FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Quarterly Period Ended September 30, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______ to _______.
GOLDEN PHOENIX MINERALS, INC.
(Exact Name of Registrant as specified in its charter)
Minnesota 41-1878178
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
3595 Airway Dr. Suite 405 Reno, Nevada 89511
(Address of Principal Executive Offices) (Zip Code)
(702) 853-4919
Registrant's telephone number, including area code:
Indicate by check mark whether the Registrant
(1) has filed all reports required to be filed by Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the preceding 12months
(or for such shorter period that the Registrant was required to file
such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes _X_ No ___
The number of shares outstanding of the Registrant's Common Stock as of
September 30, 1998 was 16,496,418.
Transitional Small Business Disclosure Format (check one):
Yes ___ No ___
<PAGE>
GOLDEN PHOENIX MINERALS, INC.
INDEX
Page
Number
------
PART I Financial Information
Item 1 Financial Statements
Condensed Balance Sheet as of September 30, 1998 3
Condensed Statements of Loss and Operating Deficit
for the three months and nine months ended September 30, 1998 4
Condensed Statements of Cash Flows for the three months and
nine months ended September 30, 1998 5-6
Notes to Condensed Financial Statements. 7
Item 2 Management's Discussion and Analysis of Financial Condition and
Results of Operations 8-9
PART II Other Information
SIGNATURE 9
2
<PAGE>
GOLDEN PHOENIX MINERALS, INC.
(A Development Stage Company)
CONDENSED BALANCE SHEET
(Unaudited)
September 30, 1998
<TABLE>
<CAPTION>
ASSETS
September 30
------------
<S> <C>
Current Assets
Cash and cash equivalents $ 1,193
Employee receivables 6,056
Investments 1,082,700
Prepaid Expenses 5,478
Stock subscription receivable 136,000
-----------
Total Current Assets 1,231,427
-----------
Vehicles and Equipment
Vehicles and equipment 127,264
Less accumulated depreciation 20,128
-----------
107,136
-----------
Mining Properties and Claims
Options/leases 69,115
Deferred exploration cost 126,407
Mining property and claim 10,000
-----------
205,522
-----------
Other Assets
Refundable Deposits 3,800
Incorporation costs, net of amortization of $193 866
-----------
4,666
-----------
$ 1,548,751
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 405,773
Accrued liabilities 89,845
Amount due to shareholders 455,650
-----------
Total Current Liabilities 951,268
-----------
Stockholders' Equity
Preferred stock, no par value, 50,000,000 shares authorized and
500,000 shares issued and outstanding at September 30, 1998. 2,000
Common stock, no par value, 150,000,000 shares authorized,
16,496,418 issued and outstanding at September 30, 1998 (including
2,000,000 of 144 Restricted shares for organizational services) 3,614,585
Additional paid-in capital (10,000)
Deficit accumulated during exploration stage (3,009,102)
-----------
Total Stockholders' Equity 597,483
-----------
Total Liabilities and Stockholders' Equity $ 1,548,751
===========
</TABLE>
The Accompanying Notes to Condensed Financial
Statements are an integral part of these statements
3
<PAGE>
GOLDEN PHOENIX MINERALS, INC.
(A Development Stage Company)
CONDENSED STATEMENT OF LOSS AND OPERATING DEFICIT
(Unaudited)
Three months and nine months ended September 30, 1998
<TABLE>
<CAPTION>
Three Months Nine Months
------------ -----------
ended September ended September
--------------- ---------------
30 30
-- --
<S> <C> <C>
Revenues
Joint Ventures $ 0 $ 32,700
------------------------------
Expenses
Exploration 516,035 858,481
General and Administrative 150,078 712,146
Depreciation and Amortization 5,892 17,823
------------------------------
672,005 1,588,450
------------------------------
(Loss) From Operations (672,005) (1,555,750)
Other Income
Interest and Other Income -- 1
Other Expense
Loss on Sale of Fixed Assets -- (960)
------------------------------
Loss Before Provision
For Income Taxes (672,005) (1,556,709)
Provision For Income Taxes -- --
------------------------------
(672,005) (1,556,709)
Deficit Accumulated During Exploration Stage
Beginning of Period (2,333,097) (1,452,393)
------------------------------
Ending of Period $ (3,005,102) $ (3,009,102)
==============================
Net Loss per share (primary and fully diluted) $ (0.04) $ (0.11)
==============================
Weighted Average
Common Shares Outstanding
(primary and fully diluted): 15,691,772 14,696,913
==============================
</TABLE>
The Accompanying Notes to Condensed Financial
Statements are an integral part of these statements
4
<PAGE>
GOLDEN PHOENIX MINERALS, INC.
(A Development Stage Company)
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
Three months and nine months ended September 30, 1998
<TABLE>
<CAPTION>
Three Months Nine Months
------------ -----------
ended ended
----- -----
September 30 September 30
------------ ------------
<S> <C> <C>
Cash Flows From Operating Activities
Net Loss $ (672,005) $(1,556,709)
Adjustments to reconcile net loss
to cash provided by operating activities
Depreciation and amortization 5,892 17,823
(Increase) in receivables (2,570) (6,056)
Decrease in investments -- 167,300
Terminate Lease Option 250,000 250,000
Decrease in prepaid expenses 8,772 29,876
(Increase) Decrease in stock subscriptions receivable (35,000) 754,000
Decrease in deposits -- 11,981
Increase in accounts payable 126,958 309,883
Increase in accrued liabilities 42,055 72,228
----------------------------
Net Cash Provided (Used) by
Operating Activities (275,898) 50,326
----------------------------
Cash Flows From Investing Activities
Purchase of lease options (4,800) (279,115)
Purchase of Vehicles and equipment -- (15,128)
Sales of Vehicles and equipment -- 24,999
Increase in deferred exploration costs (27,798) (55,440)
----------------------------
Net Cash (Used) by
Investing Activities (32,598) (324,684)
----------------------------
Cash Flows from Financing Activities
Cancellation of stock subscriptions receivable -- (890,000)
Cancellation of Debt -- (300,000)
Payment of Debt (30,000) (545,000)
Proceeds from issuance of debt 24,250 160,650
Proceeds from issuance of stock 312,000 1,568,928
----------------------------
Net Cash Provided (Used) by
Financing Activities 306,250 (5,422)
----------------------------
Net Decrease in Cash
And Equivalents (2,246) (279,780)
Cash and Equivalents, Beginning of Period 3,439 280,973
----------------------------
Cash and Equivalents, End of Period $ 1,193 $ 1,193
============================
</TABLE>
The Accompanying Notes to Condensed Financial
Statements are an integral part of these statements
5
<PAGE>
GOLDEN PHOENIX MINERALS, INC.
(A Development Stage Company)
CONDENSED STATEMENT OF CASH FLOWS
(Unaudited)
Three months and nine months ended September 30, 1998
<TABLE>
<CAPTION>
Supplemental Disclosure of Cash Flow Information
Three Months Nine Months
------------ -----------
ended ended
----- -----
September 30 September 30
------------ ------------
<S> <C> <C>
Cash Paid during the Period
for interest, net of amount
Capitalized $ 293 $ 4,914
Cash Paid During the Period
For Income Taxes $ -- $ --
</TABLE>
The Accompanying Notes to Condensed Financial
Statements are an integral part of these statements
6
<PAGE>
GOLDEN PHOENIX MINERALS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Interim Financial Statement Policies and Disclosures
The interim, unaudited, condensed financial statements of GOLDEN PHOENIX
MINERALS, INC. (the "Company") included herein have been prepared pursuant to
the rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally required in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations, although the
Company believes that the disclosures are adequate to make the information
presented not misleading.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the nine months ending September 30, 1998, are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1998. These financial statements should be read in conjunction with
the financial statements and notes thereto for the period ended December 31,
1997. The accounting policies set forth in the audited financial statements are
the same as the accounting policies utilized in the preparation of these
financial statements except as modified from appropriate interim presentation.
Income Taxes
No provision for income taxes was required in 1998 because of the net operating
losses.
Net Income per Share
Net income per share is computed based on the weighted-average number of shares
of common stock and common stock equivalents, if dilutive, actually outstanding
during the period.
On a primary basis, net income per share is based on common stock equivalents
adjusted to reflect additional shares that would be outstanding (1) using the
treasury stock method assuming exercise of dilutive stock warrants and stock
options having exercise prices less than the average market price, and (2) using
the as-converted method for convertible debentures.
On a fully diluted basis, net income per share is based on common stock
equivalents adjusted to reflect additional shares that would be outstanding (1)
using the treasury stock method assuming exercise of dilutive stock warrants and
stock options having exercise prices less than the period end market price (when
greater than the average market price), and (2) using the as-converted method
for convertible debentures.
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS No. 128")
which establishes a new accounting standard for the computation and reporting on
net income per share. SFAS No. 128 is effective for financial statements issued
for periods ending after December 15, 1997, and early adoption is prohibited.
The Company expects that there will be no material effect upon implementing SFAS
No. 128 on its net income per share computations.
Note 3 - Long-Term Debt
There was no long-term debt at September 30, 1998.
7
<PAGE>
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Section 21E of the Securities Exchange Act of 1934 provides a "safe
harbor" for forward-looking statements. Certain information included herein
contains statements that are forward-looking, such as statements regarding
management's expectations about future production and development activities as
well as other capital spending, financing sources and the effects of regulation.
Such forward-looking information involves important risks and uncertainties that
could significantly affect anticipated results in the future and, accordingly,
such results may differ from those expressed in any forward-looking statements
made herein. These risks and uncertainties include, but are not limited to,
those relating to the market price of metals, production rates, production
costs, the availability of financing, the ability to obtain and maintain all of
the permits necessary to put and keep properties in production, development and
construction activities and dependence on existing management. The Company
cautions readers not to place undue reliance on any such forward-looking
statements, and such statements speak only as of the date made.
RESULTS OF OPERATIONS
The Company generated revenues from the granting of joint venture positions in
part of its Alaska holdings. Company activities have been directed toward
exploration activities and acquisition of properties. The Company has
exploration properties in Alaska, Nevada and California.
The Company has entered into a joint venture agreement with Kennecott
Exploration, ("Kennecott") Inc. on its High Grade property located in Modoc
County, California. The agreement was signed on September 19, 1997, and gives
the Company the option to acquire a 100% interest in the property over a three
year period. The agreement calls for Golden Phoenix to spend $200,000 the first
year, $300,000 the second year, and $500,000 the last year for a total of
$1,000,000 in exploration work commitments on the property. The Company will
also pay Kennecott $200,000 in cash or the equivalent hereof in the Company's
stock to complete the exercise of the option. Kennecott has reserved the right
to buy back a 51% interest in the property at the time of a positive feasibility
study for 150% of 51% of all exploration expenses at the time of such
feasibility study. If Kennecott chooses not to exercise the right to buy back
into the property, Kennecott will retain a 2% net smelter return royalty on the
property. The company has completed a 13 hole drill program on this property as
part of its 1998 work obligation. The results of this program are mixed so far.
We have not received all of the assay results from the drill program as of this
filing.
The Company entered into an agreement on August 21, 1997 with J. D. Welsh &
Associates to purchase an interest in a mineral property, situated in Mineral
County, Nevada, known as the Borealis property ("Borealis Property"). The Welsh
interest in the Borealis property was in a joint venture with Cambior
Exploration USA, Inc. ("Cambior"). Cambior has elected to terminate the joint
venture due to budgetary constraints on their US exploration program for 1999.
The Company had the option to purchase all of Welsh's interest in Borealis over
three years for a total of $1,250,000 in payments. The Company will be
responsible for 65% of the payments to the underlying owners starting in late
December 1998. We are actively seeking a new joint venture partner for this
property.
The Company acquired on January 6, 1998, an option to purchase 100% of the
issued and outstanding stock of F. W. Lewis, Inc. and Mina Gold Mine, Inc.
(collectively "Lewis Companies") for an option payment of $250,000. The option
replaces a previous option to purchase the above stock, which expired December
31, 1997. The Lewis Companies control in excess of 25,000 acres of mining
properties consisting of patented and unpatented mining claims, patented and
unpatented mill sites, and fee lands in Nevada, Colorado, and certain oil and
gas interests in California. The Lewis Companies also own various pieces of
mining equipment in Nevada. The purchase price for the Lewis Companies and all
their real and personal property assets is $20,000,000. The option to purchase
was to expire on December 31, 1998. The company has terminated this option due
to its inability to secure financing for the $20,000,000 exercise price. We have
retained our interest in the Contact copper property. The company believes that
this is one of the premiere properties in the F. W. Lewis portfolio.
Exploration costs have been incurred in connection with the properties in
California, Alaska and Nevada. These costs have been incurred for the location
and rental fees of prospect sites and mining claims, and field examinations to
determine the potential occurrence of economic mineralization on the different
properties. Other exploration
8
<PAGE>
costs include the compilation of historic data on the properties to assist in
the evaluation of the properties and the planning of further exploration.
No provision for income taxes was recognized for the nine months ended September
30, 1998 due to net operating losses.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1998, the company had $280,159 in working capital. . A
significant portion of the working capital is allocated to the Borealis
Property. The total Borealis Property interest acquisition cost is $1,050,000
and an additional $100,000 lease payment made in January 1998, for the benefit
of the seller. Payments to date total $1,050,000. The payments are payable in
cash or stock of the Company or a combination of cash and stock, with the stock
being valued at its current closing market price on the day before payment.
The ability of the Company to satisfy the cash requirements of its development
and operations will be dependent upon future financing. The Company anticipates
that additional financing will be obtained, although no assurance can be made
that funds will be available on terms acceptable to the Company.
See "OUTLOOK" below.
INVESTING AND FINANCING ACTIVITIES
The Company is investigating potential financing sources and is in discussions
with potential joint venture partners to further develop its key exploration
properties, but the Company has not yet finalized commitments for such financing
or joint ventures. No assurance can be given that the Company will obtain all of
the financing for its exploration and development activities.
OUTLOOK
The Company will also need to raise additional financing to fund its
exploration, development and operations.
PART II OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
(b) No reports were filed on Form 8-K during the three-month period ended
September 30, 1998.
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GOLDEN PHOENIX MINERALS, INC.
(Registrant)
October 29, 1998 BY: /s/ Michael R. Fitzsimonds
(Date) Michael R. Fitzsimonds
President
9
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS INCLUDED IN REGISTRANT'S FORM 10-Q FOR THE
QUARTER ENDED JUNE 30, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
ITS FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 1,193
<SECURITIES> 0
<RECEIVABLES> 136,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,231,427
<PP&E> 107,136
<DEPRECIATION> (5,892)
<TOTAL-ASSETS> 1,548,751
<CURRENT-LIABILITIES> 951,268
<BONDS> 0
0
500,000
<COMMON> 16,496,418
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,548,751
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 672,005
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 672,005
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (672,005)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (672,005)
<EPS-PRIMARY> (0.04)
<EPS-DILUTED> 0
</TABLE>
