SECURITIES EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
Annual Report Pursuant to
the Securities Exchange Act of 1934
For the fiscal year ended December 31, 1996
Commission file number 023726
GOLDEN EAGLE INTERNATIONAL, INC.
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(Exact name of Registrant as specified in its charter)
Colorado 84-1116515
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(State of incorporation) (I.R.S. Employer
Identification No.)
4949 South Syracuse Street, Suite 300, Denver, CO 80237
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303)694-6101
Securities registered pursuant to Section 12(b) of the Act:
Title of each class: None
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Name of each exchange on which registered: N/A
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Securities registered pursuant to Section 12(g) of the Act:
Title of each class: Common No Par Value
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 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to the filing
requirements for at least the past 90 days.
Yes No X
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Check if disclosure of delinquent filers pursuant to Item 405 of Regulation S-B
is not contained in this form, and no disclosure will be contained, to the best
of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [ X ]
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State issuer's revenues for its most recent fiscal year: $0.
Transitional Small Business Disclosure Format:
Yes No X
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Aggregate market value of the voting stock held by non-affiliates of the
Registrant as of December 31, 1996 was $6,522,999 based upon the closing price
of the common stock on December 31, 1996.
Number of outstanding shares of the Registrant's no par value common stock, as
of December 31, 1996: 44,517,143*.
*an additional 2,384,500 common shares were issuable at year end.
DOCUMENTS INCORPORATED BY REFERENCE
List hereunder the following documents if incorporated by reference and the
Part of this Form 10-KSB into which the document is incorporated: (1) Any annual
report to security holders - None; (2) Any proxy or information statement -
None; (3) Any prospectus filed pursuant to Rule 424(b) or (c) under the
Securities Act of 1933 - None.
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PART 1
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Item 1. Business Development
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HISTORY
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Golden Eagle International, Inc., formerly Beneficial Capital Financial
Services Corp. (hereinafter referred to as the "Registrant") is a development
stage company, incorporated pursuant to the laws of the State of Colorado on
July 21, 1988. Prior to the change of control described in subsequent
paragraphs, which occurred on November 8, 1994, the Registrant was engaged in
the business of providing financial services to emerging growth companies in the
United States, as well as development stage companies located in selected
developing countries, primarily in Central and South America. Since the change
in control, the Registrant intends to engage in the business of exploring,
acquiring, developing, and operating gold, silver and other mineral properties.
The business activities of Registrant for the fiscal year ended December
31, 1996 were limited to negotiating, evaluating and purchasing the exploration
and mining rights on 11 mining concessions owned by the United Cangalli Gold
Mining Cooperative, Ltd. ("UCL"), and in evaluating several other mining
projects. Registrant had no revenues for the fiscal year ended December 31,
1996.
On February 2, 1995, Registrant changed its name to Golden Eagle
International, Inc.
REORGANIZATION
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On January 10, 1994, Registrant held a special shareholders meeting and
approved a 150-to-1 reverse split reducing issued and outstanding shares to
1,123,500.
On November 8, 1994, a change of control of Registrant occurred by virtue
of the issuance of previously authorized shares, the appointment of two new
directors to the incumbent Board of Directors, and the appointment of new
Officers of Registrant.
After the change in control previously described, the Board of Directors,
pursuant to the Business Corporation Act of the State of Colorado, on December
6, 1994, authorized and declared a forward five-for-one (5-for-1) split of the
then 5,123,500 issued and outstanding Common Stock of the Registrant, thereby
increasing issued and outstanding to 25,617,500. Notwithstanding such forward
split, the par value and the authorized capital of Registrant remain unchanged.
On November 8, 1994, Registrant issued 20,000,000 (adjusted post split on a
5-for-1 basis) common restricted shares to Golden Eagle Mineral Holdings, Inc.,
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a Colorado corporation controlled by Mary Erickson, the Secretary and a
Director. Consideration for the issuance of such shares was the delivery of a
Secured Corporate Promissory Note in the amount of $25,000.00 at ten percent
(10%) interest, due on demand.
Also upon the change of control previously described, the Registrant agreed
and appointed to its existing Board of Directors consisting of Messrs. Robert A.
Hildebrand and Kenneth P. Bottoms two additional directors consisting of Ronald
A. Knittle and Mary A. Erickson. Ronald A. Knittle was appointed President and
Chief Executive Officer and Mary A. Erickson was Secretary and Treasurer. Robert
A. Hildebrand and Kenneth Bottoms resigned as directors in 1994 and 1995,
respectively. Ronald A. Knittle resigned as President, CEO and director in May
1996. Ronald Sparkman was appointed interim President in May 1996 and served
until July 4, 1996. Mary A. Erickson, then Secretary of the corporation, was
appointed as President on July 4, 1996 and served in that capacity until
February 14, 1997. Terry C. Turner was appointed as the Company's President and
a director on February 14, 1997. Ms. Erickson has resumed serving as Corporate
Secretary and also continues as a director.
Other than as specified herein, there were no other arrangements or
understandings among the members of both the former and new control group and
their associates with respect to election of directors or other matters except
that Registrant intends to convene a special meeting of the shareholders for the
purposes of electing a new slate of directors, and to approve other matters as
deemed necessary, essential or appropriate.
(b) BUSINESS OF ISSUER
General Information
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Former Business
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From inception to November 1994, Registrant was engaged in the business of
providing financial services to emerging growth companies in the United States,
and also contemplated such activities for companies in developing countries.
Registrant's activities during this period of time were insignificant in nature
and amount. Registrant's total revenues from such activities amounted to only
Twenty Two Thousand One Hundred Sixteen Dollars ($22,116.00) while incurring
operating losses of Two Hundred Sixty Three Thousand Eight Hundred Fifty Six
Dollars ($263,856.00) for the same. (See "Financial Statements.")
Business Activities in Mining
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Registrant's management acquired control on November 8, 1994. Management's
activities were primarily devoted to organizational matters following the change
in control and the identification of precious metal and mineral properties which
it deemed suitable for evaluation and possible acquisition.
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Plan of Operation
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Registrant's plan of operation is to engage in the business of evaluating,
acquiring, developing, owning, and operating gold, silver and other
mineral-producing properties. Registrant will also, in accordance with industry
custom and when the opportunity is available, enter into partnerships, business
associations and other arrangements to directly or indirectly, jointly and with
others, engage in similar activities with a view toward becoming a fully
operating mineral exploration, development, mining and marketing company.
During the fiscal year ended December 31, 1994, Registrant commenced its
initial activities toward this objective. Such activities were exclusively
concentrated on negotiating the acquisition of mineral properties or interests
in mineral properties which had the potential of commercial development and
production, in management's opinion, and were deemed worthy of continued
corporate activities to acquire such properties.
One of Registrant's affiliates entered into a Letter of Intent with Mineral
Mountain Mining Co. ("MMMC") to acquire a 50% equity interest in MMMC, which is
the owner of the Silver Bar Mine, located near Apache Junction, Arizona. In that
connection, in reliance upon representations made, and in anticipation of the
closing of a definitive agreement in the first quarter of 1995, Registrant
advanced substantial funds to MMMC. Registrant commenced preparation of
documentation and continued negotiations of technical matters relating to the
acquisition during late 1994 and early 1995.
During this time, Registrant became aware of undisclosed unfavorable facts
concerning the proposed acquisition which it considered material to its decision
and which had induced it to enter into the Agreement. MMMC refused to enter into
a definitive agreement. Registrant, in view of such facts, declined to close the
transaction. Consequently, no acquisition of the property was made.
As of the date of this report, Registrant has abandoned efforts to acquire
the property. Registrant has filed a lawsuit in Arizona to recover monies
advanced toward acquisition of this property. (See Item 3.)
In addition, Registrant entered into negotiations to acquire a precious
metals property known as the Long Point Placer Mining claims, Parcels I and II,
located in Siskiyou County, California. Registrant proposed to acquire all of
the assets and assume certain of the liabilities of Cash Plus Mining, L.P.
("Cash Plus"), a Missouri Limited Partnership which owned the property. An Asset
Purchase Agreement dated December 28, 1994 between Registrant's affiliate, Cash
Plus and F.R.S., Inc., Cash Plus' corporate general partner, and all limited
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partners, was signed by one of Registrant's affiliates and the corporate
general partner of Cash Plus on December 31, 1994. Cash Plus thereafter
undertook procedures to have the Agreement approved by its limited partners on
or about January 28, 1995.
During November 1994, Registrant negotiated for the acquisition of a
precious metals property known as the Evergreen Nos. 1 through 12 unpatented
lode mining claims located in Siskiyou County, California. The property was
owned by Mark 1 Limited, a Delaware corporation.
Mark I Limited on December 4, 1994, confirmed to Registrant that a Letter
of Intent dated November 29, 1994 was acceptable and the preparation of the
definitive agreement commenced.
These transactions have all been abandoned due to unsatisfactory due
diligence results.
History of Prospective Mining Property in Bolivia
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More than ten thousand years ago, an ancient river flowed from the
Cordillera Real Mountains of the Andes to the tropical jungle area where it
converged with two other rivers. This ancient river, known today as the Tipuani
River, carried with it deposits of gold which were disbursed in its bed along
its length, from the head of the river to the convergence. As time passed, these
deposits were covered by other alluvial deposits as the valley filled with
material washed away from the surrounding mountains with each season's flooding
and erosion. The Tipuani River, containing significant amounts of alluvial gold
deposits, was for centuries one of the Incan Empire's sources of gold. Tipuani,
Bolivia is located just 2 km from Cangalli, Bolivia and the site of Registrant's
current exploration operations.
In 1562, Juan de Roda arrived at Roman Playa near Tipuani, Bolivia. This
was the first colonial expedition to the Tipuani River. Mining reached Chuqini
in 1580 and Tipuani in 1602. The Tipuani River was found to hold significant
deposits of gold from the surface down to the ancient riverbed, known as the
Paleocanal, up to 1,200 ft. below the surface.
Early in the 19th century the first attempts at large-scale mining were
made by Ildefonso Villamil. According to historical reports, Villamil produced
more than 150,000 ounces of gold from several areas upstream from Tipuani from
1813 to 1833 and again from 1850 to 1866. The first attempts at mechanization
were made with the use of water pumps in 1840 by J. Wheathey, an Irishman.
Heavy equipment was not introduced in the area until near the end of the
19th century. In 1898, the Incahuira Dredging Company brought machinery and a
dredge to the nearby Kaka River. It was the "Compania Aramayo de Minas" which
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conducted major mining activities between 1936 and 1949, putting the main
emphasis on the exploration and mining of the Old Channel of the Paleotipuani.
Since 1952 (following the nationalization of the mines and the forced return of
all gold concessions held by Aramayo to the State on November 7 of that year)
and until 1961, the gold placers of the Tipuani Valley were mined by groups
controlled by the National Mining Bank, which bought the gold. In 1961 the
government annulled all previous licenses and recognized the gold mining
cooperatives, which in 1963 formed the "Regional Federation of Gold-mining
Cooperatives", which are currently mining the placer deposits.
Current Status of Company Interests
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In October 1995 the Registrant began reviewing potential mining
opportunities in Bolivia. A site visit to the Tipuani River Basin followed in
December, with representatives of the Registrant traveling to Cangalli,
approximately 2 km downriver from Tipuani. Included in the expedition was an
independent geologist hired to evaluate the Cangalli area. This consultant
reported that the area merited further study.
Based on this favorable report, along with other pre-existing reports on
the Tipuani area, the Registrant formed a majority-owned Bolivian subsidiary,
Golden Eagle Bolivia Mining S.A. ("GEBM") in January 1996, of which Registrant
initially owned 74% and later acquired an additional 19% from its Bolivian
partners, for a total of 93%.
On January 25, 1996, GEBM entered into an agreement with United Cangalli
Gold Mining Cooperative, Ltd. ("UCL"), a Bolivian cooperative, for the rights to
explore and mine an area consisting of 11 concessions along the Tipuani River,
covering an area of 2,004 hectares (4,810 acres) for a 25- year period with an
option for an additional 25 years. While binding according to the Company's
counsel in Bolivia, this contract was not "protocolized" (recorded) with the
Bolivian Notary of Mines.
Registrant's directors elected to form a new majority-owned Bolivian
subsidiary, Eagle Mining of Bolivia, Ltd. ("EMB"), in October 1996 to hold the
concession interests. Registrant owns 84% of EMB; Registrant's former president,
Mary A. Erickson, owns 3%; and Rene Velasquez owns 13%. EMB subsequently assumed
GEBM's contract rights and proceeded to renegotiate the contract with UCL, which
was protocolized with the Notary of Mines in La Paz on November 11, 1996. The
new contract provides for a gross royalty interest of 18% in gold production to
UCL and commits EMB to complete first-phase exploration and open one work front,
in addition to the Cangalli shaft, by April 20, 1997; to open two additional
work fronts by December 6, 1997; and to invest a minimum of $3 million in the
project. Management is working to meet its contractual commitments of April 20,
1997 and December 6, 1997, as well as the $3 million commitment.
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In addition, EMB is obligated to provide to UCL $200,000 for reduction of
UCL's prior obligations: $100,000 in the form of a loan and $100,000 in the form
of a grant. EMB has loaned the entire $100,000 obligation to UCL as of December
31, 1996, with terms which allow EMB to control the repayment of the loan out of
production on a "reasonable" basis which will not unduly impact UCL's percentage
of participation. As of March 31, 1997, EMB had also met more than 16% of its
grant obligation to UCL, and had confirmed the finalization of the grant payment
by the end of the 2nd quarter of 1997, which term had been confirmed as
acceptable by UCL.
As of March 28, 1997, GEBM continues to be the operator of the Cangalli
mining prospect; however, EMB will assume operations in the Second Quarter 1997.
Giovanni Viscarra, a geologist with regional experience in the Tipuani
River Valley of Bolivia, was hired by GEBM in January 1996 as chief geologist
and mine superintendent. In March 1996, Rene Velasquez joined GEBM as President.
Velasquez is an economist who has served as head of collections for the Bolivian
Internal Revenue Service, as well as having been in charge of the development
corporation for the State of La Paz ("CORDEPAZ"). Velasquez has run his own
construction/mining company, which worked extensively in the Tipuani River
Basin. Both Viscarra and Velasquez assumed their respective positions in the new
Bolivian subsidiary, Eagle Mining of Bolivia, Ltd.; however, Viscarra is on
leave of absence as of the date of this filing due to health reasons.
Hereinafter, "Registrant" shall signify Registrant and its Bolivian
subsidiaries, Golden Eagle Bolivia Mining, S.A. and Eagle Mining of Bolivia,
Ltd., unless either of these subsidiaries is referred to specifically.
Principal products or services and their markets. Registrant has begun its
operations as a minerals and metals exploration company; however, Registrant has
not yet commenced operation of its proposed business activities as a gold,
silver and other minerals mining and marketing company. When such activities are
commenced, its principal products obviously will be such minerals and metals.
Distribution methods of the products or services. When, if ever, Registrant
is successful in commencing and maintaining operations in its proposed business
activities, it will utilize distribution methods which are customarily employed
within the mining industry. Registrant does not contemplate that it would be
employing any distribution methods which would be considered innovative or
unusual. The Registrant has established, through its legal counsel in Bolivia,
buyers for any precious metals or minerals that it may be successful in
producing from its properties in Bolivia. The Registrant has not yet determined
if it will sell these precious metals or minerals to the local buyers or if it
will ship to other worldwide locations for sale to various well-known refiners.
Status of any publicly announced new product or service. Not applicable.
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Competition, business conditions and the small business issuer's
competitive position in the industry and methods of competition. Registrant is
an insignificant participant among the firms which engage in the same line of
business (mining) which Registrant has chosen as its principal area of business
concentration. Many of Registrant's competitors are companies with significantly
greater financial and personnel resources and technical expertise than the
Registrant. The combined financial resources and management experience of
Registrant's officers and directors are very limited and Registrant has
encountered, and will continue to encounter, substantial competitive
disadvantages compared to Registrant's competitors.
Sources and availability of raw materials and the names of principal
suppliers. As of December 31, 1996, the Company required no raw materials. If it
ever conducts mining operations, in Bolivia or elsewhere, it will need mining
equipment and supplies. Such items are often in short supply and may be
unavailable. In addition, high import tariffs may make mining equipment either
very expensive or of restricted availability due to import difficulties.
Dependence on one or a few major customers. The Registrant is currently
dependent upon one contract with United Cangalli Gold Mining Cooperative, Ltd.
(UCL) to explore, develop, and mine 11 concessions along the Tipuani River in
Bolivia, and market precious metals and minerals which may be produced
therefrom. The Registrant has not commenced its business activities on any other
property nor can there be any assurances that there will be any other properties
in the future.
Patents, trademarks, licenses, franchises, concessions, royalty agreements
or labor contracts, including duration. Registrant, through its majority-owned
subsidiary, Eagle Mining of Bolivia, Ltd. ("EMB"), has contracted for 11
concessions along the Tipuani River to explore, develop, mine, and market
precious metals and minerals that it may be able to extract from the properties
involved in the concessions. In the same contract the Registrant's subsidiary
has granted an 18% royalty to UCL in exchange for the rights to the concessions.
The duration of the contract between the Registrant's subsidiary and UCL is for
25 years, with an automatic extension for another 25 years. The subsidiary made
a commitment to complete first-phase exploration and open one work front, in
addition to the Cangalli shaft, by April 20, 1997; to open two additional work
fronts by December 6, 1997; and to invest a minimum of $3 million in the
project. Registrant is working to meet the contractual commitments of April 20,
1997 and December 6, 1997, as well as the $3 million commitment.
In addition, EMB is obligated to provide to UCL $200,000 for reduction of
UCL's prior obligations: $100,000 in the form of a loan and $100,000 in the form
of a grant. EMB has loaned the entire $100,000 obligation to UCL as of December
31, 1996, with terms which allow EMB to control the repayment of the loan out of
production on a "reasonable" basis which will not unduly impact UCL's percentage
of participation. As of March 31, 1997, EMB had also met more than 16% of its
grant obligation to UCL, and had confirmed the finalization of the grant payment
by the end of the 2nd quarter of 1997, which term had been confirmed as
acceptable by UCL.
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Need for any government approval of principal products or services. If
government approval is necessary and the small business issuer has not yet
received that approval, discuss the status of the approval within the government
approval process. Neither the Company nor either of its operating subsidiaries,
Golden Eagle Bolivia Mining, S.A. or Eagle Mining of Bolivia, Ltd., are
obligated to receive approval of their principal products or services. Some
activities in which the Company's subsidiaries are engaged do require
permitting, such as the harvesting of lumber for mine timbers and the transport
of explosives. However, UCL has had those permits for many years, and the
Company's subsidiaries are allowed to piggy-back onto those permits and any
others which are occasionally required for moving heavy equipment, etc.
Effect of existing or probable governmental regulations on the business.
Registrant intends to concentrate its immediate efforts in developing its
Bolivian mining prospect and obtaining all necessary governmental approvals. The
effect of such governmental regulations on its business should not cause
Registrant to incur any delays in commencing operations but may directly affect
its ability to continue operations once commenced. It is impossible at this time
to determine within any reasonable degree of certainty the effect of such
regulations on its proposed business.
Research and development activities. Registrant does not intend to engage
in any research and development activities, other than those regularly
associated with the exploration, evaluation and mining of minerals and metals.
Costs and effects of compliance with environmental laws. Registrant
proposes to engage in an industry which is historically subject to assertive,
time consuming, and expensive compliance with environmental law. There is and
can be no assurance that Registrant, with its small financial resources and
limited personnel, will be able to comply with such environmental laws and yet
operate in a commercially profitable manner.
Number of total employees and number of full-time employees. Registrant at
year end employed two (2) full-time persons in its offices in Denver, Colorado
consisting of its then-president, Mary A. Erickson, and one administrative
assistant. However, by February 14, 1997, Registrant's new President, Terry C.
Turner, resided in La Paz, Bolivia, and directed the Company's affairs from
there. In addition, Registrant had at year end several consultants and advisors,
including Guido Paravicini, M.A., a mining engineer and geophysicist working on
a full-scope evaluation of the Cangalli properties; and Ronald L. Atwood, Ph.D.,
former chief metallurgist for Newmont Gold, who is evaluating the Company's
metallurgical issues on the Cangalli property. Other consultants and advisors
provide expertise in disciplines directly related to mining activities.
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Also at year end, Registrant's majority-owned subsidiary, Golden Eagle
Bolivia Mining, S.A., employed 96 personnel including its president, Rene
Velasquez; two purchasing agents; one secretary; two accountants; and one
administrative assistant in the administrative offices in La Paz, Bolivia. The
additional personnel were employed in the mine offices and shops in Cangalli,
Bolivia, and consisted of one mining engineer/mine supervisor, one geologist,
two mechanical engineers, one mine accountant, two warehouse supervisors, one
personnel manager, three shift foremen, and 78 miners, including drillers,
muckers, hoist operators, and other essential support personnel.
Item 2. Property
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The Registrant's executive offices in the United States are located at 4949
South Syracuse, Suite 300, Denver, Colorado 80237. These offices are leased from
a non-affiliated third party. At year end, Registrant utilized, at no cost,
computer, fax machine and other general office furnishings owned by Mary A.
Erickson and located on the premises. Registrant has since purchased computer
equipment, a fax machine and a copier.
As of February 14, 1997, Registrant also leases offices in La Paz, Bolivia
located at Avenida Arce, Plaza Isabel La Catolica, Edificio Torre de las
Americas, Piso 9, Of. 902, and utilizes, at no cost, computer equipment, fax
machine and general office furnishings owned by Terry C. Turner.
Registrant owns the mining equipment acquired in the San Silvestre purchase
initiated in September 1996 and consummated in February 1997. Included in the
equipment purchase were an electric generating set, two compressors, jaw
crusher, 150 ton-per-hour ball mill, thickener, classifier, spiral recovery
equipment, centrifugal bowls, vibrating tables, mine rail, ore cars, mine hoist,
lighting system, ventilators, ventilator sleeve, two welders, radio sets with
receiver and transmitter, fuel tanks, support housings, and various supplies and
small equipment.
Registrant's majority-owned subsidiary, GEBM, owns one new Toyota
Landcruiser purchased during 1996, one mine pickup, and several pieces of
recovery equipment. GEBM also leases office space located at Avenide Arce 2131,
Edificio Illampu 1er Mezz in La Paz, Bolivia, and owns computer, fax and copy
equipment. In addition, GEBM leases offices and shops located in Cangalli,
Bolivia.
Item 3. Legal Proceedings
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At year end there were no actual or threatened legal proceedings against
Registrant, any Officer, Director or affiliate, except as follows:
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There is an active civil investigation of the company and its officers by
the Denver Regional Office of the Securities and Exchange Commission into
violations of the Securities Act of 1933 and Securities Exchange Act of
1934. There is no disposition at this date but it could result in SEC
actions against the Company and its officers, directors, or control
shareholders for injunctive relief and penalties. In February 1997 the
Company proposed an offer of settlement following negotiations with the
local regional office of the SEC in Denver, Colorado, which offer is
pending approval with the Securities and Exchange Commission in Washington,
DC.
The Company is Plaintiff in Case No. 96-043428 in Superior Court, Pinal
County, Arizona. The Company sued Mineral Mountain Mining Co. and James and
Diane Brown alleging fraud and misrepresentations and for refund of monies
paid and benefits received. A jury trial has been set for July 8, 1997. The
future outcome cannot be predicted at this time.
During 1995, the Company engaged a person it believed was an independent
mining engineer as a consultant. In 1996, the consultant claimed the
Company liable for unpaid services and expenses totaling $78,440. The
Company believes that the consultant did not provide the services
contracted, usurped business opportunities, and tortiously interfered with
the Company. No litigation has been filed to date between the parties and
the Company is still assessing its position. An evaluation as to the
outcome of this matter cannot be made at this time.
Item 4. Submission of Matters to a Vote of Security Holders
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None
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PART II
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Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
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The following table shows the high and low bid of Registrant's Common Stock
during the last four years.
1993 Low Bid High Bid
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First Quarter did not trade
Second Quarter
Third Quarter
Fourth Quarter
1994 Low Bid High Bid
- --------------------------------------------------------------------------------
First Quarter did not trade
Second Quarter did not trade
Third Quarter did not trade
Fourth Quarter $2.50 $6.25
1995 Low Bid High Bid
- --------------------------------------------------------------------------------
First Quarter $.125 $5.50
Second Quarter $.1875 $.75
Third Quarter $.21875 $.53125
Fourth Quarter $.125 $.43275
1996 Low Bid High Bid
- --------------------------------------------------------------------------------
First Quarter $.21875 $.75
Second Quarter $.25 $.96875
Third Quarter $.0625 $.5625
Fourth Quarter $.1875 $.59375
(b) Holders
As of December 31, 1996, there were 566 shareholders of record of the
Registrant's Common Stock.
Registrant is authorized to issue Eight Hundred Million (800,000,000)
Common Shares par value $0.0001. In addition, Registrant is authorized to issue
Ten Million (10,000,000) Preferred Shares par value $0.01. No shares of
Preferred Stock have been issued.
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The Registrant has never paid a cash dividend on its Common Stock and has
no present intention to declare or pay cash dividends on the Common Stock in the
foreseeable future. The Registrant intends to retain any earnings which it may
realize in the foreseeable future to finance its operations. Future dividends,
if any, will depend on earnings, financing requirements and other factors.
Item 6. Management's Discussion and Analysis of Financial Condition and Results
of Operations
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Changes in Financial Condition
------------------------------
At year end 1996 the Company's assets increased to $824,760 compared to
$79,031 at the end of 1995. The increase was a result of operations in Bolivia
and expenditures for the exploration and development of the Tipuani/Cangalli
prospect.
Liabilities also increased significantly as a result of operations in
Bolivia. At year end 1996, liabilities were $1,666,870, an increase of 223% over
1995 year end liabilities of $515,271.
Stockholders' deficit at year end 1996 was ($842,110), an increase of 93%
over the 1995 stockholders' deficit of ($436,240). The Company, in other words,
continued to increase the stockholders' deficit. This was exacerbated by the
Company's failure to generate any revenues from any source, in spite of
continued expenses and mining prospect investment and exploration costs.
From the aspect of whether the Company can continue toward its business
goal of commencing production from its Cangalli mining prospect, the Company is
critically deficient in needed capital. Without a capital infusion or loans or a
combination thereof, it is unlikely that the Company can carry out its business
goals regarding the mine operations on the Bolivian Cangalli prospect.
Subsequent to December 31, 1996 the Company received a bridge loan for
$240,000 from a Texas bank, as well as a loan commitment from the same bank for
$1,000,000 pursuant to a revolving line of credit which would retire the
$240,000 bridge loan.
The Company also received additional funding through private stock
purchases. Management believes that these cash infusions will contribute
substantially to satisfying a portion of the needed capital. However, no
guarantee can be made that the loan amount, nor the capital raised through
private placements, will entirely satisfy the Company's capital needs.
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Comparison of Results of Operation for the Fiscal Years Ended December 31,
1996 and 1995
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The Company had no operating revenues in either 1996 or 1995. The Company
had gains on sales of marketable securities of $19,167 in 1996 and $9,666 in
1995. These are non-recurring gains and would not be considered regular income.
The Company incurred operating expenses, all of which are general and
administrative in nature, totaling $1,982,768 in 1996 as compared to $815,507 in
1995. As a result of having no operating income, the Company incurred operating
losses of ($1,982,768) in 1996 and ($815,507) in 1995.
Salaries and consulting fees decreased in 1996 to $191,635 from a total of
$317,938 in 1995. This, however, excludes common stock issued to consultants and
others in 1996 valued at $1,230,842 compared to $171,983 in 1995. These
continuing costs are the result of the use of consultants related to
negotiations and investigations concerning the Bolivian mining prospect. This
trend will continue in 1997.
Travel expenses in 1996 were about the same as 1995, $71,649 and $69,429,
respectively; they are expected to remain at approximately the same level in
1997.
Office expenses, including telephone, were $101,984 in 1996 and $31,714 in
1995. This may increase again in 1997 due to expanded operations.
Legal expenses in 1996 increased significantly due to the SEC
investigation, Arizona litigation effort, negotiation of the agreement for the
Bolivian mining prospect, and efforts to update the corporate records and SEC
filings. The expense totaled $229,037 in 1996 as compared to $51,284 in 1995.
Likewise, accounting and other professional expenses in 1996 were
materially larger due to efforts required to bring the Company's accounting
current. 1996 expense for accounting totaled $34,373, while 1995 accounting and
other professional expenses were $10,754. It should be expected that future
legal and accounting expenses will continue in amounts comparable to 1996.
The per-share loss amounted to ($.05) in 1996 as compared to ($.03) in
1995.
Capital expenditures for property and equipment increased
disproportionately in 1996 to $741,696 as the Company funded exploration costs
and investment on the Bolivian mining prospect. By comparison, 1995 results
showed capital expenditures of only $34,516.
The Company incurred interest expenses in 1996 of $79,141 as opposed to
1995 interest of $9,289. The increased dollar amount of loans led to the
15
<PAGE>
eight-fold interest category increase. This increased interest cost will
continue, and probably double, in the coming year with projected borrowings.
The Company lost $16,000 in 1996 on the sale of equipment, but had no such
loss in 1995. The Company hopes to avoid future losses on equipment
purchases/sales.
The Company had a net loss for 1996 of ($2,058,742) compared to its net
loss in 1995 of ($908,130). The Company anticipates that the trend of net losses
will continue in 1997 as it continues to incur major expenses in attempting to
start up mining of its Bolivian prospect without initially generating any
significant revenues from mining.
Comparison of Results of Operation for the Fiscal Years Ended December 31,
1995 and 1994
---------------------------------------------------------------------------
During the fiscal year ended December 31, 1994, the Registrant realized a
net loss on operations of $119,354 compared to $908,130 for the fiscal year
ended December 31, 1995. In 1994, $899 in interest income was generated from
business loans and in 1995 no revenue was generated.
Operating expenses increased during 1995 to $815,507 compared to 1994 at
$114,212 as a result of the increase in administrative, travel and professional
costs involved in negotiating and evaluating potential mining prospects. In
addition, only in 1995 did the Company begin activities in mineral prospect
analysis and evaluation and incurred greatly increased expenses as a result of
its attempts to negotiate, evaluate and acquire mineral prospects. It had to
write off $78,000 in expenditures for the Mineral Mountain/Arizona proposed
acquisition. In 1995, the Company issued or agreed to issue stock for services
of $171,983 in relation to operations and attempts to find mining properties.
Accounts payable increased by $215,516 related to ongoing operations. It wrote
off a loan to an investment advisor of $15,000. It received advances or loans
from officers and related parties of $297,846 and repaid $168,811 of such loans
or advances. It issued stock, and agreed to issue stock related to financing
activities that the company valued at $391,693. The Company issued notes for
funds advanced of $110,422.
(b) Liquidity and Capital Resources
At year end 1996, the Company had cash of $11,741 as compared to $32,979 in
1995. Its total current assets were $51,584 at year end 1996 and $42,645 in
1995. The Company investment in exploration and development costs of its
Bolivian mining prospect at 1996 year end, and mining and related equipment,
totaled $762,870 whereas in 1995 the Company had property and equipment of
$34,516.
16
<PAGE>
At year end 1996 the total assets, less depreciation, were $824,760, while
at year end 1995 total assets stood at $79,031.
Other than its cash on hand, the Company had no other capital resources.
Its investment in mining equipment not yet placed in service was illiquid. In
order to fund future operations and capital expenditures, the Company will have
to borrow monies or make private equity placements on terms which may not be
favorable to the Company. The Company's subsidiary, Eagle Mining of Bolivia,
Ltd., committed in its contract with United Cangalli Gold Mining Cooperative,
Ltd. ("UCL") to complete first-phase exploration and open one work front, in
addition to the Cangalli shaft, by April 20, 1997; to open two additional work
fronts by December 6, 1997; and to invest a minimum of $3 million in the
project. Management of the Company's subsidiary is working to meet its
contractual commitments. As of December 31, 1996 the Company had expended
$762,870 in Bolivia, and considers that a major portion of its overhead and
expenses in the United States are allocable toward the $3,000,000 commitment in
its efforts to complete title and commence mining operations in Bolivia. In
addition, subsequent to December 31, 1996, the Company has acquired $1,000,000
worth of recovery and other mining equipment, which will be applied toward the
$3,000,000 commitment to UCL. The Company has also received a commitment from a
Texas bank for a $1,000,000 line of credit, which amount in its entirety will be
allocable to the UCL contract commitment; and has raised additional capital
through private stock purchases. In 1997 the Company will continue in its
efforts to obtain additional capital and mining equipment which it will apply
against the $3 million commitment.
Item 7. Financial Statements and Supplementary Data
Please refer to pages F-1 through F-19.
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
----------------------------------------------------------------
There were no disagreements with the Company's accountants on any matters
of accounting principles, practices or financial statement disclosures during
1996.
17
<PAGE>
PART III
Item 9. Directors and Executive Officers of the Registrant and Compliance with
Section 16(a) of the Exchange Act.
----------------------------------------------------------------------
The following table sets forth certain information concerning the Directors
and Executive Officers of the Registrant as of December 31, 1996 and subsequent
appointments.
Office
Name Age Position Term
- --------------------------------------------------------------------------------
Mary A. Erickson 39 President* 7/4/96 to 2/14/97
Mary A. Erickson 39 Director 11/8/94 to present
Terry C. Turner 44 President & Director 2/14/97 to present
* Resigned as President and was appointed Secretary as of February 14,
1997.
Directors are elected at the annual meeting of shareholders to serve for a
period of one year or until their successors are elected and have qualified.
Vacancies on the Board of Directors are filled by the Board of Directors.
Officers serve at the discretion of the Board of Directors.
BIOGRAPHICAL INFORMATION
- ------------------------
The following biographical information is presented for the present
Officers and Directors of Registrant as of March 31, 1997.
Terry C. Turner, current President and Director (appointed on February 14,
1997). Mr. Turner received a Bachelor of Arts in Political Science (1977) and a
Bachelor of Arts in Spanish (1977) from the University of Utah. He received his
Juris Doctorate in 1980 from Brigham Young University. He is a member of the
Utah State Bar Association and admitted to practice in the State and Federal
Courts of Utah and the 10th Circuit Court of Appeals. He is a member of the
Bolivian College of Lawyers (Bolivian Bar Association) and is the first American
attorney admitted to practice law in Bolivia. Under the Andean Pact Accord, this
also qualifies him to practice in Columbia, Ecuador, Peru and Venezuela.
From 1980-1983 Mr. Turner was a partner in Day, Barney and Tycksen,
Attorneys, in Salt Lake City, Utah, with practice emphasis in mining and natural
resources, international law, business, and litigation. From 1983 to 1989 Mr.
Turner was President of High Andes Mining Co., La Paz, Bolivia. From 1989 to
1991 he was General Counsel to Panworld Minerals International, Inc., a public
company with mineral prospects in North and South America. From 1991 to 1993 Mr.
Turner was General Counsel to Tipuani Development Company, S.A., La Paz,
Bolivia, a gold dredging company. From 1993 to 1995 he was Vice President and
18
<PAGE>
General Counsel to Minas del Glaciar, S.A., La Paz, Bolivia, which was a mineral
exploration company. From 1995 to 1997 Mr. Turner has been in private practice
in La Paz, Bolivia. During the entire period of 1983 through 1997 Mr. Turner has
been affiliated with and "of counsel" to Cordero and Cordero, a La Paz, Bolivia
law firm, dealing with mineral and international law. From January 1996 until
his appointment with Registrant in February 1997, Mr. Turner was corporate
counsel in Bolivia for Golden Eagle International, Inc. and its subsidiaries,
Golden Eagle Bolivia Mining, S.A. and Eagle Mining of Bolivia, Ltd.
Mary A. Erickson, President at December 31, 1996 (July 4, 1996 to February
14, 1997); currently serving as Secretary. Ms. Erickson was the
Secretary/Treasurer of the Company from November 8, 1994 until July 4, 1996,
when she was appointed to the office of President. She resumed her position as
Secretary on February 14, 1997. She has served as a director of the Company from
November 8, 1994 to the present. She is the sole shareholder of Golden Eagle
Mineral Holdings, Inc. Prior to her association with Golden Eagle, Ms. Erickson
was employed as an executive assistant in publishing and administration with
Jones Intercable, Inc. (1984-1987), Jones Spacelink, Ltd. (1987-1988), AIRCOA
Hospitality Services (1988-1989), and CIBER, Inc. (1989-1991). She was an
officer and director of Timberline Consultants, Inc., an investor relations
consulting firm, from January 1991 until September 1, 1994.
Rene Velasquez, 53, President of Golden Eagle Bolivia Mining, S.A. and
Eagle Mining of Bolivia, Ltd. Mr. Velasquez graduated in 1979 from the Major
University of St. Andrews in La Paz, Bolivia with a degree in Economics. He had
previously served in the Bolivian Air Force between 1959 and 1963. He was a
member of the Customs Police from 1964 to 1966. In 1967 he formed the mining
company Minera Velasquez and began working in the Tipuani area from that time
through 1995, either as Minera Velasquez, Bolintex S.R.L., or Burgoa/Velasquez
Joint Venture. Mr. Velasquez was also head of collections for the Bolivian
Internal Revenue Service from 1978-1979. He has been an economic advisor to the
Mayor's Office of the City of La Paz (1992-1993), and economic advisor (1995)
for Canac, a Canadian consulting firm attempting to capitalize ENFE, Bolivia's
national railroad. From 1995 through his employment with GEBM he was General
Manager of CORDEPAZ, the development corporation for the State of La Paz.
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's officers and directors, and persons who
own more than 10% of a registered class of the Company's equity securities, to
file reports of ownership and changes in ownership of equity securities of the
Company with the Securities and Exchange Commission and NASDAQ. Officers,
directors and greater-than-10% shareholders are required by Securities and
Exchange Commission regulations to furnish the Company with copies of all
Section 16(a) filings. No then-current officer or director had failed to file
Form 5 at year end.
19
<PAGE>
Item 10. Executive Compensation
----------------------
The Company paid or accrued a total of $96,142 compensation to the
executive officers as a group for services rendered to the Company in all
capacities during the 1996 fiscal year. No one executive officer received, or
has accrued for his benefit, in excess of $60,000 for the year. No cash bonuses
were or are to be paid to such persons.
The Company does not have any employee incentive stock option plans.
[This space intentionally left blank.]
20
<PAGE>
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE OF EXECUTIVES
Annual Compensation Awards
- ------------------------------------------------------------------------------------------------------------------------------------
Name and Principal Other Annual Restricted Securities Underlying
Position Year Salary ($) Bonus ($) Compensation($) Stock Award(s)($) Options/SARs (#)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
President, 1993 0 0 0 0 0
Ronald A. Knittle**
----------------------------------------------------------------------------------------------------------
1994 0 0 0 0 0
----------------------------------------------------------------------------------------------------------
1995 35,583 0 0 0 0
----------------------------------------------------------------------------------------------------------
1996 12,050 0 0 0 0
- ----------------------------------------------------------------------------------------------------------------------------------
Secretary, 1993 0 0 0 0 0
Mary A. Erickson***
----------------------------------------------------------------------------------------------------------
1994 0* 0 0 0 0
----------------------------------------------------------------------------------------------------------
1995 58,499* 0 0 0 0
----------------------------------------------------------------------------------------------------------
1996 50,400* 0 0 0 0
- ---------------------------------------------------------------------------------------------------------------------------------
President, 1993 0 0 0 0 0
Ronald Sparkman**
----------------------------------------------------------------------------------------------------------
1994 0 0 0 0 0
----------------------------------------------------------------------------------------------------------
1995 0 0 0 0 0
----------------------------------------------------------------------------------------------------------
1996 14,671 0 0 0 0
- ----------------------------------------------------------------------------------------------------------------------------------
Vice President,
Paul Enright** 1993 0 0 0 0 0
----------------------------------------------------------------------------------------------------------
1994 0 0 0 0 0
----------------------------------------------------------------------------------------------------------
1995 24,304 0 0 $14,000 0
----------------------------------------------------------------------------------------------------------
1996 19,021 0 0 0 0
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Designates unpaid accruals for management services.
** Resigned during 1996.
*** Secretary from November 8, 1994 until July 4, 1996; President from July 4,
1996 until February 14, 1997; re-appointed Secretary on February 14, 1997.
Option/SAR Grants Table (None)
21
<PAGE>
Aggregated Option/SAR Exercises in Last Fiscal Year an FY-End Option/SAR
value (None)
Long Term Incentive Plans - Awards in Last Fiscal Year (None)
DIRECTOR COMPENSATION FOR LAST FISCAL YEAR
------------------------------------------
(Except for compensation of Officers who are also Directors which Compensation
is listed in Summary Compensation Table of Executives)
<TABLE>
<CAPTION>
Cash Compensation Security Grants
- -----------------------------------------------------------------------------------------------------
Name Annual Consulting Number of Securities
Retainer Meeting Fees/Other Number of Underlying Options/
Fees($) Fees ($) Fees($) Shares (#) SARs (#)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Mary A. Erickson, 0 0 0 0 0
Director
=====================================================================================================
</TABLE>
Item 11. Security Ownership of Certain Beneficial Owners and Management
---------------------------------------------------------------
The following table sets forth information, as of December 31, 1996, as to
the number of shares of the Registrant's Common Stock owned by (a) beneficial
owners of more than five percent of the Registrant's outstanding Common Stock
who are known by the Registrant, and (b) the Officers and Directors of the
Registrant, individually, an the Officers and Directors of the Registrant as a
group, and (c) the percentage of ownership of the outstanding Common Stock
represented by such shares.
<TABLE>
<CAPTION>
Stock Names and Address Beneficial Percent of
Title of Class of Beneficial Owner Ownership Ownership
- -------------- ------------------- --------- ---------
<S> <C> <C> <C>
Common Stock Mary A. Erickson (*1) 14,697,717 33% (*2)
4949 S. Syracuse St., #300
Denver, CO 80237
</TABLE>
- -------------
*1 Owned indirectly and beneficially as sole shareholder of Golden Eagle
Mineral Holdings, Inc.
*2 Computed not including shares issuable to others at year end.
22
<PAGE>
The following table sets forth information, as of December 31, 1996, with
respect to the beneficial ownership of the Company's $.0001 par value common
stock by the directors and officers of the Company, both individually and as a
group.
<TABLE>
<CAPTION>
Name and address of Beneficial
Ownership Shares owned %Ownership
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Golden Eagle Mineral Holdings, Inc. 14,697,717 33% (*2)
4949 S. Syracuse St., #300
Denver, CO 80237
Mary A. Erickson 14,697,717 33% (*2)
4949 S. Syracuse St., #300 *1
Denver, CO 80237
Present Officers and Directors
as a Group 14,697,717 33% (*2)
</TABLE>
*1 Mary A. Erickson owns these shares indirectly and beneficially as sole
shareholder of Golden Eagle Mineral Holdings, Inc.
*2 Computed not including shares issuable at year end.
Item 12. Certain Relationships and Related Transactions
----------------------------------------------
During 1994, an officer (and former president), Mary Erickson, advanced a
total of $44,107 to the Company. In 1995, the officer advanced additional sums
totaling $265,163, was repaid $160,719, and applied $25,000 against a promissory
note issued the Company in 1994 in connection with the purchase of stock. In
1996, repayment of the advances was agreed to, providing for interest at eight
percent. Also during 1996, the officer loaned the Company an additional $84,500
and was repaid $116,500. As of December 31, 1996, $98,424 plus accrued interest
of $1,134 was owed the officer (a net decrease of $25,727 during 1996). The
loans are unsecured and due on demand. In addition, as of December 31, 1996,
$169,417 owed the officer for out-of-pocket operating expenses and unpaid salary
are included in accounts payable, a net increase of $94,355 during 1996. In the
First Quarter 1997, $39,565 was repaid to the officer in reimbursement of
certain expenses.
During 1995, relatives of an officer (and former president), Mary Erickson,
advanced the Company a total of $32,683 and were repaid $8,092 (amount due as of
December 31, 1995 was $24,591). In 1996, repayment of the advances was agreed
to, providing for interest at twelve percent. Also, during 1996, the officer's
relatives loaned an additional $195,658 to the Company. As of December 31, 1996,
$228,341 plus accrued interest of $16,691 was outstanding. The loans have been
extended to January 1, 2000 and are unsecured. In the First Quarter 1997,
$70,000 was repaid against the advances.
23
<PAGE>
During 1995, the Company agreed to issue 80,000 shares of common stock,
valued at $.07 per share, to a relative of a former president for services. As
of December 31, 1995, the shares had not been issued, and are reflected in the
accompanying financial statements as "issuable." The shares were issued in
October 1996.
During 1995, non-cash transactions consist of a $20,000 promissory note
received from a corporation in partial payment of 800,000 shares of common stock
upon conversion of short-term loans totaling $105,000; issuance of 700,000
common shares and 83,333 common shares issuable to former employees for
services, valued at $.07 per share; issuance of 1,309,000 common shares and
80,000 common shares issuable to consultants for services, valued at $.07 per
share (1,080,000 shares) and $.10 per share (309,000 shares); and, 165,000
common shares issuable as additional consideration to an individual for making a
$50,000 loan to the Company, valued at $.07 per share.
During 1996, non-cash transactions consist of 5,448,985 common shares to
former employees and others for services with an estimated total value of
$1,230,842 (316,667 shares at $.07 per share; 900,000 shares at $.15625 per
share; 2,017,318 shares at $.20 per share; and 2,215,000 shares at $.30 per
share).
During 1996, the Company issued $188,500 of 6% Convertible Debentures to
International Futures Holdings, Inc., a foreign corporation, which are
convertible to common stock at the lesser of 80% of the NASDAQ closing bid price
the day prior to notice or $.30 per share. International Futures Holdings, Inc.
currently owns 1,750,000 shares; if the debentures were converted at $.30 it
would have owned 5.34% of the Company's common stock at December 31, 1996.
On September 18, 1996, the Company initiated an agreement to purchase
certain mining equipment located in Bolivia from an individual for $20,000 cash
and convertible debentures totaling $1 million. Closing of the agreement was on
February 10, 1997. The debentures holder has subsequently notified the Company
of his desire to convert his debentures into 2,993,191 shares of common stock.
All voting rights associated with the stock issued are to be placed in a voting
trust with the Company's Board of Directors as trustee.
On February 11, 1997, a Texas bank loaned the Company $240,000 pursuant to
a short-term bridge loan at the bank's prime rate, due August 1, 1997. On March
6, 1997, the same bank committed to a loan to the Company for $1 million
pursuant to a revolving line of credit agreement due June 1, 1998. The loan will
bear interest at the prime rate (8 1/2% as of March 28, 1997). In addition, the
loan will be personally guaranteed by an officer of the Company (and its
principal shareholder), including a pledge of 13,500,000 shares of Common Stock
24
<PAGE>
of the Company owned by a corporation wholly-owned by the officer. The loan will
be further secured by certain assets of the same officer's relatives. As
consideration for the relatives' guarantees of the $1 million loan, the Company
has agreed to issue a total of 20,000,000 shares of Common Stock. The proceeds
from the $1 million loan will retire the earlier $240,000 bank bridge loan.
Four notes payable totaling $450,000 at 10.5% interest were issued from
January through July 1996 to a relative of Mary Erickson, an officer. Said notes
have been extended to January 1, 2000, are unsecured and personally guaranteed
by the officer and her husband.
Loans totaling $228,341 were issued from January 1995 through December 1996
from relatives of Mary Erickson, an officer. These loans, which bear interest at
12% and are unsecured, have been extended to January 1, 2000. In February 1997,
payments totaling $70,000 were made against these loans.
The Company has also agreed to issue an additional 5,000,000 shares of
Common Stock in payment of $25,000 interest and for extension of the $450,000
loan and the $228,341 loan made to the Company by relatives of an officer (and
former president).
Also, as part of the renewal agreement, the Company agreed to assume a
$165,000 personal loan of an officer (and former president) from a relative, as
a partial offset to total amounts owed the same officer of $268,975 as of
December 31, 1996 (consisting of $98,424 in loans, $1,134 of accrued interest
and $169,417 of out-of-pocket expenses and unpaid salary). The $165,000 loan,
which was previously advanced to the Company by the officer, has been extended
to January 1, 2000 and is unsecured, bearing interest at the prime rate (8 1/2%
at March 28, 1997).
Borrowings from Related Parties
- -------------------------------
Loans totaling $98,424 were issued from December 1994 through December 1996
by Mary Erickson, an officer. These loans bear interest at 8%, are unsecured,
and due on demand. In the First Quarter 1997, payments totaling $39,565 were
made to the officer against these loans.
Non-interest bearing advances of $41,900 from March 1996 through December
1996 from Rene Velasquez, an officer of GEBM and EMB, are unsecured and due on
demand.
A note for $5,000 in December 1996 from a relative of Mary Erickson, an
officer, was unsecured and due on demand. This note was subsequently paid in
March, 1997.
25
<PAGE>
An officer, Mary Erickson, retained 3% of the stock ownership of
newly-formed Eagle Mining of Bolivia, Ltd., an 84% owned subsidiary of the
Company, in partial consideration of the loans and advances made to the Company
by her and her family.
On January 17, 1997 relatives of the former president, Mary Erickson,
loaned the Company $10,000.
Other Arrangements to Issue Common Stock
- ----------------------------------------
During February and March 1996, the Company issued a total of 21,150 shares
of common stock to two individuals (non-affiliates) for a total of $5,530 ($.25
and $.46 per share).
A $50,000 note payable, due in October 1998, was convertible to common
stock at the lender's option at the bid price on October 16, 1996 (approximately
$.46875 per share). This note was subsequently paid in full, with accrued
interest, on March 14, 1997.
In addition, on March 27, 1997 an agreement was reached to convert another
$50,000 note payable, including accrued interest, to 260,000 shares of common
stock of the Company.
As a result of certain private purchases in 1996, 457,000 shares of common
stock were issuable at year end.
[This space intentionally left blank.]
26
<PAGE>
Item 13. Exhibits, Financial Statement Schedules and Reports on Form 8-K
----------------------------------------------------------------
The following documents are filed as part of this report: Page
----
Reports of Independent Public Accountants F-2 & F-3
Consolidated Balance Sheet as of December 31, 1996 F-4
Consolidated Statements of Operations for the years ended
December 31, 1996 and 1995 and from July 21, 1988
(inception of development stage) through
December 31, 1996 F-5
Consolidated Statements of Cash Flows for the years ended
December 31, 1996 and 1995 and from July 21, 1988
(inception of development stage) through
December 31, 1996 F-6
Consolidated Statements of Stockholders' Equity (Deficit)
for the years ended December 31, 1996 and 1995 and from
July 21, 1988 (inception of development
stage) through December 31, 1996 F-7
Notes to Consolidated Financial Statements F-8
The following exhibits are filed with this Form 10-KSB or incorporated
herein by the following references:
Reports on Form 8-K:
September 18, 1996
December 19, 1996
Exhibits:
Registrant hereby incorporates by reference all exhibits identified in Par.
III, Item 1 Exhibit Index of its Report on Form 10-SB, effective June 17, 1994.
27.1 Financial Data Schedule.
No other exhibits.
27
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 EAGLE INTERNATIONAL, INC.
(Registrant)
Date: March 28, 1997 /s/ Terry C. Turner
------------------ --------------------------------------
President
Pursuant to the Securities Exchange Act of 1934, this report has been signed
below by the following persons on behalf of the Registrant and in the capacities
and on the dates indicated.
GOLDEN EAGLE INTERNATIONAL, INC.
(Registrant)
Date: March 28, 1997 /s/ Terry C. Turner
----------------- ------------------------------------
Director
/s/ Mary A. Erickson
------------------------------------
Director
28
<PAGE>
- --------------------------------------------------------------------------------
Golden Eagle International, Inc.
(A Development Stage Company)
Financial Statements
Table of Contents
================================================================================
PAGE
----
Reports of Independent Public Accountants F-2 and F-3
Financial Statements
Consolidated Balance Sheet F-4
Consolidated Statement of Operations F-5
Consolidated Statement of Cash Flows F-6
Consolidated Statement of Changes in
Stockholders' Equity (Deficit) F-7
Notes to Consolidated Financial Statements F-8
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANT
March 28, 1997
To the Board of Directors
Golden Eagle International, Inc.
Denver, Colorado
I have audited the accompanying consolidated balance sheet of Golden Eagle
International, Inc. (a development stage company) and subsidiaries as of
December 31, 1996, and the related consolidated statements of operations, cash
flows and changes in stockholders' equity (deficit) for the years ended December
31, 1996 and 1995, and the related amounts included in the cumulative amounts
for the period from July 21, 1988 (inception and beginning of the development
stage) to December 31, 1996. These financial statements are the responsibility
of the Company's management. My responsibility is to express an opinion on these
financial statements based on my audits.
I conducted my audits in accordance with generally accepted auditing standards.
Those standards require that I 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.
I believe that my audits provide a reasonable basis for my opinion.
I did not audit the financial statements of Golden Eagle Bolivia Mining, S.A., a
93% owned subsidiary, which statements reflect total assets of $739,630 as of
December 31, 1996. Those statements were audited by other auditors whose report
has been furnished to me, and my opinion, insofar as it relates to the amounts
included for Golden Eagle Bolivia Mining, S.A. as of December 31, 1996 and for
the year then ended, is based solely on the report of the other auditors.
In my opinion, the accompanying consolidated financial statements referred to
above present fairly, in all material respects, the financial position of Golden
Eagle International, Inc. at December 31, 1996, and the results of its
operations and its cash flows for the years ended December 31, 1996 and 1995,
and the related amounts included in the cumulative amounts for the period from
July 21, 1988 (beginning of the development stage) to December 31, 1996, in
conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been presented assuming
that the Company will continue as a going concern, which contemplates the
realization of assets and the satisfaction of liabilities in the normal course
of business. As more fully discussed in Note A to the financial statements, the
Company had significant working capital and stockholders' deficits as of
December 31, 1996 and has incurred substantial losses since its inception. The
Company presently has no product or producing properties and requires
significant additional financing to satisfy its outstanding obligations and
commence operations. Unless the Company successfully obtains suitable
significant additional financing as discussed in Note A, there is substantial
doubt about the Company's ability to continue as a going concern. Management's
plans in regard to these matters are also discussed in Note A. The financial
statements do not include any adjustments to reflect the possible future effect
on the recoverability and classification of assets or the amounts and
classification of liabilities that may result from the outcome of this
uncertainty.
/s/ GAYLEN R. HANSEN
----------------------------------
Gaylen R. Hansen
Certified Public Accountant
Greenwood Village, Colorado
F-2
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Shareholders
Golden Eagle Bolivia Mining S.A.
La Paz
We have audited the accompanying balance sheet of Golden Eagle Bolivia Mining
S.A. as of December 31, 1996, and the related statement of cash flows from
January 23, 1996 (inception) to December 31, 1996. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements, based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Golden Eagle Bolivia Mining
S.A. as of December 31, 1996, and its cash flows for the period from January 23,
1996 to December 31, 1996, in conformity with generally accepted accounting
principles in the United States.
The financial statements referred to above assume Golden Eagle Bolivia Mining
S.A. will continue as a going concern which contemplates the realization of
assets and the satisfaction of liabilities in the normal course of business.
Currently, Golden Eagle Bolivia Mining S.A. is not in a commercial production
stage and does not have producing properties. The Company requires significant
additional financing to satisfy its needs and commence operations. Unless the
Company obtains suitable additional financing there is substantial doubt about
the Company's ability to continue as a going concern.
BERTHIN AMENGUAL Y ASOCIADOS
Member of Ernst & Young International
/s/ HUGO BERTHIN AMENGUAL
------------------------------------
Lic. Hugo Berthin Amengual (Partner)
MAT. PROF. No. CAUB 0482
RUC 2190931
La Paz - Bolivia
April 9, 1997
F-3
<PAGE>
- --------------------------------------------------------------------------------
Golden Eagle International, Inc.
(A Development Stage Company)
Consolidated Balance Sheet
================================================================================
December 31,
1996
- --------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS
Cash $ 11,741
Prepaid expense other costs 30,897
Income tax refund receivable 8,946
- --------------------------------------------------------------------------------
Total current assets 51,584
- --------------------------------------------------------------------------------
PROPERTY AND EQUIPMENT
Exploration and development costs of mining prospect 570,853
Mining equipment and vehicles not placed in service 158,448
Mining equipment 33,569
Office equipment 13,342
- --------------------------------------------------------------------------------
776,212
Less accumulated depreciation (7,811)
- --------------------------------------------------------------------------------
768,401
- --------------------------------------------------------------------------------
DEPOSITS 4,775
- --------------------------------------------------------------------------------
$ 824,760
================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Notes payable and loan $ 89,558
Loans from related parties 46,900
Convertible debentures 188,500
Accounts payable 400,581
Accrued interest 74,566
Other accrued liabilities 40,000
- --------------------------------------------------------------------------------
Total current liabilities 840,105
- --------------------------------------------------------------------------------
LONG-TERM DEBT 826,765
- --------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred stock, par value $.01 per share;
shares authorized 10,000,000; none issued --
Common stock, par value $.0001 per share; authorized
800,000,000 shares; issued and outstanding
44,517,143 shares 4,452
Common stock issuable, 2,384,500 shares 446,500
Additional paid-in capital 1,856,949
Deficit accumulated during the development stage (3,150,011)
- --------------------------------------------------------------------------------
Total stockholders' (deficit) (842,110)
- --------------------------------------------------------------------------------
$ 824,760
================================================================================
F-4
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Golden Eagle International, Inc.
(A Development Stage Company)
Consolidated Statement of Operations
===============================================================================================================
July 21, 1988
(Inception)
Year Ended Through
December 31, December
1996 1995 31, 1996
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUE
Interest from loans $ -- $ -- $ 11,727
Commissions -- -- 6,708
Other -- -- 3,681
- ---------------------------------------------------------------------------------------------------------------
Total revenue -- -- 22,116
- ---------------------------------------------------------------------------------------------------------------
OPERATING EXPENSES 1,982,768 815,507 3,075,650
- ---------------------------------------------------------------------------------------------------------------
OPERATING (LOSS) (1,982,768) (815,507) (3,053,534)
- ---------------------------------------------------------------------------------------------------------------
OTHER INCOME (EXPENSE)
Gain on marketable securities 19,167 9,666 124,336
Loss on sale of equipment (16,000) -- (17,314)
Interest expense (79,141) (9,289) (106,925)
Interest income -- -- 1,726
Write off advances to Mineral Mountain Mining Co. -- (78,000) (78,000)
Write off loan to investment advisor -- (15,000) (15,000)
- ---------------------------------------------------------------------------------------------------------------
Total other income (loss) (75,974) (92,623) (91,177)
- ---------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) $ (2,058,742) $ (908,130) $ (3,144,711)
===============================================================================================================
EARNINGS (LOSS) PER SHARE $ (.05) $ (.03) $ (.29)
===============================================================================================================
WEIGHTED AVERAGE SHARES OUTSTANDING 44,130,185 31,852,522 10,964,608
===============================================================================================================
F-5
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
Golden Eagle International, Inc.
(A Development Stage Company)
Consolidated Statement of Cash Flows
==================================================================================================================
July 21, 1988
(Inception)
Year Ended Through
December 31, December
1996 1995 31, 1996
---------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $(2,058,742) $ (908,130) $(3,144,711)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Stock issued and issuable for services 1,230,842 171,983 1,405,919
Depreciation expense 7,006 805 10,625
Loss (gain) from investments (19,167) (9,666) (124,336)
Write off advances to Mineral Mountain Mining Co. -- 78,000 78,000
Write off loan to investment advisor -- 15,000 15,000
Loss on retirement of equipment -- -- 1,314
Fair value of officer salary expensed -- -- 20,000
Changes in operating assets and liabilities:
Marketable securities 9,666 -- 9,666
Prepaid expense and other costs (30,897) -- (30,897)
Income tax refund receivable (8,946) -- (8,946)
Accounts payable and accrued liabilities 258,440 215,516 515,147
- ------------------------------------------------------------------------------------------------------------------
Net cash flows (used for) operating activities (611,798) (436,492) (1,253,219)
- ------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from investment sales 29,589 -- 184,380
Investment in property and equipment (741,696) (34,516) (780,240)
Deposits (2,100) (2,675) (4,775)
Advances to Mineral Mountain Mining Co. -- (68,000) (78,000)
Loan to investment advisor -- (15,000) (15,000)
Purchase of investment securities -- -- (59,478)
Purchase of subsidiary (net of cash acquired) -- -- (2,700)
- ------------------------------------------------------------------------------------------------------------------
Net cash flows (used for) investing activities (714,207) (120,191) (755,813)
- ------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Loans from related parties 812,023 297,846 1,209,880
Repayment of loans from related parties (116,500) (168,811) (333,202)
Proceeds from notes payable 29,136 110,422 139,558
Repayments of bank note payable (10,422) -- (10,422)
Proceeds from convertible debentures 188,500 -- 188,500
Common stock issued and issuable 402,030 391,693 889,523
Stock issuance costs -- (41,644) (63,064)
- ------------------------------------------------------------------------------------------------------------------
Net cash flows from financing activities 1,304,767 589,506 2,020,773
- ------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH (21,238) 32,823 11,741
CASH - BEGINNING OF PERIOD 32,979 156 --
- ------------------------------------------------------------------------------------------------------------------
CASH - END OF PERIOD $ 11,741 $ 32,979 $ 11,741
==================================================================================================================
F-6
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Golden Eagle International, Inc.
(A Development Stage Company)
Consolidated Statement of Stockholders' Equity (Deficit)
====================================================================================================================================
Common Stock Common Additional
------------------ Stock Paid-in Stockholder Accumulated
Shares Amount Issuable Capital Receivable Deficit Total
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Inception July 21, 1988 -- $ -- $ -- $ -- $ -- $ -- $ --
Issuance of common stock:
June 1, 1989 for cash at
$.00006 per share 1,666,665 167 -- (67) -- -- 100
June 30, 1990 for cash at
$.03 per share 300,000 30 -- 8,970 -- -- 9,000
July 3, 1990 for cash at
$.003 per share 366,665 37 -- 1,063 -- -- 1,100
50,000 to 1 stock split -- -- -- 4,900 -- -- 4,900
January and March 1991 for
cash at $.30074 per share
from stock offering 268,335 27 -- 59,253 -- -- 59,280
November 1, 1993 - deficit
of acquired subsidiary -- -- -- -- -- (5,300) (5,300)
Acquisition of subsidiary -- -- -- 2,600 -- -- 2,600
Fair value of officer salary -- -- -- 20,000 -- -- 20,000
November 7, 1994, convert
debt to equity at $.003 per share 2,640,830 264 -- 7,659 -- -- 7,923
November 8, 1994, $.00125 per share:
Note receivable from affiliate 20,000,000 2,000 -- 23,000 (25,000) -- --
Legal services 375,000 37 -- 432 -- -- 469
Other (70) -- -- 2,625 -- -- 2,625
Net loss for the periods -- -- -- -- -- (177,839) (177,839)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1994 25,617,425 2,562 -- 130,435 (25,000) (183,139) (75,142)
Issued for cash in June and August
($.01 to $.05 per share), less
$41,644 in stock issuance costs 10,052,250 1,005 -- 164,044 -- -- 165,049
Issued for services ($.07 per share) 2,009,000 201 -- 148,799 -- -- 149,000
Convert notes payable
($.15625 per share) 800,000 80 -- 124,920 (20,000) -- 105,000
Payment of note by affiliate -- -- -- -- 25,000 -- 25,000
Issuable for cash ($.125 to
$.282 per share), 417,500 shares -- -- 80,000 -- -- -- 80,000
Issuable for services and additional
consideration for loan
($.07 per share),
328,333 shares -- -- 22,983 -- -- -- 22,983
Net loss for the year -- -- -- -- -- (908,130) (908,130)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1995 38,478,675 3,848 102,983 568,198 (20,000) (1,091,269) (436,240)
Collection of receivable
January 9, 1996 -- -- -- -- 20,000 -- 20,000
Shares previously subscribed issued 568,333 57 (52,983) 52,926 -- -- --
Issued for cash ($.05 to
$.25 per share) 21,150 2 -- 5,528 -- -- 5,530
Issuable for cash ($.10 to
$.20 per share),
2,207,000 shares -- -- 396,500 -- -- -- 396,500
Issued for services ($.07 to
$.30 per share) 5,448,985 545 -- 1,230,297 -- -- 1,230,842
Net loss for the year -- -- -- -- -- (2,058,742) (2,058,742)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1996 44,517,143 $4,452 $446,500 $1,856,949 $ -- $(3,150,011) $ (842,110)
====================================================================================================================================
F-7
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
Golden Eagle International, Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
================================================================================
Note A - Organization and Business
Organization and Nature of Business
- -----------------------------------
Golden Eagle International, Inc. (a development stage company, the "Company",)
was incorporated in Colorado July 21, 1988. The Company is to engage in the
business of acquiring, developing, and operating gold, silver and other precious
mineral properties. Activities of the Company since November 1994 have been
primarily devoted to organizational matters and identification and limited
sampling of precious mineral properties considered for acquisition. Presently,
substantially all of the Company's operations and business interests are focused
on a prospect in the Tipuani River area of the Republic of Bolivia.
Organization of Subsidiaries and Bolivian Mining Venture
- --------------------------------------------------------
In January 1996, the Company organized a Bolivian corporation, Golden Eagle
Bolivia Mining, S.A. ("GEBM"). The Company has a 93% ownership in GEBM; the
remaining 7% is owned by two Bolivian nationals. In October 1996 a sister
subsidiary was formed, Eagle Mining of Bolivia, Ltd. ("EMB"), for the purpose of
assuming, together with GEBM, the responsibilities under a contract with a
Bolivian gold mining cooperative, United Cangalli Gold Mining Cooperative, Ltd.
("UCL"). The Company has an 84% ownership in EMB; 13% is owned by a Bolivian
national, and the remaining 3% is personally owned by an officer (and former
president). As a shareholder in GEBM, the Company has elected to dissolve GEBM
and cease all operations in its name after the First Quarter 1997. All
continuing operations by the Company in Bolivia will be carried out by EMB
commencing in the Second Quarter 1997.
On January 25, 1996, GEBM entered into an agreement with UCL for 25 years, with
an option for an additional 25 years, to explore and mine a group of mining
concessions owned by UCL. That agreement, while binding according to GEBM's
Bolivian counsel, was never "protocolized" (recorded by the Bolivian Notary of
Mines). A new agreement was completed between EMB and UCL and was protocolized
on November 11, 1996.
The mining agreement with UCL provides for a gross royalty interest of 18% in
gold production to UCL and commits the Company to complete first-phase
exploration and open one work front, in addition to the Cangalli shaft, by April
20, 1997; to open two additional work fronts by December 6, 1997; and to invest
a minimum of $3 million in the project. In addition, EMB is obligated to provide
UCL $200,000: $100,000 as a non-interest bearing loan and $100,000 in the form
of a grant. As of December 31, 1996, the $100,000 loan had been funded.
F-8
<PAGE>
- --------------------------------------------------------------------------------
Golden Eagle International, Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
================================================================================
Going Concern Considerations
- ----------------------------
The accompanying financial statements have been presented assuming the Company
will continue as a going concern, which contemplates the realization of assets
and the satisfaction of liabilities in the normal course of business. The
Company had significant working capital and stockholders' deficits as of
December 31, 1996 and has incurred substantial losses since its inception. The
Company presently has no product or producing properties and requires
significant additional financing to satisfy its outstanding obligations and
commence operations. Unless the Company successfully obtains suitable
significant additional financing, there is substantial doubt about the Company's
ability to continue as a going concern. Management's plans to address these
matters include proposed private placements of stock, obtaining short-term
loans, putting properties currently under contract into production, and the
acquisition of operating properties that will provide cash flow. The financial
statements do not include any adjustments to reflect the possible future effect
on the recoverability and classification of assets or the amounts and
classification of liabilities that may result from the outcome of this
uncertainty.
Note B - Summary of Significant Accounting Policies
Principles of Consolidation
- ---------------------------
The financial statements include the accounts of Golden Eagle International,
Inc. and its subsidiaries Golden Eagle Bolivia Mining, S.A. and Eagle Mining of
Bolivia, Ltd. All inter-company transactions and balances have been eliminated.
Foreign Currency Translation
- ----------------------------
The Company's primary functional currency is the U.S. dollar. Its foreign
subsidiaries translate monetary assets and liabilities at the year-end exchange
rates while non-monetary items are translated at historical rates. Income and
expense accounts are translated at the average rates in effect during the year,
except for depreciation which is translated at historical rates. Gains or losses
from changes in exchange rates are recognized in the year of occurrence.
Use of Estimates
- ----------------
Preparation of financial statements in conformity with generally accepted
accounting principles requires Management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results inevitably will differ from those estimates, and such differences
may be material to the financial statements.
F-9
<PAGE>
- --------------------------------------------------------------------------------
Golden Eagle International, Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
================================================================================
Marketable Securities
- ---------------------
Marketable securities consist of equity securities stated at fair market value
in accordance with Statement of Financial Standard No. 115, "Accounting for
Certain Investments in Debt and Equity Securities." Market values are based on
quoted prices. Realized and unrealized gains and losses are computed using the
first-in, first-out method of determining the cost of securities.
Property and Equipment
- ----------------------
Property and equipment are recorded at cost. Costs associated with the
acquisition, exploration and development of mining prospects are capitalized on
a country-by-country basis, subject to a limitation so as not to exceed the
present value of future net revenues from estimated production. Maintenance and
repair costs are charged to expense as incurred, and renewals and improvements
that extend the useful life of assets are capitalized.
Depreciation is computed using the straight-line method over the assets'
estimated useful lives which range from five to seven years for office equipment
and seven years for mining equipment. After mining properties have been
evaluated, associated capitalized costs are amortized on a unit-of- production
method based on proven reserves.
Income Taxes
- ------------
The Company has adopted the provisions of Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes", which incorporates the use of
the asset and liability approach of accounting for income taxes. The asset and
liability approach requires the recognition of deferred tax assets and
liabilities for the expected future consequences of temporary differences
between the financial reporting basis and tax basis of assets and liabilities
(see Note D).
Statement of Cash Flows Information and Supplemental Non-Cash Financing
Activities
- --------------------------------------------------------------------------------
Cash and cash equivalents include cash and short-term investments with original
maturities of three months or less. During 1996 and 1995, the Company paid
interest of $13,258 and none, respectively.
1996 non-cash transactions consist of issuance of 5,448,985 common shares to
employees and others for services with an estimated total value of $1,230,842.
F-10
<PAGE>
- --------------------------------------------------------------------------------
Golden Eagle International, Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
================================================================================
1995 non-cash transactions consist of a $20,000 promissory note received from a
corporation in partial payment of 800,000 shares of common stock upon conversion
of short-term loans totaling $105,000 (see Note E); issuance of 700,000 common
shares and 83,333 common shares issuable to former employees for services,
valued at $.07 per share; issuance of 1,309,000 common shares and 80,000 common
shares issuable to consultants for services, valued at $.07 per share (1,080,000
shares) and $.10 per share (309,000 shares); and 165,000 common shares issuable
as additional consideration to an individual for making a $50,000 loan to the
Company, valued at $.07 per share (see Note C).
Earnings (Loss) Per Share
- -------------------------
Earnings (loss) per share of common stock are computed using the weighted
average number of shares outstanding during each period plus common equivalent
shares (in periods in which they have a dilutive effect). Weighted average
shares include common shares issuable from the date they became issuable.
[This space intentionally left blank.]
F-11
<PAGE>
- --------------------------------------------------------------------------------
Golden Eagle International, Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
================================================================================
Note C - Long-term Debt and Notes Payable
6% Convertible debentures issued April through
June 1996 to a foreign corporation, due September
15, 1997, convertible to common stock at the
lesser of 80% of the closing bid price the day
prior to notice or $.30 per share. $188,500
15% Note payable dated April 5, 1995 to an
individual, due July 5, 1995. Personally
guaranteed by an officer and her husband and
200,000 shares of common stock. (On March 27,
1997, the note holder elected to convert the note
and related accrued interest to 260,000 shares of
common stock - see Note H.) 50,000
10% Note payable to an individual, due October
1998, convertible to common stock at $.46875 per
share. In addition, 165,000 shares of common stock
was issued February 1, 1996 (issuable at December
31, 1995) as additional consideration. (The note
was paid March 14, 1997.) 50,000
Non-interest bearing equipment loans in 1996 from
a Bolivian gold mining cooperative, net of
$104,092 loaned the cooperative. Due July 1, 1997. 23,558
Other 6% to 8% notes payable, unsecured. ($5,000
subsequently paid.) 16,000
Borrowings from Related Parties:
- --------------------------------
10.5% notes payable issued from January through
July 1996 to a relative of an officer, unsecured,
due January 1, 2000, personally guaranteed by the
officer and her husband (see Note H). 450,000
12% loans issued from January 1995 through
December 1996 from relatives of an officer,
unsecured, due January 1, 2000 (see Note H). 228,341
8% loans issued from December 1994 through
November 1996 by an officer (and former
president), unsecured, due January 1, 2000 (see
Note H). 98,424
Non-interest bearing advances from March 1996
through December 1996 from an officer of a
subsidiary, unsecured, due on demand. 41,900
12% loan in December 1996 from a relative of an
officer, unsecured, due on demand. (This loan was
paid in March 1997). 5,000
---------
1,151,723
Less current maturities (324,958)
---------
Long-term maturities $ 826,765
===========
F-12
<PAGE>
- --------------------------------------------------------------------------------
Golden Eagle International, Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
================================================================================
Note D - Income Taxes
As of December 31, 1996, the Company had net operating loss carryforwards
totaling approximately $3,074,000 that may be offset against future taxable
income, if any. These loss carryforwards expire in varying amounts from 2005
through 2011. Furthermore, use of the loss carryforwards are limited by certain
changes in the Company's ownership.
A tax benefit has not been reported in the accompanying financial statements for
the operating loss carryforwards because the Company is uncertain as to the
likelihood of utilization. Accordingly, the approximate tax benefit of $461,000
of the loss carryforward has been offset by a valuation allowance of the same
amount.
Note E - Stockholders' Equity
Authorized Shares
- -----------------
The Company initially authorized 10,000 shares of no par value common stock. On
June 1, 1990, the Company authorized a 50,000-for-one stock split and authorized
800,000,000 shares of $.0001 par value common stock and 10,000,000 shares of
$.01 par value preferred stock, and additional capital of $4,900 was contributed
to allow enough equity for the split to take place.
Common Stock Issued
- -------------------
On June 1, 1989, the Company issued 1,666,665 shares of common stock for cash of
$100.
In 1990, the Company issued 300,000 shares of common stock for cash at $.03, or
$9,000; and 366,665 shares of common stock to individuals for cash at $.003 per
share, or $1,100.
From January through April 1991, the Company met the minimum funding
requirements of a stock offering and sold 268,335 units at $.30 per unit which
consisted of one share of common stock and four warrants to purchase one
additional share each of common stock at $.60. After deferred offering costs of
$21,221, the Company received net proceeds of $59,280.
On November 7, 1994, the Company issued 2,640,830 shares stock for a reduction
of amounts owed related parties in the amount of $7,923 ($.003 per share).
F-13
<PAGE>
- --------------------------------------------------------------------------------
Golden Eagle International, Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
================================================================================
On November 8, 1994, the Company issued 20,000,000 common restricted shares to a
corporation solely owned by a former president of the Company. Consideration for
the common shares (valued at $.00125) was a $25,000 promissory note, secured by
equipment, at 10% interest, due on demand. The note receivable was satisfied in
1995 as a result of application of 1995 advances from the former president in
excess of the outstanding balance.
Also on November 8, 1994, 375,000 common restricted shares valued at $.00125
were issued to an attorney for services.
During 1995, the Company issued a total of 10,052,250 shares of common stock to
individuals for a total of $206,693 (ranging from approximately $.01 to $.05 per
share) and incurred $41,644 in stock issuance costs, for net cash proceeds to
the Company of $165,049.
During 1995, a total of 2,009,000 shares of common shares were issued to
employees for services (700,000 shares valued at $.07 per share) and to
consultants for services (1,000,000 shares valued at approximately $.07 and
309,000 shares at approximately $.10 per share).
In August and September 1995, a total of 800,000 shares of common stock were
issued a corporate investor for $125,000 ($.15625 per share), consisting of
conversion of $105,000 of short-term loans made the Company in August through
October 1995, and a $20,000 receivable which was subsequently paid January 9,
1996.
During February and March 1996, the Company issued a total of 21,150 shares of
common stock to two individuals (non-affiliates) for a total of $5,530 ($.25 and
$.46 per share).
During 1996, a total of 5,448,985 shares of common stock were issued to
employees and others for services with an estimated total value of $1,230,842
(316,667 shares at $.07; 900,000 shares at $.15625 per share; 2,017,318 shares
at approximately $.20 per share; and, 2,215,000 shares at $.30 per share).
Common Stock Issuable
- ---------------------
As of December 31, 1995, a total of 745,833 shares of common stock were issuable
for the following: 177,500 shares for $50,000 cash ($.282 per share); 240,000
shares for $30,000 cash ($.125 per share); 83,333 shares for employee services
(valued at $.07); 80,000 shares to a consultant for services (valued at $.07 per
share); and 165,000 shares to an individual as additional consideration for
making a $50,000 loan to the Company (valued at $.07 per share). During 1996,
with exception of the 177,500 shares subscribed for cash, the foregoing were
issued.
F-14
<PAGE>
- --------------------------------------------------------------------------------
Golden Eagle International, Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
================================================================================
As of December 31, 1996, a total of 2,384,500 shares of common stock were
issuable for stock subscribed for cash (including 177,500 shares originally
subscribed in 1995). The additional shares issuable as of December 31, 1996 were
for cash as follows: 425,000 shares ($.10 per share); 32,000 shares ($.125 per
share); and, 1,750,000 shares ($.20 per share) by the holder of the Company's
Convertible Debentures (see below and Note C).
Convertible Debt
- ----------------
During 1996, the Company issued $188,500 of 6% Convertible Debentures to a
foreign corporation which are convertible to common stock at the lesser of 80%
of the NASDAQ closing bid price the day prior to notice or $.30 per share (see
Note C).
On March 27, 1997, the holder of a $50,000 note payable agreed to convert the
note and accrued interest into 260,000 shares of common stock (see Note C).
Note F - Related Party Transactions
During 1994, an officer (and former president) advanced a total of $44,107 to
the Company. In 1995, the officer advanced additional sums totaling $265,163,
was repaid $160,719, and applied $25,000 against a promissory note issued the
Company in 1994 in connection with the purchase of stock. In 1996, repayment of
the advances was agreed to, providing for interest at eight percent. Also during
1996, the officer loaned the Company an additional $84,500 and was repaid
$116,500. As of December 31, 1996, $98,424 plus accrued interest of $1,134 was
owed the officer (a net decrease of $25,727 during 1996). The loans are
unsecured and due upon demand. In addition, as of December 31, 1996, $169,417
owed the officer for out-of pocket operating expenses and unpaid salary are
included in accounts payable, a net increase of $94,355 during 1996. As of
December 31, 1996 a total of $268,975 was owed the officer for loans, accrued
interest and amounts included in accounts payable. On March 22, 1997 the Company
assumed $165,000 of other obligations of the officer (see Note H).
During 1996, the officer (and former president) discussed above received 3% of
the stock ownership of Eagle Mining of Bolivia, Ltd. in partial consideration of
the loans and advances made to the Company by the officer and her family.
F-15
<PAGE>
- --------------------------------------------------------------------------------
Golden Eagle International, Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
================================================================================
During 1996, four one-year notes payable, totaling $450,000 at an interest rate
of 10 1/2%, were issued to a relative of an officer (and former president). The
notes are unsecured and are personally guaranteed by the officer (and former
president) and her husband. On March 22, 1997, the notes were renewed with an
extended due date of January 1, 2000 (see Note H).
During 1995, relatives of an officer (and former president) advanced the Company
a total of $32,683 and were repaid $8,092 (amount due as of December 31, 1995
was $24,591). In 1996, repayment of the advances was agreed to, providing for
interest at twelve percent. Also during 1996, the officer's relatives loaned an
additional $195,658 to the Company. As of December 31, 1996, $228,341 plus
accrued interest of $16,691 is outstanding. The loans are unsecured. On March
22, 1997 the notes were renewed with an extended due date of January 1, 2000
(see Note H).
During 1995, the Company agreed to issue 80,000 shares of common stock, valued
at $.07 per share, to a relative of a former president for services. As of
December 31, 1995, the shares had not been issued, and are reflected in the
accompanying financial statements as "issuable". The shares were issued in
October 1996.
Note G - Commitments and Contingencies
Securities and Exchange Commission Investigation
- ------------------------------------------------
There is an active civil investigation of the Company and its officers by the
Denver Regional Office of the Securities and Exchange Commission into violations
of the Securities Act of 1933 and Securities Exchange Act of 1934. There is no
disposition of this matter as of March 28, 1997, but it could result in SEC
actions against the Company and its officers, directors, or control shareholders
for injunctive relief and penalties.
Disagreement with Consultant
- ----------------------------
During 1995, the Company engaged a person it believed was an independent mining
consultant. In 1996, the consultant claimed the Company liable for unpaid
services and expenses totaling $78,440. The Company believes the consultant did
not provide the services contracted, usurped business opportunities, and
tortiously interfered with the Company. No litigation has been filed to date and
the Company is still assessing damages that it has incurred as a result of the
consultant's conduct. An evaluation as to the outcome of this matter cannot be
made at this time.
F-16
<PAGE>
- --------------------------------------------------------------------------------
Golden Eagle International, Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
================================================================================
MMMC and Silver Bar Mining Prospect
- -----------------------------------
During 1994, a corporation owned by an officer (and former president) of the
Company conducted negotiations with Mineral Mountain Mining Co. ("MMMC") to
acquire a 46% equity interest in MMMC, the owner of the Silver Bar Mine located
near Apache Junction, Arizona. As a result of the foregoing, a letter of intent
was entered into with MMMC. The rights and obligations pursuant to the letter of
intent were assigned to the Company. The purchase price of the 46% equity
interest was to be $1.2 million cash and a $4.3 million loan at two percent over
the prime rate. The letter of intent also provides an option to acquire an
additional four percent equity in MMMC for nominal amounts upon certain
conditions. In partial performance and pursuant to the negotiations, the Company
advanced $10,000 to MMMC in 1994.
In 1995, the Company continued negotiations with MMMC in attempts to conclude
the stock purchase agreement, advancing an additional $68,000 to MMMC (for
cumulative total advances of $78,000).
Principals of MMMC subsequently refused to execute or acknowledge the agreement.
On January 18, 1996, the Company filed suit against MMMC and two of its
principals for breach of the joint venture agreement. The case has been set for
a jury trial on July 8, 1997. Litigation is subject to many uncertainties and
the Company is unable to predict the outcome of this matter. Accordingly, the
$78,000 in advances to MMMC were written off during 1995.
Obligation to Bolivian Gold Mining Cooperative
- ----------------------------------------------
The November 11, 1996 mining agreement with the United Cangalli Gold Mining
Cooperative, Ltd. ("UCL") provides for a gross royalty interest of 18% in gold
production to UCL and commits the Company to complete first-phase exploration
and open one work front, in addition to the Cangalli shaft, by April 20, 1997;
to open two additional work fronts by December 6, 1997; and to invest a minimum
of $3 million in the Bolivian mining project. In addition, EMB is obligated to
provide UCL $200,000: $100,000 as a non-interest bearing loan and $100,000 in
the form of a grant. As of December 31, 1996, the $100,000 loan had been funded.
(See Note A.)
Facility Leases
- ---------------
The Company leases its principal offices in Denver, Colorado on a month-to-month
basis at $1,475 per month. In addition, the Company entered into a one-year
office lease in La Paz, Bolivia at $1,500 per month, effective January 1, 1996,
and thereafter on a month-to-month basis; these offices are occupied by the
Company's subsidiary. As of February 14, 1997, the Company also leased offices
for its corporate operations in La Paz, Bolivia on a month-to-month basis at
$600 per month.
F-17
<PAGE>
- --------------------------------------------------------------------------------
Golden Eagle International, Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
================================================================================
Note H - Events Subsequent to December 31, 1996 (Unaudited)
Bank Financing
- --------------
On February 11, 1997, a Texas bank loaned the Company $240,000 pursuant to a
short-term bridge loan at the bank's prime rate, due August 1, 1997. On March
13, 1997 the bank agreed to loan the Company $1 million pursuant to a revolving
line of credit agreement due June 1, 1998 and bearing interest at the prime rate
(8 1/2% as of March 28, 1997). The loan is personally guaranteed by an officer
of the Company (and its former president and principal shareholder), including
13,500,000 shares of common stock of the Company owned by a corporation
wholly-owned by the officer, and is further secured as described below. The
proceeds from the $1 million loan will retire the earlier $240,000 bank bridge
loan. As of March 28, 1997 the loan had not closed.
Related Party Loan Pledge and Renewal Agreements for Common Stock
- -----------------------------------------------------------------
The $1 million bank loan described above will be secured by the pledge of
certain assets of relatives of an officer (and former president) for a period of
five years from closing of the loan. As consideration for the relatives' pledge,
the Company has agreed to issue a total of 20,000,000 shares of common stock to
the relatives.
The Company also agreed to issue an additional 5,000,000 shares of common stock
for renewal and extension of $450,000 and $228,341 in prior loans to the Company
by relatives and abatement of $25,000 in previously accrued interest (see Note
C).
Also, as a part of the renewal agreement, the Company agreed to assume a
$165,000 personal loan of an officer (and former president) from a relative, as
a partial offset to total amounts owed the same officer of $268,975 as of
December 31, 1996 (see Note F). The $165,000 loan is due January 1, 2000, is
unsecured and bears interest at the prime rate (81/2% as of March 28, 1997).
Sales of Common Stock to Investors
- ----------------------------------
The Company has issued or will issue a total of 7,114,700 shares of common stock
to ten individual investors for cash received through March 28, 1997, totaling
$711,470.
F-18
<PAGE>
- --------------------------------------------------------------------------------
Golden Eagle International, Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
================================================================================
Purchase of Equipment and Common Stock Issued
- ---------------------------------------------
On September 18, 1996, the Company initiated an agreement to purchase certain
mining equipment located in Bolivia from an individual for $20,000 cash and
convertible debentures totaling $1 million. Closing of the agreement was on
February 10, 1997. The debenture holder has subsequently notified the Company of
his desire to convert the debentures into 2,993,191 shares of common stock. All
voting rights associated with the stock issued are to be placed in a voting
trust with the Company's board of directors as trustee.
Conversion of Note Payable to Common Stock
- ------------------------------------------
On March 27, 1997, an individual elected to convert a $50,000 15% note payable,
plus accrued interest, to 260,000 shares of common stock (see Note C).
Related Party Loans and Repayments
----------------------------------
On January 17, 1997 relatives of an officer (and former president) loaned the
Company $10,000. During February 1997, the Company repaid $70,000 of loans that
had previously been made to the Company by these individuals (see Notes C and
F).
In February and March 1997, an officer (and former president) was repaid $39,465
of expenses which had been accrued and included in the December 31, 1996
accounts payable (see Notes C and F).
During March 1997, $5,000 loaned by a relative in December 1996 was repaid with
interest. (See Note C).
Other Loan Repayments
- ---------------------
On March 14, 1997, the Company paid a $50,000, 10% convertible note payable and
accrued interest. (See Note C).
F-19
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 11,741
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
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<BONDS> 826,765
0
0
<COMMON> 4,452
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