UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
________________________________
Form 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL BUSINESS
ISSUERS
Under Section 12(b) or (g) of the Securities Exchange Act of
1934
CLIFTON MINING COMPANY
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(Exact Name of Registrant as Specified in Its
Charter
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Utah
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87-0511836
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(State or other jurisdiction of incorporation or
organization)
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(I.R.S. Employer Identification Number)
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80 West Canyon Crest Road, Alpine,
Utah
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84004
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(Address of Principal Executive Offices)
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(Zip Code)
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(801) 756-1414
(Registrant’s Telephone Number, Including Area Code)
Securities to be registered under section 12(b) of the Act:
None
Securities to be registered under section 12(g) of the Act: Common
Stock
CLIFTON
MINING
COMPANY
TABLE OF CONTENTS TO FORM 10-SB
Part I
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3
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Item 1. Description of Business
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3
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Item 2. Management’s Discussion and Analysis or
Plan of Operation
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6
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Item 3. Description of Property
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12
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Item 4. Security Ownership of Certain Beneficial Owners
and Management
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16
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Item 5. Directors and Executive Officers, Promoters and
Control Persons
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18
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Item 6. Executive Compensation
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19
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Item 7. Certain Relationships and Related
Transactions
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21
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Item 8. Description of Securities
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22
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Part II
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25
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Item 1. Market Price of and Dividends on the
Registrant’s Common equity and Other
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Shareholder Matters
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25
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Item 2. Legal Proceedings
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26
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Item 3. Changes in and Disagreements with
Accountants
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26
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Item 4. Recent Sale of Unregistered
Securities
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26
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Item 5. Indemnification of Directors and
Officers
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26
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Part F/S
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28
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Part III
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28
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Item 1. Index to Exhibits
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28
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Item 2. Description of Exhibits
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28
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2
Forward Looking Statements
Some of the statements contained in this Form 10-SB that are not
historical facts are “forward-looking statements” which can be identified
by the use of terminology such as “estimates,” “projects,”
“plans,” “believes,” “expects,”
“anticipates,” “intends,” or the negative or other variations,
or by discussions of strategy that involve risks and uncertainties. We urge you to be
cautious of the forward-looking statements, that such statements, which are contained
in this Form 10-SB, reflect our current beliefs with respect to future events and
involve known and unknown risks, uncertainties and other factors affecting our
operations, market growth, services, products and licenses. No assurances can be given
regarding the achievement of future results, as actual results may differ materially as
a result of the risks we face, and actual events may differ from the assumptions
underlying the statements that have been made regarding anticipated events.
All written forward-looking statements made in connection with this Form
10-SB that are attributable to us or persons acting on our behalf are expressly
qualified in their entirety by these cautionary statements. Given the uncertainties
that surround such statements, you are cautioned not to place undue reliance on such
forward-looking statements.
The safe harbors of forward-looking statements provided by the
Securities Litigation Reform Act of 1995 are unavailable to issuers not subject to the
reporting requirements set forth under Section 13(a) or 15(d) of the Securities
Exchange Act of 1934, as amended. As we have not registered our securities pursuant to
Section 12 of the Exchange Act, such safe harbors set forth under the Reform Act are
unavailable to us.
Part I
Item 1. Description of Business
Background
We were incorporated in the State of Utah on June 8, 1993, under the
name Megaton Gold Corporation. On or about February 24, 1994, we filed a certificate of
amendment to change our name to Clifton Mining Company (“Clifton”). Our
Articles of Incorporation authorize us to issue up to 70,000,000 shares of common stock
at a par value of $0.001 per share and 10,000,000 shares of preferred stock at a par
value of $0.001 per share. We are filing this Form 10-SB voluntarily with the intention
of establishing a fully reporting status with the SEC. Consequently, we will continue
to voluntarily file all necessary reports and forms as required by existing legislation
and SEC rules.
We have never been party to any bankruptcy, receivership or similar
proceeding, nor have we undergone any material reclassification, merger, consolidation,
or purchase or sale of a significant amount of assets not in the ordinary course of
business.
Between February and May, 1998, the Company acquired a 58% interest in
Woodman Mining Company (“WMC”) through the purchase of stock for cash of
$49,716. Subsequently in 2006, the Company purchased an additional 2.8% ownership in
WMC for $2,500 and Dumont Nickel, Inc. (“Dumont”) has acquired in a fifty
percent (50%) interest in the WMC claims. WMC owns mining claims and is not otherwise
engaged in any active business activities.
In December 1998, the Company acquired a 28% interest in American Silver
LLC (“AmSil”) through the purchase of stock for $20,000. AmSil operates
through a wholly owned subsidiary, American Biotech Labs LLC (“ABL”). As of
November 6, 2007, the Company owns approximately 23% of AmSil. ABL markets and
distributes dietary supplement products used as alternative to antibiotics and gel
products for natural wound care for humans and animals.
As used herein, the term “Company,” “we,”
“us,” “our” and similar terms means Clifton and WMC on a
consolidated basis, except where the context clearly indicates otherwise.
3
Business of Issuer
Principal Products and Principal Markets
In the beginning years, the Company was engaged in the process of
acquiring, exploring, and developing properties or selling the properties at an
appreciated value in the historic Clifton Mining Area of Western Utah. The Company has
acquired several claims which have previously been in production, with historical
production records. The Company has obtained a report calculating mineralized material
for the Clifton shear zone property (see Item 3. Description of Property) and is no
longer considered to be in the exploration stage. The Company is now primarily engaged
in property management by joint venturing the properties to other companies including
the use of the Company’s equipment to bring the claims into production and
investing in other businesses.
Notwithstanding our limited assets and capital resources, we currently
hold 38 patented claims (includes ten patented claims owed fifty percent (50%) by WMC
and fifty percent (50%) by Dumont), 210 unpatented lode claims and two state mineral
leases covering a total of approximately 5,774 acres in the Golden Hill/Clifton Mining
District, Tooele County, Northwest Utah area (the “Clifton
Property”).
Licenses, Franchises and Royalty Agreements, Including
Duration
In furtherance of our business plan, in 1993, we obtained 18 patented
and 54 unpatented claims from American Consolidated Management Group, Inc.
(“ACMG”) (formerly known as American Consolidated Mining Co.). In
consideration for the claims, we issued to ACMG 100 shares of common stock and
3,100,000 shares of 1993 Series Preferred A Stock, subject to $250,000 in existing
indebtedness. In November 1994, we redeemed a portion of the shares held by ACMG in
consideration for a 2.5% net smelter royalty to be paid on our mineral production. In
2002, the Company entered into a Settlement and Release Agreement with ACMG whereby the
Company released loan amounts due from ACMG pursuant to a Loan Agreement in exchange
for a release of any and all obligations and the transfer of property and
equipment.
In 1995, we issued 250,000 shares of our 1993 Series Preferred A Stock
to The Sunday School Board of the Southern Baptist Convention in consideration for an
investment of $375,000. We also granted a royalty of 20% of our net profits to The
Sunday School Board, pursuant to a Stock Purchase and Net Profits Interest Agreement
with the Sunday School Board. In addition, we also entered into a Net Profits Interest
Agreement and Consent with Mr. K. Bruce Jones and Mr. Matthew R. White.
Pursuant to this agreement, we agreed to pay Mr. White 5% of our net profits. The
Stock Purchase and Net Profits Interest Agreement and the Net Profits Interest
Agreement and Consent with the Sunday School Board cap the aggregate royalty payable
thereunder at US$1,500,000 and do not have a production commencement date requirement.
On or about June 20, 1996 we were provided notice that the Sunday School Board and
Mr. White had assigned their respective interests in the Stock Purchase and Net
Profits Interest Agreement and the Net Profits Interest Agreement and Consent to CPM
Partners, L.L.C.
On December 9, 2002, the Company entered into a letter agreement with
Dumont Nickel, Inc. (“Dumont”) whereby Dumont was given the option to
explore the Clifton Property in consideration for $10,000 and 100,000 shares of Dumont
common stock. Dumont may exercise this option by performing certain data and
feasibility studies with respect to the Clifton Property and incurring certain minimum
annual expenditures toward exploration work at the Clifton Property. If Dumont
completes the feasibility study, Dumont will be entitled to between 50% and 60% of the
Clifton Property that hosts a mineral deposit as per the feasibility study (the
“Special Project Area”). If Dumont earns a portion of the Clifton Property,
then Dumont and Clifton will enter into a Joint Venture arrangement to explore the
Special Project Area. Dumont has no obligation to exercise this option or to complete
any future work. To date Dumont has a total of approximately 15 square miles of
contiguous mineral properties under active exploration, including approximately 4.5
square miles of the Company’s approximately 8.75 square miles of
Property.
4
Competitive Business Conditions and the Issuer’s Competitive
Position
The silver exploration and mining industry is highly fragmented. We
expect to compete with many other exploration companies looking for gold, silver, and
other minerals. We are among the smallest exploration companies in existence and are a
very small participant in the precious metal industry. While we generally expect to
compete with other exploration companies, there is no competition for the exploration
or removal of minerals from our claims. Furthermore, if we are able to successfully
recover silver or the gold and lead by-products from our claims, due to the relatively
scarce nature of such minerals, it is likely that we will be able to sell all minerals
that we are able to recover. There can be no assurance, however, that mineral
exploration findings will be favorable or that, if the result are favorable, we will be
able to mine these minerals profitably or at all.
Government Approval of Principal Activities
Our operations are subject to extensive federal and state laws and
regulations designed to conserve and prevent the degradation of the environment. These
laws and regulations require obtaining various permits before undertaking certain
exploration activities and may result in significant delays, substantial costs and the
alteration of proposed operating plans. These requirements also necessitate significant
capital outlays and may result in liability to the owner and operator of the property
for damages that may result from specific operations or from contamination of the
environment, all of which may prevent us from continuing to operate.
Our operations are specifically subject to the statutes and related
regulations administered by the Utah Division of Oil, Gas & Mining and Tooele
County, Utah. We have obtained approval for reclamation, which will be needed upon the
conclusion of mining operations, if any, and have also posted a reclamation bond. We
have also obtained a conditional use permit from Tooele County to allow open pit mining
of our property and the use of extractive chemicals on the property. Accordingly, in
the future in conjunction with Dumont, we may commence operations in the permitted area
and may seek to expand the permit as needed.
As indicated above, we are required to reclaim the land upon completion
of mining activities should we become involved in mining activities. Certain of our
property is located on federal land, which also requires compliance with applicable
requirements administered by the U.S. Department of the Interior, Bureau of Land
Management. The foregoing regulations impose specific conditions on the nature and
extent of surface disturbance, the manner in which exploration and mining can be
conducted, the disposition of spent ore, the use and containment of chemical leachate
and other solutions, spill prevention, liquid and solid waste disposition, ground water
monitoring, and a number of other matters which if violated could result in fines,
penalties or attendant adverse publicity.
We believe that we are currently in compliance with all applicable
federal or state environmental regulations. Mining and exploration operations are also
subject to both federal and state laws and regulations pertaining to employee health
and safety. We have posted $59,091 in reclamation bonds to comply with applicable
federal and state environmental laws. We anticipate that if product commences this
amount will increase substantially.
Effect of Existing or Probable Government Regulations
Mineral exploration, including mining operations should we become
involved in such operations at some future date, are subject to governmental
regulation. Our operations may be affected in varying degrees by government regulation
such as restrictions on production, price controls, tax increases, expropriation of
property, environmental and pollution controls or changes in conditions under which
minerals may be marketed. An excess supply of certain minerals may exist from time to
time due to lack of markets and restrictions on exports. The marketability of metals
such as gold will be affected by numerous factors beyond our control. These factors
include market fluctuations and government regulations relating to prices, taxes,
royalties, allowable production and importing and exporting minerals. The effect of
these factors cannot be accurately determined.
5
Employees
Other than our officers and our Chairman, we have no employees. We have
three officers who are employed by the Company. We also rely on the efforts of our
directors. Messrs. Kenneth S. Friedman, President; William D. Moeller, Chairman of
our Board of Directors (the “Board”); Keith W. Moeller, Director; Scott S.
Moeller, Secretary, Treasurer and Director; Harold Gunsinger, Director; and Robert J.
Holladay, Vice-President of Operations each provide services to us on an as needed
basis, which, on average, amounts to approximately ten to one hundred twenty hours per
month per person. We do not anticipate hiring additional employees during the next
twelve months.
Reports to Security Holders
Annual Reports
We intend to make available our annual reports to security holders and
the United States Securities and Exchange Commission on Form 10-KSB in accordance with
the provisions of Section 12 of the Securities Exchange Act of 1934, as amended. Such
annual reports will include audited financial statements.
Periodic Reports with the SEC
As of the date of this registration statement, we have not been filing
periodic reports with the SEC. However, the purpose of this registration statement is
to become a fully reporting company on a voluntary basis. Hence, we will file periodic
reports with the SEC as required by laws and regulations applicable to fully reporting
companies.
Availability of Filings
You may read and copy any materials we file with the SEC at the
SEC’s Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549.
You may obtain information on the operation of the Public Reference Room by calling the
SEC at 1-800-SEC-0330. Additionally, the SEC maintains an Internet site
(http://www.sec.gov) that contains reports, proxy and information statements and other
information regarding issuers that file electronically with the SEC.
Item 2. Management’s Discussion and Analysis or Plan of
Operation
The following discussion and analysis or plan of operation provides
information which management believes is relevant to an assessment and understanding of
the Company’s consolidated results of operations and financial condition. The
discussion should be read in conjunction with the consolidated financial statements and
notes thereto.
General
The Company has only limited business operations. The Company has had no
revenue from operations during the past two fiscal years and has had no revenue for the
six months ended June 30, 2007. We had a net loss of $449,162 for the six months ended
June 30, 2007, compared to a net loss of $882,226 for the comparable period from the
prior year. The Company had $637,827 in cash, $735,756 in current assets and working
capital of $682,484 at June 30, 2007. As of June 30, 2007, we had a stockholders’
equity of $2,800,065. Our efforts are primarily focused on property management by joint
venturing the properties to other companies. During the past two fiscal years we have
financed our operations primarily through the sale of equity securities. We received a
total of $814,293 in cash from financing activities during 2006 and 2005.
6
Plan of Operation
The Company is primarily engaged in property management by joint
venturing the properties to other companies including the use of the Company’s
equipment to bring the claims into production in the historic Clifton Mining Area of
Western Utah. Our business plan is to acquire additional properties either by ourselves
or in joint venture partnership with others. Notwithstanding our limited assets and
capital resources, we currently hold 38 patented claims, 210 unpatented lode claims and
two state mineral leases covering a total of approximately 5,774 acres in the Golden
Hill/Clifton Mining District, Tooele County, Northwest Utah area (the “Clifton
Property”). Due to our limited financial resources there can be no assurance as
to the level of any future property purchases.
In furtherance of our business plan, on December 9, 2002, we entered
into a letter agreement with Dumont Nickel, Inc. (“Dumont”) whereby Dumont
was given the option to explore the Clifton Property in consideration for $10,000 in
cash and 100,000 shares of Dumont common stock. In addition, Dumont is to perform
certain data and feasibility studies with respect to the Clifton Property and incur
minimum annual expenditures toward exploration work at the Clifton Property. If Dumont
completes the feasibility study, Dumont will be entitled to between 50% and 60% of the
Clifton Property that hosts a mineral deposit as per the feasibility study (the
“Special Project Area”). If Dumont earns a portion of the Clifton Property,
then Dumont and Clifton will enter into a Joint Venture arrangement to explore the
Special Project Area. Dumont has no obligation to exercise this option or to complete
any future work. To date Dumont has a total of approximately 15 square miles of
contiguous mineral properties under active exploration, including approximately 4.5
square miles of the Company’s approximately 8.75 square miles of
Property.
We are relying on Dumont to conduct necessary and proper exploration
activities. While Dumont is not obligated to perform any future exploration activities
on the Clifton Property, Dumont has conducted several programs involving detailed soil
sampling, mapping, and drilling. One of properties of interest to Dumont is the Kiewit
Project Area. Dumont’s press release dated October 4, 2007 states that they have
resolved contractual matters with amendments that will now facilitate resumption of the
in-house Scoping Study initiated in 2006 to evaluate economic viability of a portion of
the Kiewit Gold Zone. The press release continues stating, “This portion
comprises a 250mx250m area overlaying the Historic portion of the Zone. It is the most
accessible and has been grid-drilled by Dumont in sufficient detail to support a
resource estimate. The Study is intended to establish threshold economic parameters to
enable a determination whether delineation of additional similarly mineralized material
elsewhere over the 2km length of the Kiewit Gold Zone is warranted. Should the Scoping
Study prove favourable, intentions would be to resume additional definition drilling of
up to 400 holes to identify additional mineralized material which meet economic
threshold criteria established by the Study. The necessary permitting for the
anticipated expanded drilling has been in hand for some time and is being maintained in
good standing by ongoing maintenance of related reclamation bonds and related surface
remediation. Progress and results from various studies completed to date which will be
consolidated into the Scoping Study will be reported at a later date.” There is
no assurance that this program will be successful in delineating additional
mineralization. Moreover, even if the program does delineate additional mineralization,
additional engineering and metallurgic studies may be required before we will know if a
commercially viable mineral deposit or reserve can be calculated. There is no assurance
that Dumont or we will have the financial capability to conduct such drilling,
engineering and metallurgic studies necessary to prove a gold reserve, if such a
reserve exists. Even if Dumont funded feasibility studies that proved a gold reserve,
there is no assurance that Dumont or we would be able to fund a mining operation. There
is no assurance metals prices would remain at levels at which such a mining operation
would be profitable.
Liquidity
As of June 30, 2007 we had $637,827 in cash and current liabilities of
$53,272. We have committed to spend an additional estimated $50,000 in capital
expenditures during the next twelve months for a unique microwave patent filed earlier
this year in 2007. As a result, we believe that our cash on hand is sufficient to
continue our business for the next at least 12 months. We will need to raise additional
funding thereafter to execute our business plan. When additional cash needs arise, we
anticipate raising additional funds by
7
either issuing equity or debt securities in exchange for cash, selling
marketable securities, investments, or properties. There can be no assurance, however,
that we will be able to secure additional funds by the issuance of equity or debt
securities or that such funding, if it can be obtained, will be available on favorable
terms or that a ready market with be available to purchase marketable securities,
investments, or properties.
We do not anticipate purchasing or selling any plant or other
significant equipment. We do not anticipate the need to hire additional full- or part-
time employees over the next 12 months, as the services provided by our officers and
directors appear sufficient at this time. We believe that our operations are currently
manageable by a few individuals.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are
reasonably likely to have a current or future effect on our financial condition,
changes in financial condition, revenues or expenses, results of operations, liquidity,
capital expenditures or capital resources that is material to investors.
Risk Factors
We are subject to certain other risk factors due to the nature of our
operations and our industry. These risk factors include the following.
We have a history of losses and may not be profitable in the
future.
We have limited operations and have incurred a net loss of $1,570,137
for the year ended December 31, 2006 and a net loss of $449,162 for the six months
ended June 30, 2007. We will not be profitable until joint ventures involving mining
and processing minerals from our properties derive substantial revenues from sales of
such processed minerals or the return on the investment in American Silver LLC
generates sufficient revenues. We expect to continue to lose money until we are able to
generate significant revenues. There is no assurance that we will be able to generate
revenues in the future.
We do not have sufficient funds to execute our business
plan.
We believe that our current cash reserves will be sufficient to support
a planned level of activity for the next twelve months. Thereafter, we will need to
raise additional funding to execute our business plan. Until we have obtain additional
information relating to the minerals contained in the Clifton Properties and the costs
of acquiring additional properties, we cannot forecast the amount of long term funding
that we will require to execute our business plan. When additional cash needs arise, we
anticipate raising additional funds by issuing equity or debt securities in exchange
for cash. There can be no assurance, however, that we will be able to secure additional
funds by the issuance of equity or debt securities or that such funding, if it can be
obtained, will be available on favorable terms. Moreover, the Company’s business
plans may change or unforeseen events may occur which affect the amount of additional
funds required by the Company. If additional funds are not obtained when required, the
lack thereof may have a material adverse effect on the Company.
Our management is involved with other business activities, which
could reduce the time they allocate to our operations.
Our operations depend substantially on the skills and experience of our
officers and directors. We do not have employment agreements with any of our officers.
Any of our officers or directors can leave at any time. Moreover, our officers and
directors are each involved in other business activities and may, in the future, become
involved in other business opportunities. If a specific business opportunity becomes
available, one or more of these individuals may face a conflict in selecting between
Clifton Mining Company and other business opportunities. Should the services of our
present officers and directors become unavailable for any reason, our business could be
adversely affected. There is no assurance that we
8
will be able to retain the existing working team or attract new officers
and directors of the caliber and experience needed to achieve our
objectives.
We are dependent on third
parties
.
Our success may be dependent on the efforts and expertise of Dumont with
whom we have contracted and other third parties with whom we may contract in the
future. Dumont is responsible for exploration and discovery with respect to certain of
our mineral properties and related assets. Dumont and other third parties are not under
our control or direction. We are dependent on Dumont for accurate information with
respect to our mining properties and related assets and the progress and development of
such properties and assets. Dumont controls the time of exploration and, if warranted,
the development of certain of our mining properties and related assets.
If we lose key personnel or are unable to attract and retain
additional personnel, we may be unable to continue or further develop
our
business.
Our success is highly dependent on the efforts of key management
employees, namely, Kenneth S. Friedman (currently President and a director) and other
key employees that we hire in the future. Loss of any of these people could have a
material adverse effect on our business. Although we plan to enter into employment
agreements with Mr. Friedman, as well as other key employees as determined by us,
we do not have and currently have no plans to obtain key man insurance with respect to
any of our key employees. In addition, if we are unable to successfully recruit and
retain such necessary personnel, our development and growth could be significantly
curtailed.
We will depend on outside sources to place our mineral deposit
properties into production.
Our ability to place our properties into production will be dependent
upon using the services of appropriately experienced personnel or contractors and
purchasing equipment, or entering into agreements with other major resource companies
that can provide such expertise or equipment. There can be no assurance that we will
have available to us the necessary expertise or equipment when and if we place our
mineral deposit properties into production.
Our lack of operating experience may cause us difficulty in managing
our
growth.
As our operations mature, we will need to establish operating procedures
for evaluating, acquiring and developing properties, and negotiating, establishing and
maintaining strategic relationships. Our ability to manage our growth, if any, will
require us to improve and expand our management and our operational and financial
systems and controls. If our management is unable to manage growth effectively, our
business and financial condition would be materially harmed. In addition, if rapid
growth occurs, it may strain our operational, managerial and financial
resources.
We cannot be certain that our acquisition, exploration and evaluation
activities will be commercially successful.
We currently have no properties that produce gold in commercial
quantities. Substantial expenditures are required to acquire existing gold properties,
to establish ore reserves through drilling and analysis, to develop metallurgical
processes to extract metal from the ore and, in the case of new properties, to develop
the mining and processing facilities and infrastructure at any site chosen for mining.
We cannot assure you that any gold reserves or mineralized material acquired or
discovered will be in sufficient quantities to justify commercial operations or that
the funds required for development can be obtained on a timely basis.
Environmental permitting may deplete our capital
resources.
Mining and/or processing activities on our property, should they occur,
are subject to numerous permitting and environmental laws and regulations administered
by active federal, state and local authorities, particularly the Utah Division of Oil,
Gas & Mining and Tooele County, Utah. Although we
9
believe that our joint venture partners will obtain all permits
necessary to commence operations, it may be necessary to gather and analyze baseline
data, complete environmental assessment or environmental impact statements with
appropriate steps to mitigate potential adverse impacts and modify the proposed plans
in order to accommodate environmental impacts, all of which may take an indeterminable
amount of time and capital to complete. We may be unable to continue our operations
with our joint venture partners if these tasks cause them to expend a greater amount of
capital than they currently have and may be able to obtain.
Our future revenues and profits
are
uncertain.
We are currently generating no revenues. None of our properties are
currently producing gold or other precious metals and there can be no assurance that
these properties will ever produce precious metals in commercial quantities or that we
will otherwise generate operating earnings. There is no certainty that we will produce
revenue, operate profitably or provide a return on investment in the future. If we are
unable to generate revenues or profits, investors might not be able to realize returns
on their investment in our common stock. Even if we do achieve profitability, we may
not be able to sustain or increase profitability on a quarterly or
annual basis.
Our business plan for processing ores through joint venture partners
is dependent on silver and gold prices.
Precious metals mining operations are dependent on silver and gold
prices, which may fluctuate in the world commodity markets and are beyond our control
or influence. A substantial reduction in the prices of silver or gold on the world
commodity markets may impede our joint venture partner’s ability to execute the
business plan and our ability to raise additional capital.
The imposition of an uninsured loss could cause us to cease
conducting business.
Precious metals exploration and mining (should that occur at some future
date) involves hazards which include environmental damage and personal injury due to
mining and the use of heavy equipment. These injuries could result in substantial
losses and liabilities to third parties. We may not be able to insure against all
losses and liabilities which may arise from all hazards because such insurance is
unavailable, or if available, is at a price prohibitive to us for obtaining such
insurance. The imposition of an uninsured loss could force us out of business. Because
we place the burden of property liability on our joint venture partners, we currently
carry no insurance coverage relating to environmental or personal injury
claims.
Mining exploration, development and operating activities are
inherently hazardous.
Mineral exploration involves many risks that even a combination of
experience, knowledge and careful evaluation may not be able to overcome. Operations in
which we have direct or indirect interests will be subject to all the hazards and risks
normally incidental to exploration, development and production of gold and other
metals, any of which could result in work stoppages, damage to property and possible
environmental damage. The nature of these risks is such that liabilities might exceed
any liability insurance policy limits. It is also possible that the liabilities and
hazards might not be insurable, or, that we could elect not to insure us against such
liabilities due to high premium costs or other reasons, in which event, we could incur
significant costs that could have a material adverse effect on our financial
condition.
Reserve calculations are estimates only, subject to uncertainty due
to factors including metal prices, inherent variability of the ore and recoverability
of metal in the mining
process.
There is a degree of uncertainty attributable to the calculation of
reserves and corresponding grades dedicated to future production. Until reserves are
actually mined and processed, the quantity of ore and grades must be considered as an
estimate only. In addition, the quantity of reserves and ore may vary depending on
metal prices. Any material change in the quantity of reserves, mineralization, grade or
stripping ratio may affect the economic viability of our properties. In addition, there
can be no assurance
10
that
gold recoveries or other metal recoveries in small-scale laboratory tests will be
duplicated in larger scale tests under on-site conditions or during
production.
We face intense competition in the mining industry.
The mining industry is intensely competitive in all of its phases. As a
result of this competition, some of which is with large established mining companies
with substantial capabilities and with greater financial and technical resources than
ours, we may be unable to acquire additional attractive mining claims or financing on
terms we consider acceptable. We also compete with other mining companies in the
recruitment and retention of qualified managerial and technical employees. If we are
unable to successfully compete for qualified employees, our exploration and development
programs may be slowed down or suspended. We compete with other gold companies for
capital. If we are unable to raise sufficient capital, our exploration and development
programs may be jeopardized or we may not be able to acquire, develop or operate
gold projects.
We may be unable to raise additional capital on favorable
terms.
The exploration and development of our development properties,
specifically the construction of mining facilities and commencement of mining
operations, may require substantial additional financing. Significant capital
investment is required to achieve commercial production from each non-producing
property. We will have to raise additional funds from external sources in order to
maintain and advance our existing property positions and to acquire new gold projects.
There can be no assurance that additional financing will be available at all or on
acceptable terms and, if additional financing is not available to us, we may have to
substantially reduce or cease operations.
There may be challenges to our title to our mineral
properties.
There may be challenges to title to the mineral properties in which we
hold a material interest. If there are title defects with respect to any properties, we
might be required to compensate other persons or perhaps reduce our interest in the
affected property. Also, in any such case, the investigation and resolution of title
issues would divert our management’s time from ongoing exploration and
development programs.
Exploration and development operations are subject to environmental
regulations, which could result in incurrence of additional costs and operational
delays.
All phases of mining operations are subject to environmental regulation.
Environmental legislation is evolving in some countries or jurisdictions in a manner
which will require stricter standards and enforcement, increased fines and penalties
for non-compliance, more stringent environmental assessments of proposed projects and a
heightened degree of responsibility for companies and their officers, directors and
employees. There is no assurance that future changes in environmental regulation, if
any, will not adversely affect our projects. We will be subject to environmental
regulations with respect to our properties in Utah, under applicable federal and state
laws and regulations.
Some of our properties in Utah occupy federal lands. These claims are
governed by the laws and regulations of the U.S.
federal government and the Utah Division of Oil, Gas &
Mining.
The BLM requires that mining operations on lands subject to its
regulation obtain an approved plan of operations subject to environmental impact
evaluation under the U.S. National Environmental Policy Act. Any significant
modifications to the plan of operations may require the completion of an environmental
assessment or EIS prior to approval. Mining companies must post a bond or other surety
to guarantee the cost of post-mining reclamation. These requirements could add
significant additional cost and delays to any mining project we undertake.
Under the U.S. Resource Conservation and Recovery Act, mining
companies may incur costs for generating, transporting, treating, storing, or disposing
of hazardous waste, as well as for closure and post-closure maintenance once they have
completed mining activities on a property. Our mining operations may
11
produce air emissions, including fugitive dust and other air pollutants,
from stationary equipment, storage facilities, and the use of mobile sources such as
trucks and heavy construction equipment which are subject to review, monitoring and/or
control requirements under the Federal Clean Air Act and state air quality laws.
Permitting rules may impose limitations on our production levels or create additional
capital expenditures in order to comply with the rules. CERCLA imposes strict
joint and several liability on parties associated with releases or threats of releases
of hazardous substances. The groups who could be found liable include, among others,
the current owners and operators of facilities which release hazardous substances into
the environment and past owners and operators of properties who owned such properties
at the time the disposal of the hazardous substances occurred. This liability could
include the cost of removal or remediation of the release and damages for injury to the
surrounding property. We cannot predict the potential for future CERCLA liability with
respect to our properties.
At the state level, mining operations in Utah are also regulated by the
Utah Division of Oil, Gas & Mining and Tooele County, Utah. Under pursuant to state
and/or county requirements, we have obtained approval for reclamation, which will be
needed upon the conclusion of mining operations, if any, and have also posted a
reclamation bond. We have also obtained a conditional use permit from Tooele County to
allow open pit mining of our property and the use of extractive chemicals on the
property. Accordingly, in the future in conjunction with Dumont, we may commence
operations in the permitted area and may seek to expand the permit as
needed.
Any changes to these laws and regulations could have an adverse impact
on our financial performance and results of operations by, for example, required
changes to operating constraints, technical criteria, fees or surety
requirements.
There can be no assurance of a liquid public market for our common
stock.
There can be no assurance as to the depth or liquidity of any market for
our common stock or the prices at which holders may be able to sell their shares. As a
result, an investment in our common stock may not be totally liquid, and investors may
not be able to liquidate their investment readily or at all when they need or desire to
sell.
Applicability of low priced stock risk disclosure requirements may
adversely affect the prices at which our common stock trades.
Our common stock may be considered a low priced security under rules
promulgated under the Securities Exchange Act of 1934 (the “Exchange Act”).
Under these rules, broker-dealers participating in transactions in low priced
securities must first deliver a risk disclosure document which describes the risks
associated with such stocks, the broker-dealer’s duties, the customer’s
rights and remedies, and certain market and other information, and make a suitability
determination approving the customer for low priced stock transactions based on the
customer’s financial situation, investment experience and objectives.
Broker-dealers must also disclose these restrictions in writing to the customer, obtain
specific written consent of the customer, and provide monthly account statements to the
customer. With these restrictions, the likely effect of designation as a low priced
stock will be to decrease the willingness of broker-dealers to make a market for the
stock, to decrease the liquidity of the stock and to increase the transaction cost of
sales and purchases of such stock compared to other
securities.
12
Item 3. Description of Property
Description of Property
General
Our business offices are located at 80 West Canyon Crest Road, Alpine,
Utah 84004. We rent our office space from American Biotech Labs, LLC, a related party,
on a month-to-month basis for approximately $1,250.00 per month. There are currently no
proposed programs for the renovation, improvement or development of the leased space.
We believe that this arrangement is suitable given the nature of our current
operations, and believe that we will not need to lease additional administrative
offices for at least the next 12 months.
Clifton Property
Location and Means of Access
. The
Clifton-Gold Hill Property lies within the Gold Hill Mining District in Tooele County,
northwest Utah within the Deep Creek Mountains, approximately 190 miles (304
kilometers) west-southwest of Salt Lake City and 30 miles (48 kilometers) south of the
town of Wendover on the Utah-Nevada border.
The Clifton Property is best reached by taking Alternate 93A south from
Wendover to the Ibapah Road, a distance of approximately 24.5 miles (39 kilometers).
The Ibapah Road is a paved two-lane road that services the settlements of Ibapah and
Goshute situated southwest of the property. Approximately 17 miles and 25 miles from
the 93A-Ibapah intersection, two roads- the Gold Hill and Pony Express Canyon
roads-turn off the Ibapah Road towards the settlements of Gold Hill and Callao. Both
are well-groomed, all-weather gravel roads that provide good access to the Clifton
Property from the north and south respectively.
Numerous service roads and trails exist throughout the property area as
a result of the many old mines and workings. All can be reached from the Gold Hill and
Pony Express Canyon roads. Though unmaintained, the condition of the service roads and
trails are generally good and negotiable by 4-wheel drive vehicle, providing year round
access throughout the property area. Very few facilities are available at Gold Hill.
The settlement has electrical power and water. A nearby local water source once
provided water for the historical mill operations at Gold Hill and is, reportedly, able
to provide enough water for the current 250 ton per day mill.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
13
14
Description of Title
. The Clifton Property
consists of 38 patented and 210 unpatented (lode) mining claims and two State Mineral
Leases totalling approximately 5,774 acres. We own 100% fee title to 28 of the patented
claims and the other 10 patent mining claims are owned fifty percent (50%) by WMC and
fifty percent (50%) by Dumont Nickel, Inc. We pay an annual maintenance fee of $125 to
the Bureau of Land Management for the 210 lode claims and we pay an annual lease fees
to the State of Utah on the two State Mineral Leases. All of these mineral properties
except 142 of the unpatented (lode) mining claims are subject to Dumont’s rights,
discussed below. The lode claims are federal mineral claims that are managed by the
Bureau of Land Management and the State Mineral Leases are state mineral claims. The
$125 annual maintenance fee per lode claims has been through the period ending on
August 31, 2007. The lease arrangements with respect to the State Mineral Leases
relating to approximately 412 acres expire in 2014 and the lease arrangements with
respect to State Mineral Leases relating to approximately 533 acres expires in 2015.
There are no other underlying agreements or interests in the Clifton Property other
than explained herein. Our mineral properties may be summarized as follows:
Property Breakdown
|
Nature of Claim
|
Approximate Area (Acres)
|
|
|
Patented Claims
|
629
|
Lode Claims
|
4,200
|
State Lease Lands
|
|
945
|
|
|
|
Total:
|
|
5,774
|
|
.
Previous Operations
. Exploration and mining
activities in the Gold Hill (of which the Clifton Property is a part) began in the mid
1800’s Lead mineralization in the form of galena (a common lead sulfide) first
attracted the attention travelers through the area prompting some to stay to prospect.
Placer gold was first discovered in Gold Hill in 1858. A lead smelter was constructed
at Clifton in 1872 and 1,500 tons of high-grade lead-silver ore was treated. The
smelter was relocated to Gold Hill in 1874 and an additional 500 tons of lead-silver
ore from the Western Utah Copper Company treated there. The mill was in operation for
23 months between 1892 and 1895. Some 3,000 residents lived in Gold Hill and Clifton at
the time.
Tungsten production in the district began in 1912 with commencement of
operations at the Lucy L Mine. Approximately 500 tons of ore was produced from the
mine. Significant amounts of gold and bismuth were also reportedly extracted. Tungsten
was also produced from the Reaper and Yellow Hammer mines. Production began at the two
mines in 1914 and 1917. Net receipts from ore production at the Reaper Mine indicate a
total of $75,000 of tungsten was produced, $70,000 of which was produced during World
War I. Production at the Yellow Hammer during is estimated to have been $25,000 to
$45,000. The district remained largely dormant during the period following the Second
World War to the mid-1970’s primarily because the highly fragmented land tenure
precluded any serious regional-scale study or exploration.
Ongoing Work
. The Company has not recently
done any material exploration or development work on the Clifton Property. Rather, on
December 9, 2002, the Company entered into a letter agreement with Dumont Nickel, Inc.
(“Dumont”) whereby Dumont was given the option to explore the Clifton
Property in consideration for $10,000 and 100,000 shares of Dumont common stock. Dumont
may exercise this option by performing certain data and feasibility studies with
respect to the Clifton Property and incurring certain minimum annual expenditures
toward exploration at the Clifton Property. If Dumont completes the feasibility study,
Dumont will be entitled to between 50% and 60% of the Clifton Property that hosts a
mineral deposit as per the feasibility study (the “Special Project Area”).
If Dumont earns a portion of the Clifton Property, then Dumont and Clifton will enter
into a Joint Venture arrangement to explore the Special Project Area. Dumont has no
obligation to exercise this option or to complete any future work. To date, Dumont has
a total of approximately 15 square miles of contiguous mineral properties under active
exploration, including approximately 4.5 square miles of the Company’s
approximately 8.75 square miles of Property.
|
The Company has a processing mill, rolling stock and
other miscellaneous equipment on the Clifton Property.
|
Possible Mineralization
. The
Clifton Property is located within the Gold Hill Mining District in Tooele County,
Utah. The district is situated in the east central part of the Great Basin section of
the Basin and Range province
15
The Clifton Property area is underlain by Carboniferous limestone and
shale units of the Ochre Mountain Limestone, Manning Canyon and Oquirrh Formations. Two
large igneous plutons intrude the sediments: a Jurassic granodiorite and Oligocene
quartz-monzonite in the northern part of the property.
Economic mineralization exhibits a close spatial relation to the
Jurassic granodiorite intrusive body, with known mineralized areas localized in
fracture zones within the granodiorite or in the contact zone between the intrusive and
carbonate strata of the Ochre Mountain Limestone and Oquirrh Formation. The close
spatial relationships suggest the granodiorite was the source of metal-bearing
hydrothermal fluids and economic mineralization in the property area is consequently
purported to be Jurassic in age.
Economic mineralization in the property area is manifested as
contact-metasomatic deposits in and around limestone-granodiorite contacts (skarns), as
fissure quartz-carbonate-adularia veins within the intrusive body itself, and as
replacement deposits within both the limestone and intrusive. Together, these styles of
mineralization are indicative of epithermal and related porphyry systems. The scarcity
of volcanic material in the property area however precludes a high-level epithermal
mineralizing system existing in the area but it is possible that a Cu-Au porphyry
system formed in the area, at depth, possibly as a deeper part of a larger Jurassic
granodiorite intrusive complex.Structurally, the Gold Hill area is well prepared. The
deep-seated underlying Ochre Mountain Thrust and numerous Mesozoic crosscutting
lowangle and high-angle faults would have allowed hydrothermal fluids emanating from
the intrusive to migrate far from the intrusive and deep into the surrounding wall
rock.
It is believed that the regional structural and lithological setting of
the area is favorable for a porphyry copper-gold system (and related skarns) proximal
to the Jurassic granodiorite, and for sediment-hosted disseminated gold deposits distal
to the granodiorite intrusive.
Several historic mines and workings dating back to the late 1800’s
and early 1900’s can be found within the Clifton Property and include the Cane
Springs, Alvarado, Frankie mines as well as numerous smaller workings. These old mines
and workings typically exploited mineralization that was readily identifiable by
structure (veins) and/or visible minerals such as visible gold, sulphides
(chalcopyrite, galena, sphalerite) and staining (malachite). The mining activities at
the time were likely restricted to the higher-grade portions of mineralized zones and
to relatively shallow depths (200-300 feet), leaving the possibility that significant
portions of mineralized zones still exist.
Investment Policies
Our management does not currently have policies regarding the
acquisition or sale of real estate assets primarily for possible capital gain or
primarily for income. We do not presently hold any investments in real estate,
investments in real estate mortgages or securities of or interests in persons primarily
engaged in real estate activities.
Item 4. Security Ownership of Certain Beneficial Owners and
Management
Security Ownership of Certain Beneficial Owners and
Management
The following table sets forth certain information with respect to the
beneficial ownership of our common stock as of November 6, 2007, for: (i) each person
who is known by us to beneficially own more than five percent of our common stock, (ii)
each of our directors, (iii) each of our Named Executive Officers, and (iv) all
directors and executive officers as a group. On November 6, 2007 the Company had
50,632,128 shares of common stock outstanding. To the knowledge of the Company, no
shareholder beneficially owns 5% or more of the capital stock.
16
TITLE OF CLASS
|
NAME AND ADDRESS
OF BENEFICIAL
OWNER
(1)
|
AMOUNT AND NATURE OF BENEFICIAL
OWNER
(2)
|
% OF CLASS
|
|
|
|
|
Common Stock
|
William D. Moeller, Director
(3)
|
605,000
|
1.2%
|
Common Stock
|
Kenneth S. Friedman, President and
Director
(4)
|
1,274,000
|
2.5%
|
Common Stock
|
Keith W. Moeller, Vice-President and
Director
(5)
|
1,841,003
|
3.5%
|
Common Stock
|
Scott S. Moeller, Vice-President, Secretary, Treasurer
and Director
(6)
|
1,135,000
|
2.2%
|
Common Stock
|
Harold Gunsinger, Director
(7)
|
830,000
|
1.6%
|
|
|
|
|
|
Officers and Directors as a Group
|
5,685,003
|
11.0%
|
Footnotes:
(1)
|
Except where otherwise indicated, the address of the
beneficial owner is deemed to be the same address as the
company.
|
(2)
|
Beneficial ownership is determined in accordance with
SEC rules and generally includes holding voting and investment power
with respect to the securities. Shares of common stock subject to
options or warrants currently exercisable, or exercisable within 60
days, are deemed outstanding for computing the percentage of the total
number of shares beneficially owned by the designated person, but are
not deemed outstanding for computing the percentage for any other
person.
|
(3)
|
Includes options that are immediately exercisable for
430,000 shares of common stock and options that are exercisable for
175,000 shares of common stock on and after 2/15/08.
|
(4)
|
Includes 624,000 shares of common stock, warrants that
are immediately exercisable for 45,000 shares of common stock and
options that are immediately exercisable for 430,000 shares of common
stock and options that are exercisable for 175,000 shares of common
stock on and after 2/15/08.
|
(5)
|
Includes 1,236,003 shares of common stock and options
that are immediately exercisable for 430,000 shares of common stock and
options that are exercisable for 175,000 shares of common stock on and
after 2/15/08.
|
(6)
|
Includes 530,000 shares of common stock and options that
are immediately exercisable for 430,000 shares of common stock and
options that are exercisable for 175,000 shares of common stock on and
after 2/15/08.
|
(7)
|
Includes 225,000 shares of common stock and options that
are immediately exercisable for 430,000 shares of common stock and
options that are exercisable for 175,000 shares of common stock on and
after 2/15/08.
|
Change in Control
We are aware of no arrangements that may result in a change in control
of the Company.
Item 5. Directors and Executive Officers, Promoters and Control
Persons
Set forth below is certain information concerning each of our directors
and executive officers as of November 6, 2007.
17
NAME
|
AGE
|
POSITION
|
WITH THE COMPANY SINCE
|
William D. Moeller
|
70
|
CEO and Director
|
1993
|
Kenneth S. Friedman
|
65
|
President and Director
|
1994
|
Keith W. Moeller
|
47
|
Vice-President and Director
|
1993
|
Scott S. Moeller
|
44
|
Vice-President, Secretary, Treasurer and
Director
|
1993
|
Harold Gunsinger
|
69
|
Director
|
1996
|
Robert J. Holladay
|
59
|
Vice-President of Operations
|
1993
|
Directors, Executive Officers and Significant
Employees
Set forth below are summary descriptions containing the name of our
directors and officers, all positions and offices held with us, the period during which
such officer or director has served as such, and the business and educational
experience of each during at least the last five years:
William D. Moeller is Chairman of the Board and has been since 1993. His
term as director expires at the 2008 annual meeting of shareholders. Mr. Moeller
is currently principally employed as the President of American Silver LLC and has been
in that position since 1998 and as a Managing Director for American Biotech Labs LLC.
Mr. Moeller spends a majority of his business time working for American Biotech
Labs LLC. During the past year Mr. Moeller spent approximately ten percent of his
business time working on Company related matters.
Kenneth S. Friedman is the President and a director. His term as a
director expires at the 2010 annual meeting of shareholders. Mr. Friedman was
principally employed as the CEO of Strathmore Minerals from 1996 to 2002. Since leaving
Strathmore Minerals, Mr. Friedman has been principally employed as the president
of the Company. In 1991 and 1992, Mr. Friedman served as director of research at
Dickinson & Co., a regional Midwestern broker-dealer, and earlier in 1991, as a
natural resources analyst for Kemper Financial. In 1990, he was a metals and mining
analyst for Boettcher & Co. From 1983 through 1990, Mr. Friedman served as
Vice President of Norstar Investment Advisory Services, Inc, which acted as a money
manager. Mr. Friedman also serves as a director of Northfield Minerals, Inc.,
Eloro Minerals and Strathmore Resources. During the last year Mr. Friedman spent
approximately eighty percent of his business time working on Company related
matters.
Keith W. Moeller is a Vice-President and a director. His term as a
director expires at the 2009 annual meeting of shareholders. Mr. Moeller is
currently and for the past five years has been principally employed as a Managing
Director for American Biotech Labs LLC. Mr. Moeller spends approximately 75% of
his business time working for American Biotech Labs LLC. During the last year
Mr. Moeller spent approximately 25% of his business time working on Company
related matters.
Scott S. Moeller is a Vice-President, Secretary, Treasurer and director.
His term as a director expires at the 2010 annual meeting of shareholders.
Mr. Moeller has been principally employed over the past five years as a Managing
Director for American Biotech Labs LLC. Mr. Moeller spends approximately 70% of
his business time working for American Biotech Labs LLC. During the last year
Mr. Moeller spent approximately 30% of his business time working on Company
related matters.
Harold Gunsinger is a director. His term as a director expires at the
2009 annual meeting of shareholders. Mr. Gunsinger has been retired and, as a
result, has not been employed on a full time basis during the past five years.
Mr. Gunsinger was the Projects Manager of Patrick Harrison Company Ltd. a private
mining company, from January 1985 to November 1993. Thereafter, Mr. Gunsinger
acted as the General Manager of Operations of Patrick Harrison Constructors Inc., a
private construction business involved in the mining industry from January 1994 to
February 1996, and then occupied the position of President of that company.
Robert J. Holladay is the Vice-President, Operations. Mr. Holladay
has a B.S. in Chemistry and an MBA and has worked in the mining industry for over 30
years. For the past eight years Mr. Holladay has been principally employed as the
Vice-President of Quality Control and a Managing Director of ABL Manufacturing LLC, and
as
18
a
managing Partner of Resource Recycling, LC. Mr. Holladay spends most of his
business time working for ABL Manufacturing LLC.
|
Our executive officers are elected by the Board on an
annual basis and serve at the discretion of the Board.
|
Family Relationships
William Moeller is the father to Keith Moeller and to Scott
Moeller.
The executive officers and directors of the Company have not been
involved in any legal proceedings which occurred within the last five years of any type
as described in Regulation S-B.
Audit Committee Financial Expert
The Company currently does not have an audit committee. The entire Board
functions as the audit committee. Mr. Scott Moeller serves as our financial expert
on the Board. Mr. Scott Moeller also services as an officer of the Company and he
is not independent.
Item 6. Executive Compensation
Remuneration of Directors, Executive Officers and Significant
Employees
Summary Compensation Table.
The following
table provides certain information regarding compensation paid by the company to the
Named Executive Officers. No officer or director of the Company received annual salary
and bonus in excess of $100,000 during any of the last three fiscal years.
Summary Compensation Table
|
|
Name and
Principal Position
|
Year
|
Salary ($)
|
Bonus ($)
|
Stock Awards ($)
|
Option Awards ($)
|
Non-Equity Incentive Compen-sation (#)
|
Non-Qualified Deferred Compen-sation Earnings
($)
|
All other Compen-sation ($)
|
Total ($)
|
Kenneth Friedman,
|
2004
|
68,500
|
0
|
0
|
0 (1)
|
0
|
0
|
0
|
68,500
|
PEO
|
2005
|
78,000
|
0
|
0
|
0
|
0
|
0
|
0
|
78,000
|
|
2006
|
78,000
|
0
|
0
|
152,949(2)
|
0
|
0
|
0
|
230,949(2)
|
William Moeller,
|
2004
|
32,500
|
0
|
0
|
0 (1)
|
0
|
0
|
0
|
32,000
|
CEO
|
2005
|
32,500
|
0
|
0
|
0
|
0
|
0
|
0
|
32,500
|
|
2006
|
32,500
|
0
|
0
|
152,949(2)
|
0
|
0
|
0
|
185,449(2)
|
Keith Moeller,
|
2004
|
65,000
|
0
|
0
|
0 (1)
|
0
|
0
|
0
|
65,000
|
Vice President
|
2005
|
65,000
|
0
|
0
|
0
|
0
|
0
|
0
|
65,000
|
|
2006
|
65,000
|
0
|
0
|
152,949(2)
|
0
|
0
|
0
|
217,949(2)
|
Scott Moeller,
|
2004
|
65,000
|
0
|
0
|
0 (1)
|
0
|
0
|
0
|
65,000
|
PFO
|
2005
|
65,000
|
0
|
0
|
0
|
0
|
0
|
0
|
65,000
|
|
2006
|
65,000
|
0
|
0
|
152,949(2)
|
0
|
0
|
0
|
217,949(2)
|
(1)
Prior to the adoption of SFAS 123R, the
Company applied the intrinsic-value-based method of accounting prescribed by Accounting
Principle Board Opinion No. 25, “Accounting for Stock Issued to Employees”
(APB 25). Under APB Opinion 25, no compensation expense was recognized at the time of
option grant when the exercise price of the Company’s employee stock options
equals or exceeds the fair market value of the underlying common stock on the date of
grant. As permitted by SFAS 123, the stock options granted in 2004 were issue at market
price on the day of grant and therefore have no book value. Current prevailing stock
prices are below the grant price of $0.74 and therefore the stock options currently
have no intrinsic value.
(2)
Effective January 1, 2006, we adopted
FASB Statement No. 123(R), “Accounting for Stock-Based Compensation”. SFAS
123(R) requires all share-based payments to employees, including grants of employee
stock options and restricted stock, to be recognized in the financial statements based
on their fair values. We have selected the Black-Scholes method of valuation for
share-based compensation. The charge is being recognized in non-cash compensation,
which is included in stock-based compensation expense. As permitted by SFAS 123(R),
prior periods have not been restated. Current prevailing stock prices are below the
exercise price of $1.06 and therefore the stock options currently have no intrinsic
value.
19
We do not have employment agreements with any of our officers, directors
of employees. Mr. Friedman is paid an annual salary of $78,000.
Mr. Friedman’s employment with the Company may be terminated by
Mr. Friedman or the Company at any time. The Company also compensates the other
officers, who each work for the Company on an at will basis.
Outstanding Equity Awards at Fiscal Year End 2006
The following table sets forth certain information with respect to
outstanding equity awards at the year ended December 31, 2006 to our Named Executive
Officers.
Outstanding Equity Awards At Fiscal Year End
|
Option Awards
|
Stock Awards
|
Name
|
Number of Securities Underlying Unexercised Options (#)
Exercisable
|
Number of Securities Underlying Unexercised Options (#)
Unexer-cisable
|
Equity Incentive Plan Awards: Number of Securities
Underlying Unexercised Unearned Options (#)
|
Option Exercise Price ($)
|
Option Expiration Date
|
Number of Shares or Units of Stock That Have Not
Vested(#)
|
Market Value of Shares of Units of Stock That Have Not
Vested ($)
|
Equity Incentive Plan Awards: Number of Unearned Shares,
Units or Other Rights That Have Not Vested (#)
|
Equity Incentive Plan Awards: Market or Payout Value of
Unearned Shares, Units or Other Rights That Have Not Vested
($)
|
Kenneth
|
100,000(1)
|
0
|
0
|
0.09
|
01/18/07
|
0
|
0
|
0
|
0
|
Friedman,
|
150,000(1)
|
0
|
0
|
1.32
|
12/23/08
|
0
|
0
|
0
|
0
|
PEO
|
100,000(1)
|
0
|
0
|
0.74
|
12/21/09
|
0
|
0
|
0
|
0
|
|
90,000(1)
|
90,000(1)
|
0
|
1.06
|
02/08/11
|
0
|
0
|
0
|
0
|
William
|
100,000(1)
|
0
|
0
|
0.09
|
01/18/07
|
0
|
0
|
0
|
0
|
Moeller,
|
150,000(1)
|
0
|
0
|
1.32
|
12/23/08
|
0
|
0
|
0
|
0
|
CEO
|
100,000(1)
|
0
|
0
|
0.74
|
12/21/09
|
0
|
0
|
0
|
0
|
|
90,000(1)
|
90,000(1)
|
0
|
1.06
|
02/08/11
|
0
|
0
|
0
|
0
|
Keith
|
100,000(1)
|
0
|
0
|
0.09
|
01/18/07
|
0
|
0
|
0
|
0
|
Moeller,
|
150,000(1)
|
0
|
0
|
1.32
|
12/23/08
|
0
|
0
|
0
|
0
|
Vice-President
|
100,000(1)
|
0
|
0
|
0.74
|
12/21/09
|
0
|
0
|
0
|
0
|
|
90,000(1)
|
90,000(1)
|
0
|
1.06
|
02/08/11
|
0
|
0
|
0
|
0
|
Scott
|
100,000(1)
|
0
|
0
|
0.09
|
01/18/07
|
0
|
0
|
0
|
0
|
Moeller,
|
150,000(1)
|
0
|
0
|
1.32
|
12/23/08
|
0
|
0
|
0
|
0
|
PFO
|
100,000(1)
|
0
|
0
|
0.74
|
12/21/09
|
0
|
0
|
0
|
0
|
|
90,000(1)
|
90,000(1)
|
0
|
1.06
|
02/08/11
|
0
|
0
|
0
|
0
|
|
|
|
|
|
|
|
|
|
|
|
(1) These options were granted pursuant to our 2004 Stock Option Plan.
In December 2003, our shareholders approved the adoption of the Clifton Mining Company
2004 Stock Option Plan (the “2004 Option Plan”). The 2004 Option Plan
permits us to grant “non-qualified stock options” and “incentive
stock options” to acquire our common stock. The total number of shares authorized
for the 2004 Option Plan may be allocated by the Board between the non-qualified stock
options and the incentive stock options from time to time, subject to certain
requirements of the Internal Revenue Code of 1986, as amended. The option exercise
price per share under the Option Plan may not be less than the fair market value of a
share of common stock on the date on which the option is granted. A total of 7,000,000
shares are allocated to the 2004 Option Plan. As of November 6, 2007, options to
acquire an aggregate of 3,124,000 shares of common stock at exercise prices ranging
from $0.57 to $1.32 were outstanding under the 2004 Option Plan.
20
Directors’ Compensation
The following table provides certain information regarding compensation
paid by the Company to its directors during the last fiscal year.
Director Compensation
Name
|
Fees Earned or Paid in Cash ($)
|
Stock Awards ($)
|
Option Awards ($)
|
Non-Equity Incentive Plan Compen-sation ($)
|
Change in Pension Value and Nonqualified Deferred
compen-sation Earnings
|
All Other Compen-sation ($)
|
Total ($)
|
Kenneth Friedman (1)
|
|
|
|
|
|
|
|
William Moeller (1)
|
|
|
|
|
|
|
|
Keith Moeller (1)
|
|
|
|
|
|
|
|
Scott Moeller (1)
|
|
|
|
|
|
|
|
Harold Gunsinger
|
0
|
0
|
152,949(2)
|
0
|
0
|
0
|
152,949(2)
|
(1)
|
Please see the summary compensation table
above.
|
(2)
Effective January 1, 2006, we adopted
FASB Statement No. 123(R), “Accounting for Stock-Based Compensation”. SFAS
123(R) requires all share-based payments to employees, including grants of employee
stock options and restricted stock, to be recognized in the financial statements based
on their fair values. We have selected the Black-Scholes method of valuation for
share-based compensation. The charge is being recognized in non-cash compensation,
which is included in stock-based compensation expense. As permitted by SFAS 123(R),
prior periods have not been restated. Current prevailing stock prices are below the
exercise price of $1.06 and therefore the stock options currently have no intrinsic
value.
No cash fees or other consideration were paid to our directors for
service on the Board during 2006. We did not provide cash compensation to directors in
2006. In February 2006, we granted stock options, that half vested immediately and half
vested on 02/2007 to our directors as compensation for service on the Board as
compensation for service on the Board during 2006 and 2007. We have made no other
agreements regarding compensation of directors. All directors are entitled to
reimbursement for reasonable out-of-pocket travel related expenses incurred in the
performance of their duties as Board members.
Item 7. Certain Relationships and Related Transactions
On December 9, 2002, Clifton and WMC (a majority owned subsidiary of
Clifton) entered into a letter agreement with Dumont Nickel, Inc.
(“Dumont”) whereby Dumont was given the option to explore the Clifton
Property in consideration for $10,000 and 100,000 shares of Dumont common stock. Dumont
may exercise this option by performing certain data and feasibility studies with
respect to the Clifton Property and incurring certain minimum annual expenditures
toward exploration work at the Clifton Property. If Dumont completes the feasibility
study, Dumont will be entitled to between 50% and 60% of the Clifton Property that
hosts a mineral deposit as per the feasibility study (the “Special Project
Area”). If Dumont earns a portion of the Clifton Property, then Dumont and
Clifton will enter into a Joint Venture arrangement to further explore the Special
Project Area. Dumont has no obligation to exercise this option or to complete any
future work.
Item 8. Description of Securities
Our authorized capital stock consists of 70,000,000 shares of common
stock, par value $.001 per share and 10,000,000 shares of preferred stock, par value
$0.001 per share, of which 251,918 have been designated as 1993 Series Preferred A
Stock. As of November 6, 2007, we had 50,632,128 shares of common stock outstanding and
186,584 shares of 1993 Series Preferred A Stock (the “1993 Preferred”)
outstanding. The following description of the securities is a summary and is qualified
in its entirety by the provisions of the Company’s Articles of Incorporation and
the provisions of the Utah Revised Business Corporations Act, the Company’s Stock
Option Plan and the related stock option grants and the Warrant Agreements.
Common Stock
At November 6, 2007, the Company had 50,632,128 shares of common stock
outstanding. Holders of common stock are entitled to one vote for each share held of
record on all matters submitted to a vote of stockholders. Accordingly, holders of a
majority of the shares of common stock entitled to vote in any election of directors
may elect all of the directors standing for election. Subject to preferential dividend
rights with respect to any outstanding preferred stock, holders of common stock are
entitled to receive ratably such dividends, if any, as may be declared by the Board out
of funds legally available therefor. Upon liquidation, dissolution or winding up of the
Company, holders of common stock are entitled to share ratably in the assets of the
Company legally available, subject to the rights of any outstanding preferred stock or
other rights including any preemptive, subscription, redemption or conversion rights.
Holders of common stock have no cumulative voting rights and no preemptive,
subscription, redemption or conversion rights. The rights, preferences and privileges
of holders of common stock are subject to, and may be adversely affected by, the rights
of the holders of shares of the 1993 Preferred and any series of preferred stock which
the Company may designate and issue in the future.
Blank Check Preferred Stock
The Company’s Board is empowered, without further action by
shareholders, to issue from time to time one or more series of preferred stock, with
such designations, rights, preferences and limitations as the Board may determine by
resolution. The rights, preferences and limitations of separate series of preferred
stock may differ with respect to such matters among such series as may be determined by
the Board, including, without limitation, the rate of dividends, method and nature of
payment of dividends, terms of redemption, amounts payable on liquidation, sinking fund
provisions (if any), conversion rights (if any) and voting rights. Certain issuances of
preferred stock may have the effect of delaying or preventing a change in control of
the Company that some stockholders may believe is not in their interest.
21
1993 Series Preferred A Stock
As of November 6, 2007, 251,918 shares of the Company’s preferred
stock had been designated as 1993 Preferred and 186,584 shares were outstanding which
were held by twelve shareholders of record. A summary of the rights, privileges and
preferences of the 1993 Preferred are set forth below:
Liquidation.
In the event of any voluntary
or involuntary liquidation (whether complete or partial), dissolution, or winding up of
the Company, the holders of the 1993 Preferred are entitled to be paid out of the
assets of the Company available for distribution to its shareholders, whether from
capital, surplus, or earnings, an amount in cash equal to $3.00 per share plus all
unpaid dividends, whether or not previously declared plus accrued thereon to the date
of final distribution. No distribution shall be made on any common stock or other
subsequent series of preferred stock of the Company by reason of any voluntary or
involuntary liquidation (whether complete or partial), dissolution, or winding up of
the Company unless each holder of any 1993 Preferred shall have received all amounts to
which such holder is entitled. If the Company does not have sufficient funds to pay the
liquidating distribution to which the 1993 Preferred are entitled, then the holders of
the 1933 Preferred will share pro rata in the funds available of distribution to the
1933 Preferred holders determined on the basis of the number of shares of 1993
Preferred held by each holder reflected on the stock records and the total number of
shares of 1993 Preferred outstanding.
Voting Rights
. The 1993 Preferred is voted
with the common stock of the Company as a single class and is not entitled to vote as a
separate class, except to the extent that the consent of the holders of the 1993
Preferred, voting as a class, is specifically required by the provisions of the
corporation laws of the state of Utah, as now existing or as hereafter amended. Each
holder of 1993 Preferred is entitled to such number of votes in respect of each share
of such stock held by him or her that would be appurtenant to the common stock issuable
upon conversion in respect of such stock.
Dividends
. Dividends may be paid on the
outstanding shares of common and 1993 Preferred as and when declared by the Board, out
of funds legally available therefor. For purposes of the declaration and payment of
dividends, the common stock and the 1993 Preferred shall be treated together as a
single class.
Conversion
. Subject to adjustment upon the
happening of certain events, the 1933 Preferred is convertible into common stock on a
one-for-one basis. The 1993 Preferred may be converted at the option of the holder at
any time. The 1993 Preferred is automatically convertible into common stock upon the
happening of any of the following events: (1) the date of effectiveness of a
registration statement under the Securities Act of 1933, as amended, (the
“Securities Act”) or any successor statute, which covers the resale of
common stock issuable on the conversion of the 1993 Preferred, (2) the date of
effectiveness of a registration statement under the Securities Act, for a firmly
underwritten offering of common stock which will provide gross proceeds to the Company
of $5,000,000 or more, (3) the date on which the Company has received gross proceeds of
at least $5,000,000 pursuant to a best-efforts offering of common stock which was
registered pursuant to the Securities Act, or (4) the date on which the Board causes a
notice to be sent, by first class mail to the latest known address as shown on the
Company’s records, to the holders of 1993 Preferred which accurately states that:
(a) the Company has successfully completed two consecutive fiscal years in which it has
shown in each year a net profit before taxes (excluding nonrecurring and extraordinary
items), (b) such net profit is shown on the Company’s regular books and records
of account and (c) the aggregate amount of the two-year period net profit equals or
exceeds $5,000,000.
Redemption.
Shares of 1993 Preferred is
subject to redemption by the Company at any time after July 31, 1996 pursuant to
written notice of redemption given to the holders of the 1993 Preferred specifying the
date on which the 1993 Preferred shall be redeemed (the “Redemption Date”).
Subsequent to notice of redemption and prior to the Redemption Date, shares of 1993
Preferred may still be converted to common stock as described above. The Company may
redeem a portion or all of the issued and outstanding shares of 1993 Preferred;
provided, that in the event that less than all of the outstanding shares of 1993
Preferred is redeemed, such redemption shall be pro rata determined on the basis of the
number of shares of 1993 Preferred held by each holder reflected on the stock records
and the total number of shares of 1993 Preferred outstanding. The redemption price for
each share of 1993 Preferred is $5.00 plus any accrued but unpaid dividends, if
applicable, on such share as of the Redemption Date,
Warrants
The Company has outstanding Warrants that are exercisable for 745,000
shares of common stock and are exercisable for $1.75 per share and expire in April
2008. The warrants are exercised by surrendering to the Company a
22
warrant certificate evidencing the warrants to be exercised, with the
exercise form included therein duly completed and executed, and paying to the Company
the exercise price per share in cash or check payable to the Company. Stock
certificates with respect to shares purchased through the exercise of warrants will be
issued as soon thereafter as practicable.
The warrants do not confer voting, dividend, liquidation, or preemptive
rights, or any other rights of shareholders of the Company. The exercise price of the
warrants may be adjusted downward at any time in the sole discretion of the
Board.
Options
In December 2003, our Board approved the adoption of the 2004 Option
Plan and the Company’s shareholders subsequently ratified the adoption of the
plan. The 2004 Option Plan permits us to grant “non-qualified stock
options” and “incentive stock options” to acquire our common stock.
The total number of shares authorized for the 2004 Option Plan may be allocated by the
Board between the non-qualified stock options and the incentive stock options from time
to time, subject to certain requirements of the Internal Revenue Code of 1986, as
amended. The option exercise price per share under the Option Plan may not be less than
the fair market value of a share of common stock on the date on which the option is
granted. A total of 7,000,000 shares are allocated to the 2004 Option Plan. As of
November 6, 2007, options to acquire an aggregate of 3,124,000 shares of common stock
at exercise prices ranging between $0.57 and $1.32.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
23
Part II
Item 1. Market Price of and Dividends on the Registrant’s
Common Equity and Other Shareholder Matters
Dividend Policy
To date, we have not paid dividends on our common stock. The payment of
dividends on the common stock, if any, is at the discretion of the Board and will
depend upon our earnings, if any, our capital requirements and financial condition, and
other relevant factors. We do not intend to declare any dividends in the foreseeable
future, but instead intend to retain all earnings, if any, for use in our
operations.
Share Price History
Our common stock is traded in the NASD Over-the-Counter market in what
is sometimes referred to as the “Pink Sheets” under the trading symbol
“CFTN.PK” The following table sets forth the high and low bid information
of our common stock for the periods indicated. The price information contained in the
table was obtained from Yahoo. Note that the over-the-counter market quotations reflect
inter-dealer prices, without retail mark-up, mark-down or commission, and that the
quotations may not necessarily represent actual transactions in the common
stock.
Quarter Ended
|
High
|
Low
|
2005
March 31
|
$0.81
|
$0.75
|
June 30
|
$1.25
|
$1.20
|
September 30
|
$1.08
|
$1.00
|
December 30
|
$1.12
|
$1.09
|
2006
March 31
|
$1.04
|
$1.00
|
June 30
|
$0.60
|
$0.57
|
September 29
|
$0.66
|
$0.63
|
December 29
|
$0.66
|
$0.62
|
2007
March 30
|
$0.58
|
$0.53
|
June 29
|
$0.52
|
$0.51
|
September 28
|
$0.38
|
$0.36
|
Holders of Record
At September 30, 2007, there were approximately 197 holders of record of
our common stock. The number of holders of record was calculated by reference to our
stock transfer agent’s books.
Securities Authorized for Issuance Under Equity Compensation
Plans
The following table sets forth certain information with respect to
equity securities of the Company that are authorized for issuance as of the quarter
ended June 30, 2007.
24
Equity Compensation Plan Information
|
Number of securities to
be issued upon exercise
of outstanding options,
warrants and rights
|
Weighted average
exercise price of
outstanding options,
warrants and rights
|
Number of securities
remaining available for
future issuance
|
Equity compensation plans approved by security
holders
|
3,124,000
|
$0.93
|
3,876,000
|
Equity compensation plans not approved by security
holders
|
0
|
$0.00
|
0
|
Total
|
3,124,000
|
$0.93
|
3,876,000
|
Item 2. Legal Proceedings
We are not currently involved in any legal proceedings nor do we have
any knowledge of any threatened litigation.
Item 3. Changes in and Disagreements with Accountants
On February 8, 2006, the Company’s Board of Directors elected to
retain HJ & Associates, LLC (“HJ”) as its independent registered public
accounting firm and to dismiss Rosenberg Rich Baker Berman & Company
(“RRBBC”). Heretofore RRBBC had acted as the Company’s registered
public accounting firm. The decision to change auditors was recommended by the
Company’s Board of Directors.
The reports of RRBBC on the financial statements of the Company for each
of the two fiscal years in the period ended December 31, 2004 and 2003, did not contain
any adverse opinion or disclaimer of opinion and were not qualified or modified as to
uncertainty, audit scope or accounting principles.
During the Company’s 2003 and 2004 and all subsequent interim
periods preceding such change in auditors, there was no disagreement with RRBBC on any
matter of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure, which, if not resolved to the satisfaction of the former
accountant, would have caused it to make a reference to the subject matter of the
disagreements in connection with its report; nor has RRBBC ever presented a written
report, or otherwise communicated in writing to the Company or its Board of Directors
the existence of any “disagreement” or “reportable event”
within the meaning of Item 304 of Regulation S-B.
The Company has authorized RRBBC to respond fully to the inquiries of
the Company’s successor accountant and has requested that RRBBC provide the
Company with a letter addressed to the SEC, as required by Item 304(a)(3) of
Regulations S-B, so that the Company can file such letter with the SEC.
Item 4. Recent Sale of Unregistered Securities
In December of 2004, the Company issued 275,000 shares of common stock
in consideration for $27,500 that was paid connection with the exercise of incentive
stock options by employees. The Company claimed an exemption for the offer and sale of
the securities pursuant to Rule 701 as promulgated under the Securities Act of
1933.
In January of 2005, the Company issued 150,000 shares of common stock in
consideration for $15,000 that was paid connection with the exercise of incentive stock
options by employees. The Company claimed an exemption for the offer and sale of the
securities pursuant to Rule 701 as promulgated under the Securities Act of
1933.
In September and October of 2005, the Company received gross proceeds of
$224,000 in consideration for the issuance of 800,000 shares of common stock issued in
connection with the exercise of outstanding warrants. The Company claimed an exemption
for the offer and sale of the securities under Sections 4(2) and 4(6) of the Securities
Act of 1933 and pursuant to Rule 506 of Regulations D as promulgated under the
Securities Act of 1933.
In March and April of 2006, the Company issued 625,000 shares of common
stock in consideration for $44,950 that was paid connection with the exercise of
incentive stock options by employees. The Company claimed an
25
exemption for the offer and sale of the securities pursuant to Rule 701
as promulgated under the Securities Act of 1933.
In August of 2006, the Company received gross proceeds of $6,500 through
the private offer and sale of 17,687 shares of common stock to an investor in a private
transaction. The Company claimed an exemption for the offer and sale of the securities
under Sections 4(2) and 4(6) of the Securities Act of 1933 and pursuant to Rule 506 of
Regulations D as promulgated under the Securities Act of 1933.
In August of 2006, the Company received gross proceeds of $29,960
through the offer and sale of 68,000 shares of common stock to an investor in a single
transaction. The Company claimed an exemption for the offer and sale of the securities
pursuant to Rule 504 of Regulations D as promulgated under the Securities Act of
1933.
In September and December of 2006, the Company received gross proceeds
of $490,000 through the private offer and sale of 1,225,000 shares of common stock to a
limited number of investors in a private transaction. The Company claimed an exemption
for the offer and sale of the securities under Sections 4(2) and 4(6) of the Securities
Act of 1933 and pursuant to Rule 506 of Regulations D as promulgated under the
Securities Act of 1933.
In December of 2006, the Company issued 39,216 shares of common stock in
consideration for $3,882 that was paid connection with the exercise of incentive stock
options by employees. The Company claimed an exemption for the offer and sale of the
securities pursuant to Rule 701 as promulgated under the Securities Act of
1933.
In January and February of 2007, the Company received gross proceeds of
$452,647 through the private offer and sale of 1,005,883 shares of common stock to a
limited number of investors in a private transaction. The Company claimed an exemption
for the offer and sale of the securities under Sections 4(2) and 4(6) of the Securities
Act of 1933 and pursuant to Rule 506 of Regulations D as promulgated under the
Securities Act of 1933.
In January of 2007, the Company issued 560,784 shares of common stock in
consideration for $51,018 that was paid connection with the exercise of incentive stock
options by employees. The Company claimed an exemption for the offer and sale of the
securities pursuant to Rule 701 as promulgated under the Securities Act of
1933.
|
The Company did not use an underwriter in connection
with any of the above described sales of securities.
|
Item 5. Indemnification of Directors and Officers
As permitted by the provisions of the Utah Revised Business Corporation
Act, we have the power to indemnify an individual made a party to a proceeding because
they are or were a director, against liability incurred in the proceeding, if such
individual acted in good faith and in a manner reasonably believed to be in, or not
opposed to, our best interest and, in a criminal proceeding, they had no reasonable
cause to believe their conduct was unlawful. Indemnification under this provision is
limited to reasonable expenses incurred in connection with the proceeding. We must
indemnify a director or officer who is successful, on the merits or otherwise, in the
defense of any proceeding or in defense of any claim, issue, or matter in the
proceeding, to which they are a party to because they are or were a director or officer
of our company, against reasonable expenses incurred by them in connection with the
proceeding or claim with respect to which they have been successful. Pursuant to the
Utah Act, our Board may indemnify our officers, directors, agents, or employees against
any loss or damage sustained when acting in good faith in the performance of their
corporate duties.
We may pay for or reimburse reasonable expenses incurred by a director,
officer employee, fiduciary or agent who is a party to a proceeding in advance of final
disposition of the proceeding provided the individual furnishes us with a written
affirmation that their conduct was in good faith and in a manner reasonably believed to
be in, or not opposed to, our best interest, and undertake to pay the advance if it is
ultimately determined that they did not meet such standard of conduct.
26
Part F/S
Part III
Item 1. Index to Exhibits
2.1
|
Articles of Restatement of
the Articles of Incorporation
|
2.2
|
Bylaws
|
3.1
|
Form of Common Stock Certificate
|
3.2
|
Clifton Mining Company 2004 Stock Option Plan
|
6.1
|
Letter Agreement by and
between Dumont Nickel Inc. and the Company, dated December 6,
2002
|
6.2
|
Stock Purchase and Net Profits Interest Agreement, dated
November 20, 1995
|
6.3
|
Net Profits Interest Agreement and Consent, dated
November 20, 1995
|
10.1
|
Consent of Robert Cameron
(Incorporated by reference to Exhibit 10.1 to the Company’s Form
10-SB, filed on March 28, 2005).
|
12.1
|
Behre Dolbear Report, dated
October 2000 (Incorporated by reference to Exhibit 15.1 to the
Company’s Form 10-SB, filed on March 28, 2005).
|
12.2
|
Report on the Clifton-Gold
Hill Property, dated June 1, 2004 (Incorporated by reference to Exhibit
15.2 to the Company’s Form 10-SB, filed on March 28,
2005).
|
12.3
|
Letter regarding change in certifying
accountants
|
23.1
|
Consent of auditors
|
Item 2. Description of Exhibits
EXHIBIT NO.
|
DESCRIPTION OF EXHIBIT
|
|
2.1
|
Articles of Restatement of
the Articles of Incorporation (Incorporated by reference to Exhibit 2.1
to the Company’s Form 10-SB, filed on June 28, 2004).
|
|
2.2
|
Bylaws (Incorporated by reference to Exhibit 2.2 to the
Company’s Form 10-SB, filed on June 28, 2004).
|
|
3.1
|
Form of Common Stock Certificate (Incorporated by
reference to Exhibit 3.1 to the Company’s Form 10-SB, filed on
June 28, 2004).
|
|
3.2
|
Clifton Mining Company 2004 Stock Option Plan
(Incorporated by reference to Exhibit 3.2 to the Company’s Form
10-SB, filed on June 28, 2004).
|
|
6.1
|
Letter Agreement by and
between Dumont Nickel Inc. and the Company, dated December 6, 2002
(Incorporated by reference to Exhibit 6.1 to the Company’s Form
10-SB, filed on June 28, 2004).
|
|
6.2
|
Stock Purchase and Net Profits Interest Agreement, dated
November 20, 1995 (Incorporated by reference to Exhibit 6.2 to the
Company’s Form 10-SB, filed on June 28, 2004).
|
|
6.3
|
Net Profits Interest Agreement and Consent, dated
November 20, 1995 (Incorporated by reference to Exhibit 6.3 to the
Company’s Form 10-SB, filed on June 28, 2004).
|
|
10.1
|
Consent of Robert Cameron (Incorporated by reference to
Exhibit 10.1 to the Company’s Form 10-SB, filed on March 28,
2005).
|
|
12.1
|
Behre Dolbear Report, dated October 2000 (Incorporated
by reference to Exhibit 15.1 to the Company’s Form 10-SB, filed
on March 28, 2005).
|
|
12.2
|
Report on the Clifton-Gold Hill Property, dated June 1,
2004 (Incorporated by reference to Exhibit 15.2 to the Company’s
Form 10-SB, filed on March 28, 2005).
|
|
12.3
|
Letter regarding change in certifying
accountants
|
|
23.1
|
Consent of auditors
|
|
|
|
|
27
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
the registrant caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date: November 9, 2007
|
CLIFTON
MINING
COMPANY
(Registrant)
By
/s/ Kenneth S. Friedman
Kenneth S. Friedman
President
|
28
Clifton Mining Company
Index to the Financial Statements
December 31, 2006 and 2005
Independent Auditors’ Report
|
F-1
|
Financial Statements for the Years Ended December 31, 2006 and
2005
|
Consolidated Balance Sheets
|
F-2
|
|
Consolidated Statements of Operations and Retained
Deficit
|
F-3
|
|
Consolidated Statements of Cash Flows
|
F-4
|
|
Notes to the Consolidated Financial
Statements
|
F-5
|
Periods Ended June 30, 2007 and 2006 (unaudited)
|
Consolidated Balance Sheet
|
F-20
|
|
Consolidated Statements of Operations and Comprehensive
Income (Loss)
|
F-21
|
|
Consolidated Statements of Cash Flows
|
F-22
|
|
Notes to the Consolidated Financial
Statements
|
F-23
|
29
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
To
the Board of Directors and Shareholders of
Clifton Mining Company
Alpine, Utah
We
have audited the accompanying consolidated balance sheets of Clifton Mining Company as
of December 31, 2006 and 2005, and the related consolidated statements of operations
and retained deficit and other comprehensive loss, and cash flows for the years ended
December 31, 2006 and 2005. These consolidated financial statements are the
responsibility of the Company’s management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We
conducted our audits in accordance with the standards of the Public Company Accounting
Oversight Board (United States). 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 consolidated financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Clifton Mining Company as
of December 31, 2006 and 2005 and the consolidated results of their operations and cash
flows for the years ended December 31, 2006 and 2005, in conformity with United States
generally accepted accounting principles.
As
discussed in Note 13, the consolidated financial statements for the year ended December
31, 2006 have been restated to correct an error in accounting for the fair-value of
equity based compensation and to correct the equity investment in the unconsolidated
affiliate. The consolidated financial statements for the year ended December 31, 2005
have been restated to correct an error in accounting for the equity investment in the
unconsolidated affiliate.
/s/
HJ & Associates, LLC
HJ
& Associates, LLC
Salt
Lake City, Utah
June
8, 2007, except for Note 13, which is dated October 23, 2007.
F-1
CLIFTON MINING COMPANY
Consolidated Balance Sheets
ASSETS
|
|
Years Ended December 31,
|
|
|
|
2006
|
|
2005
|
|
|
(Restated)
|
|
(Restated)
|
CURRENT ASSETS
|
|
|
|
|
Cash
|
$
|
334,083
|
$
|
253,173
|
Marketable securities (Note 11)
|
|
60,318
|
|
71,786
|
Receivable
|
|
-
|
|
300
|
Prepaid expenses
|
|
11,758
|
|
-
|
Total Current Assets
|
|
406,159
|
|
325,259
|
|
|
|
|
|
PROPERTY AND EQUIPMENT
|
|
|
|
|
Mining properties (Note 3)
|
|
603,840
|
|
603,974
|
Buildings (Note 5)
|
|
278,832
|
|
288,304
|
Milling equipment
|
|
904,491
|
|
943,816
|
Equipment, net of accumulated depreciation (Note
5)
|
|
25,783
|
|
39,198
|
Total Property and Equipment, Net
|
|
1,812,946
|
|
1,875,292
|
|
|
|
|
|
OTHER ASSETS
|
|
|
|
|
Equity investment in affiliate (Note 2)
|
|
303,900
|
|
220,296
|
Restricted cash-reclamation
|
|
59,006
|
|
55,400
|
Deposits
|
|
1,225
|
|
1,225
|
Total Other Assets
|
|
364,131
|
|
276,921
|
|
|
|
|
|
Total Assets
|
$
|
2,583,236
|
$
|
2,477,472
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’
EQUITY
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES
|
|
|
|
|
Accounts payable and accrued liabilities
|
$
|
24,583
|
$
|
15,205
|
Note payable
|
|
8,385
|
|
-
|
Total Current Liabilities
|
|
32,968
|
|
15,205
|
|
|
|
|
|
LONG-TERM LIABILITIES
|
|
|
|
|
Reclamation and remediation liabilities (Note
4)
|
|
53,666
|
|
50,564
|
|
|
|
|
|
Total Liabilities
|
|
86,634
|
|
65,769
|
|
|
|
|
|
MINORITY INTEREST
|
|
29,672
|
|
32,491
|
|
|
|
|
|
STOCKHOLDERS’ EQUITY
|
|
|
|
|
Capital Stock (Note 6)
|
|
12,861,378
|
|
11,192,055
|
Retained Deficit
|
|
(10,316,152)
|
|
(8,746,015)
|
Accumulated Other Comprehensive Loss
- Unrealized loss on securities
|
|
(78,296)
|
|
(66,828)
|
|
|
|
|
|
Total Stockholders’ Equity
|
|
2,466,930
|
|
2,379,212
|
|
|
|
|
|
Total Liabilities and Stockholders’
Equity
|
$
|
2,583,236
|
$
|
2,477,472
|
|
|
|
|
|
|
See
accompanying notes to consolidated financial
statements.
F-2
CLIFTON MINING COMPANY
Consolidated Statements of Operations and Retained Deficit and Other
Comprehensive Loss
|
|
Years Ended December 31,
|
|
|
|
2006
|
|
2005
|
|
|
|
(Restated)
|
|
(Restated)
|
|
REVENUE
|
$
|
-
|
$
|
-
|
|
|
|
|
|
|
|
EXPENSES
|
|
|
|
|
|
Exploration costs
|
|
70,109
|
|
-
|
|
Research and development
|
|
13,614
|
|
-
|
|
General and administrative
|
|
71,555
|
|
75,719
|
|
Professional fees
|
|
53,075
|
|
62,507
|
|
Accretion expense
|
|
3,102
|
|
2,924
|
|
Depreciation
|
|
62,213
|
|
66,266
|
|
Salaries and employee benefits
|
|
293,494
|
|
288,584
|
|
Stock based compensation
|
|
884,238
|
|
-
|
|
Property and claim taxes, filing fees and
insurance
|
|
25,173
|
|
34,001
|
|
Total Expenses
|
|
1,476,573
|
|
530,001
|
|
Loss From Operations
|
|
(1,476,573)
|
|
(530,001)
|
|
|
|
|
|
|
|
OTHER INCOME (EXPENSE)
|
|
|
|
|
|
Interest income
|
|
4,790
|
|
7,110
|
|
Interest expense
|
|
(119)
|
|
-
|
|
Other income
|
|
2,270
|
|
1,341
|
|
Loss on sale of property and equipment
|
|
-
|
|
(3,709)
|
|
Total Other Income (Expense)
|
|
6,941
|
|
4,742
|
|
|
|
|
|
|
|
Net Loss Before Minority Interest and net loss in equity
investment
|
|
(1,469,632)
|
|
(525,259)
|
|
Loss from equity investment
|
|
(100,691)
|
|
(75,074)
|
|
Minority Interest
|
|
186
|
|
472
|
|
|
|
|
|
|
Net Loss
|
|
(1,570,137)
|
|
(599,861)
|
|
|
|
|
|
|
|
Deficit, Beginning of Year as Restated for Prior Period
Adjustment (Note 13)
|
|
(8,746,015)
|
|
(8,146,154)
|
|
|
|
|
|
|
|
Deficit, End of Year
|
$
|
(10,316,152)
|
$
|
(8,746,015)
|
|
|
|
|
|
|
|
Loss per share - basic and fully diluted
|
$
|
(0.03)
|
$
|
(0.01)
|
|
|
|
|
|
|
|
Weighted average number of common shares
outstanding
|
|
|
|
|
|
during the year - basic and fully diluted
|
|
47,719,000
|
|
46,497,000
|
|
Net Loss Per Above
|
$
|
(1,570,137)
|
$
|
(599,861)
|
|
Other comprehensive loss, net of tax
|
|
|
|
|
|
Unrealized loss on securities
|
|
(11,468)
|
|
(38,643)
|
|
Comprehensive loss
|
$
|
(1,581,605)
|
$
|
(638,504)
|
|
|
|
|
|
|
|
|
|
See
accompanying notes to consolidated financial
statements. F-3
CLIFTON MINING COMPANY
Consolidated Statements of Cash Flows
|
|
Years Ended December 31,
|
|
|
2006
|
|
2005
|
|
|
(Restated)
|
|
(Restated)
|
Cash Flows From Operating Activities:
|
|
|
|
|
Net Loss
|
$
|
(1,570,137)
|
$
|
(599,861)
|
Adjustments to reconcile net loss to net cash used by
operating activities:
|
|
|
|
|
Depreciation
|
|
62,213
|
|
66,266
|
Accretion expense
|
|
3,102
|
|
2,924
|
Loss on sale of assets and investments
|
|
-
|
|
3,709
|
Equity in loss (earnings) from equity
investment
|
|
100,691
|
|
75,074
|
Valuation for stock based compensation expense related
to options
|
|
884,238
|
|
-
|
Minority interest
|
|
(186)
|
|
(472)
|
Changes in operating assets and liabilities:
|
|
|
|
|
(Increase) in receivables, prepaid expenses, and other
assets
|
|
(15,064)
|
|
18,926
|
Increase (Decrease) in accounts payable and accrued
liabilities
|
|
9,378
|
|
2,746
|
|
|
|
|
|
Net Cash Used in Operating Activities
|
|
(525,765)
|
|
(430,688)
|
|
|
|
|
|
Cash Flows From Investing Activities:
|
|
|
|
|
Purchase of plant, equipment, and land
|
|
-
|
|
(2)
|
Proceeds from sales of equipment
|
|
-
|
|
2,800
|
Investment in subsidiary
|
|
(2,500)
|
|
-
|
Distributions from equity investment
|
|
25,498
|
|
-
|
|
|
|
|
|
Net Cash Provided by Investing Activities
|
|
22,998
|
|
2,798
|
|
|
|
|
|
Cash Flows From Financing Activities:
|
|
|
|
|
Issuance of capital stock
|
|
575,292
|
|
239,000
|
Proceeds from borrowings
|
|
8,385
|
|
-
|
|
|
|
|
|
Net Cash Provided by Financing Activities
|
|
583,677
|
|
239,000
|
|
|
|
|
|
Net Increase (Decrease) in Cash
|
|
80,910
|
|
(188,890)
|
Cash, Beginning of Year
|
|
253,173
|
|
442,063
|
Cash, End of Year
|
$
|
334,083
|
$
|
253,173
|
|
|
|
|
|
SUPPLEMENTAL CASH FLOW DISCLOSURES:
|
|
|
|
|
Interest paid
|
$
|
119
|
$
|
-
|
Taxes paid
|
$
|
-
|
$
|
-
|
|
|
|
|
|
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING
ACTIVITIES
Stock issued for consulting services
|
$
|
-
|
$
|
-
|
Equity valuation change from positive equity of
affiliate
|
$
|
209,792
|
$
|
102,008
|
See accompanying notes to consolidated financial
statements. F-4
Clifton Mining Company
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2006 and 2005
NOTE
1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Clifton Mining Company (the Company), was incorporated on June 8, 1993
under the laws of the State of Utah. In the beginning years, the Company was engaged in
the process of acquiring, exploring, and developing properties or selling the
properties at an appreciated value. The Company has acquired several claims which have
previously been in production, with historical production records. The Company has
obtained a report calculating mineralized material for the Clifton shear zone property
(see Note 3 – Mineral Properties) and is no longer considered to be in the
exploration stage. The Company is now primarily engaged in property management by joint
venturing the properties to other companies including the use of the Company’s
equipment to bring the claims into production and investing in other
businesses.
Principles of Consolidation
The accompanying consolidated financial statements are prepared in
accordance with accounting principles generally accepted in the United States and
include the accounts of its 61% owned subsidiary, Woodman Mining Company.
Cash and Cash Equivalents
For purposes of the statements of cash flows, cash includes all cash and
investments with original maturities to the Company of three months or less.
Investments in Marketable Securities
The Company has investments in equity securities. These securities are
classified at the date of acquisition as trading securities, held-to-maturity
securities or available-for-sale securities. Trading securities, which represent
securities purchased for the purpose of resale in the near term, are reported at fair
value and unrealized gains and losses are included in earnings. Held-to-maturity
securities are reported at amortized cost, as the Company has both the ability and
intent to hold such securities until maturity. Available-for-sale securities are
reported at fair value with unrealized gains and losses, net of the related tax effect,
reflected as an accumulated other comprehensive income (loss) component of
stockholders’ equity until such gains or losses are realized.
Realized gains and losses on investment securities are determined using
the specific identification method. Dividend and interest income are recognized when
earned.
Equity Investments
The Company accounts for its investments in companies subject to
significant influence using the equity method of accounting, under which, the
Company’s pro-rata share of the net income (loss) of the affiliate is recognized
as income (loss) in the Company’s income statement and the Company’s share
of the equity of the affiliate is reflected in the Company’s capital stock
account and added to the investment on the balance sheet. Dividends received from the
affiliate are treated as a return of capital and are accordingly deducted from the
carrying value of the investment.
Depreciation
Equipment is recorded at cost. Depreciation is determined using the
straight-line method over the estimated useful lives of the assets over periods ranging
from three to thirty-nine years. Expenditures for maintenance and repairs which do not
extend the useful lives of the related assets are expensed as incurred.
F-5
Clifton Mining Company
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2006 and 2005
NOTE
1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Securities Issued for Services
The Company accounts for stock issued for services under the intrinsic
value method. For stock issued for services, the fair market value of the
Company’s stock on the date of stock issuance is used. The Company has adopted
Statement of Financial Accounting Standard (SFAS) No. 123, “Accounting for
Stock-Based Compensation”. The Statement generally suggests, but does not
require, stock-based compensation transactions to be accounted for based on the fair
value of the services rendered or the fair value of the equity instruments issued,
whichever is more reliably measurable.
Stock – Based Compensation
Effective January 1, 2006, we adopted FASB Statement No. 123(R),
“Accounting for Stock-Based Compensation”. SFAS 123R requires all
share-based payments to employees, including grants of employee stock options and
restricted stock, to be recognized in the financial statements based on their fair
values. We have selected the Black-Scholes method of valuation for share-based
compensation. The charge is being recognized in non-cash compensation, which is
included in stock-based compensation expense. As permitted by SFAS 123R, prior periods
have not been restated. Under SFAS 123R, the pro forma disclosures previously permitted
under SFAS 123R are no longer an alternative to financial statement
recognition.
Prior to the adoption of SFAS 123R, the Company applied the
intrinsic-value-based method of accounting prescribed by Accounting Principle Board
Opinion No. 25, “Accounting for Stock Issued to Employees” (APB 25). Under
APB Opinion 25, no compensation expense was recognized at the time of option grant when
the exercise price of the Company’s employee stock options equals or exceeds the
fair market value of the underlying common stock on the date of grant. As permitted by
SFAS 123, the Company elected the disclosure only requirements of SFAS 123.
Our financial statements as of December 31, 2006 reflect the impact of
SFAS 123(R). The valuation for stock based compensation expense recognized under SFAS
123(R) for the year ended December 31, 2006 was $884,238 related to employee stock
options issued during the respective period. The valuation for stock based compensation
expense assumes all awards will vest, therefore no reduction has been made for
estimated forfeitures.
The following table would illustrate the pro forma effect on our net
loss had compensation cost been determined based on the fair value at the grant date
for the year ending December 31, 2005 pursuant to the accounting provisions of SFAS No.
123, however, no options were granted in 2005 and therefore no compensation was
recognized and so the Company’s net loss and loss per share showed no effective
change as follows:
|
|
2005
|
|
|
(Restated)
|
Net Loss
|
|
|
As reported
|
$
|
(599,861)
|
Pro forma
|
$
|
(599,861)
|
Basic and diluted loss per share
|
|
|
As reported
|
$
|
(0.01)
|
Pro forma
|
$
|
(0.01)
|
F-6
Clifton Mining Company
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2006 and 2005
NOTE
1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
As required by SFAS No. 123(R), “Accounting for Stock-Based
Compensation”, in 2006 the Company incorporated the Black-Scholes option pricing
model to estimate the fair-value of each option and warrant on the grant date. No
options were granted in 2005 and no compensation-related warrants were granted in 2006
or 2005. The following assumptions were made in estimating fair value for the options
issued in 2006.
Risk-free interest rate
|
4.55%
|
Expected life
|
5 years
|
Expected volatility
|
109%
|
Property Acquisition Evaluations and Mineral Exploration
Costs
Acquisition costs of mining properties are deferred in the accounts.
Mineral exploration expenditures are expensed as incurred. When production is attained,
these costs are depleted using the unit of production method based upon estimated
proven recoverable reserves. When deferred expenditures on individual properties exceed
their estimated net realizable value, the properties are written down to the estimated
value. Costs relating to properties abandoned are charged to operations in the period
in which that determination is made.
Costs include the cash consideration and the fair market value of shares
issued for the acquisition of mineral properties.
The Company is in the process of exploring and developing its mineral
properties and has determined the initial amount of mineralized material available.
Senior management regularly reviews the carrying amount of mineral properties to assess
whether there has been any impairment in value.
Reclamation and Remediation Costs
Current laws and regulations require certain closure, reclamation and
remediation work to be done on mineral properties as a result of exploration,
development and operating activities. The Company periodically reviews the activities
performed on its mineral properties and makes estimates of closure, reclamation and
remediation work that will need to be performed as required by those laws and
regulations and makes estimates of amounts that are expected to be incurred when the
closure, reclamation and remediation work is expected to be performed. Future closure,
reclamation and environmental related expenditures are difficult to estimate in many
circumstances due to the early stages of investigation, uncertainties associated with
defining the nature and extent of environmental contamination, the uncertainties
relating to specific reclamation and remediation methods and costs, application and
changing of environmental laws, regulations and interpretation by regulatory
authorities and the possible participation of other potentially responsible
parties.
Reclamation costs are allocated to expense over the life of the related
assets and are periodically adjusted to reflect changes in the estimated present value
resulting from the passage of time and revisions to the estimates of either timing or
amount of reclamation and abandonment costs. The Company has estimated costs associated
with closure, reclamation and environmental reclamation of its properties which have
been reflected in its financial statements in accordance with generally accepted
accounting principles, including the adoption of SFAS 143, Accounting for Asset
Retirement Obligations, which the Company adopted effective January 1, 2003. See Note 4
for a related discussion.
F-7
Clifton Mining Company
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2006 and 2005
NOTE
1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Advertising Costs
Advertising costs are charged to general and administrative expenses
when incurred.
Provision for Taxes
Income taxes are provided based upon the liability method of accounting
pursuant to SFAS No. 109, “Accounting for Income Taxes.” Under this
approach, deferred income taxes are recorded to reflect the tax consequences in future
years of differences between the tax basis of assets and liabilities and their
financial reporting amounts at each year-end. The deferred tax assets and liabilities
represent the future tax return consequences of those differences, which will either be
taxable or deductible when the assets
and liabilities are recovered or settled. Deferred taxes also are
recognized for operating losses that are available to offset future federal income
taxes. A valuation allowance is recorded against deferred tax assets if management does
not believe the Company has met the “more likely than not” standard imposed
by SFAS No. 109 to allow recognition of such an asset.
At December 31, 2006, the Company had net deferred tax assets
(calculated at an expected U.S. Federal Statutory tax rate of 34%) of approximately
$3,200,000 principally arising from net operating loss carry forwards for income tax
purposes.
Net deferred tax liabilities consist of the following components as of
December 31, 2006 and 2005:
|
|
December 31, 2006
|
|
December 31, 2005
|
Deferred tax assets:
|
|
|
|
|
NOL Carryover
|
$
|
3,187,525
|
$
|
2,965,163
|
Deferred tax liabilities
|
|
|
|
|
Depreciation
|
|
-
|
|
-
|
|
|
|
|
|
Value allowance
|
|
(3,187,525)
|
|
(2,965,163)
|
Net deferred tax asset
|
$
|
-
|
$
|
-
|
|
|
|
|
|
The income tax provision differs from the amount of
income tax determined by applying the U.S. federal income tax rate to
pretax income from continuing operations for the years ended December
31, 2006 and 2005 due to the following:
|
|
2006
|
|
2005
|
Book Income (loss)
|
$
|
(250,119)
|
$
|
(201,183)
|
Meals & Entertainment
|
|
82
|
|
220
|
Accretion
|
|
1,055
|
|
2,055
|
Unrealized Loss
|
|
26,620
|
|
22,721
|
Valuation allowance
|
|
222,362
|
|
176,187
|
|
$
|
-
|
$
|
-
|
At December 31, 2006, the Company has net operating loss carry forwards
of approximately $9,300,000, which will expired in the years 2013 through 2024, which
can be used to reduce taxable income in future years. A control change may limit the
availability of the net operating losses from periods prior to the control
change.
F-8
Clifton Mining Company
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2006 and 2005
NOTE
1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Impairment of Long-Lived Assets
Management reviews the net carrying value of all property and equipment
and other long-lived assets, including mineral properties, on a periodic basis. We
estimate the net realizable value of an asset based on the estimated undiscounted
future cash flows that will be generated from operations at each property, the
estimated salvage value of the surface plant and equipment and the value associated
with property interests. These estimates of undiscounted future cash flows are
dependent upon the estimates of metal to be recovered from proven and probable ore
reserves, future production cost estimates and future metal price estimates over the
estimated remaining life of the mineral property. If undiscounted cash flows are less
than the carrying value of a property, an impairment loss will be recognized based upon
the estimated expected future cash flows from the property discounted at an interest
rate commensurate with the risk involved.
Management’s estimates of metal prices, recoverable proven and
probable ore reserves, and operating, capital and reclamation costs are subject to
risks and uncertainties of change affecting the recoverability of our investment in
various projects. Although management believes it has made a reasonable estimate of
these factors based on current conditions and information, it is reasonably possible
that changes could occur in the near term which could adversely affect
management’s estimate of net cash flows expected to be generated from our mineral
properties and the need for asset impairment write-downs.
Use of Estimates
The preparation of financial statements in conformity with United States
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.
Earnings Per Share
Basic and diluted earnings per share are calculated in accordance with
SFAS No. 128, “Earnings Per Share”. Basic earnings per share is computed by
dividing net income by the weighted average number of common shares outstanding during
the period. Diluted earnings per share reflects the potential dilution that could occur
if stock options and other commitments to issue common stock were exercised resulting
in the issuance of common stock of the Company. For all periods presented the common
stock equivalents were not included in computing diluted earnings per share since their
effects would be antidilutive.
Concentration of Credit Risk
Financial instruments which potentially subject the Company to credit
risk consist primarily of cash in bank. At times throughout the year, the Company may
maintain certain bank accounts in excess of FDIC insured limits.
NOTE
2 – EQUITY INVESTMENT IN AFFILIATE
The Company owned a 23% and 24.2% interest in American Silver, LLC (the
“Affiliate”), at December 31, 2006 and 2005, respectively. Accordingly, the
Company is accounting for this investment, using the equity method under which the
Company’s share of the net income (loss) of the affiliate is recognized as income
(loss) in the Company’s income statement and added to or deducted from the
investment account.
F-9
Clifton Mining Company
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2006 and 2005
NOTE
2 – EQUITY INVESTMENT IN AFFILIATE (continued)
Dividends received from the Affiliate are treated as a reduction of the
investment account. In addition, the Company’s ownership interest in American
Silver, LLC decreases as the Affiliate obtains additional equity funding, with the
Company recognizing its proportionate share of the increase in the net equity of
American Silver, LLC as an increase in the equity investment asset and a corresponding
increase in additional paid-in capital. American Silver, LLC owns American Biotech
Labs, LLC and ABL Manufacturing, LLC.
Condensed financial information of American Silver, LLC as of and for
the years ended December 31, 2006 and 2005 is as follows:
Assets
|
|
2006
|
|
2005
|
Current assets:
|
|
|
|
|
Cash
|
$
|
739,818
|
$
|
605,261
|
Account receivables
|
|
204,281
|
|
163,769
|
Other current assets (prepaid expenses,
inventory)
|
|
182,857
|
|
223,120
|
Total current assets
|
|
1,126,956
|
|
992,150
|
|
|
|
|
|
Equipment: less accumulated depreciation
|
|
131,264
|
|
137,290
|
|
|
|
|
|
Other Assets
|
|
157,945
|
|
144,194
|
Total Assets
|
$
|
1,416,165
|
$
|
1,273,634
|
Liabilities and Shareholders’
Equity
|
|
2006
|
|
2005
|
|
|
(Restated)
|
|
|
Current liabilities:
|
|
|
|
|
Accounts payable and accrued liabilities
|
$
|
93,358
|
$
|
364,444
|
|
|
|
|
|
Shareholders’ Equity
|
|
|
|
|
Member’s equity
|
|
4,548,339
|
|
3,708,100
|
Retained earnings (deficit)
|
|
(3,225,532)
|
|
(2,798,910)
|
Total Shareholders’ Equity
|
|
1,322,807
|
|
909,190
|
Total Liabilities and Shareholders’
Equity
|
$
|
1,416,165
|
$
|
1,273,634
|
|
|
|
|
|
Net sales
|
$
|
3,174,791
|
$
|
2,629,854
|
Gross profit
|
|
1,871,012
|
|
1,477,800
|
Selling, general and administrative expenses
|
|
(2,317,044)
|
|
(1,793,344)
|
Other income
|
|
19,410
|
|
9,869
|
Net income (loss)
|
$
|
(426,622)
|
$
|
(305,675)
|
Dividends received from American Silver, LLC during 2006 and 2005
amounted to $25,498 and $0, respectively. The Company has increased its value in this
unconsolidated affiliate as a result of continued equity infusion into the Affiliate
during 2006 and 2005. The Company’s recognized investment in American Silver, LLC
for the years ending December 31, 2006 and 2005 is $303,900 and $220,296, respectively.
As the Affiliate continues to obtain additional equity investment and has income or
losses, the investment balance will continue to reflect those changes.
F-10
Clifton Mining Company
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2006 and 2005
NOTE
3 - MINERAL PROPERTIES
At December 31, 2006, the Company’s mining claims consist of 38
patented claims (includes 10 patented claims owned by Woodman Mining Company), 108
unpatented lode claims, and two state mineral leases, in total covering approximately
3,559 acres. The properties are located in the Gold Hill/Clifton Mining District,
Tooele County, Northwest Utah area.
On December 9, 2002, the Company entered into an Agreement with Dumont
Nickel, Inc. (“Dumont”) whereby Dumont was given the option to explore the
Company’s properties pursuant to performing certain data and feasibility studies
with respect to the Company’s mineral properties and incurring minimum annual
expenditures. Dumont will be entitled to earn a 50% to 60% interest in each special
projects area per the completion of the feasibility study for that area.
The acquisition costs of the mineral properties in the schedule below
are stated at or below the market value and are not to exceed the original purchase
price. Mineral properties consist of the following:
|
|
2006
|
|
2005
|
Acquisition costs
|
$
|
585,334
|
$
|
585,468
|
Asset retirement obligation – mineral
properties
|
|
16,006
|
|
16,006
|
Land
|
|
2,500
|
|
2,500
|
Total
|
$
|
603,840
|
$
|
603,974
|
A study prepared by Behre Dolbear & Company, Inc. dated April 1996
and updated October 2000 by Robert Cameron, Consulting reported the following
mineralized material for the Clifton shear zone:
Category
|
|
Tons
|
|
Ag (opt)
|
|
Ag (ounces)
|
|
Au (opt)
|
|
Au (ounces)
|
|
Pb(%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Measured (1)
|
|
107,000
|
|
8.41
|
|
901,597
|
|
0.045
|
|
4,802
|
|
5.09
|
Indicated (2)
|
|
473,000
|
|
8.15
|
|
3,905,133
|
|
0.051
|
|
21,824
|
|
5.22
|
Total
|
|
580,000
|
|
8.05
|
|
4,806,730
|
|
0.050
|
|
26,626
|
|
5.20
|
Notes:
|
(1)
|
Measured Resources are those materials for which tonnage
is computed from dimensions revealed in outcrops or mine workings
and/or drill holes and for which the grade is computed from the results
of adequate sampling. The sites for inspection, sampling and
measurement are so spaced and the geological character is so well
defined that the size, shape and mineral content are
established.
|
|
(2)
|
Indicated Resources are those materials for which
tonnage and grade are computed partly from specific measurements,
samples, or production data, and partly from projections for a
reasonable distance on geological evidence. The sites available for
inspection, measurement, and sampling are too widely or otherwise
inappropriately spaced to outline the material completely or to
establish its grade throughout.
|
Behre Dolbear qualified the mineralized material estimate as follows:
The majority of the surface samples were collected from old, shallow prospecting pits
that occurred at irregular spacing; The underground samples were taken from only
readily accessible locations in old mines; and The sampling technique may have biased
the Clifton data.
F-11
Clifton Mining Company
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2006 and 2005
NOTE
4 – RECLAMATION AND REMEDIATION LIABILITIES
Federal, state and local laws and regulations concerning environmental
protection affect the Company’s operations. Under current regulations, the
Company is required to meet performance standards to minimize environmental impact from
operations and to perform site reclamation and remediation activities. The
Company’s provisions for reclamation and remediation liabilities are based on
known requirements. It is not possible to estimate the impact on operating results, if
any, of future legislative or regulatory developments. Effective January 1, 2003, the
Company adopted SFAS No. 143, Accounting for Asset Retirement Obligations and
recognized a reclamation liability of $42,290 representing the net present value of the
estimated reclamation costs related to the Company’s properties and milling
facilities.
The following table sets out the activity for the Company’s
reclamation and remediation liabilities for the years ending December 31, 2006 and
2005.
|
|
December
31, 2006
|
|
December
31, 2005
|
Opening Balance
|
$
|
50,564
|
$
|
47,640
|
Accretion
|
|
3,102
|
|
2,924
|
Ending Balance
|
$
|
53,666
|
$
|
50,564
|
The Company believes that the reclamation obligations incurred by the
exploration work being performed by Dumont Nickel, Inc. (“Dumont”) are
adequately provided for in the current reclamation estimates should Dumont fail to
complete its reclamation obligations as of December 31, 2006. Dumont, on an ongoing
basis, is required to obtain permits and post reclamation bonds and reclaim any
disturbances caused by the exploration work. The Company has completed all required
reclamation requirements to date and currently has bonding posted for all of its
exploration work including road development and mill buildings and mill site
reclamation.
NOTE
5 - EQUIPMENT
Buildings and equipment, less accumulated depreciation as of December
31, 2006 and 2005 consisted of the following:
2006
|
|
|
|
Accumulated
|
|
Net Book
|
|
|
Cost
|
|
Depreciation
|
|
Value
|
Buildings
|
$
|
347,886
|
$
|
(87,277)
|
$
|
260,609
|
Asset retirement obligation - buildings
|
|
21,536
|
|
(3,313)
|
|
18,223
|
Total
|
$
|
369,422
|
$
|
(90,590)
|
$
|
278,832
|
|
|
|
|
|
|
|
Mill Equipment
|
$
|
983,142
|
$
|
(78,651)
|
$
|
904,491
|
Equipment:
|
|
|
|
|
|
|
Machinery and equipment
|
$
|
181,509
|
$
|
(167,287)
|
$
|
14,222
|
Vehicles
|
|
12,039
|
|
(9,200)
|
|
2,839
|
Office equipment and fixtures
|
|
29,492
|
|
(20,770)
|
|
8,722
|
Total
|
$
|
223,040
|
$
|
(197,257)
|
$
|
25,783
|
|
|
|
|
|
|
|
|
F-12
Clifton Mining Company
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2006 and 2005
NOTE
5 – EQUIPMENT (continued)
2005
|
|
|
|
Accumulated
|
|
Net Book
|
|
|
Cost
|
|
Depreciation
|
|
Value
|
Buildings
|
$
|
347,886
|
$
|
(78,357)
|
$
|
269,529
|
Asset retirement obligation - buildings
|
|
21,536
|
|
(2,761)
|
|
18,775
|
Total
|
$
|
369,422
|
$
|
(81,118)
|
$
|
288,304
|
|
|
|
|
|
|
|
Mill Equipment
|
$
|
983,142
|
$
|
(39,326)
|
$
|
943,816
|
Equipment:
|
|
|
|
|
|
|
Machinery and equipment
|
$
|
181,509
|
$
|
(161,431)
|
$
|
20,078
|
Vehicles
|
|
12,039
|
|
(6,361)
|
|
5,678
|
Office equipment and fixtures
|
|
29,492
|
|
(16,050)
|
|
13,442
|
Total
|
$
|
223,040
|
$
|
(183,842)
|
$
|
39,198
|
|
|
|
|
|
|
|
|
NOTE
6 - CAPITAL STOCK
|
10,000,000
|
Preferred stock issued in series, $0.001 par value,
voting, convertible to one common share for each Preferred share at the
holders option, redeemable at $5.00 per share at the Company’s
option.
|
|
70,000,000
|
Common stock, $0.001 par value, voting.
|
Series A preferred shares and common shares are treated as a single
class for the purposes of voting and dividend declaration.
|
|
Series A Preferred Shares
|
|
Common Shares
|
Additional
|
|
|
|
Paid in
|
|
|
|
Number
|
|
Par Value
|
|
Number
|
|
Par Value
|
|
Capital
|
December 31, 2004
|
|
188,584
|
$
|
189
|
|
46,138,558
|
$
|
46,138
|
$
|
10,804,720
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued for cash
|
|
-
|
|
-
|
|
950,000
|
|
950
|
|
238,050
|
|
Shares converted
|
|
(2,000)
|
|
(2)
|
|
2,000
|
|
2
|
|
-
|
|
Equity valuation change from positive equity of
affiliate
|
|
-
|
|
-
|
|
-
|
|
-
|
|
102,008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2005
|
|
186,584
|
|
187
|
|
47,090,558
|
|
47,090
|
|
11,144,778
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued for cash
|
|
-
|
|
-
|
|
1,974,903
|
|
1,975
|
|
573,318
|
Valuation for stock based compensation related to
options
|
|
-
|
|
-
|
|
-
|
|
-
|
|
884,238
|
Equity valuation change from positive equity of
affiliate
|
|
-
|
|
-
|
|
-
|
|
-
|
|
209,792
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2006
|
|
186,584
|
$
|
187
|
|
49,065,461
|
$
|
49,065
|
$
|
12,812,126
|
F-13
Clifton Mining Company
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2006 and 2005
NOTE
6 - CAPITAL STOCK (continued)
|
|
|
|
|
|
|
December 31,
|
|
Summary of Capital Stock
|
|
2006
|
|
2005
|
|
Preferred shares
|
$
|
187
|
$
|
187
|
Common shares
|
|
49,065
|
|
47,090
|
Additional paid in capital
|
|
12,812,126
|
|
11,144,778
|
|
|
|
|
|
Total
|
$
|
12,861,378
|
$
|
11,192,055
|
NOTE
7 - STOCK OPTIONS AND WARRANTS
The Company has adopted a stock option plan. Under the plan, options or
stock awards may be granted to employees, including officers, of the Company and to
other individuals who are not employees of the Company as may be deemed in the best
interest of the Company by the board of directors or duly authorized
committee.
The plan makes available 10% of the outstanding shares for grants.
Options granted under this plan shall have a term established by the board of
directors, but in no event will the term exceed five years. The exercise price of each
option is to be determined by the board of directors on the date of grant. All options
granted to date are for a stated term of five years or less.
Information regarding the option plan is summarized as
follows:
|
|
Weighted
|
|
Outstanding
|
|
|
|
|
|
|
|
Outstanding
|
|
|
average
|
|
At
|
|
|
|
|
|
|
|
At
|
|
|
price
|
|
January 1,
|
|
|
|
|
|
Expired/
|
|
December 31,
|
Date granted
|
|
per share
|
|
2005
|
|
Granted
|
|
Exercised
|
|
forfeited
|
|
2005
|
January 6, 2000
|
$
|
0.10
|
|
150,000
|
|
-
|
|
(150,000)
|
|
-
|
|
-
|
April 3, 2001
|
|
0.07
|
|
600,000
|
|
-
|
|
-
|
|
-
|
|
600,000
|
January 18, 2002
|
|
0.09
|
|
625,000
|
|
-
|
|
-
|
|
-
|
|
625,000
|
December 23, 2003
|
|
1.32
|
|
924,000
|
|
-
|
|
-
|
|
-
|
|
924,000
|
December 21, 2004
|
|
0.74
|
|
615,000
|
|
-
|
|
-
|
|
-
|
|
615,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total options
|
$
|
0.64
|
|
2,914,000
|
|
-
|
|
(150,000)
|
|
-
|
|
2,764,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
Outstanding
|
|
|
|
|
|
|
|
Outstanding
|
|
|
Average
|
|
At
|
|
|
|
|
|
|
|
At
|
|
|
Price
|
|
December 31,
|
|
|
|
|
|
Expired/
|
|
December 31,
|
Date granted
|
|
per share
|
|
2005
|
|
Granted
|
|
Exercised
|
|
forfeited
|
|
2006
|
April 3, 2001
|
|
0.07
|
|
600,000
|
|
-
|
|
(600,000)
|
|
-
|
|
-
|
January 18, 2002
|
|
0.09
|
|
625,000
|
|
-
|
|
(64,216)
|
|
-
|
|
560,784
|
December 23, 2003
|
|
1.32
|
|
924,000
|
|
-
|
|
-
|
|
-
|
|
924,000
|
December 21, 2004
|
|
0.74
|
|
615,000
|
|
-
|
|
-
|
|
-
|
|
615,000
|
February 8, 2006(1)
|
|
1.06
|
|
-
|
|
1,110,000
|
|
-
|
|
-
|
|
1,110,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total options
|
$
|
0.90
|
|
2,764,000
|
|
1,110,000
|
|
(664,216)
|
|
-
|
|
3,209,784
|
|
(1)
|
All stock options outstanding for each of the periods
ending December 31, 2006 and 2005 are exercisable except for 555,000 of
the 1,110,000 stock options granted on February 8, 2006, which shall
vest on February 15, 2007.
|
F-14
Clifton Mining Company
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2006 and 2005
NOTE
7 - STOCK OPTIONS AND WARRANTS (continued)
Information regarding the warrants is summarized as follows:
|
|
|
Weighted
|
|
Outstanding
|
|
|
|
|
|
|
|
Outstanding
|
|
|
|
Average
|
|
At
|
|
|
|
|
|
|
|
at
|
|
|
|
Price
|
|
January 1,
|
|
|
|
|
|
Expired/
|
|
December 31,
|
|
|
Date granted
|
|
per share
|
|
2005
|
|
Granted
|
|
Exercised
|
|
forfeited
|
|
2005
|
October 16, 2002
|
$
|
0.28
|
|
800,000
|
|
-
|
|
(800,000)
|
|
-
|
|
-
|
|
April 16, 2004
|
|
4.00
|
|
-
|
|
745,000
|
|
-
|
|
-
|
|
745,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total warrants
|
$
|
2.07
|
|
800,000
|
|
745,000
|
|
(800,000)
|
|
-
|
|
745,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
Outstanding
|
|
|
|
|
|
|
|
Outstanding
|
|
|
|
Average
|
|
At
|
|
|
|
|
|
|
at
|
|
|
|
Price
|
|
December 31,
|
|
|
|
|
|
Expired/
|
|
December 31,
|
Date granted
|
|
per share
|
|
2005
|
|
Granted
|
|
Exercised
|
|
forfeited
|
|
2006
|
|
April 16, 2004
|
$
|
1.75
|
|
745,000
|
|
-
|
|
-
|
|
-
|
|
745,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total warrants
|
$
|
1.75
|
|
745,000
|
|
-
|
|
-
|
|
-
|
|
745,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On February 8, 2006, the 745,000 outstanding warrants expiration date
was extended to April 16, 2008 and the exercise price was decreased from $4.00 to
$1.75.
All warrant outstanding for each of the periods ending December 31, 2006
and 2005 are exercisable and each warrant entitles the holder to purchase one common
share at the above noted prices.
NOTE
8 - COMMITMENTS AND CONTINGENT LIABILITIES
a) The Company entered into a net profits interest agreement with a
shareholder of the Company in 1995. Under the terms of the agreement, the Company will
pay 25% of the “net profits” from mining production up to a maximum payout
of $1,500,000. “Net profits” is defined as being the remaining amount of
income from the sale of ores and minerals after all operating, reclamation, general and
administrative, and development expenses have been paid. To date there have been no
payments made pursuant to this agreement.
b) On December 9, 2002, the Company entered into a joint venture
agreement with Dumont Nickel, Inc. to perform exploration drilling on the
Company’s property. The Company will make available all of its mineral rights,
property and equipment on site at no charge. Dumont will finance and operate the joint
venture and can obtain an ownership interest in the Company’s mining properties
by delivering to the Company bankable feasibility studies.
NOTE
9 - FINANCIAL INSTRUMENTS
Fair Values
The fair values for cash, accounts receivable, accounts payable and
accrued liabilities approximates their carrying values due to the short maturity of
those instruments.
F-15
Clifton Mining Company
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2006 and 2005
NOTE
10 - NEW ACCOUNTING PRONOUNCEMENTS
In March 2005, the SEC released Staff Accounting Bulletin No. 107,
“Share-Based Payment” (“SAB No. 107”), which provides
interpretive guidance related to the interaction between SFAS No. 123(R) and certain
SEC rules and regulations. It also provides the SEC staff’s views regarding
valuation of share-based payment arrangements. In April 2005, the SEC amended the
compliance dates for SFAS No. 123(R), to allow companies to implement the standard at
the beginning of their next fiscal year, instead of the next reporting period beginning
after June 15, 2005. Management is currently evaluating the impact SAB No. 107 will
have on our consolidated financial statements.
In March 2005, the FASB issued FASB Interpretation No. 47,
“Accounting for Conditional Asset Retirement Obligations” (“FIN
47”). FIN 47 provides guidance relating to the identification of and financial
reporting for legal obligations to perform an asset retirement activity. The
Interpretation requires recognition of a liability for the fair value of a conditional
asset retirement obligation when incurred if the liability’s fair value can be
reasonably estimated. FIN 47 also defines when an entity would have sufficient
information to reasonably estimate the fair value of an asset retirement obligation.
The provision is effective no later than the end of fiscal years ending after December
15, 2005. The Company has evaluated the impact of the adoption of FIN 47 and does not
believe the impact will be significant to the Company’s overall results of
operations or financial position.
In May 2005, the FASB issued SFAS No. 154, “Accounting Changes and
Error Corrections.” This new standard replaces APB Opinion No. 20,
“Accounting Changes, and FASB Statement No. 3, Reporting Accounting Changes in
Interim Financial Statements,” and represents another step in the FASB’s
goal to converge its standards with those issued by the IASB. Among other changes, SFAS
No. 154 requires that a voluntary change in accounting principle be applied
retrospectively with all prior period financial statements presented on the new
accounting principle, unless it is impracticable to do so. SFAS No. 154 also provides
that (1) a change in method of depreciating or amortizing a long-lived non-financial
asset be accounted for as a change in estimate (prospectively) that was effected by a
change in accounting principle, and (2) correction of errors in previously issued
financial statements should be termed a “restatement.” The new standard is
effective for accounting changes and correction of errors made in fiscal years
beginning after December 15, 2005. Early adoption of this standard is permitted for
accounting changes and correction of errors made in fiscal years beginning after June
1, 2005. The Company has evaluated the impact of the adoption of SFAS No. 154 and does
not believe the impact will be significant to the Company’s overall results of
operations or financial position.
In February 2006, the FASB issued SFAS No. 155, “Accounting for
Certain Hybrid Financial Instruments”, which is intended to simplify the
accounting and improve the financial reporting of certain hybrid financial instruments
(i.e., derivatives embedded in other financial instruments). The statement amends SFAS
No. 133, “Accounting for Derivative Instruments and Hedging Activities”,
and SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities—a replacement of FASB Statement No. 125.”
SFAS No. 155 is effective for all financial instruments issued or acquired after the
beginning of an entity’s first fiscal year that begins after September 15, 2006.
The Company is currently evaluating the impact SFAS No. 155 will have on its
consolidated financial statements, if any.
F-16
Clifton Mining Company
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2006 and 2005
NOTE
11 – MARKETABLE INVESTMENT SECURITIES
|
Cost and fair value of the Company’s investments
in equity securities at December 31, 2006 is as follows:
|
|
|
Cost
|
|
Gross
Unrealized
Losses
|
|
Fair
Value
|
Available-for-sale:
|
|
|
|
|
|
|
Equity securities
|
$
|
138,614
|
$
|
(78,296)
|
$
|
60,318
|
NOTE
12 – RELATED PARTY TRANSACTIONS
The Company shares office space with American Biotech Labs, LLC and
incurs rent and ancillary charges in connection with this arrangement. The Company
incurred $18,000 and $19,000 of such costs which were charged to operations in 2006 and
2005, respectively. The unconsolidated affiliate American Silver, LLC, is considered to
be a related party due to several of the Company’s management and board members
have similar positions with the affiliate.
NOTE
13 – PRIOR PERIOD ADJUSTMENTS
The consolidated financial statements for the year ended December 31,
2006 have been restated to correct an error in accounting for the fair-value-based
method of accounting for the valuation of the stock based compensation expense and the
investment valuation and equity method loss from the Company’s unconsolidated
affiliate, American Silver, LLC. As a result of the corrections, the Company recorded
adjustments to the Company’s capital stock account, stock based compensation
expense account and loss from equity investment account. For the year ended December
31, 2006, the adjustments increased the previously report additional paid in capital
account and the stock based compensation expense account by $884,238 and increased the
previously reported equity investment account by $28,552 and additional loss was
recorded for the Company’s portion of the affiliate’s loss increasing the
retained deficit by $28,552. These adjustments have been reflected in the accompanying
balance sheet, statement of operations, and retained deficit for the year ended
December 31, 2006.
There was no tax-effect for the prior period adjustments since the
Company already had net operating losses during this period. This correction is
reflected in the following schedule:
|
|
Originally
Reported
|
|
As Restated
|
|
Difference
|
December 31, 2006 -
|
|
|
|
|
|
|
Capital Stock
|
|
11,948,588
|
|
12,861,378
|
|
912,790
|
Retained Deficit
|
|
(9,403,362)
|
|
(10,316,152)
|
|
(912,790)
|
Loss from equity investment
|
|
(72,139)
|
|
(100,691)
|
|
(28,552)
|
Stock based compensation
expense
|
|
-
|
|
884,238
|
|
884,238
|
F-17
Clifton Mining Company
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2006 and 2005
NOTE
13 – PRIOR PERIOD ADJUSTMENTS (continued)
Subsequent to the original issuance date of the December 31, 2005
consolidated financial statements, the Company’s unconsolidated affiliate,
American Silver, LLC was audited. As a result of that audit, the Company recorded
equity method adjustments to the Company’s equity investment account. For the
year ended December 31, 2005, the adjustment increased the previously reported equity
investment account by $220,296 and additional loss was recorded for the Company’s
portion of the affiliate’s loss increasing the retained deficit by $75,074. As a
result of applying the equity method on the investment, additional paid-in capital
increased by $193,362 and $102,008 for the years ending December 31, 2004 and 2005,
respectively. These adjustments have been reflected in the accompanying balance sheet,
statement of operations, and retained deficit for the year ended December 31,
2005.
There was no tax-effect for the prior period adjustments since the
Company already had net operating losses during this period. This correction is
reflected in the following schedule:
|
|
Originally
Reported
|
|
As Restated
|
|
Difference
|
December 31, 2005 -
|
|
|
|
|
|
|
Investments
|
|
-
|
|
220,296
|
|
220,296
|
Capital Stock
|
|
10,896,685
|
|
11,192,055
|
|
295,370
|
Retained Deficit
|
|
(8,670,941)
|
|
(8,746,015)
|
|
(75,074)
|
NOTE
14 – SUBSEQUENT EVENTS
In January 2007, under the Company’s 2004 Stock Option Plan, the
board of directors authorized the granting of options to officers and directors of the
Company a purchase a total of 1,080,000 shares of the Company’s common stock at
$0.57 per share. The options have a term of five years with the shares vesting on
February 15, 2008.
F-18
CLIFTON MINING COMPANY
Index to the Consolidated Financial Statements
June 30, 2007 and 2006
Consolidated Financial Statements
|
Consolidated Balance Sheet
|
F-20
|
|
Consolidated Statements of Operations and Comprehensive
Income
|
F-21
|
|
Consolidated Statements of Cash Flows
|
F-22
|
|
Notes to the Consolidated Financial
Statements
|
F-23
|
F-19
CLIFTON MINING COMPANY
Consolidated Balance Sheet (Unaudited)
June 30, 2007
ASSETS
|
|
|
|
|
|
|
|
|
|
CURRENT ASSETS
|
|
|
|
|
Cash
|
$
|
637,827
|
|
|
Marketable securities
|
|
91,924
|
|
|
Receivable
|
|
600
|
|
|
Prepaid expenses
|
|
5,405
|
|
|
Total Current Assets
|
|
735,756
|
|
|
|
|
|
|
|
PROPETY AND EQUIPMENT
|
|
|
|
|
Mining properties (Note 2)
|
|
603,840
|
|
|
Buildings
|
|
274,132
|
|
|
Milling equipment
|
|
884,989
|
|
|
Equipment, net of accumulated depreciation
|
|
19,406
|
|
|
Total Property and Equipment, Net
|
|
1,782,367
|
|
|
|
|
|
|
|
OTHER ASSETS
|
|
|
|
|
Equity investment in affiliate
|
|
347,361
|
|
|
Restricted cash-reclamation
|
|
59,091
|
|
|
Patent filings
|
|
12,390
|
|
|
Deposits
|
|
1,225
|
|
|
Total Other Assets
|
|
420,067
|
|
|
|
|
|
|
|
Total Assets
|
$
|
2,938,190
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’
EQUITY
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES
|
|
|
|
|
Accounts payable and accrued liabilities
|
$
|
53,272
|
|
|
|
|
|
|
|
LONG-TERM LIABILITIES
|
|
|
|
|
Reclamation and remediation liabilities
|
|
55,288
|
|
|
|
|
|
|
|
Total Liabilities
|
|
108,560
|
|
|
|
|
|
|
|
MINORITY INTEREST
|
|
29,565
|
|
|
|
|
|
|
|
STOCKHOLDERS’ EQUITY
|
|
|
|
|
Capital Stock (Note 3)
|
|
13,612,069
|
|
|
Retained Deficit
|
|
(10,765,314)
|
|
Accumulated Other Comprehensive Loss
- Unrealized loss on securities
|
|
(46,690)
|
|
|
|
|
|
|
Total Stockholders’ Equity
|
|
2,800,065
|
|
|
|
|
|
|
|
Total Liabilities and Stockholders’
Equity
|
$
|
2,938,190
|
|
|
|
|
|
|
|
|
See accompanying notes to condensed consolidated
financial statements.
|
F-20
|
CLIFTON MINING COMPANY
Consolidated Statements of Operations and Retained
Deficit
and Other Comprehensive Loss (Unaudited)
|
|
Six Month Period Ending
June 30,
|
|
|
2007
|
|
2006
|
REVENUE
|
$
|
-
|
$
|
-
|
|
|
|
|
|
EXPENSES
|
|
|
|
|
Exploration costs
|
|
-
|
|
61,114
|
Research and development
|
|
32,586
|
|
4,486
|
General and administrative
|
|
28,425
|
|
29,616
|
Professional fees
|
|
15,440
|
|
24,014
|
Accretion expense
|
|
1,622
|
|
1,528
|
Depreciation
|
|
30,577
|
|
30,853
|
Salaries and employee benefits
|
|
148,381
|
|
147,702
|
Stock based compensation expense
|
|
225,776
|
|
648,441
|
Property and claim taxes, filing fees and
insurance
|
|
1,515
|
|
844
|
Total Expenses
|
|
484,322
|
|
948,598
|
Loss From Operations
|
|
(484,322)
|
|
(948,598)
|
|
|
|
|
|
OTHER INCOME (EXPENSE)
|
|
|
|
|
Interest income
|
|
11,735
|
|
2,850
|
Interest expense
|
|
(92)
|
|
-
|
Other income
|
|
1,200
|
|
1,370
|
Total Other Income (Expense)
|
|
12,843
|
|
4,220
|
|
|
|
|
|
Net Loss Before Minority Interest and gain in equity
investment
|
|
(471,479)
|
|
(944,378)
|
Gain from equity investment
|
|
22,210
|
|
61,932
|
|
Minority Interest
|
|
107
|
|
220
|
|
|
|
|
|
Net Loss
|
|
(449,162)
|
|
(882,226)
|
|
|
|
|
|
Deficit, Beginning of Period as Restated for Prior
Period Adjustment
|
|
(10,316,152)
|
|
(8,746,015)
|
|
|
|
|
|
Deficit, End of Period
|
$
|
(10,765,314)
|
$
|
(9,628,241)
|
|
|
|
|
|
Loss per share – basic and fully
diluted
|
$
|
(0.01)
|
$
|
(0.02)
|
|
|
|
|
|
Weighted average number of common shares
outstanding
|
|
|
|
|
during the period - basic and fully diluted
|
|
50,362,000
|
|
47,409,000
|
Net Loss Per Above
|
$
|
(449,162)
|
$
|
(882,226)
|
Other comprehensive loss, net of tax
|
|
|
|
|
Change in unrealized loss on securities
|
|
31,606
|
|
34,491
|
Total Comprehensive Loss
|
$
|
(417,556)
|
$
|
(847,735)
|
See accompanying notes to condensed consolidated
financial
statements.
F-21
|
|
CLIFTON MINING COMPANY
Consolidated Statements of Cash Flows
(Unaudited)
|
|
Six Month Period Ending
June 30,
|
|
|
2007
|
|
2006
|
|
|
|
|
|
Cash Flows From Operating Activities:
|
|
|
|
|
Net Loss
|
$
|
(449,162)
|
$
|
(882,226)
|
Adjustments to reconcile net loss to net cash used by
operating activities:
|
|
|
|
|
Depreciation
|
|
30,578
|
|
30,854
|
Accretion expense
|
|
1,622
|
|
1,528
|
Valuation for stock based compensation expense related
to options
|
|
225,776
|
|
648,441
|
Equity in loss (earnings) from equity
investment
|
|
(22,211)
|
|
(61,932)
|
Minority interest
|
|
(107)
|
|
(220)
|
Changes in operating assets and liabilities:
|
|
|
|
|
(Increase) in receivables, prepaid expenses, and other
assets
|
|
(6,721)
|
|
(10,593)
|
Increase (Decrease) in accounts payable and accrued
liabilities
|
|
28,689
|
|
2,325
|
|
|
|
|
|
Net Cash Used in Operating Activities
|
|
(191,536)
|
|
(271,823)
|
|
|
|
|
|
Cash Flows From Investing Activities:
|
|
|
|
|
Purchase of plant, equipment, and land
|
|
-
|
|
-
|
Proceeds from sales of equipment
|
|
-
|
|
-
|
Distributions from equity investment
|
|
-
|
|
25,498
|
|
|
|
|
|
Net Cash Provided by Investing Activities
|
|
-
|
|
25,498
|
|
|
|
|
|
Cash Flows From Financing Activities:
|
|
|
|
|
Issuance of capital stock
|
|
503,665
|
|
44,949
|
Payments on borrowings
|
|
(8,385)
|
|
-
|
|
|
|
|
|
Net Cash Provided by Financing Activities
|
|
495,280
|
|
44,949
|
|
|
|
|
|
Net Increase (Decrease) in Cash
|
|
303,744
|
|
(201,376)
|
Cash, Beginning of Period
|
|
334,083
|
|
253,173
|
Cash, End of Period
|
$
|
637,827
|
$
|
51,797
|
|
|
|
|
|
SUPPLEMENTAL CASH FLOW DISCLOSURES:
|
|
|
|
|
Interest paid
|
$
|
92
|
$
|
-
|
Taxes paid
|
$
|
-
|
$
|
-
|
|
|
|
|
|
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING
ACTIVITIES
Stock issued for consulting services
|
$
|
-
|
$
|
-
|
Equity valuation change from positive equity of
affiliate
|
$
|
21,250
|
$
|
13,112
|
See accompanying notes to condensed consolidated
financial
statements.
F-22
|
|
CLIFTON MINING COMPANY
Notes to the Consolidated Financial Statements
For the Periods Ended June 30, 2007 and 2006
NOTE
1 - BASIS OF PRESENTATION
The consolidated condensed financial statements include the accounts of
the Company and The Woodman Mining Company which the Company owns approximately sixty
percent (60%) of the outstanding shares. All significant inter-company accounts and
transactions have been eliminated in consolidation. The interim financial information
of the Company for the periods ended June 30, 2007 and June 30, 2006 are unaudited. The
accompanying unaudited condensed consolidated financial statements have been prepared
in accordance with U.S. generally accepted accounting principles for interim financial
statements. Accordingly, they omit or condense footnotes and certain other information
normally included in financial statements prepared in accordance with U.S. generally
accepted accounting principles.
The accounting policies followed for quarterly financial reporting
conform with the accounting policies disclosed in Note 1 to the Notes to Consolidated
Financial Statements for the year ended December 31, 2006. In the opinion of
management, all adjustments that are necessary for a fair presentation of the financial
information for the interim periods reported have been made. All such adjustments are
of a normal recurring nature. The results of operations for the months ended June 30,
2007 are not necessarily indicative of the results that can be expected for the entire
year ending December 31, 2007. The unaudited consolidated condensed financial
statements should be read in conjunction with the consolidated financial statements and
the notes thereto included in the Company’s audited financial statements for the
years ended December 31, 2006 and 2005.
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Stock – Based Compensation
Effective January 1, 2006, we adopted FASB Statement No. 123(R),
“Accounting for Stock-Based Compensation”. SFAS 123R requires all
share-based payments to employees, including grants of employee stock options and
restricted stock, to be recognized in the financial statements based on their fair
values. We have selected the Black-Scholes method of valuation for share-based
compensation. The charge is being recognized in our Statement of Operations as non-cash
compensation, which is included in stock-based compensation expense. As permitted by
SFAS 123R, prior periods have not been restated. Under SFAS 123R, the pro forma
disclosures previously permitted under SFAS 123R are no longer an alternative to
financial statement recognition.
Prior to the adoption of SFAS 123R, the Company applied the
intrinsic-value-based method of accounting prescribed by Accounting Principle Board
Opinion No. 25, “Accounting for Stock Issued to Employees” (APB 25). Under
APB Opinion 25, no compensation expense was recognized at the time of option grant when
the exercise price of the Company’s employee stock options equals or exceeds the
fair market value of the underlying common stock on the date of grant. As permitted by
SFAS 123, the Company elected the disclosure only requirements of SFAS 123.
Our financial statements as of and for the six month periods ended June
30, 2007 and 2006 reflect the impact of SFAS 123(R). The valuation for stock based
compensation expense recognized under SFAS 123(R) for the six month periods ended June
30, 2007 and 2006 was $225,776 and $648,441, respectively, related to employee stock
options issued during the respective periods. The valuation for stock based
compensation expense assumes all awards will vest, therefore no reduction has been made
for estimated forfeitures.
F-23
CLIFTON
MINING COMPANY
Notes to the Consolidated Financial Statements
For the Periods Ended June 30, 2007 and 2006
NOTE
3 – EQUITY INVESTMENT IN AFFILIATES
The Company owned a 22.9% and 23.9% interest in American Silver, LLC
(the “Affiliate”), at the periods ended June 30, 2007 and 2006,
respectively. Accordingly, the Company is accounting for this investment, using the
equity method under which the Company’s share of the net income (loss) of the
affiliate is recognized as income (loss) in the Company’s income statement and
added to or deducted from the investment account. Dividends received from the Affiliate
are treated as a reduction of the investment account. In addition the Company’s
ownership interest in American Silver LLC decreases as the Affiliate obtains additional
equity funding, with the Company recognizing its proportionate share of the increase in
the net equity of American Silver, LLC as an increase in the equity investment asset
and a corresponding increase in additional paid-in capital. American Silver LLC owns
American Biotech Labs LLC and ABL Manufacturing LLC.
Condensed unaudited financial information of American Silver, LLC as of
and for the periods ended June 30, 2007 and 2006 is as follows:
Assets
|
|
2007
|
|
2006
|
Current assets:
|
|
|
|
|
Cash
|
$
|
622,266
|
$
|
669,084
|
Receivables
|
|
285,719
|
|
149,010
|
Other current assets (prepaid expenses,
inventory)
|
|
175,827
|
|
203,347
|
Total current assets
|
|
1,083,812
|
|
1,021,441
|
|
|
|
|
|
Equipment: less accumulated depreciation
|
|
438,813
|
|
136,398
|
|
|
|
|
|
Other Assets
|
|
153,672
|
|
160,851
|
Total Assets
|
$
|
1,676,297
|
$
|
1,318,690
|
Liabilities and Shareholders’
Equity
|
|
2007
|
|
2006
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
Accounts payable and accrued liabilities
|
$
|
160,549
|
$
|
188,219
|
Shareholders’ Equity
|
|
|
|
|
Member’s equity
|
|
5,088,715
|
|
3,671,868
|
Retained earnings (deficit)
|
|
(3,572,967)
|
|
(2,541,397)
|
Total Shareholders’ Equity
|
|
1,515,748
|
|
1,130,471
|
Total Liabilities and Shareholders’
Equity
|
$
|
1,676,297
|
$
|
1,318,690
|
|
|
|
|
|
Net sales
|
$
|
1,807,446
|
$
|
1,593,501
|
Gross profit
|
|
996,422
|
|
872,508
|
Selling, general and administrative expenses
|
|
(911,943)
|
|
(623,993)
|
Other income
|
|
12,318
|
|
8,998
|
Net income (loss)
|
$
|
96,797
|
$
|
257,513
|
Dividends received from American Silver, LLC during 2007 and 2006
amounted to $0 and $25,498, respectively. The Company has increased its value in this
unconsolidated affiliate as a result of continued equity infusion into the Affiliate
during 2007 and 2006. The Company’s recognized investment in American Silver, LLC
for the periods ended June 30, 2007 and 2006 is $347,361 and $269,843, respectively. As
the Affiliate continues to obtain additional equity investment and has income or
losses, the investment balance will continue to reflect those changes.
F-24
CLIFTON MINING COMPANY
Notes to the Consolidated Financial Statements
For the Periods Ended June 30, 2007 and 2006
NOTE
4 - MINERAL PROPERTIES
At June 30, 2007, the Company’s mining claims consist of 38
patented claims (includes 10 patented claims owned by Woodman Mining Company), 108
unpatented lode claims, and two state mineral leases, in total covering approximately
3,559 acres. The properties are located in the Gold Hill/Clifton Mining District,
Tooele County, Northwest Utah area.
On December 9, 2002, the Company entered into an Agreement with Dumont
Nickel, Inc. (“Dumont”) whereby Dumont was given the option to explore the
Company’s properties pursuant to performing certain data and feasibility studies
with respect to the Company’s mineral properties and incurring minimum annual
expenditures. Dumont will be entitled to earn a 50% to 60% interest in each special
projects area per the completion of the feasibility study for that area.
The acquisition costs of the mineral properties in the schedule below
are stated at or below the market value and are not to exceed the original purchase
price. At June 30, mineral properties consist of the following:
|
|
2007
|
|
2006
|
Acquisition costs
|
$
|
585,334
|
$
|
585,468
|
Asset retirement obligation – mineral
properties
|
|
16,006
|
|
16,006
|
Land
|
|
2,500
|
|
2,500
|
|
|
|
|
|
Total
|
$
|
603,840
|
$
|
603,974
|
A study prepared by Behre Dolbear & Company, Inc. dated April 1996
and updated October 2000 by Robert Cameron, Consulting reported the following
mineralized material for the Clifton shear zone:
Category
|
|
Tons
|
|
Ag (opt)
|
|
Ag (ounces)
|
|
Au (opt)
|
|
Au (ounces)
|
|
Pb(%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Measured (1)
|
|
107,000
|
|
8.41
|
|
901,597
|
|
0.045
|
|
4,802
|
|
5.09
|
Indicated (2)
|
|
473,000
|
|
8.15
|
|
3,905,133
|
|
0.051
|
|
21,824
|
|
5.22
|
Total
|
|
580,000
|
|
8.05
|
|
4,806,730
|
|
0.050
|
|
26,626
|
|
5.20
|
Notes:
|
(1)
|
Measured Resources are those materials for which tonnage
is computed from dimensions revealed in outcrops or mine workings
and/or drill holes and for which the grade is computed from the results
of adequate sampling. The sites for inspection, sampling and
measurement are so spaced and the geological character is so well
defined that the size, shape and mineral content are
established.
|
|
(2)
|
Indicated Resources are those materials for which
tonnage and grade are computed partly from specific measurements,
samples, or production data, and partly from projections for a
reasonable distance on geological evidence. The sites available for
inspection, measurement, and sampling are too widely or otherwise
inappropriately spaced to outline the material completely or to
establish its grade throughout.
|
F-25
CLIFTON MINING COMPANY
Notes to the Consolidated Financial Statements
For the Periods Ended June 30, 2007 and 2006
NOTE
4 - MINERAL PROPERTIES (continued)
Behre Dolbear qualified the mineralized material estimate as follows:
The majority of the surface samples were collected from old, shallow prospecting pits
that occurred at irregular spacing; The underground samples were taken from only
readily accessible locations in old mines; and The sampling technique may have biased
the Clifton data.
NOTE
5 - CAPITAL STOCK
|
10,000,000
|
Preferred stock issued in series, $0.001 par value,
voting, convertible to one common share for each Preferred share at the
holders option, redeemable at $5.00 per share at the Company’s
option.
|
|
70,000,000
|
Common stock, $0.001 par value, voting.
|
Series A preferred shares and common shares are treated as a single
class for the purposes of voting and dividend declaration.
|
|
Series A Preferred Shares
|
|
Common Shares
|
Additional
|
|
|
Paid in
|
|
|
|
Number
|
|
Par Value
|
|
Number
|
|
Par Value
|
|
Capital
|
|
December 31, 2006
|
|
186,584
|
$
|
187
|
|
49,065,461
|
$
|
49,065
|
$
|
12,812,126
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued for cash
|
|
-
|
|
-
|
|
1,005,883
|
|
1,006
|
|
451,642
|
|
|
Shares converted
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
|
Exercise of options
|
|
-
|
|
-
|
|
560,784
|
|
561
|
|
50,456
|
|
|
Valuation for stock based compensation related to
options
|
|
-
|
|
-
|
|
-
|
|
-
|
|
225,776
|
|
|
Equity valuation change from positive equity of
affiliate
|
|
-
|
|
-
|
|
-
|
|
-
|
|
21,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2007
|
|
186,584
|
$
|
187
|
|
50,632,128
|
$
|
50,632
|
$
|
13,561,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Summary of Capital Stock
|
|
|
Preferred shares
|
$
|
187
|
Common shares
|
|
50,632
|
Additional paid in capital
|
|
13,561,250
|
|
|
|
Total
|
$
|
13,612,069
|
F-26
CLIFTON MINING COMPANY
Notes to the Consolidated Financial Statements
For the Periods Ended June 30, 2007 and 2006
NOTE
6 - STOCK OPTIONS AND WARRANTS
The Company has adopted a stock option plan. Under the plan, options or
stock awards may be granted to employees, including officers, of the Company and to
other individuals who are not employees of the Company as may be deemed in the best
interest of the Company by the board of directors or duly authorized
committee.
The plan makes available 10% of the outstanding shares for grants.
Options granted under this plan shall have a term established by the board of
directors, but in no event will the term exceed five years. The exercise price of each
option is to be determined by the board of directors on the date of grant. All options
granted to date are for a stated term of five years or less.
Information regarding the option plan is summarized as
follows:
|
|
Weighted
|
|
Outstanding
|
|
|
|
|
|
|
|
Outstanding
|
|
|
Average
|
|
At
|
|
|
|
|
|
|
|
At
|
|
|
Price
|
|
December 31,
|
|
|
|
|
|
Expired/
|
|
June 30,
|
Date granted
|
|
per share
|
|
2005
|
|
Granted
|
|
Exercised
|
|
forfeited
|
|
2006
|
April 3, 2001
|
$
|
0.07
|
|
600,000
|
|
-
|
|
(600,000)
|
|
-
|
|
-
|
January 18, 2002
|
|
0.09
|
|
625,000
|
|
-
|
|
(25,000)
|
|
-
|
|
600,000
|
December 23, 2003
|
|
1.32
|
|
924,000
|
|
-
|
|
-
|
|
-
|
|
924,000
|
December 21, 2004
|
|
0.74
|
|
615,000
|
|
-
|
|
-
|
|
-
|
|
615,000
|
February 8, 2006(1)
|
|
1.06
|
|
-
|
|
1,110,000
|
|
-
|
|
-
|
|
1,110,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total options
|
$
|
0.89
|
|
2,764,000
|
|
1,110,000
|
|
(625,000)
|
|
-
|
|
3,249,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
Outstanding
|
|
|
|
|
|
|
|
Outstanding
|
|
|
Average
|
|
At
|
|
|
|
|
|
|
|
At
|
|
|
Price
|
|
June 30,
|
|
|
|
|
|
Expired/
|
|
June 30,
|
Date granted
|
|
per share
|
|
2006
|
|
Granted
|
|
Exercised
|
|
forfeited
|
|
2007
|
January 18, 2002
|
$
|
0.09
|
|
600,000
|
|
-
|
|
(600,000)
|
|
-
|
|
-
|
December 23, 2003
|
|
1.32
|
|
924,000
|
|
-
|
|
-
|
|
(150,000)
|
|
774,000
|
December 21, 2004
|
|
0.74
|
|
615,000
|
|
-
|
|
-
|
|
(100,000)
|
|
515,000
|
February 8, 2006
|
|
1.06
|
|
1,110,000
|
|
-
|
|
-
|
|
(180,000)
|
|
930,000
|
January 11, 2007(2)
|
|
0.57
|
|
-
|
|
1,080,000
|
|
-
|
|
(175,000)
|
|
905,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total options
|
$
|
0.93
|
|
3,249,000
|
|
1,080,000
|
|
(600,000)
|
|
(605,000)
|
|
3,124,000
|
|
(1)
|
At the period ending June 30, 2006 all outstanding stock
options were exercisable except for 555,000 of the 1,110,000 stock
options granted on February 8, 2006, which shall vest on February 15,
2007.
|
|
(2)
|
At the period ending June 30, 2007, all outstanding
stock options were exercisable except for the 905,000 stock options
granted January 11, 2007, which shall vest on February 15,
2008.
|
F-27
CLIFTON MINING COMPANY
Notes to the Consolidated Financial Statements
For the Periods Ended June 30, 2007 and 2006
NOTE
6 - STOCK OPTIONS AND WARRANTS (continued)
Information regarding the warrants is summarized as follows:
|
|
|
Weighted
|
|
Outstanding
|
|
|
|
|
|
|
|
Outstanding
|
|
|
|
Average
|
|
At
|
|
|
|
|
|
|
|
at
|
|
|
|
Price
|
|
December 31,
|
|
|
|
|
|
Expired/
|
|
June 30,
|
|
|
Date granted
|
|
per shar
e
|
|
2005
|
|
Granted
|
|
Exercised
|
|
forfeited
|
|
2006
|
April 16, 2004
|
$
|
1.75
|
|
745,000
|
|
745,000
|
|
-
|
|
-
|
|
745,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total warrants
|
$
|
1.75
|
|
745,000
|
|
745,000
|
|
-
|
|
-
|
|
745,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
Outstanding
|
|
|
|
|
|
|
|
Outstanding
|
|
|
|
Average
|
|
At
|
|
|
|
|
|
|
At
|
|
|
|
Price
|
|
June 30,
|
|
|
|
|
|
Expired/
|
|
June 30,
|
Date granted
|
|
per share
|
|
2006
|
|
Granted
|
|
Exercised
|
|
forfeited
|
|
2007
|
April 16, 2004
|
$
|
1.75
|
|
745,000
|
|
-
|
|
-
|
|
-
|
|
745,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total warrants
|
$
|
1.75
|
|
745,000
|
|
-
|
|
-
|
|
-
|
|
745,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On February 8, 2006, the 745,000 outstanding warrants expiration date
was extended to April 16, 2008 and the exercise price was decreased from $4.00 to
$1.75.
All warrants outstanding are exercisable and each warrant entitles the
holder to purchase one common share at the above noted prices.
NOTE
7 – SUBSEQUENT EVENTS
In August 2007, Dumont Nickel, Inc. (“Dumont”) gave notice
to the Company, pursuant to the terms and conditions of the December 9, 2002 Agreement,
that they were planning on releasing 102 lode mining claims. Management determined that
it was in the best interest of the Company to have Dumont assign and transfer all
rights to the 102 claims directly to the Company.
F-28