Silver Falcon Mining, Inc. company history: the story so far

History

Silver Falcon Mining funded its Idaho mill and tunnel work with discount-priced convertible debt, ending 2012 in a lawsuit with lender JMJ and entering 2013 seeking new capital.

2011-2012: Funding the Idaho operation

Silver Falcon Mining, based in Bradenton, Florida, worked on War Eagle Mountain in Owyhee County, Idaho, where it held mineral rights to about 2,000 acres, and ran a mill nearby. In April 2011 it signed an equity line with Centurion Private Equity, under which Centurion committed to buy up to $7,200,000 of stock in puts of up to $300,000, at a discount to market. Drawing on it required an effective registration statement. The company paid Centurion fees in shares: 136,147 as a document fee and 1,190,083 as a commitment fee. An in-house assay lab opened that month.

The company then turned to convertible debt, meaning loans that can be repaid in shares. In April 2012 it issued Iliad Research and Trading an 8% note with $566,500 principal, for $500,000 net, repayable in twelve monthly installments, at least six in shares at a discount. In June 2012 it issued JMJ Financial a $315,000 note, and in July a second for $525,000, each with warrants (rights to buy shares at a set price). The July deal required a registration of 120,000,000 shares by August 15, 2012. In July the company said its 14-month Sinker Tunnel drilling program was underway and that it planned a mill expansion for more than 30,000 tons of tailings (leftover crushed rock).

2012-2013: Dispute and a new adviser

The JMJ relationship soured late in 2012. The company refused two conversion requests, for $54,079.20 and $52,360, believing JMJ was shorting and manipulating its stock. JMJ declared a default, demanded immediate payment of both notes and, on December 21, sued the company and CEO Pierre Quilliam, including a fraud claim against him. The company said it would defend vigorously. Separately, Iliad moved its first installment to November 1, 2012 and raised its ownership cap from 4.9% to 9.9% in some cases.

In February 2013 the company hired Omni View Capital for a year to advise on capital structure, an uplisting and board candidates. Omni was to invest at least $100,000 in a bridge convertible financing and receive shares equal to 2.45% of the company. That agreement was cancelled in May 2013.

As of June 3, 2013, the JMJ lawsuit had no reported outcome. Tunnel work continued at a slower rate awaiting funding. A loan for a GEKKO leaching unit, permitted by the county, was in final negotiation. The company had refined 592 ounces of dore (unrefined gold-silver bars) since production began, with no sales revenue figures reported.

Written from the 7 story beats below (2011 to 22 Feb 2013), which come from the company's own announcements and filings.

Beat by beat

The events that changed the company's story, in plain English, each written against everything known about the company at the time. The dot shows whether it was good, bad or neutral for shareholders.

2013

22 Feb
On February 12, 2013 the company hired Omni View Capital for one year to advise on capital structuring (including possible stock splits), an uplisting to a national exchange, board candidates and deal negotiation. Omni was to invest at least $100,000 in a bridge convertible debt financing by March 1, 2013, and gets restricted shares equal to 2.45% of the fully diluted Class A stock on signing, with another 2.45% if the company raises at least $5 million. Shareholders face dilution from these share issuances; the mention of a bridge financing is the first reference to one in the context.
capital raising announcement

2012

28 Dec
The company says it refused two JMJ conversion requests on the June 2012 note (Nov 30: $54,079.20 for about 3,000,000 shares; Dec 12: $52,360 for about 3,500,000 shares), believing JMJ was shorting and manipulating its stock. JMJ then issued a default notice (Dec 17), demanded immediate payment of both JMJ notes (Dec 18) and sued the company and CEO Pierre Quilliam on Dec 21, including a fraud claim against him; the company says it will defend vigorously. This turns the 2012 JMJ financing into a dispute over both notes ($315,000 and $525,000 original principal). Separately, Iliad agreed to move the first installment on its March 2012 note from October 1 to November 1, 2012 and to raise its ownership cap from 4.9% to 9.9% under certain circumstances.
debt financing
18 July
On July 12, 2012 the company issued JMJ Financial a second secured convertible note, $525,000 principal with a one-time 5% interest charge, due January 12, 2014, for $500,000 gross proceeds after a $25,000 discount. It converts at 80% of the average of the three lowest trading prices in the prior 15 trading days, and JMJ also got a warrant for 16,666,667 shares at $0.03 to July 12, 2016. The company must file a resale registration for 120,000,000 shares by August 15, 2012 (penalty $50,000 if late, $75,000 if not approved within 120 days), covering this deal and the June 2012 JMJ note and warrant. This stacks more discount-priced convertible debt on the June 2012 JMJ note, so the filing supports further dilution for shareholders; the registration bar on other filings (except Iliad's warrant shares and S-8s) could also affect the Centurion equity line, which needs its own effective registration (an inference).
debt financing
18 July
The company says its Sinker Tunnel drilling program is underway, a planned 14-month program, with financing received and more contributions pledged but terms not given (promised in later SEC filings). Surface drilling on War Eagle Mountain may not happen before spring 2013, and results are meant to feed its NI 43-101 report and a possible Toronto Stock Exchange listing application. It also describes a mill expansion and flotation line for the 30,000-plus tons of tailings; this follows through on the exploration plan flagged in June 2011 and likely connects to the 2012 note financings (an inference, since the filing does not name the source).
drilling progress report
8 June
The company issued JMJ Financial a secured convertible note with $315,000 principal (gross proceeds $300,000 after a $15,000 discount), a one-time 5% interest charge and payment due December 4, 2013, convertible at 80% of the average of the three lowest trading prices in the prior 15 days. JMJ also received a warrant for 10,000,000 shares at $0.03 through June 4, 2016, plus rights to lend up to $1,000,000 more and to match future financings, and Iliad got a warrant for 16,666,667 shares at $0.3 (as written) through June 4, 2016. This adds more convertible debt and warrants after the March 2012 Iliad note, increasing potential dilution for shareholders.
debt financing
10 Apr
The company issued Iliad Research and Trading an 8% convertible note with $566,500 principal, receiving $500,000 after a $51,500 discount and $15,000 of Iliad's costs. It is repaid in twelve monthly installments of $47,208.33 from October 1, 2012, at least six of which must be paid in shares at a discount to market (80%, falling to 70% if the stock closes below $0.0199), with a 25% penalty for prepayment or for paying cash where shares are required. Shareholders face dilution from share-settled payments, and Iliad also gets a right of first refusal on future financings; this is additional debt on top of the Centurion equity line, which is carved out of the anti-dilution terms.
debt financing

2011

11 Apr
The company signed an equity line with Centurion Private Equity under which Centurion committed to buy up to $7,200,000 of its common stock, in puts of up to $300,000 each, at the lesser of 97% of market price or market price minus $0.01. Drawing requires an effective resale registration statement, and the company issued Centurion 136,147 shares (valued $20,000) as a document fee and 1,190,083 shares (valued $144,000) as a commitment fee. For shareholders this is a funding source that is dilutive because shares are sold at a discount to market.
capital raising announcement