FORM 10-QSB
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 March 31, 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 March 31, 1998 was 14,475,353
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 March 31, 1998. 3
Condensed Statement of Loss and Operating Deficit
for the Three Months Ended March 31, 1998. 4
Condensed Statement of Cash Flows for the Three Months Ended
March 31, 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
Item 6 Exhibits and Reports on Form 8-K
SIGNATURE
<PAGE>
GOLDEN PHOENIX MINERALS, INC.
(An Exploration Stage Company)
CONDENSED BALANCE SHEET
(Unaudited)
March 31, 1998 and December 31, 1997
<TABLE>
<CAPTION>
ASSETS
March 31 December 31
CURRENT ASSETS 1998 1997
<S> <C> <C>
Cash and cash equivalents $ 99. $ 280,973.
Employee receivables 257.
Investments 1,375,000. 1,250,000.
Prepaid expenses 24,803. 35,384.
Stock subscription receivable 800,000. 890,000.
----------------------------------------
Total Current Assets 2,200,159. 2,456,327.
----------------------------------------
VEHICLES AND EQUIPMENT
Vehicles and equipment 127,264. 138,135.
Less accumulated depreciation 8,472. 3,478.
----------------------------------------
118,792. 134,657.
----------------------------------------
MINING PROPERTIES AND CLAIMS
Options/leases 311,615. 40,000.
Deferred exploration cost 97,876. 70,967.
Mining property and claims 10,000. 10,000.
----------------------------------------
419,491. 120,967.
----------------------------------------
OTHER ASSETS
Refundable deposits 3,800. 15,781.
Incorporation costs, net of amortization of $193 962. 1,039.
----------------------------------------
4,762. 16,820.
----------------------------------------
$2,743,204. $2,728,771.
========================================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable current $ 400,000. $ 700,000.
Accounts payable 144,990. 95,890.
Accrued liabilities 16,974. 17,617.
Bank overdraft 380. .
Amount due to shareholders 200,000. 295,000.
Total Current Liabilities 762,344. 1,108,507.
----------------------------------------
STOCKHOLDERS' EQUITY
Preferred stock, no par value, 50,000,000 shares
authorized and 500,000 shares issued and
outstanding at March 31, 1998. 2,000. 2,000.
Common stock, no par value, 150,000,000 shares
authorized, 14,475,353 issued and outstanding at
March 31, 1998 (including 2,000,000 of 144
Restricted shares for organizational services) 3,895,270. 3,080,657.
Additional paid-in capital (10,000.) (10,000.)
Deficit accumulated during exploration stage (1,906,410.) (1,452,393.)
Total Stockholders' Equity 1,980,860. 1,620,264.
----------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,743,204. $ 2,728,771.
========================================
</TABLE>
The Accompanying Notes to Condensed Financial
Statements are an integral part of these statements
<PAGE>
GOLDEN PHOENIX MINERALS, INC.
(An Exploration Stage Company)
CONDENSED STATEMENT OF LOSS AND OPERATING DEFICIT
(Unaudited)
Three Months Ended March 31, 1998 and from June 2, 1997 (date of inception)
to December 31, 1997
<TABLE>
<CAPTION>
March 31 December 31,
1998 1997
<S> <C> <C>
REVENUES $ - $ -
-----------------------------------------
EXPENSES
Exploration 212,388. 890,073.
General and administrative 234,598. 558,896.
Depreciation and amortization 6,071. 3,594.
-----------------------------------------
453,057. 1,452,563.
(Loss) From Operations (453,057.) (1,452,563.)
OTHER INCOME
Interest and other income 170.
OTHER EXPENSE
Loss on Sale of Fixed Assets (960.)
-----------------------------------------
LOSS BEFORE PROVISION
For Income Taxes (454,017.) (1,452,393.)
PROVISION FOR INCOME TAXES - -
-----------------------------------------
(454,017.) (1,452,393.)
-----------------------------------------
DEFICIT ACCUMULATED DURING EXPLORATION STAGE
Beginning of Period (1,452,393.)
End of Period $ (1,906,410.) (1,452,393.)
=========================================
NET LOSS PER SHARE
(primary and fully diluted): $ (0.03) (0.13)
=========================================
WEIGHTED AVERAGE
Common Shares Outstanding
(primary and fully diluted): 13,754,521. 11,609,358
=========================================
</TABLE>
The Accompanying Notes to Condensed Financial
Statements are an integral part of these statements
<PAGE>
GOLDEN PHOENIX MINERALS, INC.
(An Exploration Stage Company)
CONDENSED STATEMENT OF CASH FLOWS
(Unaudited)
Three Months Ended March 31, 1998
<TABLE>
<CAPTION>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss $ (454,017.)
Adjustments to reconcile net loss
to cash provided by operating activities
Depreciation and amortization 6,071.
(Increase) in receivables (257.)
(Increase) in investments (125,000.)
Decrease in prepaid expenses 10,551.
Decrease in stock subscriptions receivable 90,000.
Decrease in deposits 11,981.
Increase in accounts payable 49,100.
Increase in bank overdraft 380.
(Decrease) in accrued liabilities (643.)
-----------------
Net Cash (Used) by
Operating Activities (411,834.)
-----------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of options (271,615)
Purchase of vehicles and equipment (15,128).
Sale of vehicles and equipment 24,999.
Increase in deferred exploration costs (26,909).
-----------------
Net Cash (Used) by
Investing Activities (288,653.)
-----------------
CASH FLOWS FROM FINANCING ACTIVITIES
Cancellation of stock subscriptions receivable (90,000.)
Payment of debt (395,000.)
Proceeds from issuance of stock 904,613.
-----------------
Net Cash Provided by
Financing Activities 419,613.
-----------------
NET DECREASE IN CASH
And Equivalents (280,874).
CASH AND EQUIVALENTS, BEGINNING OF PERIOD 280,973.
-----------------
CASH AND EQUIVALENTS, END OF PERIOD $ 99.
=================
</TABLE>
The Accompanying Notes to Condensed Financial
Statements are an integral part of these statements
<PAGE>
GOLDEN PHOENIX MINERALS, INC.
(An Exploration Stage Company)
CONDENSED STATEMENT OF CASH FLOWS
(Unaudited)
Three Months Ended March 31, 1998
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
CASH PAID DURING THE PERIOD
for interest, net of amount
Capitalized $ 4,225
CASH PAID DURING THE PERIOD
for income taxes $ -
The Accompanying Notes to Condensed Financial
Statements are an integral part of these statements
<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 three months ending March 31, 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 for appropriate interim presentation.
Income Taxes
No provision for income taxes was required in 1998 due to net operating losses.
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 2 - Long-Term Debt
There was no long-term debt at March 31, 1998.
<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
No operational revenue has been generated thru March 31, 1998. All 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 thereof 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 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 is presently under a joint venture with
Cambior Exploration USA, Inc. ("Cambior"). The Company can purchase Welsh's
interest in Borealis over one year for a total of $1,250,000 in payments. The
initial payments to Welsh and Cambior secure 25% of Welsh's interest in the
Borealis Property or approximately 8% of the joint venture. The Company will be
carried through positive mining feasibility by Cambior, the operator of the
project. Cambior Exploration USA must spend $7,000,000 over seven years to earn
a 70% interest in the Borealis 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 two Lewis Companies and
all their real and personal property assets is $20,000,000. The option to
purchase expires December 31, 1998. The Company is actively seeking funding for
this acquisition and is also involved in negotiations with other companies to
share the cost of, and thereby acquire an interest in, the Lewis Companies and
their mining properties and other assets. The Company believes it will be
successful in raising the $20,000,000 purchase price. However, should the
Company and any joint venture partner be unable to raise the $20,000,000 in
funding to acquire the Lewis Companies, the option will expire without any value
retained by the Company.
Exploration costs have been incurred in connection with the properties in
California, Alaska and Nevada. These costs have been incurred for the location
of prospect sites and mining claims, and field examinations to determine
<PAGE>
the potential occurrence of economic mineralization on the different properties.
Other exploration 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 quarter ended March 31,
1998, due to net operating losses.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1998, the company had $1,437,815 in working capital. A
significant portion of the working capital is allocated to the joint venture
with Cambior Exploration USA, Inc., involving the Borealis Property. The total
Borealis Property interest acquisition cost is $1,250,000 and an additional
$100,000 lease payment made in January 1998, for the benefit of the seller.
Payments to date total $850,000, with $400,000 remaining due in four equal
installments of $100,000 each in the months April through July 1998. 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.
A second significant portion of the working capital is stock subscriptions
receivable of $800,000 from the exercise of stock options. There were two
exercises of the options for stock. One for 30,000 shares at $3.00 per share was
cancelled in February 1998, leaving on option exercised at $2.00 per share on
400,000 shares.
The ability of the Company to satisfy the cash requirements of its exploration,
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 conducting
discussions with potential joint venture partners to acquire the Lewis
Companies, 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 to purchase the Lewis Companies.
OUTLOOK
The Company will issue a significant number of common shares of Golden Phoenix
Minerals, Inc. to J.D. Welsh & Associates to satisfy all future payments to
acquire the remaining interest in the joint venture with Cambior Exploration
USA, Inc. The issuance of stock will eliminate $400,000 of current debt. 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 March
31, 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)
April 29, 1998 BY: /s/ Michael R. Fitzsimonds
(Date) Michael R. Fitzsimonds
President
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 99
<SECURITIES> 0
<RECEIVABLES> 800,257
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,200,159
<PP&E> 118,792
<DEPRECIATION> 8,472
<TOTAL-ASSETS> 2,743,204
<CURRENT-LIABILITIES> 762,344
<BONDS> 0
0
500,000
<COMMON> 14,475,353
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 2,743,204
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 453,017
<OTHER-EXPENSES> 960
<LOSS-PROVISION> 454,017
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (454,017)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (454,017)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> 0
</TABLE>
