SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarter period ended June 30, 1997
Commission file number 023726
GOLDEN EAGLE INTERNATIONAL, INC.
----------------------------------------------------
(Exact name of Registrant as specified in its charter)
Colorado 84-1116515
-------- ----------
(State of (I.R.S. Employer
incorporation) Identification No.)
4949 South Syracuse Street, Ste. #300, Denver, CO 80237
-------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 694-6101
-------------
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 X No
---- ----
As of June 30, 1997, there were 87,253,654 shares of common stock outstanding,
par value $.0001.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
--------------------
The unaudited Financial Statements for the Quarter Year ended March 31,
1997 are attached hereto. Please refer to pages F-1 through F-7.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
------------------------------------------------------------------------
Results of Operations for the Quarter ended June 30, 1997, compared to June 30,
1996.
The Company had no revenues in this quarter. It incurred operating expenses
in the amount of $425,632 and incurred an operating loss of ($425,632). For the
same period in 1996, the Company incurred operating expenses of $208,363 and had
no revenue for an operating loss of ($208,363). The increase in operating
expenses was a result of the Company attempting to place its mineral prospect in
Bolivia into production. The Company expects that these increased expenses will
continue and, as well, the Company will incur promotional expenses, and legal
and accounting fees. General and administrative expenses and salaries or
consulting fees will continue at an increased rate.
Net income (loss) for the period was ($2,936,227) for a loss of ($.036) per
share, as compared to a net loss for the same period in 1996 of ($225,380) for a
loss of ($.005) per share.
The large loss increase was due only in part to increased operating
expenses related to attempting to commence mining operations in Bolivia. A large
portion of the loss, $2,475,000, was a charge for issuance of stock related to
the loan guarantee and renewals which caused a Texas bank to issue the $1
million credit line.
The Company was, during the period, in the process of moving equipment and
setting the equipment in place at its mineral prospect site, with the plan of
commencing mining operations in the third quarter of 1997. At period end, the
equipment was not yet fully placed and operable. The Company hopes operational
status can be achieved at the mineral prospect in the third quarter.
Results of Operations for the Six Months ended June 30, 1997, compared to June
30, 1996.
The Company had no revenues in this period. It incurred operating expenses
in the amount of $511,674 and incurred an operating loss of ($511,674). For the
same period in 1996, the Company incurred operating expenses of $1,255,069 and
had no revenue for an operating loss of ($1,255,069). In 1996, the bulk of the
expenses were settlement of current year contractual obligations. The Company
expects that increased expenses will continue and, as well, the Company will
incur promotional expenses, and legal and accounting fees. General and
administrative expenses and salaries or consulting fees will continue at an
increased rate.
Net income (loss) for the period was ($3,052,214) for a loss of ($.046) per
share as compared to a net loss for the same period in 1996 of ($1,292,171) for
a loss of ($.30) per share.
The large loss increase was due primarily to a $2,475,000 charge for
issuance of stock related to the loan guarantee and renewals which caused a
Texas bank to issue the $1 million credit line to the Company.
2
<PAGE>
Changes in Financial Conditions and Liquidity.
The Company had operating capital of $220,954 in cash at period end. As of
period end the Company had $2,851,803 in total assets, of which $1,341,120
consisted of equipment to be used in its mining operation. At year end 1996, the
Company had a total of $824,760 in assets, largely consisting of capitalized
investment in the Bolivian mineral prospect and equipment for use at the mining
prospect. At period end, the Company had total liabilities of $1,936,833, of
which $1,276,926 were current, compared to $1,666,870 at 1996 year end. Of the
liabilities, $640,000 consisted of bank notes payable, $188,500 consisted of
convertible debentures, and $659,907 consisted of long-term debt owed related
parties. Advances from officers and related parties were $49,900 and accounts
payable were $337,254.
In April 1997, the Company completed opening a line of credit with a Texas
bank for $1,000,000. The Company used approximately $240,000 to pay off a
previous loan from the same bank, and had $760,000 of the credit line to use.
During the quarter it used more advances from the credit line and had $360,000
remaining on its credit line at June 30, 1997. As of August 26, 1997, the
Company had borrowed $995,000 under the credit line.
The Company had $220,954 in cash at period end.
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
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. The Company has agreed to a proposed settlement with the
Securities and Exchange Commission which would include an injunction against any
future violations; however, approval of such proposal is still pending with the
SEC 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 October 15, 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.
3
<PAGE>
Item 2. Changes in Securities
---------------------
None.
Item 3. Defaults upon Senior Securities
-------------------------------
None.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
None.
Item 5. Other Information
-----------------
None
Item 6. Exhibits and Reports on Form 8-K:
--------------------------------
(a) The following are filed as Exhibits to this Quarterly Report. The
numbers refer to the Exhibit Table of Item 601 of Regulation S-K:
27.1 Financial Data Schedules
(b) Reports on Form 8-K filed during the three months ended June 30,
1995 (incorporated by reference):
May 2, 1997
June 26, 1997
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has fully caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GOLDEN EAGLE INTERNATIONAL, INC.
(Registrant)
Date: August 27, 1997. by: /s/ Mary A. Erickson
---------------------------------
Mary A. Erickson, Secretary
4
<PAGE>
GAYLEN R. HANSEN
CERTIFIED PUBLIC ACCOUNTANT
6061 South Willow Drive, Suite 230
Greenwood Village, Cplorado 80111
(303)770-2595
August 27, 1997
To the Board of Directors
Golden Eagle International, Inc.
Denver, Colorado
The accompanying balance sheet of Golden Eagle International, Inc. (a Colorado
corporation) as of June 30, 1997, and the related statements of operations, cash
flows and changes in stockholders' equity (deficit) for the three and six months
then ended were not audited by me and, accordingly, I do not express an opinion
on them.
/s/ Gaylen R. Hansen
- --------------------------
Gaylen R. Hansen
Certified Public Accountant
<PAGE>
- --------------------------------------------------------------------------------
Golden Eagle International, Inc.
(A Development Stage Company)
Consolidated Condensed Financial Statements
Table of Contents
================================================================================
PAGE
----
Consolidated Condensed Balance Sheet F-1
Consolidated Condensed Statement of Operations F-2
Consolidated Condensed Statement of Cash Flows F-3
Consolidated Condensed Statement of Changes in
Stockholders' Equity (Deficit) F-4
Notes to Consolidated Condensed Financial Statements F-5
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
Golden Eagle International, Inc.
(A Development Stage Company)
Consolidated Condensed Balance Sheet
=====================================================================================
June 30,
1997 December 31,
(Unaudited) 1996
- -------------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS
<S> <C> <C>
Cash $ 220,954 $ 11,741
Advances to Bolivian cooperative 152,084 --
Prepaid expense and other costs 94,132 30,897
Income tax refund receivable 8,946 8,946
- -------------------------------------------------------------------------------------
Total current assets 476,116 51,584
- -------------------------------------------------------------------------------------
PROPERTY AND EQUIPMENT
Exploration and development costs
of mining prospect 938,605 570,853
Mining equipment and vehicles not
placed in service 1,341,120 158,448
Mining equipment 37,758 33,569
Vehicle 35,000 --
Office equipment 30,741 13,342
- -------------------------------------------------------------------------------------
2,383,224 776,212
Less accumulated depreciation (12,312) (7,811)
- -------------------------------------------------------------------------------------
2,370,912 768,401
- -------------------------------------------------------------------------------------
DEPOSITS 4,775 4,775
- -------------------------------------------------------------------------------------
$ 2,851,803 $ 824,760
=====================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Bank loan payable $ 640,000 $-
Convertible debentures 188,500 188,500
Loans from related parties 49,900 46,900
Notes and loans payable 7,276 89,558
Accounts payable 337,254 400,581
Accrued interest 11,921 74,566
Other accrued liabilities 42,075 40,000
- -------------------------------------------------------------------------------------
Total current liabilities 1,276,926 840,105
- -------------------------------------------------------------------------------------
LONG-TERM DEBT 659,907 826,765
- -------------------------------------------------------------------------------------
Total liabilities 1,936,833 1,666,870
- -------------------------------------------------------------------------------------
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 87,253,654
and 44,517,143 shares, respectively 8,725 4,452
Common stock issuable, 350,000 and
2,384,500 shares, respectively 35,000 446,500
Additional paid-in capital 7,073,470 1,856,949
Deficit accumulated during the
development stage (6,202,225) (3,150,011)
- -------------------------------------------------------------------------------------
Total stockholders' equity (deficit) 914,970 (842,110)
- -------------------------------------------------------------------------------------
$ 2,851,803 $ 824,760
=====================================================================================
</TABLE>
F-1
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Golden Eagle International, Inc.
(A Development Stage Company)
Consolidated Condensed Statement of Operations
(Unaudited)
===============================================================================================================================
July 21, 1988
Three Months Ended Six Months Ended (Inception)
June 30, June 30, Through
------------------------------ ---------------------------- June 30,
1997 1996 1997 1996 1997
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
REVENUE
Interest from loans $ -- $ -- $ -- $ -- $ 11,727
Commissions -- -- -- -- 6,708
Other -- -- -- -- 3,681
- -------------------------------------------------------------------------------------------------------------------------------
Total revenue -- -- -- -- 22,116
- -------------------------------------------------------------------------------------------------------------------------------
OPERATING EXPENSES 425,632 208,363 511,674 1,255,069 3,587,324
- -------------------------------------------------------------------------------------------------------------------------------
OPERATING (LOSS) (425,632) (208,363) (511,674) (1,255,069) (3,565,208)
- -------------------------------------------------------------------------------------------------------------------------------
OTHER INCOME (EXPENSE)
Stock issued related parties for
loan guarantees and renewals (2,475,000) -- (2,475,000) -- (2,475,000)
Loss on sale and retirement of
equipment -- (16,000) (4,084) (16,000) (21,398)
Gain on marketable securities -- 19,167 -- 19,167 124,336
Write off advances to Mineral
Mountain Mining Co. -- -- -- -- (78,000)
Write off loan to investment advisor -- -- -- -- (15,000)
Interest expense (35,595) (20,184) (61,470) (40,269) (168,395)
Interest income -- -- 14 -- 1,740
- -------------------------------------------------------------------------------------------------------------------------------
Total other income (expense) (2,510,595) (17,017) (2,540,540) (37,102) (2,631,717)
- -------------------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) $(2,936,227) $ (225,380) $(3,052,214) $(1,292,171) $(6,196,925)
===============================================================================================================================
EARNINGS (LOSS) PER SHARE $ (.036) $ (.005) $ (.046) $ (.030) $ (.441)
===============================================================================================================================
WEIGHTED AVERAGE
SHARES OUTSTANDING 82,416,004 44,267,658 66,279,224 42,926,283 14,049,330
===============================================================================================================================
F-2
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
Golden Eagle International, Inc.
(A Development Stage Company)
Consolidated Condensed Statement of
Cash Flows
(Unaudited)
============================================================================================================
July 21,1988
Six Months Ended (Inception)
June 30, Through
----------------------------- June 30,
1997 1996 1997
- ------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C>
Net income (loss) $(3,052,214) $(1,292,171) $(6,196,925)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Stock issued related parties for loan guarantees
and renewals 2,475,000 -- 2,475,000
Stock issued for services 220,000 35,600 1,625,919
Accrued interest converted to stock 41,659 -- 41,659
Depreciation expense 5,417 120 16,042
Loss (gain) from sale of investments -- (6,444) (114,670)
Other 4,084 -- 118,398
Changes in operating assets and liabilities:
Prepaid expense and other costs (63,235) -- (94,132)
Income tax refund receivable -- -- (8,946)
Accounts payable and accrued liabilities (123,897) 164,499 391,250
- ------------------------------------------------------------------------------------------------------------
Net cash flows (used for) operating activities (493,186) (1,098,396) (1,746,405)
- ------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in property and equipment (572,012) (2,232) (1,352,252)
Advances to Bolivian cooperative (152,084) -- (152,084)
Advances to Mineral Mountain Mining Co. -- (68,000) (78,000)
Loan to investment advisor -- (25,000) (15,000)
Other -- -- 117,427
- ------------------------------------------------------------------------------------------------------------
Net cash flows from (used for) investing activities (724,096) (95,232) (1,479,909)
- ------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from bank loan 640,000 -- 640,000
Loans from related parties 63,000 31,098 1,272,880
Repayments of loans from related parties (181,858) (54,567) (515,060)
Proceeds from notes payable -- 50,000 139,558
Repayment of notes payable and bank loan (82,282) -- (92,704)
Proceeds from convertible debentures -- -- 188,500
Common stock issued 987,635 121,319 1,877,158
Stock issuance costs -- (19,204) (63,064)
- ------------------------------------------------------------------------------------------------------------
Net cash flows from financing activities 1,426,495 128,646 3,447,268
- ------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH 209,213 (1,064,982) 220,954
CASH - BEGINNING OF PERIOD 11,741 156 --
- ------------------------------------------------------------------------------------------------------------
CASH - END OF PERIOD $ 220,954 $(1,064,826) $ 220,954
============================================================================================================
F-3
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
Golden Eagle International, Inc.
(A Development Stage Company)
Consolidated Condensed Statement of Stockholders' Equity (Deficit)
=========================================================================================================
Common Stock Common
--------------------------- Stock
Shares Amount Issuable
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Inception July 21, 1988 -- $ -- $ --
Issuance of common stock:
June 1, 1989 for cash at $.00006 per share 1,666,665 167 --
June 30, 1990 for cash at $.03 per share 300,000 30 --
July 3, 1990 for cash at $.003 per share 366,665 37 --
50,000 to 1 stock split -- -- --
January and March 1991 for cash at
$.30074 per share from stock offering 268,335 27 --
November 1, 1993 - deficit of acquired subsidiary -- -- --
Acquisition of subsidiary -- -- --
Fair value of officer salary -- -- --
November 7, 1994, convert debt to equity
at $.003 per share 2,640,830 264 --
November 8, 1994, $.00125 per share:
Note receivable from affiliate 20,000,000 2,000 --
Legal services 375,000 37 --
Other (70) -- --
Issued for cash in June and August ($.01 to $.05
per share), less $41,644 in stock issuance costs 10,052,250 1,005 --
Issued for services in 1995 ($.07 per share) 2,009,000 201 --
Convert notes payable in 1995 ($.15625 per share) 800,000 80 --
Payment of note by affiliate in 1995 -- -- --
Issuable for cash in 1995 ($.125 to $.282 per share),
417,500 shares -- -- 80,000
Issuable I 1995 for services and additional consideration
for loan ($.07 per share), 328,333 shares -- -- 22,983
Collection of receivable January 9, 1996 -- -- --
Shares previously subscribed issued in 1996 568,333 57 (52,983)
Issued for cash in 1996 ($.05 to $.25 per share) 21,150 2 --
Issuable for cash in 1996 ($.10 to $.20 per share),
2,207,000 shares -- -- 396,500
Issued for services in 1996 ($.07 to $.30 per share) 5,448,985 545 --
Net loss for the periods -- -- --
- ---------------------------------------------------------------------------------------------------------
Balance at December 31, 1996 44,517,143 4,452 446,500
Unaudited:
Issued for cash ($.10 per share) 9,876,350 987 --
Issued to related parties for loan guarantees
and renewals ($.10 per share) 25,000,000 2,500 --
Issued for services ($.10 per share) 2,200,000 220 --
Issued for equipment ($.334 per share), 2,993,161 299 --
Issued for conversion of note payable
and accrued interest ($.256 per share) 260,000 26 --
Issuable for vehicle ($.10 per share), 350,000 shares -- -- 35,000
Shares previously subscribed issued 2,407,000 241 (446,500)
Net loss for the period -- -- --
- ---------------------------------------------------------------------------------------------------------
Balance at June 30, 1997 87,253,654 $ 8,725 $ 35,000
=========================================================================================================
See accompanying notes.
F-4
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Golden Eagle International, Inc.
(A Development Stage Company)
Consolidated Condensed Statement of Stockholders' Equity (Deficit)
(Continued)
====================================================================================================================================
Additional
Paid-in Stockholder Accumulated
Capital Receivable Deficit Total
- ------------------------------------------------------------------------------------------------------------------------------------
Inception July 21, 1988 $ $ $ $
<S> <C> <C> <C> <C>
Issuance of common stock:
June 1, 1989 for cash at $.00006 per share (67) -- -- 100
June 30, 1990 for cash at $.03 per share 8,970 -- -- 9,000
July 3, 1990 for cash at $.003 per share 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 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 7,659 -- -- 7,923
November 8, 1994, $.00125 per share:
Note receivable from affiliate 23,000 (25,000) -- --
Legal services 432 -- -- 469
Other 2,625 -- -- 2,625
Issued for cash in June and August ($.01 to $.05
per share), less $41,644 in stock issuance costs 164,044 -- -- 165,049
Issued for services in 1995 ($.07 per share) 148,799 -- -- 149,000
Convert notes payable in 1995 ($.15625 per share) 124,920 (20,000) -- 105,000
Payment of note by affiliate in 1995 -- 25,000 -- 25,000
Issuable for cash in 1995 ($.125 to $.282 per share),
417,500 shares -- -- -- 80,000
Issuable I 1995 for services and additional consideration
for loan ($.07 per share), 328,333 shares -- -- -- 22,983
Collection of receivable January 9, 1996 -- 20,000 -- 20,000
Shares previously subscribed issued in 1996 52,926 -- -- --
Issued for cash in 1996 ($.05 to $.25 per share) 5,528 -- -- 5,530
Issuable for cash in 1996 ($.10 to $.20 per share),
2,207,000 shares -- -- -- 396,500
Issued for services in 1996 ($.07 to $.30 per share) 1,230,297 -- -- 1,230,842
Net loss for the periods -- -- (3,144,711) (3,144,711)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1996 1,856,949 -- (3,150,011) (842,110)
Unaudited:
Issued for cash ($.10 per share) 986,648 -- -- 987,635
Issued to related parties for loan guarantees
and renewals ($.10 per share) 2,497,500 -- -- 2,500,000
Issued for services ($.10 per share) 219,780 -- 220,000
Issued for equipment ($.334 per share), 999,701 -- -- 1,000,000
Issued for conversion of note payable
and accrued interest ($.256 per share) 66,633 -- -- 66,659
Issuable for vehicle ($.10 per share), 350,000 shares -- -- -- 35,000
Shares previously subscribed issued 446,259 -- -- --
Net loss for the period -- -- (3,052,214) (3,052,214)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at June 30, 1997 $ 7,073,470 $ -- $($6,202,225) $ 914,970
====================================================================================================================================
See accompanying notes.
F-4 (Continued)
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
Golden Eagle International, Inc.
(A Development Stage Company)
Notes to Condensed Consolidated Financial Statements
(Unaudited)
================================================================================
Note A - General
Golden Eagle International, Inc. (a development stage company, the
Company,) was incorporated in Colorado on 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 of precious mineral properties considered for acquisition.
Presently, substantially all of the Companys operations and business
interests are focused on a prospect in the Tipuani River area of the
Republic of Bolivia.
The accompanying unaudited condensed financial statements have been
prepared in accordance with the instructions to Form 10QSB and do not
include all of the information and notes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all material adjustments, consisting of only normal recurring
adjustments considered necessary for a fair presentation, have been
included. These statements should be read in conjunction with the financial
statements and notes thereto included in the Companys Form 10KSB for the
year ended December 31, 1996.
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 intercompany transactions and
balances have been eliminated.
The results of operations for the six and three months ended June 30, 1997,
are not necessarily indicative of the results for the remainder of 1997.
Note B - 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.
Note C - Bank Financing, Notes Payable and Long-Term Debt
Bank Financing
--------------
On February 11, 1997, a Texas bank loaned the Company $240,000 pursuant to
a short-term bridge loan at the banks 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% as of June 30, 1997). The loan is personally guaranteed
by an officer of the Company (and its former president and principal
shareholder), including a pledge of 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 agreement called for the retirement
F-5
<PAGE>
of the earlier $240,000 bank loan from the proceeds of the $1 million loan.
The $1 million bank loan, which closed in the second quarter of 1997, is
secured by the pledge of certain trust assets of relatives of an officer
(and former president) for a period of five years from closing of the loan.
As of August 26, 1997, a total of $995,000 has been drawn on the bank loan.
As consideration for the relatives pledge on the bank loan, the Company
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 to January 1, 2000, of $450,000
and $228,341 in prior loans to the Company by relatives and abatement of
$25,000 in previously accrued interest. The 25 million shares were issued
in the second quarter after final approval on April 10, 1997 of the bank
financing and renewal agreements, and were valued at $.10 per share, the
estimated fair value of restricted stock on April 10, 1997. The estimated
value of the stock issued, $2,500,000, less the abated interest of $25,000,
is reflected as a period expense for the loan guarantees and renewals,
since the future economic benefit cannot be reasonably estimated.
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 (at June 30, 1997 $72,208) as of December 31, 1996. The $165,000
loan is due January 1, 2000, is unsecured and bears interest at the prime
rate (8% as of March 31, 1997). As of June 30, this transaction has not
been finalized and recorded by the Company.
On March 14, 1997, the Company repaid a $50,000, 10% convertible note
payable and accrued interest.
Note D - Common Stock
Sales of Common Stock to Investors
----------------------------------
During the six months ended June 30, the Company received cash of $987,635
from individual investors for which it issued a total of 9,876,350 shares
of restricted common stock.
Purchase of Equipment, Vehicle and Common Stock Issued and Issuable
-------------------------------------------------------------------
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 or restricted common stock totaling $1
million. Closing of the agreement was on February 10, 1997. On February 25,
1997 the individual notified the Company of his desire to exercise an
option pursuant to the debenture agreement to convert the debentures into
2,993,161 shares of common stock, which were issued June 16, 1997.
F-6
<PAGE>
On May 23, 1997, the Company agreed to issue 350,000 shares of restricted
common stock, valued at $.10 per share to acquire a vehicle.
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 totaling $16,659, to 260,000 shares of
restricted common stock.
Stock Issued for Services
-------------------------
During the three months ended June 30, 1997, a total of 2,000,000
restricted shares, valued at $.10 per share, were issued to a Bolivian
officer of the Company as a bonus and 200,000 restricted shares were issued
to an independent consultant.
Note E - Related Party Transactions
During the six months ended June 30, 1997, relatives of an officer loaned
the Company a total of $60,000, with interest ranging from 10% to 12%.
During the same period, $181,858 was repaid the officer and her relatives
against amounts previously loaned the Company.
F-7
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 220,954
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
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