that additional financing will be
available on terms acceptable to us. The failure to obtain such additional
financing could have a material adverse effect on our results of operations
and financial condition. There can be no assurance that we will be able to
secure the financing necessary to retain our properties or to sustain
exploration activities in the future.
COMPETITION - WE COMPETE AGAINST LARGER, BETTER FINANCED AND MORE EXPERIENCED
COMPANIES.
The exploration industry is very competitive. Exploration companies
compete to obtain and to evaluate exploration prospects for their drilling,
exploration, development, and, ultimately, mining potential. We encounter
competition from both larger, better financed companies, such as Stillwater
Mining Company, and similarly-situated junior mining companies in connection
with the acquisition of properties with the potential of profitably producing
platinum group metals. There can be no assurance that such competition,
although customary in the industry, will not result in delays, increased
costs, or other types of negative consequences affecting us, or that our
planned exploration program will yield commercially mineable ore reserves.
WE DEPEND ON THE SERVICES OF KEY PERSONNEL.
The success of our exploration program will depend, in part, on our ability
to retain our existing employees, and on our ability to hire such additional
employees, temporary employees
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and consultants as are necessary to complete each phase of our planned
exploration program. No assurance can be given that we will be successful in our
efforts in either of these areas.
VOLATILITY OF METALS PRICES - OUR PROFITABILITY AND VIABILITY WILL BE AFFECTED
BY CHANGES IN THE PRICES OF METALS.
To the extent we are able to identify ore reserves, our ability to develop
those reserves and conduct profitable mining operations will be greatly
influenced by the prices of the platinum group metals. These prices fluctuate
widely and are affected by numerous factors beyond our control, including:
- expectations for inflation;
- the strength of the United States dollar;
- global and regional supply and demand; and
- political and economic conditions and production costs in
major platinum group metals producing regions of the world,
particularly Russia and South Africa.
The aggregate effect of these factors on metals prices is impossible for us
to predict. In addition, the prices of platinum group metals sometimes are
subject to rapid short-term and/or prolonged changes because of speculative
activities. The current demand for and supply of platinum group metals affect
platinum group metal prices, but not necessarily in the same manner as current
supply and demand affect the prices of other commodities. The supply of platinum
group metals primarily consists of new production from mining. If the prices of
platinum group metals are, for a substantial period, below our foreseeable cost
of production, we could determine that it is not economically feasible to
continue the development of our projects.
WE HAVE NEVER PAID DIVIDENDS ON OUR COMMON STOCK.
We have never paid any dividends on our Common Stock, and it is not
anticipated that dividends will be declared in the foreseeable future.
POTENTIAL FUTURE SALES PURSUANT TO RULE 144 COULD DEPRESS OUR STOCK PRICE AND
ADVERSELY AFFECT OUR ABILITY TO RAISE ADDITIONAL EQUITY FINANCING.
Of our outstanding shares of common stock as of October 31, 2000,
substantially all are currently "restricted securities," as that term is defined
in Rule 144 under the Securities Act. In general, under Rule 144 a person who
has satisfied a one-year holding period may sell limited numbers of shares. Rule
144 also permits the sale of shares without any quantity limitation, by persons
who are not our affiliates and who have beneficially owned the shares for a
minimum period of two years. As of October 31, approximately 2.8 million shares,
or 16%, of our outstanding common stock, has been held for one year and may be
sold in limited quantities, and approximately 2.8 million shares, or 16%, of our
outstanding common stock has been held for two years or more by persons who are
not our affiliates and thus may be sold without quantity
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limitations. The possible sale of these restricted shares may have a depressive
effect on the price of our securities and such sales, if substantial, might also
adversely affect our ability to raise additional equity capital.
Over the next twelve months, approximately 13.4 million shares may be sold
in limited quantities, and approximately 4.8 million shares may be sold without
quantity limitations.
FUTURE ISSUANCES OF ADDITIONAL COMMON STOCK COULD DILUTE THE OWNERSHIP INTERESTS
OF INVESTORS.
We intend to reincorporate in Delaware in the near future, subject to the
approval of our Board of Directors and our stockholders. In connection with the
reincorporation, we would amend our charter to increase substantially the number
of authorized shares of common stock and to authorize the issuance of preferred
stock by action of the Board of Directors without stockholder approval. Our
Board of Directors would have the power to issue such shares, subject, in some
instances, to shareholder approval. Any additional issuance by us from our
authorized but unissued shares would have the effect of diluting the interest of
investors.
THE PUBLIC MARKET FOR OUR COMMON STOCK IS THINLY TRADED AND LACKS LIQUIDITY,
WHICH MAY MAKE IT MORE DIFFICULT FOR INVESTORS TO SELL THEIR SHARES.
At present, our common stock is traded under the symbol "TRDM" on the "pink
sheets" maintained by Pink Sheets LLC. This market is thinly traded and lacks
the liquidity of other public markets with which some investors may have more
experience. There is no assurance that a more liquid trading market will develop
or, if developed, would be sustained. A purchaser of shares may, therefore, be
unable to resell any securities should he or she desire to do so. Furthermore,
it is unlikely that a lending institution would accept our securities as pledged
collateral for loans unless a regular trading market develops.
THE UNITED STATES PENNY STOCK RULES MAY MAKE IT MORE DIFFICULT FOR INVESTORS TO
SELL THEIR SHARES.
Because shares of our common stock will not be quoted on a national
securities exchange in the United States, the shares will be subject to rules
adopted by the U.S. Securities and Exchange Commission regulating broker-dealer
practices in connection with transactions in "penny stocks." These rules require
that prior to effecting any transaction in a penny stock, a broker or dealer
must give the customer a risk disclosure document that describes various risks
associated with an investment in penny stocks, as well as various costs and fees
associated with such an investment. It is possible that some brokers may be
unwilling to engage in transactions of shares of our common stock because of
these added disclosure requirements, which would make it more difficult for a
stockholder to sell his shares.
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This registration statement 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 accurately
predict or control. The factors listed in the sections captioned "Risk
Factors" and "Management's Discussion and Analysis or Plan of Operation," as
well as any cautionary language in this registration statement, 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 "Risk Factors" and
"Management's Discussion and Analysis or Plan of Operation" sections and
elsewhere in this registration statement could have a material adverse effect
on our business, operating results and financial condition.
GLOSSARY OF TERMS
AMPHIBOLITE: granular metamorphic rocks.
ANOMALY: a deviation from uniformity or regularity in geophysical or
geochemical quantities.
ARCHEAN: geologic age older than 2,500,000 years.
BLEBS: a vesicle, blister or bubble.
BRECCIA: rock in which angular fragments are surrounded by a mass of
fine-grained minerals.
CHALCOPYRITE: the main copper ore, which is widely occurring and found mainly
in veins.
CIRCULATION DRILL: a rotary drill or rotary percussion drill in which the
drilling fluid and cuttings return to the surface through the drill pipe,
minimizing contamination.
CRETACEOUS AGE: the geologic age period dating from approximately 68 million
years to 142 million years.
CROSS CUTS: a horizontal opening driven from a shaft and (or near) right angles
to the strike of a vein or other ore body.
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DIAMOND DRILL: a type of rotary drill in which the cutting is done by abrasion
rather than by percussion. The hollow bit of the drill cuts a core of rock which
is recovered in long cylindrical sections.
DISSEMINATED: fine particles of mineral dispensed through the enclosing rock.
DEVELOPMENT: work carried out for the purpose of opening up a mineral deposit
and making the actual extraction possible.
DIKES: a tabular igneous intrusion that cuts across the structures of
surrounding rock.
DIP: the angle at which a vein, structure or rock bed is inclined from the
horizontal as measured at right angles to the strike.
DRIFTS: a horizontal passage underground that follows along the length of a vein
or mineralized rock formation.
EXPLORATION: work involved in searching for ore by geological mapping,
geochemistry, geophysics, drilling and other methods.
GABBRO: Dark colored basic intrusive rocks. Intrusive equivalent of volcanic
basalt.
GEOCHEMISTRY: study of variation of chemical elements in rocks or soils.
GEOPHYSICS: study of the earth by quantitative physical methods.
GNEISS: a layered or banded crystalline metamorphic rock the grains of which are
aligned or elongated into a roughly parallel arrangement.
HYDROTHERMAL: pertaining to hot water, especially with respect to its action in
dissolving, re-depositing, and otherwise producing mineral changes within the
earth's crust.
INTRUSION/INTRUSIVE: a volume of igneous rock that was injected, while still
molten, into the earth's crust or other rocks.
LITHOLOGY: The character of a rock described in terms of its structure,
color, mineral composition, grain size and arrangement of its component parts.
MAFIC: Pertaining to or composed dominantly of the ferromagnesian
rock-forming silicates; used to describe some igneous rocks and their
constituent minerals.
METAMORPHISM: The mineralogical and structural changes in solid rock that
have been caused by heat and pressure at depth over time.
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MINERALIZATION: the concentration of metals and their compounds in rocks, and
the processes involved therein.
NORITE: a course grained igneous rock formed at great depth.
ORE: material that can be economically mined and processed.
ORE BODY: a continuous, well-defined mass of material of sufficient ore content
to make extraction economically feasible.
OUTCROP: the part of a rock formation that appears at the earth's surface, often
protruding above the surrounding ground.
PYRITE: the most widespread sulfide mineral.
PYROXENITE: any group of minerals.
QUARTZITE: a sedimentary rock consisting mostly of silica sand grains that have
been welded together by heat and compaction.
RECLAMATION: the restoration of a site after exploration activity or mining is
completed.
SCHIST: a foliated metamorphic rock the grains of which have a roughly parallel
arrangement.
SEDIMENTARY ROCKS/SEDIMENTS: rocks resulting from the consolidation of loose
sediments of older rock transported from its source and deposited.
SHEAR OR SHEARING: The deformation of rocks by lateral movement along numerous
parallel planes, generally resulting from pressure and producing such
metamorphic structures as cleavage and schistosity.
SILLS: a near horizontal flat-bedded strata of intrusive rock.
SULFIDE: a metallic mineral containing unoxidized sulphur.
STRIKE: the course or bearing of a vein or a layer of rock.
ULTRAMAFIC: said of an igneous rock composed chiefly of mafic materials.
UNPATENTED MINING CLAIM: a parcel of property located on federal lands pursuant
to the U.S. General Mining Law of 1872 and the requirements of the state in
which the unpatented claim is located, the paramount title of which remains with
the federal government. The holder of a valid, unpatented lode mining claim is
granted certain rights including the right to explore and mine such claim.
VEIN: an epigenetic mineral filling the fault or other fracture, in tabular or
sheetlike form, often with associated replacement of the host rock, or a mineral
deposit of this form or origin.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATION
We have incurred losses in the first nine months of fiscal year 2000 and
in the year ended September 30, 1999 of $954,183 and $434,199, respectively,
and had accumulated deficits as of June 30, 2000 and September 30, 1999 of
$1,997,918 and $1,043,735, respectively. We have inadequate cash to fund our
planned acquisition and exploration activities and other operations during
the next 12 months. These factors raise substantial doubts about our ability
to continue as a going concern without raising significant additional capital.
Since February 2000, the exercise by Electrum LLC of its options to
acquire our common stock has generated approximately $1,097,000 in funds to
finance our planned activities. As of December 1, we have borrowed
approximately $135,000 from Electrum LLC, our largest stockholder, to fund
certain activities. We expect to borrow additional funds from Electrum in the
future. We also need to seek additional financing from the public or private
debt or equity markets to continue our business activities. For a discussion
of our agreements with Electrum LLC, see "Certain Relationships and Related
Transactions - Tigris Financial Group, Ltd." There can be no assurance that
Electrum will continue to advance funds to us or that our efforts to obtain
additional financing will be successful. If we are unable to raise additional
capital, we may have to suspend or cease operations.
Our primary business objective over the next twelve months will be to focus
on the evaluation and possible acquisition of additional properties which have
platinum group minerals potential. We may acquire properties by locating
unpatented mining claims on federal lands that are open for mining claim
location, by leasing state lands, or through leases, joint ventures or purchases
of lands that are controlled by other companies or individuals. We expect to
spend from $300,000 to $500,000 on acquisitions during this period, if funds are
available on acceptable terms for these activities.
We will also focus on satisfying the work commitments that are required on
the Lake Owen property under the Lake Owen option agreement. We plan to spend
from $50,000 to $100,000 during the next twelve months on claim-staking
activities, scientific analyses of existing geologic data, and general
exploration activities on the Lake Owen property.
In regard to our other properties, during the next twelve months we plan to
continue, on a selected basis, both reconnaissance and detailed exploration
work, which will include geological mapping, geochemical sampling, and/or
geophysical surveys, if funds are available on acceptable terms for these
activities.
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As of September 30, 1999, we had a net operating loss for federal income
tax purposes of approximately $425,000. A significant portion of this net
operating loss may expire without it being utilized, as we may be unable to
begin profitable operations, which would involve moving from being a new
exploration stage company to a development stage 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.
ITEM 3. DESCRIPTION OF PROPERTIES
Our interests in our exploration properties are described in Item 1.
Our executive offices are located at 401 Front Avenue, Suite 1, Second
Floor, Coeur d'Alene, Idaho 83814, and our telephone number is (208) 664-8095.
We lease our office space under a three- year lease for monthly rent payments of
$2,656.
We also maintain office facilities in Reno, Nevada. We lease this office
space under a two-year lease that requires monthly payments of $1,725 until July
2001 and $1,775 until July 2002.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth as of November 30, 2000 the common stock
ownership of the directors, executives officers and each person known by us to
be the beneficial owner of five percent or more of our common stock. The
percentage of ownership is based on 18,449,109 shares of our common stock
outstanding as of November 30, 2000.
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<TABLE>
<CAPTION>
NUMBER OF SHARES OF
COMMON STOCK PERCENT OF
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED SHARES
------------------------ -------------------- ----------
<S> <C> <C>
DIRECTORS AND EXECUTIVE OFFICERS:
J. Michael Sharratt 2,500 *
Fred Brackebusch 104,500 *
Jeffrey M. Christian(1) 180,000 *
Kurt J. Hoffman 303,996 1.65%
Arthur E. Johnson 141,767 *
Blaze Julum 302,102 1.64%
Ishiung J. Wu - -
John Ryan 335,000 1.82%
All officers and directors as a group 1,369,865 7.43%
(8 persons)
5 PERCENT STOCKHOLDERS:
Thomas S. Kaplan(2) 13,537,349 52.72%
C/o William Natbony, Esq.
Rosenman & Colin LLP
575 Madison Avenue
New York, NY 10022-2585
Asher B. Edelman(3) 3,425,000 17.86%
C/o Edelman Companies
717 Fifth Avenue
New York, NY 10022
General Minerals Corporation(4) 1,662,895 8.92%
789 Sherman Street, Suite 600A
Denver, Colorado 80203
</TABLE>
----------------------
* Amounts shown as less than 1 percent.
(1) Mr. Christian has voting and dispositive control with respect to 180,000
shares owned by CPM Group of which he is the sole stockholder.
(2) Mr. Kaplan has voting and dispositive control with respect to 1,000,000
shares owned by Tigris Financial Group Ltd. of which he is the sole stockholder.
He also, pursuant to voting trust agreements expiring March 31, 2001, has voting
and dispositive control with respect to 5,307,588 shares and warrants
exercisable within 60 days to acquire 7,229,761 shares, all owned by Electrum
LLC.
(3) Mr. Edelman directly owns 900,000 shares and has voting and dispositive
control with respect to an additional 1,800,000 shares and warrants exercisable
within 60 days to acquire 725,000 shares.
(4) These shares include 200,000 shares issuable pursuant to a warrant
exercisable within 60 days.
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<PAGE>
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS
AND CONTROL PERSONS
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information concerning our directors and
executive officers.
<TABLE>
<CAPTION>
NAME AGE POSITION
---------------------- --- --------------------------------------
<S> <C> <C>
J. Michael Sharratt 71 Chairman and Director
Fred W. Brackebusch 55 Director
Jeffrey M. Christian 45 Director
Kurt J. Hoffman 33 Chief Executive Officer, President and
Director
Arthur E. Johnson 53 Director
Blaze Julum 38 Vice President and Director
Ishiung Wu 55 Director
John Ryan 38 Chief Financial Officer, Secretary and
Treasurer
</TABLE>
Our Board of Directors has established a Compensation Committee consisting
of Fred W. Brackebusch, Kurt J. Hoffman, and John Ryan.
Set forth below is certain additional information with respect to the
directors and executive officers.
J. MICHAEL SHARRATT became a member of the Board and began serving as the
Company's Chairman in August 2000. Prior to joining the Company, Mr. Sharratt
served as Vice Chairman, from 1994 to 1997, and President, from 1992 to 1994, of
Stillwater Mining Company. Mr. Sharratt previously served as Vice President and
Senior Director of Mining and Minerals for Manville Corp and as a Director of
the International Precious Metals Institute, the Canadian Institute of Mining
and Metallurgy and the Society of Mining Engineers. Mr. Sharratt earned a B.A.
in geology at McGill University.
FRED W. BRACKEBUSCH has served as a Director since September 1991. Since
May 1995, Mr. Brackebusch has been the owner and President of Mine Systems
Design, Inc. a consulting company which specializes in mine backfill, the new
technology paste backfill, and tailings disposal. Mr. Brackebusch earned a B.S.
and M.S. in geological engineering from the University of Idaho.
JEFFREY M. CHRISTIAN was elected to the Board of Directors in August 2000.
Since 1986, Mr. Christian has owned and has been Managing Director of CPM Group,
an independent precious metals research and consulting firm which he founded in
1986. From 1980 until 1986, he was the head of the precious metals and
commodities market statistics research groups of
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<PAGE>
Goldman, Sachs & Co. and J. Aron & Company. Mr. Christian is President and a
Director of the International Precious Metals Institute. Mr. Christian
received a B.A. in journalism at the University of Missouri and completed
post-graduate work in economics at the University of Missouri, New York
University and the University of Iowa.
KURT HOFFMAN has served as our Chief Executive Officer, President and a
Director since June 1998. From March 1995 to June 1998, Mr. Hoffman was the
owner and President of Kurt J. Hoffman Mining & Land Services, a private mining
consulting firm that provided property sales, acquisitions and land management
services for a number of U.S. based mining and timber companies. Mr. Hoffman has
been a director of New Jersey Mining Company since 1996 and Atlas Mining Company
since 1998. Mr. Hoffman received a B.A. in economics and political science from
the College of Idaho in Caldwell, Idaho.
ARTHUR E. JOHNSON has served as a Director since June 1998. Since May 1995,
Mr. Johnson has been engaged in family-owned timber and ranching businesses.
BLAZE JULUM has served as a Director since June 1998 and as our Vice
President since July 1999. He served as our Director of Corporate Development
from November 1998 to June 1999. Since 1995, Mr. Julum has owned and been
President of Cascade Equipment, an international mining equipment brokerage
which has from time to time been involved in equipment procurement and sales for
mining companies in North America, South America, and Australia. Prior to his
involvement in mining, Mr. Julum held various positions in the management of the
Heath Tecna Aerospace Company, British Petroleum - Advanced Composite Division,
and as an industrial engineer for the Boeing Airplane Company. Mr. Julum earned
a B.A. in industrial organization from Western Washington University in
Bellingham, Washington.
ISHIUNG WU became a Director in August 2000. He is the co-founder and since
1994 has been a Director and the Vice President of Acquisitions of General
Minerals Corporation. Dr. Wu has over 30 years experience in mineral exploration
management. Previously, he was manager of exploration for Chevron Resources
Company in North and South America. Prior to his service at Chevron, Dr. Wu
gained extensive field experience and made several mineral discoveries, through
various positions with Exxon Minerals, Kennecott Exploration, Cerro de Pasco and
Compania de Minas Buenaventura. Dr. Wu holds an M.A. and Ph.D. in economic
geology from Harvard University and is a fellow of the Society of Economic
Geologists.
JOHN RYAN has served since March 2000 as our Chief Financial Officer,
Treasurer and Secretary. Since November 1999, Mr. Ryan has served as Secretary
of Elite Logistics, Inc., a company in the telematics (wireless tracking)
business. Since May 1998, Mr. Ryan has been the Secretary and a Director of
Bitterroot Mining Company, which is engaged in the business of mineral
exploration. Mr. Ryan expects to devote approximately 10% of his time to the
business of Trend Mining. From April 1999 to November 1999, Mr. Ryan was the
President and Chief Executive Officer of Elite Logistics, Inc. From May 1996 to
November 1999, Mr. Ryan was Secretary and a Director of Metalline Mining
Company, a Nevada corporation engaged in the mining business. From January 1998
to February 1999, Mr. Ryan was President and a Director of Grand Central Silver
Mines, Inc., a Utah mining corporation. Mr. Ryan has been Vice President of
Corporate Development for Royal Silver Mines, Inc., a Utah corporation engaged
in
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<PAGE>
the business of mining, since October 1996, and a Director since April 1997.
From May 1995 to May 1996, Mr. Ryan was a financial consultant for Pennaluna &
Company, a registered broker/dealer located in Coeur d'Alene, Idaho. Mr. Ryan
received a B.S. in mining engineering from the University of Idaho, and earned a
J.D. from the Boston College Law School.
KEY EMPLOYEES
THOMAS E. CALLICRATE has served as Vice President of Exploration since
August 1999. Mr. Callicrate is a professional geologist who is a certified,
licensed, registered geologist with the American Institute of Professional
Geologist (AIPG) in the states of Wyoming and Wisconsin. Since January 1999, Mr.
Callicrate has been the President and a Director of Nevada Natural Stone Supply,
Inc., an industrial rock company. Since September 1998, he has been the Vice
President and a Director of Terradyne Resources, Inc., an inactive minerals
exploration company. Since 1988, Mr. Callicrate has been President and a
Director of Mountain Gold Exploration, Inc., a minerals exploration consulting
company. Further, since 1988 Mr. Callicrate has conducted exploration as a
consulting geologist for various exploration companies. Mr. Callicrate earned a
B.S. in Geology from Southern Oregon University.
DAVID G. MOONEY has served as Chief Geologist since March 2000. Mr. Mooney
is an economic geologist with extensive experience of platinum group element
deposits. During 1999, Mr. Mooney was an associate geologist with Micon
International Ltd., an international geological and mining consulting company,
and provided consulting services to Stillwater Mining Company, a platinum mining
company. From July 1993 to November 1998, Mr. Mooney was Chief Geologist with
Lonmin Plc. responsible for its platinum group mining and exploration activities
in Bushveld, South Africa. Mr. Mooney is a member of the Geological Association
of Canada, as well as the Geological Society of South Africa. Mr. Mooney earned
a B.A. and M.A. in natural science (geology), from the Trinity College, Dublin,
Ireland, and an M.S. in exploration geology from Rhodes University, South
Africa.
ITEM 6. EXECUTIVE COMPENSATION
The following table sets forth the compensation paid by Trend Mining for
the last two completed fiscal years for the President and Chief Executive
Officer. No other officer received more than $100,000 in compensation from Trend
Mining.
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<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
--------------------------
NAME AND PRINCIPAL POSITION YEAR SALARY
--------------------------- ---- ------
<S> <C> <C>
Kurt J. Hoffman 2000 $77,458
President and Chief Executive
Officer
Kurt J. Hoffman 1999 $37,287
President and Chief Executive
Officer
</TABLE>
In 2000, Mr. Hoffman received $70,458 of his salary in cash and $7,000 in
shares of our common stock, comprised of 26,924 shares at approximately $0.26
per share. In 1999, Mr. Hoffman received $13,287 of his salary in cash and
$24,000 in shares of our common stock, comprised of 257,572 shares at
approximately $0.093 per share.
We have entered into an agreement with Mr. Ryan under which, commencing
March 1, 2000, he receives 3,000 shares of our common stock per month as
compensation for his services as Chief Financial Officer, Treasurer and
Secretary. Our agreement with Mr. Ryan may be terminated by either party on 30
days notice.
We are currently negotiating employment agreements with Mr. Hoffman and Mr.
Julum.
COMPENSATION OF DIRECTORS
For fiscal year 1999, we granted to each of our directors 15,000 shares of
our common stock as compensation. On April 11, 2000, we granted to each
departing director options to purchase 1,000 shares of common stock for each
completed year of service. These options are exercisable from April 15, 2000 to
April 15, 2003. The following table sets forth information regarding these
option grants:
<TABLE>
<CAPTION>
YEARS OF OPTIONS EXERCISE
NAME SERVICE GRANTED PRICE
-------------------------------------- -------------- -------------- -------------
<S> <C> <C> <C>
Lovon Fausett 17 17,000 $0.50
Don Springer 17 17,000 $0.50
Geraldine Schimpf 17 17,000 $0.50
Robert Gee 8 8,000 $0.50
Bill Jacobson 5 5,000 $0.50
Grant Brackebusch 3 3,000 $0.50
</TABLE>
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<PAGE>
We recently awarded J. Michael Sharratt 1,500 shares, valued at $1,050 or
$0.70 per share, as compensation for board service in 2000. We are currently
considering additional director compensation arrangements.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
GENERAL MINERALS CORPORATION
Effective July 27, 1999, we entered into the Lake Owen option agreement
with General Minerals Corporation, which owns beneficially approximately 9
percent of our common stock. The primary terms and conditions of that option
agreement are described in Item 1 of Part I under the heading "Exploration
Properties Lake Owen, Wyoming." The Lake Owen option agreement was amended in
June 2000. Pursuant to that amendment, General Minerals agreed to give up
certain anti-dilution protections and the right to participate in future stock
offerings. In return, we issued to General Minerals in June 2000 an additional
200,000 shares of our common stock valued at $60,000, and warrants to purchase
an additional 200,000 shares of our common stock at any time during a two-year
period ending in June 2002 at $0.70 per share. In addition, in connection with
the amendment of the Lake Owen option agreement, General Minerals exercised its
rights under the original option agreement to purchase 416,961 shares of our
common stock for an aggregate purchase price of $23,351.
TIGRIS FINANCIAL GROUP LTD. AND ELECTRUM LLC
On December 29, 1999, we entered into a stock purchase agreement with
Tigris Financial Group Ltd., under which Tigris purchased 1,000,000 common
shares of our common stock for $100,000, and was granted rights to acquire
additional common stock and warrants. Tigris is solely owned by Thomas S.
Kaplan, who beneficially owns approximately 53 percent of our common stock.
Tigris has assigned certain of its rights under the stock purchase agreement to
its affiliate, Electrum LLC. The stock purchase agreement was amended in June
2000. Pursuant to that amendment, Electrum agreed to give up certain
anti-dilution protections in exchange for the right to acquire additional shares
of our common stock and certain preemptive rights. The preemptive rights were
terminated in July 2000.
Pursuant to the stock purchase agreement, Electrum acquired 3,500,000
shares of our common stock for an aggregate purchase price of $490,000 in March
2000, 1,597,588 shares for an aggregate purchase price of $100,000 in June 2000,
and an additional 4,740,174 shares for an aggregate purchase price of $545,020
in August and September 2000. Also pursuant to the stock purchase agreement and
in exchange for a cash payment of $10,000, we issued in June 2000 a warrant to
Electrum to purchase an additional 7,979,761 shares of our common stock for an
aggregate purchase price of $3,191,900, exercisable in whole or in part through
September 30, 2003. Electrum assigned 3,530,174 shares of our common stock in
connection with its acquisition of those shares and 500,000 warrants.
Subsequently, Electrum has assigned an additional 1,000,000 shares and 250,000
warrants. Tigris and Electrum own approximately 34% of our outstanding common
stock and, upon exercise of their warrants and assuming we have issued no other
shares, would own approximately 53% of our then outstanding common stock.
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<PAGE>
In addition, under the stock purchase agreement, Tigris and Electrum have
the right to proportional representation on our board of directors, and we
agreed to retain the CPM Group as financial advisors. Tigris and Electrum have
not exercised their rights to representation on our board of directors. We also
agreed that at the request of Tigris, we would use reasonable efforts to divest
ourselves of our silver exploration properties. Tigris and Electrum have demand
registration rights. In November 2000, Electrum requested that we register all
of the common stock, warrants and common stock underlying the warrants currently
held by Electrum and assigned by Electrum to others.
In November 2000, we entered into an agreement with Electrum under which we
have borrowed $135,000 to fund certain expenses. The loan bears interest at the
annual rate of 5% and is due upon the earlier to occur of the closing of a
public or private debt or equity financing or December 1, 2005. We anticipate
borrowing additional funds from Electrum in the future.
We intend to reincorporate in Delaware in the near future, subject to the
approval of our board of directors and our stockholders. In connection with
reincorporation, we would amend our charter to increase substantially the number
of authorized shares of common stock, to authorize the issuance of preferred
stock by action of the board of directors without stockholder approval, and to
eliminate cumulative voting for directors. In connection with this
reincorporation, we expect to enter into an arrangement under which the consent
of Electrum will be required in connection with the issuance of additional
common stock, preferred stock, options or warrants.
CPM GROUP
CPM Group is managed and wholly-owned by Jeffrey M. Christian, a director
of our company. CPM Group performs various services for us, including public and
shareholder relations, research and market intelligence on platinum group metal
markets and financial advisory functions in connection with possible mergers and
acquisitions. CPM Group has not performed services for and is not affiliated
with Tigris or Electrum.
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<PAGE>
ITEM 8. DESCRIPTION OF SECURITIES
COMMON STOCK
Our authorized capital consists of 30,000,000 shares of no par value common
stock. As of November 30, 2000, 18,449,109 shares of our common stock are issued
and outstanding. All outstanding shares have equal voting rights and are validly
issued, fully paid and non-assessable. Stockholders may employ cumulative voting
in the election of directors.
Upon liquidation, dissolution, or winding up, our assets, after the payment
of liabilities, would be distributed pro rata to the holders of our common
stock. Our shareholders do not have preemptive rights to subscribe for any of
our securities and have no right to require us to redeem or purchase their
shares.
WARRANTS
We have warrants outstanding as of November 30, 2000 to purchase 8,999,761
shares of common stock. Electrum LLC holds warrants to purchase 7,229,761 shares
at $0.40 per share until September 30, 2003; General Minerals holds warrants to
purchase 200,000 shares at $0.70 per share until June 12, 2002; Asher Edelman
beneficially owns warrants to purchase 725,000 shares at $0.40 per share until
September 30, 2003; and another holder owns warrants to acquire 820,000 shares
at $1.50 per share until November 1, 2005, 250,000 of which vested on November
1, 2000 with an additional 250,000 warrants vesting on May 1, 2000, 200,000
shares on November 1, 2001 and 120,000 shares on May 1, 2002.
REGISTRATION RIGHTS
Electrum has requested that we register all of the common stock,
warrants and common stock underlying the warrants acquired by Tigris and
Electrum pursuant to demand registration rights granted under the stock
purchase agreement. This includes 6,307,588 shares and warrants to purchase
7,229,761 shares held by Electrum and 1,800,000 shares and warrants to purchase
725,000 shares beneficially owned by Asher Edelman. In addition, a stockholder
holding 180,000 shares has the right to have those shares registered in any
registration statement of the Company filed on or before November 17, 2001, and
a warrant holder owning 820,000 warrants has the right to have the common stock
underlying those warrants registered in the next registration statement of the
Company.
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<PAGE>
DIVIDENDS
Our shareholders are entitled to share equally in dividends when, as and if
declared by the board of directors, out of funds legally available therefore. No
dividend has been paid on our common stock since inception, and none is
contemplated in the foreseeable future.
TRANSFER AGENT
The transfer agent for our common stock is Columbia Stock Transfer,
421 Coeur d'Alene Avenue, Coeur d'Alene, Idaho 83814.
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<PAGE>
PART II
ITEM 1. MARKET PRICE FOR COMMON EQUITY AND
OTHER SHAREHOLDER MATTERS
Until May 2000, our shares were traded on the Bulletin Board operated by
the National Association of Securities Dealers, Inc. (NASD) under the trading
symbol "TRDM." Our shares are now traded on the "pink sheets" maintained by Pink
Sheets LLC. Our shares began trading in 1968. Summary trading by quarter for the
1999 and 1998 fiscal years and the first three quarters of 2000 are as follows:
<TABLE>
<CAPTION>
FISCAL QUARTER HIGH BID [1] LOW BID [1]
-------------- ------------ -----------
<S> <C> <C>
2000
Fourth Quarter $1.60 $0.60
Third Quarter $1.06 $0.50
Second Quarter $1.06 $0.28
First Quarter $0.44 $0.26
1999
Fourth Quarter $0.44 $0.08
Third Quarter $1.06 $0.41
Second Quarter $0.45 $0.19
First Quarter $0.50 $0.19
1998
Fourth Quarter $0.63 $0.25
Third Quarter $1.00 $0.63
Second Quarter $1.88 $0.63
First Quarter $1.88 $1.25
</TABLE>
[1] These quotations reflect inter-dealer prices, without retail
mark-up, mark-down or commissions and may not represent actual
transactions.
As of October 31, 2000, we had approximately 955 holders of record of our common
stock.
We have not paid any dividends since our inception and do not anticipate
paying any dividends on our common stock in the foreseeable future. There are no
restrictions which preclude the payment of dividends.
ITEM 2. LEGAL PROCEEDINGS
We are not a party to any pending or threatened litigation and to our
knowledge, no action, suit or proceeding has been threatened against any of our
officers or directors.
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<PAGE>
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
Our previous accountant, LeMaster and Daniels, PLLC resigned, effective
September 1999. LeMaster and Daniels did not prepare financial statements or an
audit opinion for the fiscal year ended September 30, 1998. There were no
disagreements with LeMaster and Daniels on accounting and financial disclosures.
Williams & Webster, P.S., our current accountants, were appointed in
February 2000. There have been no disagreements on accounting and financial
disclosures through the date of this registration statement.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
We had 18,449,109 shares of common stock issued and outstanding as of
November 30, 2000. Of these shares, approximately 2.8 million shares may be sold
without limitation under Rule 144, adopted under the Securities Act, and
approximately 2.8 million shares can only be resold in compliance with Rule 144
volume limitations.
Effective February 16, 1999, we completed a 1 for 10 reverse stock split of
our common stock. Unless otherwise stated, all share amounts set forth in this
registration statement are presented on a post-split basis.
In general, under Rule 144, a person who has beneficially owned shares
privately acquired directly or indirectly from us or from one of our affiliates,
for at least one year, or who is an affiliate, is entitled to sell, within any
three-month period, a number of shares that do not exceed the greater of 1% of
the then outstanding shares or the average weekly trading volume in our shares
during the four calendar weeks immediately preceding such sale. Sales under Rule
144 are also subject to certain manner of sale provisions, notice requirements
and the availability of current public information about us. A person who is not
deemed to have been an affiliate at any time during the 90 days preceding a
sale, and who has beneficially owned restricted shares for at least two years,
is entitled to sell all such shares under Rule 144 without regard to the volume
limitations, current public information requirements, manner of sale provisions
or notice requirements.
Rule 701, as currently in effect, permits resales of shares in reliance
upon Rule 144 but without compliance with certain restrictions, including the
holding period requirement, of Rule 144. Any of our employees, officers,
directors or consultants who purchased shares under a written compensatory plan
or contract may be entitled to rely on the resale provisions of Rule 701. Rule
701 permits affiliates to sell their Rule 701 shares under Rule 144 without
complying with the holding period requirements of Rule 144. Rule 701 further
provides that non-affiliates may sell such shares in reliance on Rule 144
without having to comply with the holding period, public information, volume
limitation or notice provisions of Rule 144.
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<PAGE>
The issuances discussed under this section are exempted from registration
under Rule 701 of the Securities Act ("Rule 701"), Rule 504 of the Securities
Act ("Rule 504") or Section 4(2) of the Securities Act ("Section 4(2)"), as
provided.
COMMON STOCK
1. On July 23, 1998, we issued 12,000 shares to the lessor under a mining
lease pursuant to Section 4(2), as consideration for termination of the lease,
valued at $6,000.
2. On July 23, 1998, we issued 150,000 shares pursuant to Rule 504 to eight
investors in exchange for a exploration property valued at $75,000.
3. On July 23, 1998, we issued 80,000 shares pursuant to Rule 504 to two
investors in lieu of repayment of a $40,000 loan.
4. On July 23, 1998, we issued 7,500 shares pursuant to Rule 504 to an
investor for a purchase price of $1,500.
5. In September 1998, we issued 9,000 shares in the aggregate to three of
our officers pursuant to Section 4(2) in lieu of cash payments for services,
with an aggregate value of $4,500.
6. On October 12, 1998, we issued 9,210 shares pursuant to Section 4(2) to
one of our directors in satisfaction of outstanding indebtedness in the amount
of $340, and in exchange for common stock of two public companies, Atlas Mining
Company and Merger Mines Corp., valued at $427 and $1,075, respectively, for a
total aggregate consideration of $1,842.
7. On October 30, 1998, we issued 600,000 shares pursuant to Rule 504 to an
investor in exchange for equipment valued at $180,000.
8. On November 28, 1998, we issued 5,000 shares pursuant to Rule 504 to an
investor for an aggregate purchase price of $1,000.
9. In December 1998 and January 1999, we issued 39,429 shares pursuant to
Section 4(2) to three of our officers in lieu of cash payment for services with
an aggregate value of $16,500.
10. On January 25, 1999, we issued 16,500 shares in the aggregate to eleven
of our directors pursuant to Section 4(2) as compensation for their service on
the board of directors in 1998, with an aggregate value of $4,125.
11. On March 31, 1999, we issued 6,000 shares pursuant to Rule 504 to a
consultant in lieu of payment for services valued at $1,500.
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<PAGE>
12. From March to September 1999, we issued 261,000 shares at prices
ranging from $0.06 to $0.25 per share to certain of our officers pursuant to
Section 4(2) in lieu of cash payment for their services, with an aggregate value
of $22,500.
13. On April 30, 1999, we issued 32,000 shares pursuant to Rule 701 to a
consultant in lieu of payment for consulting services with an aggregate value of
$8,000.
14. From May to July 1999, we issued 120,364 shares pursuant to Rule 701 to
a consultant in lieu of cash payment for consulting services valued at $11,022.
15. From May to September 1999, we issued 329,206 shares pursuant to Rule
504 to a consultant as compensation for consulting services with an aggregate
value of $29,509.
16. In June and August 1999, we issued 8,000 shares pursuant to Rule 504 to
a consultant in lieu of cash payment for consulting services valued at $2,000.
17. From June to September 1999, we issued 89,500 shares pursuant to
Section 4(2) to a consultant as compensation for consulting services valued at
$6,450.
18. In July 1999, we issued 5,000 shares pursuant to Rule 504 to a
consultant in lieu of cash payment for consulting services valued at $1,250.
19. On July 27, 1999, we issued 715,996 shares pursuant to Section 4(2) to
an investor as partial consideration for an option to purchase an exploration
property.
20. In July and August 1999, we issued 50,000 shares pursuant to Rule 504
to two investors for an aggregate purchase price of $7,500.
21. In May through September 1999, we issued 133,332 shares pursuant to
Rule 701 to a consultant as compensation for consulting services valued at
$8,000.
22. On August 16, 1999, we issued 1,000 shares pursuant to Rule 504 in
exchange for equipment storage services valued at $250.
23. On August 31, 1999, we issued 96,000 shares pursuant to Rule 701 to an
investor as a commission on the sale of mining equipment and in lieu of payment
for consulting services, with an aggregate value of $5,050.
24. In August and September 1999, we issued 550,000 shares pursuant to Rule
504 to investors at prices ranging from $0.05 to $0.10 per share, for an
aggregate purchase price of $37,500.
25. In September 1999, we issued 19,720 shares pursuant to Rule 504 to a
consultant in lieu of cash payment for consulting services valued at $1,972.
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<PAGE>
26. In October 1999, we issued 112,500 shares pursuant to Rule 504 to a
consultant in lieu of cash payment for consulting services valued at $6,750.
27. In October 1999, we issued a total of 38,750 shares pursuant to Rule
504 to a consultant in lieu of cash payment for consulting services valued at
$3,875.
28. In October 1999, we issued 85,000 shares pursuant to Rule 504 to a
consultant in lieu of cash payment for consulting services valued at $5,100.
29. In October 1999, we issued 37,425 shares pursuant to Rule 701 to a
consultant as compensation for consulting services valued at $3,743.
30. On October 4, 1999, we issued 50,000 shares pursuant to Rule 504 to a
consultant in lieu of payment for services valued at $5,000.
31. On October 22, 1999, we issued 25,000 shares to two investors pursuant
to Rule 504 for an aggregate purchase price of $5,000.
32. In November 1999, we issued 4,327 shares to a consultant pursuant to
Rule 701 in lieu of cash payment for consulting services valued at $1,125.
33. On November 30, 1999, we issued 52,694 shares pursuant to Rule 701 to
certain of our officers in lieu of cash payments for their services, with an
aggregate value of $13,400.
34. In December 1999, we issued 1,200 shares to an employee pursuant to
Rule 504 in lieu of salary payments with an aggregate value of $420.
35. On December 31, 1999, we issued 1,000,000 shares pursuant to Section
4(2) to an accredited investor for an aggregate purchase price of $100,000.
36. On January 15, 2000, we issued 200,000 shares pursuant to Rule 504 to
four investors in exchange for common stock of New Jersey Mining Company for an
aggregate purchase price of $26,000.
37. On January 17, 2000, we issued 65,285 shares pursuant to Rule 504 to
two investors as repayment of indebtedness in the aggregate amount of $16,321.
38. On January, 25, 2000, we issued 14,286 shares pursuant to Rule 504 to
an investor for a purchase price of $5,000.
39. In January and March 2000, we issued 90,000 shares pursuant to Rule 504
to a consultant in lieu of cash payment for consulting services valued at
$9,000.
40. In February 2000, we issued 10,000 shares to a consultant pursuant to
Rule 504 in lieu of cash payment for consulting services valued at $1,500.
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<PAGE>
41. On February 25, 2000, we issued 16,667 shares pursuant to Rule 701 to a
consultant as compensation for consulting services valued at $5,000.
42. In February and March 2000, we issued 3,500,000 shares pursuant to
Section 4(2) to an accredited investor for an aggregate purchase price of
$490,000.
43. On March 24, 2000, we issued 50,000 shares of our common stock pursuant
to Rule 504 to three investors in connection with the acquisition of an option
to acquire certain mineral properties, with an aggregate value of $15,000.
44. From March to July 2000, we issued 15,000 shares pursuant to Rule 701
to one of our officers in lieu of cash payments for services valued at $7,920.
45. In April 4, 2000, we issued 50,000 shares pursuant to Rule 504 to three
investors in connection with the acquisition of an option to acquire certain
mineral properties, with an aggregate value of $15,000.
46. In May 2000, we issued 9,975 shares pursuant to Section 4(2) to a
consultant in lieu of cash payment for services valued at $5,985.
47. In May and June 2000, we issued an additional 746,899 shares pursuant
to Section 4(2) to an existing investor at prices ranging from $0.06 to $0.30
per share as additional payments for mineral properties and in connection with
the exercise of preemptive rights, for an aggregate consideration of $99,773.
48. In June 2000, we issued 1,000 shares pursuant to Section 4(2) to a
consultant in lieu of cash payment for consulting services valued at $700.
49. On June 29, 2000, we issued an additional 1,597,588 shares pursuant to
Section 4(2) to an existing accredited investor for an aggregate purchase price
of $100,000.
50. On June 30, 2000, we issued 150,000 shares to ten of our directors
pursuant to Section 4(2) as compensation for their 1999 board service, with an
aggregate value of $52,500.
51. In July 2000, we issued 10,000 shares pursuant to Rule 504 to an
existing investor for a purchase price of $3,000.
52. In July through September 2000, we issued 4,740,174 shares pursuant to
Section 4(2) to an existing investor at $0.115 per share, for a purchase price
of $545,120.
53. On August 1, 2000, we issued 100,000 shares pursuant to Rule 504 to an
existing investor for a purchase price of $22,500.
54. On August 25, 2000, we issued 1,500 shares pursuant to Rule 701 to one
of our directors as compensation for board services valued at $1,050.
-39-
<PAGE>
55. In August and September 2000, we issued 7,000 shares pursuant to Rule
701 to an one of our officers in lieu of cash payments for services valued at
$8,675.
56. On September 22, 2000, we issued 90,000 shares pursuant to Section 4(2)
to a consultant in lieu of cash payment for consulting services valued at
$18,000.
57. On October 10, 2000, we issued 33,333 shares pursuant to Section 4(2)
to an employee for a purchase price of $10,000.
58. In October 2000, we issued 3,000 shares pursuant to Section 4(2) to one
of our officers in lieu of cash payment for services valued at $3,180.
59. On November 17, 2000, we issued pursuant to Section 4(2) 180,000 shares
valued in the aggregate at approximately $215,000 to a consultant as partial
payment for consulting services.
-40-
<PAGE>
OPTIONS
1. On July 20, 1998 we granted options pursuant to Rule 504 to a potential
investor as follows:
<TABLE>
<CAPTION>
SHARES EXERCISE PRICE EXERCISE PERIOD
------- -------------- -----------------------------------
<S> <C> <C>
100,000 $0.10 July 20, 1998 to July 19, 1999
25,000 $0.20 July 20, 1998 to July 19, 1999
50,000 $0.50 September 1, 1998 to July 19, 2001
25,000 $1.00 September 1, 1998 to July 19, 2001
</TABLE>
They also agreed to purchase 10,000 shares for $1,000 upon execution of the
agreement. None of the options were exercised and the shares were not purchased.
The agreement to purchase and the unexercised options were terminated on
September 24, 1998.
On September 24, 1998, we granted options pursuant to Rule 504 to the same
potential investor as follows:
<TABLE>
<CAPTION>
SHARES EXERCISE PRICE TERMINATION DATE
------ -------------- ----------------
<S> <C> <C>
80,000 $0.20 July 19, 1999
25,000 $0.30 July 19, 2000
50,000 $0.50 July 19, 2001
25,000 $1.00 July 19, 2002
</TABLE>
They also agreed to purchase 20,000 shares for $2,000 upon execution of the
agreement. None of the options were exercised and none of the shares were
purchased. The agreement to purchase and the unexercised options were terminated
on July 7, 2000, and we issued options under Rule 504 to the same potential
investor as follows:
<TABLE>
<CAPTION>
SHARES EXERCISE PRICE TERMINATION DATE
------ -------------- ----------------
<S> <C> <C>
25,000 $0.30 August 31, 2000
15,000 $0.50 July 19, 2001
12,500 $1.00 July 19, 2002
</TABLE>
The option for 25,000 shares was exercised to the extent of 10,000 shares on
July 14, 2000, and 15,000 shares on August 31, 2000. The remaining options have
not yet been exercised.
2. On July 22, 1999, we issued an option pursuant to Rule 504 until January
22, 2000 to two existing investors to acquire an additional 33,333 shares at an
exercise price of $0.35 per share. This option has expired.
3. On July 22, 1999, we issued an option pursuant to Rule 504 until January
22, 2000 to two existing investors to acquire an additional 16,667 shares at an
exercise price of $0.35 per share. This option has expired.
-41-
<PAGE>
4. On August 13, 1999, we granted options pursuant to Rule 504 to an
existing investor as follows:
<TABLE>
<CAPTION>
SHARES EXERCISE PRICE TERMINATION DATE
------ -------------- ----------------
<S> <C> <C>
50,000 $0.15 August 13, 2000
50,000 $0.30 August 13, 2000
</TABLE>
These options were exercised in August 2000.
5. On December 29, 1999, we granted, pursuant to Section 4(2), Tigris
Financial Group, an existing accredited investor, the option until March 28,
2000 to purchase up to an additional 3,500,000 shares for an exercise price of
$0.14 per share, or $490,000 in the aggregate. Tigris has assigned its rights
under its stock purchase agreement with the Company to Electrum LLC. This option
was exercised in February and March 2000.
Upon exercise of the option described in paragraph 1, Electrum received an
option under Section 4(2) until September 25, 2000 to purchase up to an
additional 4,608,000 shares for an exercise price of $0.14 per share, or
$645,120 in the aggregate. On June 27, 2000, this option was terminated, and
replaced with 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 until September 25, 2000 to acquire
up to an additional 4,740,174 shares at an exercise price of $0.115 per share,
or $545,120 in the aggregate. The option to acquire 1,597,588 shares and the
option to acquire 4,740,174 shares have been exercised in full.
On December 29, 1999, we granted an option under Section 4(2) to Electrum
to purchase, for $10,000, warrants to buy an additional 6,250,000 shares. On
June 27, 2000, this option was terminated and replaced with an option to
purchase, for $10,000, warrants to buy up to 7,979,761 shares. The replacement
option to purchase the warrant was exercised in June 2000. The terms of the
warrant are described below in paragraph 1 under the heading "Warrants."
6. On February 25, 2000, we granted to an employee as compensation pursuant
to Rule 701 an option until February 25, 2002 to purchase 33,333 shares for an
exercise price of $0.30 per share, or $10,000 in the aggregate.
7. On April 11, 2000, we granted options under Rule 701 to purchase 67,000
shares in the aggregate at an exercise price of $0.50 per share to six of our
directors. These options are exercisable from April 15, 2000 until April 15,
2003. None of these options has yet been exercised.
WARRANTS
1. In June 2000, we sold a warrant pursuant to Section 4(2) to purchase
7,979,761 shares at an exercise price of $0.40 per share to Tigris Financial
Group, an existing accredited investor, in exchange for a $10,000 cash payment.
This warrant expires on September 20, 2003 and has not yet been exercised.
-42-
<PAGE>
2. On June 12, 2000, we sold a warrant pursuant to Section 4(2) to purchase
200,000 shares at an exercise price of $0.70 per share to an existing investor
as partial consideration for the relinquishment of certain anti-dilution rights.
This warrant expires on June 12, 2002 and has not yet been exercised.
3. On November 1, 2000, we granted pursuant to Section 4(2) warrants until
November 1, 2005 to purchase 820,000 shares at an exercise price of $1.50 per
share. The warrants vest as follows: 250,000 share vested on November 1, 2000;
250,000 shares vest on May 1, 2001; 200,000 shares vest on November 1, 2001; and
120,000 shares vest on May 1, 2002.
The issuances discussed in this section are exempted from registration
under Rule 701 of the Securities Act ("Rule 701"), Rule 504 of the Securities
Act ("Rule 504") and Section 4(2) of the Securities Act ("Section 4(2)"). All
purchasers of the above 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
Item 4.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The laws of the State of Montana (Section 35-1-451 to 459) under certain
circumstances provide for indemnification of a corporation's directors,
officers, employees and agents against liabilities that they may incur in such
capacities.
In general, any director, officer, employee or agent of a corporation made
a party to a proceeding because he or she serves in that capacity with the
corporation may be indemnified against expenses, fines, settlements or judgments
arising in connection with the proceeding, if that person's actions were in good
faith, were reasonably believed to be in the corporation's best interest, and
were reasonably believed not to be unlawful. Unless such person is successful
upon the merits in such an action, indemnification may be awarded only after a
determination by either a majority vote of a quorum of the corporation's
directors not at the time party to the proceeding, or a specially designated
committee if no quorum can be obtained, or by special legal counsel, or by a
vote of the shareholders, excluding those shares owned by or voted under control
of directors who are at the time party to the proceedings, that the applicable
standard of conduct was met by the person to be indemnified.
Our articles of incorporation and bylaws contain no indemnification
provisions.
-43-
<PAGE>
PART F/S
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Index to Financial Statements.................................................. F-1
</TABLE>
PART III
ITEMS 1 AND 2. INDEX TO EXHIBITS AND DESCRIPTION OF EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBITS
-------- --------
<S> <C>
3.1 Articles of Incorporation dated September 7, 1968; Certificate
of Amendment of Articles of Incorporation dated September 23,
1970; Articles of Amendment of the Articles of Incorporation
dated January 25, 1980; Articles of Amendment to the Articles
of Incorporation dated July 23, 1984; Articles of Amendment
1984 to the Articles of Incorporation dated October 31, 1984;
Articles of Amendment to the Articles of Incorporation filed
August 13, 1998; and Articles of Amendment to the Articles of
Incorporation dated March 3, 1999.*
3.2 Bylaws adopted effective October 1, 1968.*
10.1 Stock Purchase Agreement dated as of December 29, 1999,
between Tigris Financial Group Ltd. and Trend Mining Company;
Amendment to Stock Purchase Agreement dated as of June 27,
2000 between Electrum LLC and Trend Mining Company; and
Warrant Agreement dated June 9, 2000 between Trend Mining
Company and Tigris Financial Group Ltd.*
10.2 Lake Owen Option Agreement between General Minerals
Corporation and Trend Mining Company; Amendment to Lake Owen
Option Agreement dated June, 2000 between General Minerals
Corporation and Trend Mining Company; and Warrant Agreement
dated June 12, 2000 between Trend Mining Company and General
Minerals Corporation.*
10.3 Letter Agreement between John Ryan and Trend Mining Company
dated July 12, 2000.*
23.1 Consent of Certified Public Accountants, dated July 24, 2000.
23.2 Consent of Certified Public Accountants, dated July 24, 2000.
23.3 Consent of CPM Group, dated September 25, 2000.*
27.1 Financial Data Schedule.
</TABLE>
------------------
* Previously filed.
-44-
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this Amendment No. 3 to Registration Statement on Form 10-SB
to be signed on its behalf by the undersigned, thereunto duly authorized.
TREND MINING COMPANY
Dated: November 30, 2000 By: /s/ Kurt J. Hoffman
-----------------------------------
Kurt J. Hoffman, President and Chief
Executive Officer
-45-
<PAGE>
TREND MINING COMPANY
(FORMERLY SILVER TREND MINING COMPANY)
(AN EXPLORATION STAGE COMPANY)
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Financial Statements for the Years Ended September 30, 1999 and 1998
Independent Auditor's Report........................................................................F-2
Balance Sheets at September 30, 1999 and 1998.......................................................F-3
Statements of Operations and Comprehensive Income (Loss) for the Years
Ended September 30, 1999 and 1998...................................................................F-4
Statement of Stockholders' Equity for the Years Ended September 30, 1999
And 1998............................................................................................F-5
Statements of Cash Flows for the Years Ended September 30, 1999 and 1998............................F-6
Notes to the Financial Statements...................................................................F-7
Interim Financial Statements
Accountant's Review Report.........................................................................F-22
Balance Sheets at June 30, 2000 and 1999 (Unaudited)...............................................F-23
Statements of Operations and Comprehensive Income (Loss) for the Nine
Months Ended June 30, 2000 and 1999 (Unaudited)...............................................F-24
Statement of Stockholders' Equity for the Period from October 1, 1998 to
June 30, 2000 (Unaudited).....................................................................F-25
Statements of Cash Flows for the Nine Months Ended June 30, 2000 and 1999
(Unaudited)...................................................................................F-27
Notes to the Interim Statements (Unaudited)........................................................F-28
</TABLE>
F-1
<PAGE>
The Board of Directors
Trend Mining Company
Coeur d'Alene, Idaho
INDEPENDENT AUDITOR'S REPORT
We have audited the accompanying balance sheets of Trend Mining Company
(formerly Silver Trend Mining Company) (an exploration stage company) as of
September 30, 1999 and 1998, and the related statements of operations and
comprehensive income (loss), stockholders' equity, and cash flows for the years
then ended and from November 4, 1998 (inception of exploration stage) to
September 30, 1999. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Trend Mining Company as of
September 30, 1999 and 1998, and the results of its operations and its cash
flows for the years then ended, and from November 4, 1998 to September 30, 1999,
in conformity with generally accepted accounting principles.
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
November 13, 2000
F-2
<PAGE>
TREND MINING COMPANY
(FORMERLY SILVER TREND MINING COMPANY)
(AN EXPLORATION STAGE COMPANY)
BALANCE SHEETS
<TABLE>
<CAPTION>
September 30,
----------------------------------
1999 1998
--------------- -------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 8,998 $ 2,926
Prepaid fees 1,000 -
Equipment held for resale 4,000 -
--------------- -------------
TOTAL CURRENT ASSETS 13,998 2,926
--------------- -------------
MINERAL PROPERTIES 145,873 269,086
--------------- -------------
PROPERTY AND EQUIPMENT 997 -
--------------- -------------
OTHER ASSETS
Investments 96,750 184,491
--------------- -------------
NON CURRENT ASSETS
Net assets of discontinued operations 194,086 -
--------------- -------------
TOTAL ASSETS $ 451,704 $ 456,503
=============== =============
LIABILITIES AND
STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 14,264 $ 5,693
Accrued expenses 26,256 12,750
Deferred mineral property acquisition costs 46,242 -
Notes payable 2,000 -
--------------- -------------
TOTAL CURRENT LIABILITIES 88,762 18,443
--------------- -------------
COMMITMENTS AND CONTINGENCIES - -
--------------- -------------
STOCKHOLDERS' EQUITY
Common stock, no par value, 30,000,000
shares authorized; 5,345,511 and
2,258,254 shares issued and outstanding,
respectively 1,366,117 930,516
Stock options 2,659 -
Accumulated deficit (1,043,735) (609,536)
Accumulated other comprehensive income 37,901 117,080
--------------- -------------
TOTAL STOCKHOLDERS' EQUITY 362,942 438,060
--------------- -------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 451,704 $ 456,503
=============== =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
TREND MINING COMPANY
(FORMERLY SILVER TREND MINING COMPANY)
(AN EXPLORATION STAGE COMPANY)
STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
<TABLE>
<CAPTION>
Year Ended November 4, 1998 Year Ended
Through
September 30, 1999 September 30, 1999 September 30, 1998
------------------ ------------------ ------------------
<S> <C> <C> <C>
REVENUES $ - $ - $ -
------------- --------------- -------------
GENERAL AND ADMINISTRATIVE EXPENSES
Mineral property expense 105,989 105,989 42,503
General & administrative 36,931 28,978 20,130
Officers & directors compensation 82,033 82,033 12,750
Legal & professional 12,745 12,745 8,933
Depreciation 288 288 -
------------- --------------- -------------
Total Expenses 237,986 230,033 84,316
------------- --------------- -------------
OPERATING LOSS (237,986) (230,033) (84,316)
------------- --------------- -------------
OTHER INCOME (EXPENSES)
Dividends & interest income 319 255 1,870
Loss on disposition and impairment of assets (136,674) (136,674) (1,552)
Gain (loss) on investment sales 1,177 307 (1,386)
Financing expenses (2,659) (2,659) -
Interest expense (504) (504) -
Miscellaneous income 5,790 3,790 400
------------- --------------- -------------
Total Other Income (Expense) (132,551) (135,485) (668)
------------- --------------- -------------
INCOME (LOSS) BEFORE INCOME TAXES (370,537) (365,518) (84,984)
INCOME TAXES - - -
------------- --------------- -------------
INCOME (LOSS) FROM CONTINUING OPERATIONS (370,537) (365,518) (84,984)
LOSS FROM DISCONTINUED OPERATIONS
Loss from operations of gold and silver mining
(net of income taxes of $0 in 1999) (63,662) (63,662) -
------------- --------------- -------------
CUMULATIVE EFFECT OF ACCOUNTING CHANGE - - (31,520)
------------- --------------- -------------
NET LOSS (434,199) (429,180) (116,504)
OTHER COMPREHENSIVE INCOME (LOSS)
Change in market value of investments (79,179) (79,179) 117,080
------------- --------------- -------------
COMPREHENSIVE INCOME (LOSS) $ (513,378) $ (508,359) $ 576
============= =============== =============
BASIC AND DILUTED NET LOSS
PER COMMON SHARE, CONTINUING OPERATIONS $ (0.12) $ (0.12) $ (0.04)
============= =============== =============
BASIC AND DILUTED NET LOSS
PER COMMON SHARE, DISCONTINUED OPERATIONS $ (0.02) $ (0.02) $ -
============= =============== =============
BASIC AND DILUTED NET LOSS PER COMMON SHARE,
CUMMULATIVE EFFECT OF ACCOUNTING CHANGE $ - $ - $ (0.02)
============= =============== =============
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 3,086,697 3,087,000 2,046,547
============= =============== =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
TREND MINING COMPANY
(FORMERLY SILVER TREND MINING COMPANY)
(AN EXPLORATION STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock Accumulated
---------------------- Additional Other
Number Paid-in Stock Accumulated Comprehensive
of Shares Amount Capital Options Deficit Income Total
---------- ---------- ---------- ------- ------------ ------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, October 1, 1997 1,999,754 $ 999,927 $(196,411) $ - $ (493,032) $ $ 310,484
Change from $0.05 par value to no par value - (196,411) 196,411 - - - -
Issuance of common stock for
mineral property at $0.50 per share 150,000 75,000 - - - - 75,000
Issuance of common stock for
lease termination at $0.50 per share 12,000 6,000 - - - - 6,000
Issuance of common stock for
debt at $0.50 per share 80,000 40,000 - - - - 40,000
Issuance of common stock for cash
at $0.20 per share 7,500 1,500 - - - - 1,500
Issuance of common stock for compensation
at $0.50 per share 9,000 4,500 - - - - 4,500
Net loss - - - - (116,504) - (116,504)
Change in market value of investments - - - - - 117,080 117,080
---------- ---------- ---------- ------- ------------ ------------- ---------
Balance, September 30, 1998 2,258,254 930,516 - - (609,536) 117,080 438,060
Issuance of common stock for cash
at an average of $0.07 per share 555,000 41,000 - - - - 41,000
Issuance of common stock for prepaid
expenses at $0.10 per share 50,000 5,000 - - - - 5,000
Issuance of common stock for consulting
services at an average of $0.09 per share 839,121 74,753 - - - - 74,753
Issuance of common stock for mineral
property at $0.13 per share 715,996 89,631 - - - - 89,631
Issuance of common stock for officers'
compensation at an average of $0.13
per share 300,430 39,000 - - - - 39,000
Issuance of common stock for debt and
investment at $0.20 per share 9,210 1,842 - - - - 1,842
Issuance of common stock for directors'
compensation at an average of $0.25 per
share 16,500 4,125 - - - - 4,125
Issuance of common stock for rent at $0.25
per share 1,000 250 - - - - 250
Issuance of common stock for equipment at
$0.30 per share 600,000 180,000 - - - - 180,000
Issuance of stock options for financing
activities - - - 2,659 - - 2,659
Net loss - - - - (434,199) - (434,199)
Change in market value of investments - - - - - (79,179) (79,179)
---------- ---------- ---------- ------- ------------ ------------- ---------
Balance, September 30, 1999 5,345,511 $1,366,117 $ - $2,659 $(1,043,735) $ 37,901 $ 362,942
========== ========== ========== ======= ============ ============= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
TREND MINING COMPANY
(FORMERLY SILVER TREND MINING COMPANY)
(AN EXPLORATION STAGE COMPANY)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended November 4, 1998 Year Ended
Through
September 30, 1999 September 30, 1999 September 30, 1998
Cash flows from operating activities ------------------ ------------------ ------------------
<S> <C> <C> <C>
Net income (loss) $ (434,199) $ (429,180) $ (84,984)
Adjustments to reconcile net income (loss) to
net cash used by operating activities:
Depreciation 288 288 -
Loss (gain) on investment sales (1,177) (307) -
Loss on disposition and impairment of assets 136,674 136,674 1,552
Loss on disposition of assets, discontinued 55,000 55,000
operations
Common stock issued for services -
and expenses 122,878 118,686 4,500
Common stock issued in exchange for
lease termination - - 6,000
Common stock issued for storage 250 250 -
Stock options issued for financing activities 2,659 2,659 -
Changes in assets and liabilities:
Inventory write off - - 3,805
Prepaid fees (1,000) (1,000) -
Accounts payable 8,571 8,571 5,693
Accrued expenses 13,506 10,894 12,690
------------ ---------- ----------
Net cash used in operating activities (96,550) (97,465) (50,744)
------------ ---------- ----------
Cash flows from investing activities:
Proceeds from sale of equipment 33,926 33,926 -
Proceeds from sale of mineral property 20,000 20,000 -
Purchase of furniture & equipment (450) (450) (1,072)
Purchase of mineral properties (10,000) (10,000) -
Proceeds of investments sold 16,146 15,321 8,875
------------ ---------- ----------
Net cash provided by investing activities 59,622 58,797 7,803
------------ ---------- ----------
Cash flows from financing activities:
Proceeds from short term borrowings 2,000 2,000 40,000
Sale of common stock 41,000 41,000 1,500
------------ ---------- ----------
Net cash provided by financing activities 43,000 43,000 41,500
------------ ---------- ----------
NET INCREASE (DECREASE) IN CASH 6,072 4,332 (369)
CASH, BEGINNING OF YEAR 2,926 474 3,295
------------ ---------- ----------
CASH, END OF YEAR $ 8,998 $ 4,806 $ 2,926
============ ========== ==========
SUPPLEMENTAL INFORMATION:
Interest paid $ 504 $ 504 $ -
Taxes paid $ - $ - $ -
Non-cash financing activities:
Common stock issued for acquisition of
mineral property $ 89,631 $ 89,631 $ 75,000
Common stock issued for acquisition of
resale equipment $ 180,000 $ 180,000 $ -
Common stock issued for services and expenses $ 122,878 $ 118,686 $ 4,500
Common stock issued for storage $ 250 $ 250 $ -
Common stock issued for investment $ 1,000 $ 1,000 $ -
Common stock issued for debt $ 842 $ 842 $ 40,000
Common stock issued in exchange for lease termination $ - $ - $ 6,000
Deferred acquisition costs on mining property $ 46,242 $ 46,242 $ -
Stock options issued for financing activities $ 2,659 $ 2,659 $ -
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
TREND MINING COMPANY
(FORMERLY SILVER TREND MINING COMPANY)
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 and 1998
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
Trend Mining Company (formerly Silver Trend Mining Company) was incorporated on
September 20, 1968 under the laws of the State of Montana for the purpose of
acquiring, exploring and developing mining properties. In November 1998, the
Company discontinued development of silver and gold properties and changed its
focus to exploration of platinum and palladium related metals only. 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 the platinum
group of metals. The Company conducts operations primarily from its offices in
Coeur d'Alene, Idaho. The Company has elected a September 30 fiscal year-end.
The Company is actively seeking additional capital and management believes that
additional stock can be sold to enable the Company to continue to fund its
property acquisition and platinum group metals exploration activities. However,
management is unable to provide assurances that it will be successful in
obtaining sufficient sources of capital.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies of Trend Mining Company is
presented to assist in understanding the Company's financial statements. The
financial statements and notes are representations of the Company's management,
which is responsible for their integrity and objectivity. These accounting
policies conform to generally accepted accounting principles and have been
consistently applied in the preparation of the financial statements.
ACCOUNTING METHOD
The Company's financial statements are prepared using the accrual method of
accounting.
BASIC AND DILUTED LOSS PER SHARE
Basic and diluted loss per share is computed by dividing the net loss by the
weighted average number of shares outstanding during the year. 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 of 250,000 and 180,000 shares for the periods ended
September 30, 1999 and 1998, respectively have been excluded from the
calculation of loss per share as they would be antidilutive.
F-7
<PAGE>
TREND MINING COMPANY
(FORMERLY SILVER TREND MINING COMPANY)
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 and 1998
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CASH AND CASH EQUIVALENTS
For purposes of the Statement of Cash Flows, the Company considers all
short-term debt securities purchased with a maturity of three months or less to
be cash equivalents.
CHANGE IN ACCOUNTING POLICIES
During 1998, the Company changed its method of accounting for organization costs
to conform to the requirement of Statement on Position 98-5 which requires
start-up and organization costs to be expensed as incurred. The change
(effective for fiscal years beginning after December 15, 1998 with earlier
application encouraged) resulted in an increase in losses for the year ended
September 30, 1998 of $31,520, ($0.02) per share.
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 as of September 30, 1999 and
accordingly, no liability has been recorded in the financial statements. The
Company's policy is to recognize the cost of compensated absences when
compensation is actually paid to employees.
COMPREHENSIVE INCOME (LOSS)
The Company reports comprehensive income (loss) in accordance with FASB
Statement No. 130, "Reporting Comprehensive Income." Accordingly, accumulated
other comprehensive income or loss is included in the Stockholder's 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
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities." 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 September 30, 1999, the Company had not engaged in any transactions that
would be considered derivative instruments or hedging activities.
F-8
<PAGE>
TREND MINING COMPANY
(FORMERLY SILVER TREND MINING COMPANY)
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 and 1998
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles 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.
EXPLORATION STAGE ACTIVITIES
The Company has been in the exploration stage since November 4, 1998 and has no
revenues from operations. The Company is primarily engaged in the acquisition
and exploration of mineral properties. Should the Company locate a commercial
minable reserve, the Company would expect to actively prepare the site for
extraction.
EXPLORATION COSTS
In accordance with generally accepted accounting principles, the Company
expenses exploration costs as incurred. Exploration costs expensed during the
period from the inception of exploration stage on November 4, 1998 to September
30, 1999 were $105,989.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts for cash, marketable securities, accounts receivable,
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 $434,199 for the year ended September 30, 1999 and
has an accumulated deficit of $1,043,735. These factors indicate that the
Company may be unable to continue in existence. 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 significant and imminent private
placements will generate sufficient cash for the Company to continue to operate
based on current expense projections.
F-9
<PAGE>
TREND MINING COMPANY
(FORMERLY SILVER TREND MINING COMPANY)
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 and 1998
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
IMPAIRED ASSET POLICY
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. The Company recognized $14,000 as
impairment to assets in 1998. The Company does not believe any adjustments are
needed to the carrying value of its assets at September 30, 1999.
MINERAL PROPERTIES
Costs of acquiring mineral properties are capitalized by project area upon
purchase or staking of the associated claims. Costs 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 of value is charged to operations at the time of impairment. Should a
property be abandoned, its 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.
NON-EMPLOYEE STOCK COMPENSATION
The Company values common stock issued for services, property and investments
based upon the fair market value of the common stock. Management's assessment of
the fair market value of the common stock includes the current market
conditions, assessment of the Company's financial position and funding
requirements, and trading restrictions on the common stock issued.
RECLASSIFICATIONS
Certain amounts from prior periods have been reclassified to conform with the
current period presentation. This reclassification has resulted in no changes to
the Company's accumulated deficit or net losses presented.
REVERSE STOCK SPLIT
The Company authorized a 1 for 10 reverse stock split of its no par value common
stock. (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.
F-10
<PAGE>
TREND MINING COMPANY
(FORMERLY SILVER TREND MINING COMPANY)
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 and 1998
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 September 30, 1999 and, therefore, no segment reporting
is required.
NOTE 3 - MINERAL PROPERTIES
The following describes the Company's significant mineral properties:
WYOMING PROPERTIES
During the year ended September 30, 1999, the Company entered into an agreement
with General Minerals Corporation (GMC) to acquire the Lake Owen Project located
in Albany County, Wyoming 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. (Notes
4 and 12).
Subsequent to the date of these financial statements, the Company located an
additional 502 unpatented mining claims in an agreed area of interest near the
Lake Owen Project.
The Company also staked and claimed six claims known as the Albany Claims during
the year ended September 30, 1999. These claims are located in Albany County,
Wyoming.
Subsequent to the date of these financial statements, the Company also staked
and claimed 42 unpatented mining claims known as the Spruce Mountain claims and
approximately 200 unpatented mining claims known as the Centennial West claims.
These claims are also located in Albany County, Wyoming.
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. Subsequent to the date of these financial
statements, all transactions have been completed and the Company has acquired
title to these claims.
F-11
<PAGE>
TREND MINING COMPANY
(FORMERLY SILVER TREND MINING COMPANY)
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 and 1998
NOTE 3 - MINERAL PROPERTIES (CONTINUED)
NEVADA PROPERTY
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 of the efforts. Subsequent to the date of
these financial statements, transactions were finalized for nine claims known as
the Hardrock Johnson Property located in Clark County, Nevada.
MONTANA PROPERTIES
During March 2000, the Company acquired an option to purchase eight mining
claims in Madison County, Montana, called the Intrepid Claims. Subsequent to the
date of these financial statements, the Company has paid $5,800 cash and issued
100,000 shares of its common stock at $0.30 per share under this option
agreement. If the Company has not terminated the agreement by November 2001, an
additional 100,000 shares of its common stock will be issued. This property is
part of the Company's Vanguard Project.
Additionally, in March and June 2000, the Company staked 113 claims for the
Vanguard Project. Also, the Company staked 46 claims known as the McCormick
Creek Project in Missoula County, Montana.
CALIFORNIA PROPERTY
Subsequent to the date of these financial statements, the Company located 72
unpatented mining claims, known as the Pole Corral property, in Tehema County,
California.
CANADIAN PROPERTY
Subsequent to the date of these financial statements, in August 2000, the
Company entered into an agreement whereby Spectra Management Corporation would
explore and stake five claims representing about 66,000 acres for the Company in
northern Saskatchewan. This property is known as the Reindeer Lake Claims.
The following properties are being disposed of as discontinued operations
pursuant to the Company's new focus on platinum and palladium related metals
exploration which commenced November 4, 1998:
NEVADA PROPERTY
In 1997, the Company acquired the Pyramid Mine, which consists of five
unpatented lode mining claims near Fallon, Nevada. The claims are within the
Walker Indian Reservation and located on the site of an old 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.
F-12
<PAGE>
TREND MINING COMPANY
(FORMERLY SILVER TREND MINING COMPANY)
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 and 1998
NOTE 3 - MINERAL PROPERTIES (CONTINUED)
IDAHO PROPERTY
During the 1960's, the Company acquired the Silver Strand Mine located in
Kootenai County, Idaho. The area is an inactive silver mine site and was
formerly used by a government agency to conduct research on workers' safety. The
Company completed a four hole drill program on the property in 1998. In July
2000, the Company sold this property to New Jersey Mining Company for common
stock in New Jersey Mining. (See Note 12).
ALASKA PROPERTY
During the year ended September 30, 1998, the Company purchased, through the
issuance of 150,000 shares of its common stock, four patented mining claims
known as the Rae Wallace Mine located just north of Anchorage, Alaska. The
property was recorded at the fair market value of the shares paid on the date of
issuance at $0.50 per share for a total purchase price of $75,000 (Note 4). In
the year ended September 30, 1999, the Company sold the property for $20,000,
resulting in a loss of $55,000. The Company retained a 2.5% net smelter return
in the property, which is not valued for financial purposes.
NOTE 4 - COMMON STOCK
During the year ended September 30, 1998, the Company issued 150,000 shares of
its common stock in exchange for mineral properties (Note 3) and sold 7,500
shares of common stock for $1,500. The Company also issued 80,000 shares of
common stock in payment of a $40,000 debt and issued 12,000 shares of common
stock for a lease termination valued at $6,000. Officers of the Company received
9,000 shares of common stock as compensation valued at $4,500.
On February 16, 1999, the 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 years
ended September 30, 1999 and 1998 have been restated to reflect the reverse
stock split.
F-13
<PAGE>
TREND MINING COMPANY
(FORMERLY SILVER TREND MINING COMPANY)
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 and 1998
NOTE 4 - COMMON STOCK (CONTINUED)
During the fiscal year ended September 30, 1999, the Company issued 555,000
shares of common stock for cash valued at $41,000; 839,121 shares of common
stock valued at $74,753 for consulting services; 715,996 shares of common stock
valued at $89,631 for a mineral property; and 300,430 shares of common stock
valued at $39,000 as officer compensation. An additional 9,210 shares of common
stock was issued for a debt of $340, Atlas Mining common stock valued at $427,
and Mines Corporation common stock valued at $1,075. Directors of the Company
were issued 16,500 shares of common stock valued at $4,125 for compensation.
Also, 50,000 shares of common stock were issued for $5,000 in prepaid expenses,
1,000 shares of common stock were issued for $250 of storage rent and 600,000
shares of common stock were issued for $180,000 in mining equipment.
From September 30, 1999 to October 31, 2000, the Company issued 12,923,598
shares of common stock for cash, services and mineral properties.
NOTE 5 - COMMON STOCK OPTIONS AND WARRANTS
The Company has a Stock Option Plan, which was initiated to encourage and enable
qualified officers, directors and other key employees to acquire and retain a
proprietary interest in the Company by ownership of its common stock. A total of
ten percent of the currently issued and outstanding shares of the Company's
common stock may be subject to, or issued pursuant to the terms of the plan. As
of September 30, 1999, no options under this plan had been issued. During 1999
and 1998, the Company issued options associated with equity and financing
agreements.
During 1998, the Company originally granted options to acquire 200,000 shares of
common stock to Ashington Mining Corporation at prices varying from $0.10 to
$1.00 per share for the purpose of raising additional capital. This agreement
was modified prior to September 30, 1998 reducing the shares to 180,000 and
changing the prices to $0.20 to $1.00 per share of common stock. This agreement
was further amended in July 2000 reducing the outstanding options to 50,000. The
fair value of each option granted was estimated on the grant date using the
Black-Scholes Option Price Calculation. The following assumptions were made to
estimate fair value: the risk-free interest rate was 5.5%, volatility was 30%,
and the expected life of the options varied from one to four years. Accordingly,
$2,659 of the option's expense was initially recorded in the Company's financial
statements as financing costs.
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.
F-14
<PAGE>
TREND MINING COMPANY
(FORMERLY SILVER TREND MINING COMPANY)
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 and 1998
NOTE 5 - COMMON STOCK OPTIONS AND WARRANTS (CONTINUED)
Following is a summary of the status of options during the years ended September
30, 1999 and 1998:
<TABLE>
<CAPTION>
Number Weighted Average
Of Shares Exercise Price
--------- ----------------
<S> <C> <C>
Outstanding at October 1, 1997 - $ -
Granted 180,000 .41
---------- --------
Outstanding at September 30, 1998 180,000 $ .41
========= ========
Options exercisable at September 30, 1998 180,000 $ .41
========= ========
Outstanding at October 1, 1998 180,000 $ .41
Granted 150,000 .27
Expired 80,000 .20
--------- --------
Outstanding at September 30, 1999 250,000 $ .39
========= ========
Options exercisable at September 30, 1999 250,000 $ .39
========= ========
<CAPTION>
Number Average Price
Exercise Date Of Shares Per Share
------------------------------------- --------- -------------
<S> <C> <C>
On or before January 22, 2000 50,000 $ .35
On or before July 19, 2000 25,000 .20
On or before August 13, 2000 100,000 .23
On or before July 19, 2001 50,000 .50
On or before July 19, 2002 25,000 1.00
</TABLE>
Subsequent to September 30, 1999 and prior to October 31, 2000 the Company
issued additional options for 9,938,095 shares of common stock and warrants for
common stock totaling 8,179,761 shares.
NOTE 6 - RELATED PARTY TRANSACTIONS
The Company has accrued director and officer fees in the amounts of $9,746 and
$12,750 at September 30, 1999 and 1998, respectively. These amounts are included
in accrued expenses in the accompanying financial statements.
F-15
<PAGE>
TREND MINING COMPANY
(FORMERLY SILVER TREND MINING COMPANY)
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 and 1998
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 is being calculated using the straight-line method
over the expected useful lives of five years of the assets. Depreciation expense
for the year ended September 30, 1999 was $288.
The following is a summary of property, equipment and accumulated depreciation.
<TABLE>
<CAPTION>
September 30, September 30,
1999 1998
------------- -------------
<S> <C> <C>
Furniture and Equipment $ 1,285 $ -
Less accumulated depreciation (288) -
------------- -------------
$ 997 -
============= =============
</TABLE>
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 loss in other comprehensive income for change in market
value of investments of $79,179 for the year ended September 30, 1999, while the
Company recognized a gain in other comprehensive income of $117,080 for the year
ended September 30, 1998.
Available-for-sale securities consist of common stock stated at fair value and
are summarized as follows:
<TABLE>
<CAPTION>
September 30,
------------------------------------
Investment 1999 1998
-------------------------------------- ----------------- ----------------
<S> <C> <C>
New Jersey Mining Company $ 94,000 $ 172,000
Royal Silver Mines, Inc. 2,750 -
Global Income Fund Class A - 8,150
U.S. Government Securities Series
Class A - 4,341
----------- -----------
$ 96,750 $ 184,491
=========== ===========
</TABLE>
F-16
<PAGE>
TREND MINING COMPANY
(FORMERLY SILVER TREND MINING COMPANY)
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 and 1998
NOTE 9 - INCOME TAXES
For the year ended September 30, 1998, the Company filed its required federal
income tax return. At that time, the Company had net operating losses of
$55,000. During the year ended September 30, 1999, the Company accumulated
operating losses approximating $425,000. These operating losses may be offset
against future taxable income, however there is no assurance that the Company
will have income in the future. Accordingly, the potential tax benefits of the
net operating loss carryforward is offset by a valuation allowance of the same
amount. The Company's ability to utilize these net operating loss carryforwards
may be limited by subsequent ownership changes.
The Company has not filed a tax return for year ended September 30, 1999, and is
considered deficient with respect to that filing. As the above operating losses
will carry forward to income tax return for the year ended September 30, 1999 it
is unlikely that the Internal Revenue Service will impose penalties for
underpayment of income taxes. However, the Company may be subject to failure to
timely file penalties that are considered immaterial to these financial
statements. Therefore, no provision for this uncertainty has been reported in
the financial statements of the Company.
NOTE 10 - SUBSEQUENT EVENTS
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 buy an additional 6,250,000 shares
of the Company's common stock at an exercise price of $0.40 per share. On March
8, 2000, Tigris assigned its rights under the stock purchase agreement to
Electrum LLC.
Electrum exercised its option and acquired 3,500,000 shares of the Company's
common stock in March 2000. Pursuant to the terms of the stock purchase
agreement, upon exercise of this first option, Electrum was granted an 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.
F-17
<PAGE>
TREND MINING COMPANY
(FORMERLY SILVER TREND MINING COMPANY)
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 and 1998
NOTE 10 - SUBSEQUENT EVENTS (CONTINUED)
TIGRIS FINANCIAL GROUP LTD./ELECTRUM LLC (CONTINUED)
On June 27, 2000, the Company and Electrum entered into an amendment to the
stock purchase agreement pursuant to which the option to purchase 4,608,000
shares was terminated. These options were replaced with 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
until September 25, 2000 to acquire up to an additional 4,470,174 shares at an
exercise price of $0.115 per share, or $545,120 in the aggregate. In addition,
the option to purchase warrants was terminated and replaced with 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.
Electrum has exercised all of its options to purchase the Company's common stock
and its option to purchase the warrant. In connection with its acquisition of
those shares, Electrum assigned 3,530,174 shares and 500,000 warrants to third
parties. Tigris and Electrum owns 7,307,588 shares, or approximately 40% of the
Company's outstanding common stock and, upon exercise of Electrum's warrants and
assuming the Company has issued no other shares, would own 14,787,349 shares, or
approximately 57% 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 by them.
MINERAL PROPERTIES
Subsequent to the date of these financial statements, the Company acquired
substantial additional exploration properties. (Note 3.)
F-18
<PAGE>
TREND MINING COMPANY
(FORMERLY SILVER TREND MINING COMPANY)
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 and 1998
NOTE 11 - YEAR 2000 ISSUES
The Company has modified its business technologies to be ready for the year
2000. Critical data processing systems have been reviewed and the Company does
not expect a significant effect on internal operations. Trend Mining Company
could be adversely affected if the computer systems its suppliers or customers
use do not properly process and calculate date-related information and data for
the period surrounding and including January 1, 2000. This is commonly known as
the "Year 2000" issue. Additionally, this issue could impact non-computer
systems and devices such as production equipment, elevators, etc. At this time,
because of the complexities involved in the issue, management cannot provide
absolute assurances that the Year 2000 issue will not have an impact on the
Company's operations. The costs related to Year 2000 compliance have been
expensed as incurred.
NOTE 12 - COMMITMENTS AND CONTINGENCIES
LAKE OWEN OPTION AGREEMENT
In July 1999, the Company executed an option agreement with General Minerals
Corporation (hereinafter "GMC") wherein the Company can earn a 100% interest in
a mineral property in Albany County, Wyoming in exchange for its payment of
exploration expenditures during the three-year option period which commenced on
July 27, 1999. Under the agreement, the Company is obligated to spend $750,000
on exploration expenditures for this project commonly known as the Lake Owen
property, during the option period, with no less than $150,000 of such
expenditures to be made within the first year.
In consideration for the aforementioned option, the Company has paid GMC $40,000
in cash and issued to GMC 715,996 shares in 1999 and an additional 129,938
shares in 2000. Subsequent to the date of these financial statements, in
connection with the exercise and termination of certain preemptive rights, GMC
acquired 616,961 shares and a warrant for an additional 200,000 shares.
NEW JERSEY MINING COMPANY
In July 2000, the Company 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. This agreement, concerning the claims known as the
Silver Strand Mine, will require the following three-year work commitment
payable in New Jersey common stock as follows:
F-19
<PAGE>
TREND MINING COMPANY
(FORMERLY SILVER TREND MINING COMPANY)
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 and 1998
NOTE 12 - COMMITMENTS AND CONTINGENCIES (CONTINUED)
<TABLE>
<S> <C>
Year 1 $ 25,000
Year 2 50,000
Year 3 125,000
-----------
Total $ 200,000
===========
</TABLE>
The Company will retain a 1.5% net smelter return until an aggregate of $50,000
in net smelter royalties have been received. Thereafter, the Company's net
smelter return will decrease to 0.5%.
LEASE AGREEMENTS
The Company rents office facilities in Coeur d'Alene, Idaho on a month-to-month
basis for $350 per month. Total rents paid during the year ended September 30,
1999 were $4,200.
Subsequent to the date of these financial statements in October 2000, the
Company entered into a lease for its executive offices in Coeur d'Alene. The
lease has a three year term with monthly rent of $2,656 in addition to a $2,656
security deposit. The Company has the option to extend the lease for an
additional two years at a monthly rent of $2,921.
Subsequent to the date of these financial statements, in July 2000, the Company
entered into a new lease agreement for additional office facilities in Reno,
Nevada. The agreement is a two year lease and calls for monthly payments of
$1,725 during the first year and $1,775 during the second year in addition to a
$350 security deposit. For two months prior to the signing of this lease, the
Company had occupied the facilities on a month-to-month basis for $1,714 per
month.
NOTE 13 - IMPAIRMENT OF ASSETS
During the year ended September 30, 1999, the Company initiated a plan to
dispose of mining equipment. In connection with the plan of disposal, the
Company determined that the carrying value of such assets exceeded their fair
values. Accordingly, a loss of $14,000, which is included as part of loss on
disposition and impairment of assets, and represents the excess of the carrying
value of $18,000, over the fair value of $4,000, has been charged to operations
in the year ended September 30, 1999. The fair value is based on the net selling
price estimated relative to current market conditions. The loss on impairment of
$14,000 is included as part of $136,674 loss from disposition and impairment of
assets. The majority of this loss is from the sale of mining equipment.
F-20
<PAGE>
TREND MINING COMPANY
(FORMERLY SILVER TREND MINING COMPANY)
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 and 1998
NOTE 14 - DISCONTINUED OPERATIONS
On November 4, 1998, the Company adopted a formal plan to sell its silver and
gold operations. Net assets of discontinued operations totaled $269,086. These
assets consisted of the Company's mineral properties.
Operating results for the eleven months ended September 30, 1999 are shown
separately in the accompanying Statement of Operations and Comprehensive Income.
Assets of the silver and gold operations sold consisted of the Rae Wallace Mine
located in Anchorage, Alaska. The Company sold the property for $20,000 and
recognized a loss of $55,000, which is recorded in the Statement of Operations
and Comprehensive Income. Mineral property expense related to discontinued
operations were recorded at $8,662 in the year ended September 30, 1999.
F-21
<PAGE>
The 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 (an
exploration stage company) as of June 30, 2000 and the related statements of
operations and comprehensive income (loss), stockholders' equity, and cash flows
for the nine months ended June 30, 2000 and 1999 and from November 4, 1998
(inception of exploration stage) to June 30, 2000. These financial statements
are the responsibility of the Company's management.
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
generally accepted auditing standards, 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 generally accepted accounting principles.
The financial statements for the period ended September 30, 1999 were audited by
us and we expressed an unqualified opinion on them in our report dated November
13, 2000, but we have not performed any auditing procedures since that date.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2, the Company
has been in the exploration stage since its inception on November 4, 1998.
Realization of a major portion of the assets is dependent upon the company's
ability to meet its future financing requirements, and the success of future
operations. These factors raise substantial doubt about the Company's ability to
continue as a going concern. Management's plans regarding those matters also are
described in Note 2. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
Williams & Webster
CERTIFIED PUBLIC ACCOUNTANTS
Spokane, Washington
November 14, 2000
F-22
<PAGE>
TREND MINING COMPANY
(FORMERLY SILVER TREND MINING COMPANY)
(AN EXPLORATION STAGE COMPANY)
BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, September 30,
2000 1999
(Unaudited)
--------------------- -----------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 35,841 $ 8,998
Prepaid fees - 1,000
Related party receivable 3,056 -
Equipment held for resale 4,000 4,000
----------------- --------------------
TOTAL CURRENT ASSETS 42,897 13,998
----------------- --------------------
MINERAL PROPERTIES 181,673 145,873
----------------- --------------------
PROPERTY AND EQUIPMENT 28,241 997
----------------- --------------------
OTHER ASSETS
Deposit 1,000 -
Investments 105,750 96,750
----------------- --------------------
TOTAL OTHER ASSETS 106,750 96,750
----------------- --------------------
NON CURRENT ASSETS
Net assets of discontinued operations 194,086 194,086
----------------- --------------------
TOTAL ASSETS $ 553,647 $ 451,704
================= ====================
LIABILITIES AND
STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 77,405 $ 14,264
Accrued expenses 19,481 16,510
Related party payables 10,000 9,746
Deferred mineral property acquisition costs - 46,242
Short-term notes payable 2,000 2,000
Notes payable - current portion 2,995 -
----------------- --------------------
TOTAL CURRENT LIABILITIES 111,881 88,762
----------------- --------------------
LONG-TERM DEBT
Notes payable - net of current portion 11,098 -
----------------- --------------------
COMMITMENTS AND CONTINGENCIES - -
----------------- --------------------
STOCKHOLDERS' EQUITY
Common stock, no par value, 30,000,000
shares authorized;13,266,102 and 5,345,511
shares issued and outstanding,
respectively 2,360,934 1,366,117
Stock options and warrants 24,065 2,659
Accumulated deficit (1,997,918) (1,043,735)
Accumulated other comprehensive income 45,587 37,901
----------------- --------------------
TOTAL STOCKHOLDERS' EQUITY 430,668 362,942
----------------- --------------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 553,647 $ 451,704
================= ====================
</TABLE>
See accountant's review report and accompanying notes.
F-23
<PAGE>
TREND MINING COMPANY
(FORMERLY SILVER TREND MINING COMPANY)
(AN EXPLORATION STAGE COMPANY)
STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended November 4, 1998
June 30, June 30, (Inception of
------------------------------ ----------------------------- Exploration Stage)
2000 1999 2000 1999 to June 30, 2000
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
REVENUES $ - $ - $ - $ - $ -
------------ ------------ ------------ ------------ ------------
GENERAL AND ADMINISTRATIVE EXPENSES
Mineral property expense 387,238 40,661 499,573 78,837 605,562
Officers & directors compensation 27,190 22,500 145,690 46,475 227,723
Legal & professional 34,605 5,849 77,091 11,217 89,836
Other administrative expense 73,826 10,903 154,331 21,451 183,309
Depreciation 3,105 72 3,980 216 4,268
------------ ------------ ------------ ------------ ------------
Total Expenses 525,964 79,985 880,665 158,196 1,110,698
------------ ------------ ------------ ------------ ------------
OPERATING LOSS (525,964) (79,985) (880,665) (158,196) (1,110,698)
------------ ------------ ------------ ------------ ------------
OTHER INCOME (EXPENSE)
Dividends & interest income 773 135 927 287 1,182
Gain on investment sales - - 5,420 19,177 5,727
Loss on disposition and
impairment of assets - (55,000) - (209,674) (136,674)
Interest expense (618) (43) (618) (43) (1,122)
Financing expenses (76,321) - (76,321) - (78,980)
Miscellaneous income - - 100 2,000 3,890
------------ ------------ ------------ ------------ ------------
Total Other Income and expenses (76,166) (54,908) (70,492) (188,253) (205,977)
------------ ------------ ------------ ------------ ------------
LOSS BEFORE INCOME TAXES (602,130) (134,893) (951,157) (346,449) (1,316,675)
PROVISION FOR INCOME TAXES - - - - -
------------ ------------ ------------ ------------ ------------
LOSS FROM CONTINUING OPERATIONS (602,130) (134,893) (951,157) (346,449) (1,316,675)
LOSS FROM DISCONTINUED OPERATIONS
Loss from operations of gold and silver
mining (net of income taxes of $0) - - (3,026) - (66,688)
------------ ------------ ------------ ------------ ------------
NET LOSS (602,130) (134,893) (954,183) (346,449) (1,383,363)
OTHER COMPREHENSIVE INCOME (LOSS)
Change in market value of investments - (16,000) 5,686 (47,000) (73,493)
------------ ------------ ------------ ------------ ------------
COMPREHENSIVE LOSS $ (602,130) $ (150,893) $ (948,497) $ (393,449) $ (1,456,856)
============ ============ ============ ============ ============
BASIC AND DILUTED NET LOSS
PER COMMON SHARE,
CONTINUING OPERATIONS $ (0.06) $ (0.04) $ (0.12) $ (0.13) $ (0.27)
============ ============ ============ ============ ============
BASIC AND DILUTED NET LOSS
PER COMMON SHARE,
DISCONTINUED OPERATIONS $ - $ - $ nil $ - $ (0.01)
============ ============ ============ ============ ============
WEIGHTED AVERAGE NUMBER OF
BASIC AND DILUTED
COMMON SHARES OUTSTANDING 10,829,671 3,053,634 7,628,199 2,675,412 4,815,379
============ ============ ============ ============ ============
</TABLE>
See accountant's review report and accompanying notes.
F-24
<PAGE>
TREND MINING COMPANY
(FORMERLY SILVER TREND MINING COMPANY)
(AN EXPLORATION STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock
------------------------- Stock Other
Number Options and Accumulated Comprehensive
of Shares Amount Warrants Deficit Income Total
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance, October 1, 1998 2,258,254 $ 930,516 $ - $ (609,536) $ 117,080 $ 438,060
Issuance of common stock for cash
at an average of $0.07 per share 555,000 41,000 - - - 41,000
Issuance of common stock for prepaid
expenses at $0.10 per share 50,000 5,000 - - - 5,000
Issuance of common stock for consulting
services at an average of $0.09 per share 839,121 74,753 - - - 74,753
Issuance of common stock for mineral
property at $0.13 per share 715,996 89,631 - - - 89,631
Issuance of common stock for officers'
compensation at an average of $0.13 per
share 300,430 39,000 - - - 39,000
Issuance of common stock for debt and
investment at $0.20 per share 9,210 1,842 - - - 1,842
Issuance of common stock for directors'
compensation at an average of $0.25 per
share 16,500 4,125 - - - 4,125
Issuance of common stock for rent at $0.25
per share 1,000 250 - - - 250
Issuance of common stock for equipment at
$0.30 per share 600,000 180,000 - - - 180,000
Issuance of stock options for financing
activities 2,659 2,659
Net loss - - - (434,199) - (434,199)
Other comprehensive income (loss) - - - - (79,179) (79,179)
----------- ----------- ----------- ----------- ----------- -----------
Balance, September 30, 1999 5,345,511 1,366,117 2,659 (1,043,735) 37,901 362,942
Issuance of common stock to officers as ----------- -----------
compensation at an average of $0.28 per
share 64,694 17,900 - - - 17,900
Issuance of common stock for services at
an average of $0.10 per share 440,177 43,198 - - - 43,198
Issuance of common stock for mineral
property at $0.30 per share 100,000 30,000 - - - 30,000
----------- ----------- ----------- ----------- ----------- -----------
Balance carried forward 5,950,382 $ 1,457,215 $ 2,659 $(1,043,735) $ 37,901 $ 454,040
----------- ----------- ----------- ----------- ----------- -----------
</TABLE>
See accountant's review report and accompanying notes.
F-25
<PAGE>
TREND MINING COMPANY
(FORMERLY SILVER TREND MINING COMPANY)
(AN EXPLORATION STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION> Common Stock
------------------------ Stock Other
Number Options and Accumulated Comprehensive
of Shares Amount Warrants Deficit Income Total
----------- ----------- --------- ------------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance carried forward 5,950,382 $ 1,457,215 $ 2,659 $ (1,043,735) $ 37,901 $ 454,040
Issuance of common stock for investments at
$0.13 per share 200,000 26,000 - - - 26,000
Issuance of common stock for cash at an average of
$0.11 per share 6,553,835 723,531 - - - 723,531
Issuance of common stock as an incentive fees
at $0.25 per share 65,285 16,321 - - - 16,321
Issuance of common stock and options for employee
compensation at $0.30 per share 16,667 5,000 2,173 - - 7,173
Issuance of common stock and options to directors
as compensation at an average of $0.38 per share 150,000 56,625 9,233 - - 65,858
Issuance of common stock for deferred mineral property
acquisition costs at $0.13 per share 129,938 16,242 - - - 16,242
Issuance of common stock for modification of
stockholder agreement at $0.30 per share 200,000 60,000 - - - 60,000
Miscellaneous common stock adjustments (5) - - - - -
Cash received for the issuance of common stock
warrants for 7,979,761 shares for stock - - 10,000 - - 10,000
Net loss for the nine months ended June 30, 2000 - - - (954,183) - (954,183)
Other comprehensive income (loss) - - - - 5,686 5,686
---------- ----------- --------- ------------- -------- ---------
Balance, June 30, 2000, unaudited 13,266,102 $ 2,360,934 $ 24,065 $ (1,997,918) $ 43,587 $ 430,668
========== =========== ========= ============= ======== =========
</TABLE>
See accountant's review and accompanying notes.
F-26
<PAGE>
TREND MINING COMPANY
(FORMERLY SILVER TREND MINING COMPANY)
(AN EXPLORATION STAGE COMPANY)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ended November 4, 1998
June 30, (Inception of
------------------------- exploration stage)
2000 1999 to June 30, 2000
(Unaudited) (Unaudited) (Unaudited)
------------------------- -------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (954,183) $(346,449) $ (1,383,363)
Adjustments to reconcile net income (loss) to
net cash used by operating activities:
Depreciation 3,980 216 4,268
Gain on investment sales - - (307)
Loss on disposition of assets, discontinued operations 3,026 - 58,026
Loss on disposal and impairment of assets - 209,674 136,674
Common stock and options issued as compensation 90,931 - 90,931
Common stock issued for services 43,198 52,007 166,076
Common stock issued for incentive fees 16,321 - 16,321
Common stock issued for agreement modification 60,000 - 60,000
Common stock issued for rent - - 250
Options issued for financing activities - - 2,659
Changes in assets and liabilities:
Prepaid expense 1,000 - -
Related party receivable (3,056) - (3,056)
Equipment available for resale - (4,000) -
Accounts payable 63,141 6,641 71,712
Accrued expenses 2,971 2,750 13,865
Related party payables 254 - 254
--------- -------- ---------
Net cash used in operating activities (672,417) (79,161) (765,690)
--------- -------- ---------
Cash flows from investing activities:
Payment of deposit (1,000) - (1,000)
Purchase of furniture & equipment (18,425) (450) (18,875)
Proceeds from sales of equipment - 32,300 33,926
Proceeds from sales of mineral property - 20,000 20,000
Purchases of mineral properties (30,000) - (40,000)
Purchase of investments - 14,440 -
Proceeds from investments 18,923 (262) 34,244
--------- -------- ---------
Net cash provided by (used in) investing activities (30,502) 66,028 28,295
--------- -------- ---------
Cash flows from financing activities:
Capital lease payments (1,769) - (1,769)
Proceeds from short term borrowings - 2,000 2,000
Payments on short term borrowing (2,000) - (2,000)
Sale of common stock 723,531 21,500 764,531
Sale of warrants for common stock 10,000 - 10,000
--------- -------- ---------
Net cash provided by financing activities 729,762 23,500 772,762
NET INCREASE IN CASH 26,843 10,367 35,367
CASH, BEGINNING OF PERIOD 8,998 2,926 474
--------- -------- ---------
CASH, END OF PERIOD $ 35,841 $ 13,293 $ 35,841
========= ======== =========
SUPPLEMENTAL INFORMATION:
Interest paid in cash $ 618 $ - $ 1,122
Taxes paid in cash $ - $ - $ -
Non-cash financing activities:
Common stock and options issued as compensation $ 90,931 $ - $ 90,931
Common stock issued for services $ 43,198 $ 52,007 $ 161,884
Common stock issued for agreement modification $ 60,000 $ - $ 60,000
Common stock issued for investment $ 26,000 $ 1,000 $ 27,000
Common stock issued for debt $ - $ 842 $ 842
Common stock issued for property
acquisition $ 46,242 $ - $ 135,873
Common stock issued for incentive fees $ 16,321 $ - $ 16,321
Common stock issued for storage rent $ - $ - $ 250
Common stock issued for equipment for resale $ - $ 180,000 $ 180,000
Purchase of equipment with financing agreements $ 14,093 $ - $ 14,093
</TABLE>
See accountant's review and accompanying notes.
F-27
<PAGE>
TREND MINING COMPANY
(FORMERLY SILVER TREND MINING COMPANY)
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS JUNE 30, 2000
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
Trend Mining Company (formerly Silver Trend Mining Company) was incorporated on
September 20, 1968 under the laws of the State of Montana for the purpose of
acquiring, exploring and developing mining properties. In November 1998, the
Company discontinued development of silver and gold properties and changed it
focus to exploration of platinum and palladium related metals only. 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 the platinum
group of metals. The Company conducts operations primarily from its offices in
Coeur d'Alene, Idaho. The Company has elected a September 30 fiscal year-end.
The Company is actively seeking additional capital and management believes that
additional stock can be sold to enable the Company to continue to fund its
property acquisition and platinum group metals exploration activities. However,
management is unable to provide assurances that it will be successful in
obtaining sufficient sources of capital.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies of Trend Mining Company is
presented to assist in understanding the Company's financial statements. The
financial statements and notes are representations of the Company's management,
which is responsible for their integrity and objectivity. These accounting
policies conform to generally accepted accounting principles and have been
consistently applied in the preparation of the financial statements.
ACCOUNTING METHOD
The Company's financial statements are prepared using the accrual method of
accounting.
BASIC AND DILUTED LOSS PER SHARE
Basic and diluted loss per share is computed by dividing the net loss by the
weighted average number of shares outstanding during the year. 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 13,220,268 and 250,000 shares for
the periods ended June 30, 2000 and September 30, 1999, respectively, have been
excluded from the calculation of 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.
F-28
<PAGE>
TREND MINING COMPANY
(FORMERLY SILVER TREND MINING COMPANY)
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS JUNE 30, 2000
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CHANGE IN ACCOUNTING POLICIES
During 1998, the Company changed its method of accounting for organization costs
to conform to the requirement of Statement on Position 98-5 which requires
start-up and organization costs to be expensed as incurred. The change
(effective for fiscal years beginning after December 15, 1998 with earlier
application encouraged) resulted in an increase in losses for the year ended
September 30, 1998 of $31,520, ($0.02) per share.
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 as of September 30, 1999 and June 30, 2000
and accordingly, no liability has been recorded in the financial statements. The
Company's policy is to recognize the cost of compensated absences when
compensation is actually paid to employees.
COMPREHENSIVE INCOME (LOSS)
The Company reports comprehensive income (loss) in accordance with FASB
Statement No. 130, "Reporting Comprehensive Income." Accordingly, accumulated
other comprehensive income or loss is included in the Stockholder's 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
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This standard establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. It requires
that an entity recognize all derivatives as either assets or liabilities on the
balance sheet and measure those instruments at fair value, at the appropriate
date.
At June 30, 2000, 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 generally accepted
accounting principles 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.
F-29
<PAGE>
TREND MINING COMPANY
(FORMERLY SILVER TREND MINING COMPANY)
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS JUNE 30, 2000
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
EXPLORATION STAGE ACTIVITIES
The Company has been in the exploration stage since November 4, 1998 and has no
revenues from operations. The Company is primarily engaged in the acquisition
and exploration of mineral properties. Should the Company locate a commercial
minable reserve, the Company would expect to actively prepare the site for
extraction.
EXPLORATION COSTS
In accordance with generally accepted accounting principles, the Company
expenses exploration costs as incurred. Exploration costs expensed during the
nine-month period ended June 30, 2000 were $499,573. The exploration costs
expensed during the Company's exploration state is $605,562.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts for cash, marketable securities, accounts receivable,
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 $954,183 for the nine months ended June 30, 2000 and
has an accumulated deficit of $1,997,918. These factors indicate that the
Company may be unable to continue in existence. 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 significant and imminent private
placements will generate sufficient cash for the Company to continue to operate
based on current expense projections.
IMPAIRED ASSET POLICY
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. The Company recognized $14,000 as
impairment to assets in 1998. The Company does not believe any adjustments are
needed to the carrying value of its assets at September 30, 1999.
INTERIM FINANCIAL STATEMENTS
The interim financial statements for the period ended June 30, 2000, included
herein have not been audited, at the request of the Company. They do reflect all
adjustments, which are, in the opinion of management, necessary to present
fairly the results of operations for the period. All such adjustments are normal
recurring adjustments. The results of operations for the period presented is not
necessarily indicative of the results to be expected for the full fiscal year.
F-30
<PAGE>
TREND MINING COMPANY
(FORMERLY SILVER TREND MINING COMPANY)
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS JUNE 30, 2000
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
MINERAL PROPERTIES
Costs of acquiring mineral properties are capitalized by project area upon
purchase or staking of the associated claims. Costs 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 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.
NON-EMPLOYEE STOCK COMPENSATION
The Company values common stock issued for services, property and investments
based upon the fair market value of the common stock. Management's assessment of
the fair market value of the common stock includes the current market
conditions, assessment of the Company's financial position and funding
requirements, and trading restrictions on the common stock issues.
RECLASSIFICATIONS
Certain amounts from prior periods have been reclassified to conform with the
current period presentation. This reclassification has resulted in no changes to
the Company's accumulated deficit or net losses presented.
REVERSE STOCK SPLIT
The Company authorized a 1 for 10 reverse stock split of its no par value common
stock. (Note 4.) All references in the accompanying financial statements to the
number of common shares outstanding and per share amounts have been restated to
reflect the reverse stock split.
SEGMENT REPORTING
The Company adopted SFAS No. 131, "Disclosures about Segments of an Enterprise
and Related Information," in the fiscal year ended September 30, 1999. SFAS No.
131 requires disclosures about products and services, geographic areas and major
customers. The adoption of SFAS No. 131 did not affect the Company's results of
operations or financial position. The Company's mining properties were not
engaged in any business activity. The Company had no segments engaged in
business activities at June 30, 2000 and, therefore, no segment reporting is
required.
F-31
<PAGE>
TREND MINING COMPANY
(FORMERLY SILVER TREND MINING COMPANY)
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS JUNE 30, 2000
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 agreement
with General Minerals Corporation (GMC) to acquire the Lake Owen Project located
in Albany County, Wyoming 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 during 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. (Notes 4 and 13).
Subsequent to the date of these financial statements, the Company located an
additional 502 unpatented mining claims in an agreed area of interest near the
Lake Owen Project.
The Company also staked and claimed six claims known as the Albany Claims 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 approximately 200 unpatented mining claims known as
the Centennial West claims. These claims are also located in Albany County,
Wyoming.
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 PROPERTY
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
nine claims known as the Hardrock Johnson Property located in Clark County,
Nevada.
MONTANA PROPERTIES
During March 2000, the Company acquired an option to purchase 8 mining claims in
Madison County, Montana, called the Intrepid Claims. The Company has paid $5,800
cash and issued 100,000 shares of its common stock at $0.30 per share under this
option. If the Company has not terminated the agreement by November 2001, an
additional 100,000 shares of its common stock will be issued.
F-32
<PAGE>
TREND MINING COMPANY
(FORMERLY SILVER TREND MINING COMPANY)
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS JUNE 30, 2000
NOTE 3 - MINERAL PROPERTIES (CONTINUED)
Additionally, the Company expensed $17,705 to stake 113 claims for the Vanguard
Project. The Company has also expensed $30,425 to explore and stake 46 claims
known as the McCormick Creek Project in Missoula County, Montana.
CALIFORNIA PROPERTY
Subsequent to the date of these financial statements, the Company located 72
unpatented mining claims, known as the Pole Corral property, in Tehema County,
California.
CANADIAN PROPERTY
Subsequent to the date of these financial statements, in August 2000, the
Company entered into an agreement whereby Spectra Management Corporation would
explore and stake five claims representing about 66,000 acres for the Company in
northern Saskatchewan. This property is known as the Reindeer Lake Claims.
The following properties are being disposed of as discontinued operations
pursuant to the Company's new focus on platinum and palladium related metals
exploration which commenced on November 4, 1998.
NEVADA PROPERTY
In 1997, the Company acquired the Pyramid Mine, which consists of five
unpatented lode mining claims near Fallon, Nevada. The claims are within the
Walker Indian Reservation and located on the site of an old 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.
IDAHO PROPERTY
During the 1960's, the Company acquired the Silver Strand Mine located in
Kootenai County, Idaho. The area is an inactive silver mine site and was
formerly used by a government agency to conduct research on workers' safety. The
Company completed a four hole drill program on the property in 1998. In July
2000, the Company sold this property to New Jersey Mining Company for common
stock in New Jersey Mining. (See Note 12).
ALASKA PROPERTY
During the year ended September 30, 1998, the Company purchased, through the
issuance of 150,000 shares of its common stock, four patented mining claims
known as the Rae Wallace Mine located just north of Anchorage, Alaska. The
property was recorded at the fair market value of the shares paid on the date of
issuance at $0.50 per share for a total purchase price of $75,000 (Note 4). In
the year ended September 30, 1999, the Company sold the property for $20,000,
resulting in a loss of $55,000. The Company retained a 2.5% net smelter return
in the property, which is not valued for financial purposes.
F-33
<PAGE>
TREND MINING COMPANY
(FORMERLY SILVER TREND MINING COMPANY)
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS JUNE 30, 2000
NOTE 4 - COMMON STOCK
During the year ended September 30, 1998, the Company issued 150,000 shares of
its common stock in exchange for mineral properties (Note 3) and sold 7,500
shares of common stock for $1,500. The Company also issued 80,000 shares of
common stock in payment of a $40,000 debt and issued 12,000 shares of common
stock for a lease termination valued at $6,000. Officers of the Company received
9,000 shares of common stock as compensation valued at $4,500.
On February 16, 1999, the 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
ended June 30, 2000 and the year-end September 30, 1999 have been restated to
reflect the reverse stock split.
During the fiscal year ended September 30, 1999, the Company issued 555,000
shares of common stock for cash valued at $41,000; 839,121 shares of common
stock valued at $74,753 for consulting services; 715,996 shares of common stock
valued at $89,631 for a mineral property; and 300,430 shares of common stock
valued at $39,000 as officer compensation. An additional 9,210 shares of common
stock was issued for a debt of $340, Atlas Mining common stock valued at $427,
and Mines Corporation common stock valued at $1,075. Directors of the Company
were issued 16,500 shares of common stock valued at $4,125 for compensation.
Also, 50,000 shares of common stock were issued for $5,000 in prepaid expenses,
1,000 shares of common stock were issued for $250 of storage rent and 600,000
shares of common stock were issued for $180,000 in mining equipment.
During the period ended June 30, 2000, the Company issued 64,694 shares of
common stock to officers valued at $17,900, as compensation; 440,177 shares of
common stock valued at $43,198 for services provided to the Company; 100,000
shares of common stock valued at $30,000 in exchange for mineral property;
200,000 shares of common stock valued at $26,000 for New Jersey Mining Company
common stock; 65,285 shares of common stock valued at $16,321 as incentive fees
and 6,553,835 shares of common stock for cash at $723,531.
The Company also issued 16,667 shares of common stock to an employee valued at
$5,000 as part of his employment agreement. The Company also issued to General
Minerals Corporation (GMC) an additional 129,938 shares valued at $16,242 as
part of the deferred acquisition cost of the Lake Owens Project. In addition,
the Company issued 200,000 shares of common stock valued $60,000 as partial
consideration for the termination of certain preemptive rights held by GMC.
Subsequent to June 30, 2000 and prior to October 31, 2000, the Company issued
5,003,007 shares of common stock for cash and services.
F-34
<PAGE>
TREND MINING COMPANY
(FORMERLY SILVER TREND MINING COMPANY)
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS JUNE 30, 2000
NOTE 5 - COMMON STOCK OPTIONS AND WARRANTS
The Company has a Stock Option Plan, which was initiated to encourage and enable
qualified officers, directors and other key employees to acquire and retain a
proprietary interest in the Company by ownership of its common stock. A total of
ten percent of the currently issued and outstanding shares of the Company's
common stock may be subject to, or issued pursuant to the terms of the plan. No
options have been issued under the plan as of June 30, 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.
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 this option estimated on the grant date
using the Black-Scholes Option Price Calculation was $2,173.
During the period ended June 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 were based on the 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 $9,233.
In the above Black-Scholes Option Price Calculations, the Company used the
following assumptions to estimate fair value: the risk-free interest rate was
5.5%, volatility was 30%, and the expected life of the options varied from two
to three years.
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.
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 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 buy an additional 6,250,000 shares
of the Company's common stock at an exercise price of $0.40 per share. On March
8, 2000, Tigris assigned its rights under the stock purchase agreement to
Electrum LLC.
Electrum exercised its option and acquired 3,500,000 shares of the Company's
common stock in March 2000. Pursuant to the terms of the stock purchase
agreement, upon exercise of this first option, Electrum was granted an option
until September 25, 2000 to purchase up to an additional
F-35
<PAGE>
TREND MINING COMPANY
(FORMERLY SILVER TREND MINING COMPANY)
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS JUNE 30, 2000
NOTE 5 - COMMON STOCK OPTIONS AND WARRANTS (CONTINUED)
4,608,000 shares of common stock at an exercise price of $0.14 per share, or
$645,120 in the aggregate.
On June 27, 2000, the Company and Electrum entered into an amendment to the
stock purchase agreement pursuant to which the option to purchase 4,608,000
shares was terminated. These options were replaced with 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
until September 25, 2000 to acquire up to an additional 4,470,174 shares at an
exercise price of $0.115 per share, or $545,120 in the aggregate. In addition,
the option to purchase warrants was terminated and replaced with 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.
Electrum has exercised all of its options to purchase the Company's common stock
and its option to purchase the warrant. In connection with its acquisition of
those shares, Electrum assigned 3,530,174 shares and 500,000 warrants to third
parties. Tigris and Electrum own 7,307,588 shares, or approximately 40% of the
Company's outstanding common stock and, upon exercise of Electrum's warrants and
assuming the Company has issued no other shares, would own 14,787,349 shares, or
approximately 57% 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.
Subsequent to the date of these financial statements, Electrum LLC exercised its
options to acquire an additional 4,740,174 shares of the Company's common stock
at an exercise price of $0.115, or $545,120 in the aggregate, and exercised its
right to acquire, 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. In connection with
its acquisition of these shares and warrants, Electrum assigned 3,530,174 shares
and 500,000 warrants to third parties. Electrum also entered into an agreement
with the Company in July 2000 pursuant to which Electrum terminated its
preemptive rights to acquire additional shares of the Company's common stock
under certain circumstances.
F-36
<PAGE>
TREND MINING COMPANY
(FORMERLY SILVER TREND MINING COMPANY)
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS JUNE 30, 2000
NOTE 5 - COMMON STOCK OPTIONS AND WARRANTS (CONTINUED)
Following is a summary of the status of the options during the year ended
September 30, 1999 and the nine months ended June 30, 2000:
<TABLE>
<CAPTION>
Weighted
Number of Average Exercise
Shares Price
-------------- ----------------
<S> <C> <C>
Outstanding at October 1, 1998 180,000 $.41
Granted 150,000 .27
Exercised - -
Forfeited - -
Expired (80,000) .20
-------------- ----------------
Outstanding at September 30, 1999 250,000 $.39
-------------- ----------------
Options exercisable at September 30, 1999 250,000 $.39
-------------- ----------------
Outstanding at October 1, 1999 250,000 $.39
Granted 9,938,095 .13
Exercised (5,097,588) .12
Forfeited - -
Expired (50,000) .35
-------------- ----------------
Outstanding at June 30, 2000 5,040,507 $.13
-------------- ----------------
Options exercisable at June 30, 2000 5,040,507 $.13
-------------- ----------------
<CAPTION>
Exercise Date
--------------------------
On or before July 19, 2000 25,000 .30
On or before August 13, 2000 100,000 .23
On or before September 25, 2000 4,740,174 .12
On or before July 19, 2001 50,000 .50
On or before February 25, 2002 33,333 .30
On or before July 19, 2002 25,000 1.00
On or before April 14, 2003 67,000 .50
</TABLE>
F-37
<PAGE>
TREND MINING COMPANY
(FORMERLY SILVER TREND MINING COMPANY)
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS JUNE 30, 2000
NOTE 6 - RELATED PARTY TRANSACTIONS
The Company has accrued director and officer fees in the amounts of $10,000 and
$9,746 at June 30, 2000 and September 30, 1999, respectively.
In June 2000, the Company and GMC amended the Lake Owen option agreement.
Pursuant to the amendment, the Company issued 416,961 shares at an average price
of $0.06 per share to GMC in connection with the exercise by GMC of preemptive
rights. In addition, the Company agreed to perform an additional $15,000 of
geophysical survey work on the Lake Owen project prior to December 31, 2000,
issued 200,000 additional shares of common stock to GMC and granted to GMC a
warrant to purchase 200,000 shares for $0.70 per share exercisable until June
12, 2002 in exchange for GMC's agreement to terminate its antidilution and
preemptive rights as provided in the original Lake Owen option agreement.
NOTE 7 - PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Major additions and improvements
are capitalized. Minor replacements, maintenance and repairs that do not
increase the useful lives of the assets are expensed as incurred. Depreciation
of property and equipment, including vehicles, is being calculated using the
straight-line method over the expected useful lives of five years of the assets.
Depreciation expense for the nine months ended June 30, 2000 and year ending
September 30, 1999 was $3,980 and $288, respectively. The following is a summary
of property, equipment, and accumulated depreciation.
<TABLE>
<CAPTION>
June 30, September 30,
2000 1999
------------ ------------
<S> <C> <C>
Furniture and Equipment $32,509 $1,285
Less Accumulated Depreciation (4,268) (288)
------------ ------------
$28,241 $997
============ ============
</TABLE>
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 loss in other comprehensive income for change in market
value of investments of $79,179 for the year ended September 30, 1999, while the
Company recognized a gain in other comprehensive income of $5,686 for the nine
months ended June 30, 2000.
F-38
<PAGE>
TREND MINING COMPANY
(FORMERLY SILVER TREND MINING COMPANY)
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS JUNE 30, 2000
NOTE 8 - INVESTMENTS (CONTINUED)
Available-for-sale securities consist of common stock stated at fair value and
are summarized as follows:
<TABLE>
<CAPTION>
June 30, September 30,
Investment 2000 1999
------------------------- ------------ ------------
<S> <C> <C>
New Jersey Mining Company $105,750 $94,000
Royal Silver Mines, Inc. -- 2,750
------------ ------------
$105,750 $96,750
============ ============
</TABLE>
NOTE 9 - NOTES PAYABLE
<TABLE>
<CAPTION>
Following is a summary of long-term debt at June 30, 2000:
<S> <C>
Note payable to First Security Bank, N.A.
Interest at 14.99%, secured by
1989 Chevy, payable in monthly
installments of $179.28 through
February 28, 2003. $4,705
Note payable to First Security Bank, N.A.
Interest at 14.99%, secured by
1995 Ford F-250, payable in
monthly installments of $231.03
through April 7, 2005 $ 9,388
---------
Total notes payable 14,093
Less: Current maturities included in
Current liabilities (2,995)
---------
$ 11,098
=========
</TABLE>
Following are the maturities of long-term debt for each of the next five years:
<TABLE>
<S> <C>
2000 $ 2,995
2001 3,476
2002 3,303
2003 2,259
2004 2,060
---------
$ 14,093
=========
</TABLE>
F-39
<PAGE>
TREND MINING COMPANY
(FORMERLY SILVER TREND MINING COMPANY)
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS JUNE 30, 2000
NOTE 10 - INCOME TAXES
For the year ended September 30, 1998, the Company filed its required federal
income tax return. At that time, the Company had net operating losses of
$55,000. At June 30, 2000, the Company accumulated operating losses
approximating $1,300,000. These operating losses may be offset against future
taxable income, however there is no assurance that the Company will have income
in the future. Accordingly, the potential tax benefits of the net operating loss
carryforward is offset by a valuation allowance of the same amount. The
Company's ability to utilize these net operating loss carryforwards may be
limited by ownership changes.
The Company has not filed a tax return for year ended September 30, 1999, and is
considered deficient with respect to that filing. As the above operating losses
will carry forward to the income tax return for the year ended September 30,
1999 it is unlikely that the Internal Revenue Service will impose penalties for
underpayment of income taxes. However, the Company may be subject to failure to
timely file penalties that are considered immaterial to these financial
statement.
Therefore, no provision for this uncertainty has been reported in the financial
statements of the Company.
NOTE 11 - SUBSEQUENT EVENTS
Subsequent to the date of these financial statements, Electrum LLC exercised its
options to acquire an additional 4,740,174 shares of the Company's common stock
at an exercise price of $0.115, or $545,120 in the aggregate, and exercised its
right to acquire, 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. In connection with
its acquisition of these shares and warrants, Electrum assigned 3,530,174 shares
and 500,000 warrants to third parties. Electrum also entered into an agreement
with the Company in July 2000 pursuant to which Electrum terminated its
preemptive rights to acquire additional shares of the Company's common stock
under certain circumstances.
MINERAL PROPERTIES
Subsequent to the date of these financial statements, the Company acquired
additional properties. (Note 3.)
F-40
<PAGE>
TREND MINING COMPANY
(FORMERLY SILVER TREND MINING COMPANY)
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS JUNE 30, 2000
NOTE 12 - YEAR 2000 ISSUES
Trend Mining Company could be adversely affected if the computer systems it, its
suppliers or customers use do not properly process and calculate date-related
information and data from the period surrounding and including January 1, 2000.
This is commonly known as the "Year 2000" issue. Additionally, this issue could
impact non-computer systems and devices such as production equipment, elevators,
etc. At this time there have been no known problems related to the Year 2000
issue.
NOTE 13 - COMMITMENTS AND CONTINGENCIES
LAKE OWEN OPTION AGREEMENT
In July 1999, the Company executed an option agreement with General Minerals
Corporation (hereinafter "GMC") wherein the Company can earn a 100% interest in
a mineral property in Albany County, Wyoming in exchange for its payment of
exploration expenditures during the three-year option period, which commenced on
July 27, 1999. Under the agreement, the Company is obligated to spend $750,000
on exploration expenditures for this project, commonly known as the Lake Owen
property, during the option period, with no less than $150,000 of such
expenditures to be made within the first year. This agreement was amended in
June 2000 to include $15,000 of geophysical survey work, which should be
completed by December 31, 2000.
In consideration for the aforementioned option, the Company paid GMC $40,000 in
cash and issued to GMC 715,996 shares in 1999 and 129,938 shares in 2000. In
connection with the exercise and termination of certain preemptive rights, GMC
acquired 616,961 shares and a warrant for an additional 200,000 shares.
NEW JERSEY MINING COMPANY
In July 2000, the Company 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. This agreement, concerning the claims known as the
Silver Strand Mine, will require the following three-year work commitment
payable in New Jersey common stock as follows:
<TABLE>
<S> <C>
Year 1 $ 25,000
Year 2 50,000
Year 3 125,000
-----------
Total $ 200,000
===========
</TABLE>
The Company will retain a 1.5% net smelter return until an aggregate of $50,000
in net smelter royalties have been received. Thereafter, the Company's net
smelter return will decrease to 0.5%.
F-41
<PAGE>
TREND MINING COMPANY
(FORMERLY SILVER TREND MINING COMPANY)
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS JUNE 30, 2000
NOTE 13 - COMMITMENTS AND CONTINGENCIES (CONTINUED)
LEASE AGREEMENTS
The Company rents office facilities in Coeur d'Alene, Idaho on a month-to-month
basis for $350 per month. Total rents paid during the nine months ended June 30,
2000 were $3,150.
Subsequent to the date of these financial statements in October 2000, the
Company entered into a lease for its executive offices in Coeur d'Alene. The
lease has a three-year term with monthly rent of $2,656 in addition to a $2,656
security deposit. The Company has the option to extend the lease for an
additional two years at a monthly rend of $2,921.
Subsequent to the date of these financial statements, in July 2000, the Company
entered into a new lease agreement for additional office facilities in Reno,
Nevada. The agreement is a two year lease and calls for monthly payments of
$1,725 during the first year and $1,775 during the second year in addition to a
$350 security deposit. Prior to the signing of this lease, the Company had
occupied the facilities on a month-to-month basis for $1,714 per month. Total
rents during the nine months ended June 30, 2000 were $3,438.
NOTE 14 - IMPAIRMENT OF ASSETS
During the year ended September 30, 1999, the Company initiated a plan to
dispose of mining equipment. In connection with the plan of disposal, the
Company determined that the carrying value of such assets exceeded their fair
values. Accordingly, a loss of $14,000, which is included as part of loss on
disposition and impairment of assets and represents the excess of the carrying
value of $18,000 over the fair value of $4,000, has been charged to operations
in the year ended September 30, 1999. The fair value is based on the net selling
price estimated relative to current market conditions. At June 30, 2000
management determined no further impairment was necessary.
NOTE 15 - DISCONTINUED OPERATIONS
On November 4, 1998, the Company adopted a formal plan to sell its silver and
gold operations. Net assets of discontinued operations totaled $269,086. These
assets consisted of the Company's mineral properties at that date. Subsequent to
the date of these financial statements, the Company has sold its Silver Strand
mine property in Idaho. See Note 13.
Mineral property expense related to discontinued operations were recorded at
$3,026 for the nine months ended June 30, 2000.
F-42
<PAGE>
INDEX TO EXHIBITS AND DESCRIPTION OF EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBITS
-------- --------
<S> <C>
23.1 Consent of Certified Public Accountants, dated July 24, 2000.
23.2 Consent of Certified Public Accountants, dated July 24, 2000.
27.1 Financial Data Schedule.
</TABLE>
