Silver Falcon Mining Inc. (fka SFMI)

[Imperial Whazoo]

Hey.... I want to ask everybody a question.

Which would you guys rather be doing..... arguing about SFMI or dealing with a burst hot water heater that has ruined your hard wood floors and forced you to shower in the cold until the plumber gets it fixed?

:o)

That said, lets talk about SFMI.

Specifically: let me ask this question:

Are shareholders better off this year than they were at this time last year?

Seems a fair question. A lot of folks are in a shoot-out over SFMI this weekend, and my guess is that the faction that is hunkered down and holding long is probably pretty discouraged.

It's easy to be discouraged, folks, but I'm telling you: If you can stomach wading thru one of my posts, you needn't rush to the conclusion SFMI is worse off than it was last year.

I put together this post to demonstrate that the evidence that SFMI is FAR FAR FAR FAR better off this year is undeniable.

I hate having to be so long, but I can see no other way to win this argument.

But, like I said, I will do this in a systematic way.

So here's what I'm going to do:

(A) I will display on the left monitor of one of my multi-monitor trading PCs the 10K from this time last year.

(B) I will display on the right monitor of this multi-monitor trading PC the 10K from this year, which was just released on Friday.

(C) I will compare parallel sections from the two years side by side and I will cut-n-paste to prove whatever conclusions a side-by-side comparison forces on us.

If the comparison is good for folks who think SFMI is better off this year than last year, I will add to a running score card I will be keeping and increment the GREEN counter. If the comparison shows that those who think SFMI is worse off this year than it was last year, then I will increment the RED counter. If neither gets the nod, then neither GREEEN nor RED gets incremented.

So, here are the two links, so folks can play along at home (like Charades!! LOL)

This is last year's link:
http://www.sec.gov/Archives/edgar/data/1464830/000109181810000114/sfmi03311010k.htm

and this is this year's link:
http://www.sec.gov/Archives/edgar/data/1464830/000109181810000114/sfmi03311010k.htm

OK then, lets get started.

The question I'm asking is:
Based on the 10K that just came out, is SFMI worse off this year than it was at the time of the same 10K last year?

The first relevant issue that shows up in both 10Ks is the section on employees.

Last year -
“Employees and Consultants
At December 31, 2009, we had two employees. “
This year -
“Employees and Consultants
At December 31, 2010, we had 21 employees. “

OK, so SFMI has grown into an employer of 21 full time employees. Thats relevant, impressive, and it means that GREEN gets incremented.

GREEN 1
RED 0

Next, in both last year and this year, we come to a section entitled “RISK FACTORS”, of which there are 16.

Lets compare them one at a time.

-1-
This year:
We Have Minimal Revenue To Date From Our Mining Properties, Which May Negatively Impact Our Ability To Achieve Our Business Objectives
Last year:
We Have No Revenue To Date From Our Mining Properties, Which May Negatively Impact Our Ability To Achieve Our Business Objectives

OK

Last year they had “NO REVENUE” and this year we had “MINIMAL REVENUE”.

AS such, is SFMI better off this year than last year or this year?

Obviously, SFMI is better off this year.

GREEN wins again.

GREEN 2
RED 0

Next, there is some boilerplate which is identical in both 10Ks, but there are 7 in this section items that do differ year to year, and in each case, SFMI is far better off this year than last.

The seven are:
1. SFMI began processing tailings left over from prior mining activities
2. SFMI shipped the first load of concentrate to a refiner
3. SFMI received a small amount of revenues
4. SFMI moved a significant quantity of tailings to the milling site
5. SFMI continued processing tailings through the winter
6. SFMI is stockpiling concentrate, rather than shipping it to a refiner, and PM prices are rising
7. SFMI is finishing building its own smelting operation

Score:
GREEN 9
RED 0

-2-
The contents of this section, for both years, is the same. Accordingly SFMI is no better off this year than last year.

-3-
This year:
We Have a Limited Operating History as a Mining Company, Which Makes It Hard To Evaluate Our Prospects.
Last year:
We Have No Operating History as a Mining Company, Which Makes It Hard To Evaluate Our Prospects.
Now obviously, LIMITED OPERATING HISTORY AS A MINING COMPANY (this year) is better than NO OPERATING HISTORY AS A MINING COMPANY (last year).

GREEN 10
RED 0


There is another rather minor item found in this section that shows SFMI to be a bit better off this year than last:

SFMI recently hired a president who has substantial experience running mining operations for other companies

Score:
GREEN 11
RED 0

-4-
The contents of this section, for both years, is the same. Accordingly SFMI is no better off this year than last year.

-5-
Shareholders May Suffer Dilution From the Issuance of Common Stock and Convertible Notes To Finance Our Operations
The above is the heading in both 10Ks, but the two years differ.
Last year, SFMI “issued an additional 71,986,613 shares, largely for services, rent and acquisitions” and this year, SFMI “issued an additional 116,756,429 shares, largely for services, rent and the conversion of notes”

So, this year, they DILUTED, issuing 44,769,816 shares more than last year. RED gets this round.

Score:
GREEN 11
RED 1

The exposure to convertibles this year increased in dollar amount but decreased in share size I personally think this is negative, so I'm giving it to RED.
Score:
GREEN 11
RED 2

OK, but here's the key detail in this section: “We have recently entered into an equity line of credit with Centurion Private Equity, LLC, under which we are entitled to raise up to $7.2 million...”

No need to argue this one.

Score:
GREEN 12
RED 2

The agreement is on an as needed basis favoring SFMI, and Centurian is OBLIGATED to purchase shares. This year's 10K says the following: ”Centurion is obligated to purchase our shares pursuant to put notices that we send from time to time at a purchase price equal to 97% of the market price of our common stock...”

Score:
GREEN 13
RED 2

-6-
We Need Additional Capital To Finance Our Mining Operations And We Expect To Obtain It On Terms That Dilute Existing Shareholders

In both 10Ks, SFMI says it will need to raise additional capital. Last year, the said they would need 2.1 million. This year, the plans they have will need 7 million.

Now, last year, this is how SFMI put it: “ We expect to obtain that capital by issuing notes that are convertible into common stock at the market price on the date of issuance of the notes, or are repayable in gold mined from our site, or the issuance of shares to the extent we need services and the service provider is willing to accept shares in payment.”

This year, SFMI has a 7.2 million line of credit and this section makes it abundantly clear that they will NOT be paying for services with shares.

Now folks, nobody out there discovered this very important nuance. SFMI is out of the "shares for services" business, and what this means is that the sellers who have to convert shares to meet their own financial needs are a thing of the past!!

So, I'm scoring this as GREEN incremented twice: once because SFMI is a solid enough company to not have to pay people in shares any longer, and a second time because service providers have had to sell their shares in the market, which obviously damps down share prices, so reaching the point where services will not be being paid for by shares is a milestone.

Score:
GREEN 15
RED 2

-7-
This year:
We Have A Very Small Management Team And The Loss Of Any Member Of This Team May Prevent Us From Implementing Our Business Plan In A Timely Manner; Some Members of Our Management Have Substantial Outside Business Interests.

Last year:
We Have A Very Small Management Team And The Loss Of Any Member Of This Team May Prevent Us From Implementing Our Business Plan In A Timely Manner; Our Management Has Substantial Outside Business Interests.

SFMI is better off this year, according to this part of this year's 10K because last year, all of their management team had substantial outside business interests. Not so this year.

Score:
GREEN 16
RED 2

And, last year, SFMI has 2 executives. This year, they have 5.

Score:
GREEN 17
RED 2

-8-
Our Officers And Directors Have Voting Control Over Us, And Outside Shareholders Will Have Little Voice In Management.

This one goes in REDs column because, in the last year, SFMI has become even more controlled by the Quilliams than it was before.

Score:
GREEN 17
RED 3

-9-
Our Directors Have A Material Conflict of Interest With Respect To Our Mining Lease With GoldLand.

I'd like to score this one against SFMI, but since the question is whether SFMI is better off this year than last, I have to say that, with no difference year to year, it is a wash.

-10-
Our Directors Have A Material Conflict of Interest With Respect To A Royalty Interest In The Sinker Tunnel.

I'd like to score this one against SFMI, but since the question is whether SFMI is better off this year than last, I have to say that, with no difference year to year, it is a wash.

-11-
We Have Substantial Commitments That Require That We Raise Capital.

The bean counters are the experts here.

That said, I see the following, but I could be wrong:
This year, they have 100 times the cash on hand, 8 times the current assets, 1 million less in current liabilities, and they had a working capital deficit last year that was over 2.5 times larger.

As far as I can tell, SFMI is better off this year than last in this section.

The bean counters can argue about it, and they may be right if some of them say I'm wrong, but as I look at things, SFMI's overall financial situation this year is much stronger.

Score:
GREEN 18
RED 3

-12-
The contents of this section, for both years, is the same. Accordingly SFMI is no better off this year than last year.

-13-
If We Fail To Maintain Adequate Insurance, Our Business Could Be Materially And Adversely Affected.

This year, SFMI notes that they are carrying general liability insurance, whereas last year, they carried none. As such, SFMI is better off this year than last than last.

Score:
GREEN 19
RED 3

-14-
The wording of this section, for both years, differs slightly, but the differences refer to future possibilities and do not impact either current year. Accordingly SFMI is no better off this year than last year.

But, at this point in last year's 10K, there was a section entitled “Ther is no market for our Common Stock”
SFMI got uplisted last year. Thus, SFMI is FAR better off this year in this regard than it was last year.

Score:
GREEN 20
RED 3

-15-
The contents of this section, for both years, is the same. Accordingly SFMI is no better off this year than last year.

-16-
The contents of this section, for both years, is the same. Accordingly SFMI is no better off this year than last year.

So, the final score is:
GREEN 20
RED 3


-----//-----
I have to end this, folks.

Happiness all around, LOL

I had intended to work thru the entire 10K, but as I mentioned, I had a little wrestling match with a hot water heater, and the hot water heater won.

:o)

I think it would come out pretty much the same if I were to find time to do the rest, though.

After this kind of section by section comparison of the two 10Ks, I feel 100% comfortable telling everybody that, no matter what has been said to the contrary since Friday when the 10K was files, I like SFMI more today than I did on Thursday.

But I don't give investment advice. I personally know where I think the bottoming process will take us tomorrow. I am camped out in the tall grass, waiting to buy bigtime. But if anyone got so discouraged by all that was said since the Friday release of the 10K that you feel SFMI is a bad investment, I wish you peace and good fortune, my friend.

As for me, I am enthused by the 10K.

Bigtime, too.

I read it and I like what I saw.

Now to be fair, if I had the time to do the rest of the analysis I'd intended before the water heater blew, I would criticize SFMI for the failure to file all those Form 3, 4, & 5s. That is just inexcusable. I hate suits, and these yuk yuks have no excuse for the missing 3', 4's, & 5's. Looks orchestrated to me, and that makes me wonder why.

But even with the bad behavior as regards filings, I still remain convinced that SFMI is a tremendous opportunity and that, on a risk adjusted basis, the 10K that was just released Friday shows them to be miles and miles ahead of where they were last year.

And one more thing, folks.

The adjusted 10K last year was filed on 4/7. Look at what this stock did in the next 5 weeks. In 5 short weeks after the filing of last year's 10K, which showed SFMI to be significantly weaker than it is today, the share price exploded five fold.

Bear that truth in mind tomorrow morning as you contemplate selling your SFMI shares.

Peace & good luck to everybody,

Imperial Whazoo