GOLDEN EAGLE INTERNATIONAL INC, 10KSB, 1998-11-02

GOLDEN EAGLE INTERNATIONAL INC
10KSB, 1998-11-02
FINANCE SERVICES

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-KSB

(Mark One)

[X] Annual report under Section 13 or 15(d) of the Securities Exchange Act of
1934 for fiscal year ended

December 31, 1997.

[ ] Transition report under Section 13 or 15(d) of the Securities Exchange Act
of 1934 for the transition period from __________ to __________.

Commission file number 0-23726

GOLDEN EAGLE INTERNATIONAL, INC.
-------------------------------
(Exact name of Registrant as specified in its charter)

Colorado 84-1116515
-------- ----------
(State of incorporation) (I.R.S. Employer Identification No.)

4949 South Syracuse Street, Suite 300, Denver, CO 80237
-------------------------------------------------------
(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: None
Name of each exchange on which registered: None

Securities registered pursuant to Section 12(g) of the Act:

$.0001 par value Common Stock
-----------------------------
(Title of class)

Indicate by checkmark 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

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
thereto. [ ]

Issuer's revenues for its most recent fiscal year: $101,459

Aggregate market value of the voting stock held by non-affiliates of Golden
Eagle International, Inc. as of October 28, 1998 was approximately $9,717,275.
The estimate is based on the last sale price per share ($.15 on October 28,
1998) and 64,781,836 shares estimated to be held by non-affiliates.

At October 28, 1998, there were 108,594,903 shares of common stock outstanding.

The following documents are incorporated hereunder by reference: (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.

Transitional Small Business Disclosure Format: [ ] Yes [ X ] No

<PAGE>

PART 1
------

Item 1. Business Development
--------------------

(a) GENERAL

Golden Eagle International, Inc., formerly Beneficial Capital Financial
Services Corp. (hereinafter referred to as "Registrant"), is a development-stage
company (as that term is defined in Statement of Financial Accounting Standards
No. 7 ["SFAS No. 7"]), incorporated pursuant to the laws of the State of
Colorado on July 21, 1988. Its name change occurred on February 2, 1995. Prior
to November 1994, 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. During the period of time Registrant was engaged
in such business, it achieved no significant operating revenues and generated
operating losses.

In November 1994, Golden Eagle Mineral Holdings, Inc., a previously
unaffiliated Colorado corporation, acquired control of Registrant through the
issuance (approved by the then disinterested Board of Directors) of a
controlling number of shares of common stock. Golden Eagle Mineral Holdings,
Inc., is owned by Mary A. Erickson, currently the secretary-treasurer and a
director of Registrant. New management of Registrant resulting from this change
of control changed Registrant's business focus into the minerals industry.
Through a subsidiary, Eagle Mining of Bolivia, Ltd., Registrant acquired a
contract for mining rights in the state of La Paz, Bolivia, as more completely
described below.

Registrant's Bolivian advisors recommended to management that it conduct
operations in Bolivia through subsidiaries. Initially, Registrant formed Golden
Eagle Bolivia Mining S.A. ("GEBM") in January 1996, and Eagle Mining of Bolivia
("EMB") in October 1996 to conduct Registrant's operations and to hold its
property in Bolivia, respectively (See, "Certain Relationships and Related
Transactions", Item 12). GEBM owns equipment, has carried out exploration
operations and has achieved limited production of gold from the Cangalli
deposit, which is the subject of the EMB contract for the mining rights with the
United Cangalli Cooperative.

EMB's initial constitution, the equivalent of its Articles of
Incorporation, provided that Registrant will act as the funding shareholder,
providing any necessary operating or development capital to EMB, as a "capital
contribution" and not as a loan. The other EMB shareholders are not liable for
their share of any capital contributions; all EMB shareholders share profits in
accordance with their interests.

In 1996, Registrant, through EMB, acquired mineral properties in Bolivia,
South America, which are prospectively valuable for gold (referred to herein as
the "Cangalli properties"). The properties have no established reserves, but a
significant amount of mineralization has been identified. The exploration work
and property investigations which Registrant has accomplished on the Cangalli
properties are described in more detail in Item 1(b), below. Registrant's
subsidiary has achieved no significant operating revenues from these properties,
although it did produce approximately 13,678 grams of gold (with a value of
approximately $126,000 [before royalty payments]) from exploratory operations
during 1997. (Hereinafter, all references to Registrant's holding subsidiary,
"EMB", or its operating subsidiary, "GEBM", or Golden Eagle International, Inc.,
shall all be referred to as "Registrant," unless specific references to
Registrant or its subsidiaries are called for.) There has been a small amount of
gold produced in 1998 resulting in gross sales of $61,000, and Registrant has
continued its investigation and exploration of the Cangalli properties.
Registrant has been unable to conduct significant operations during 1998 because
of adverse weather conditions and substantial working capital shortages.

Registrant's majority-owned subsidiary, GEBM, continued through 1997, and
to the date of the filing of this report, as the operator of the Cangalli shaft
and surface operations which were attempted during 1997. GEBM, at one point
during 1997, had 106 employees including executives, purchasing agents,
secretaries, accountants, administrative assistants, a mining engineer, a
geologist, two mechanical engineers, warehousemen, personnel managers, shift
foremen, and miners, including drillers, muckers, hoist operators, and other
essential support personnel. GEBM, and its sister subsidiary, EMB, shared a
suite of offices, consisting of 2,500 square feet, with Registrant in the La Paz
city center business district.

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Prior to acquiring the contract mining rights on the 11 concessions
comprising 2,004 hectares (4,952 acres) constituting the Cangalli properties in
1996, Registrant attempted to acquire several properties within the United
States. These U.S. properties were not acquired because Registrant's due
diligence investigation did not support the representations made to Registrant
by the property owners.

In 1997, Registrant entered into an agreement with a non-affiliated La Paz,
Bolivia company to provide certain services to Registrant on a non-exclusive
basis. These services include performing the necessary studies for, and making
recommendations regarding, the following: an environmental impact statement;
topographical studies; appropriate production methods for the Cangalli deposit;
current mining on the Cangalli deposit; earth-moving equipment; fine gold
recovery systems on plants; relocation of tailings and dumps; industrial
security; interfacing with and supporting the community; the executed
investments to date; production costs; administrative systems; mine personnel;
inventory control; future acquisitions and project growth; and public relations
activities in Bolivia and, where warranted, in the United States regarding
Bolivian activities. These services do not include the offer or sale of
securities. Registrant agreed to pay this entity a total of $400,000 in shares
of Registrant's common stock as a fee for these services.

In 1998, Registrant entered into an agreement with two related entities
(which are not affiliated with Registrant) to provide certain services to
Registrant on a non-exclusive basis. These services include introducing
Registrant to investment bankers and accredited investors. These services do not
include the offer or sale of securities. Registrant has agreed to pay these
entities a total of 1,500,000 shares of its restricted common stock as a fee for
these services.

On May 7, 1998, the SEC filed a civil action (SEC vs. Golden Eagle
International, Inc., et al, No. 98-Z-1020 [D. Colo.]) against Registrant;
Registrant's former president, Ronald A. Knittle (resigned in May of 1996);
Registrant's current secretary/treasurer and a director, Mary A. Erickson;
Registrant's former public relations firm (which had not performed work for
Registrant since before May 1996); and two individuals, regarding acts which had
occurred between 1994 and mid-1996. Among the allegations made in the SEC's
complaint were that Registrant and the individuals involved had issued press
releases which were false and misleading in an attempt to hype the value of
Registrant's stock. Registrant and its management are continuing to discuss the
resolution of these and other issues with the staff of the Securities and
Exchange Commission, but have denied any wrongdoing which may be actionable
under the federal securities laws.

As noted, the future conduct of Registrant's business and its response to
issues raised by third parties are dependent upon a number of factors, and there
can be no assurance that Registrant will be able to conduct its operations as
contemplated. Certain statements contained in this report using the terms "may,"
"expects to," and other terms denoting future possibilities, are forward-looking
statements. The accuracy of these statements cannot be guaranteed as they are
subject to a variety of risks which are beyond the Registrant's ability to
predict or control and which may cause actual results to differ materially from
the projections or estimates contained herein. These risks include, but are not
limited to, the risks described above, and the other risks associated with
start-up mineral exploration operations, and Registrant's operations with
insufficient liquidity and no historical profitability. It is important that
each person reviewing this report understands the significant risks attendant to
Registrant's operations and that of its subsidiaries. As noted, the future
conduct of Registrant's business and its subsidiaries is dependent upon a number
of factors, and there can be no assurance that any of these companies will be
able to conduct its operations as contemplated herein. Registrant disclaims any
obligation to update any forward-looking statement made herein.

(b) BUSINESS OF ISSUER

The Cangalli Properties
-----------------------

In October 1995, Registrant began reviewing potential mining opportunities
in Bolivia. A site visit to the Tipuani River Basin (approximately 100 miles
north of the Bolivian capital of La Paz) followed in December, 1995, with
Registrant's representatives traveling to Cangalli, approximately two kilometers
down river from the Tipuani township. Included in the expedition was an
independent geologist hired to evaluate the Cangalli area. This consultant
reported that the area merited further study.

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Based on this favorable report, along with other pre-existing reports on
the Tipuani/Cangalli area, in January 1996 Registrant, through GEBM, entered
into an agreement with United Cangalli Gold Mining Cooperative, Ltd. ("UCL"), a
Bolivian cooperative. This contract included the rights to explore and mine an
area consisting of 11 concessions along the Tipuani River, covering an area of
2,004 hectares (4,952 acres) for a 25-year period with an option for an
additional 25 years. While binding according to Registrant' counsel in Bolivia,
this contract was not "protocolized" (recorded) with the Bolivian Notary of
Mines. Registrant then formed a new majority-owned Bolivian subsidiary, Eagle
Mining of Bolivia, Ltd. ("EMB") in October 1996 to hold the concession
interests. EMB assumed the contract rights with UCL, renegotiated the contract
with UCL, and caused the renegotiated contract to be protocolized with the
Notary of Mines in La Paz on November 11, 1996. As renegotiated, the UCL
contract provides for a gross royalty interest of 18% in gold production to UCL.
It also imposed certain work obligations, which Registrant asserts have been
fulfilled:

* completion of first-phase exploration and the opening of one work
front (in addition to the Cangalli shaft) by April 20, 1997 (the
contract called for the opening, but not the sustained operation, of
this work front);

* opening of two additional work fronts by December 6, 1997 (the
contract called for the opening, but not the sustained operation, of
these work fronts);

* investing a minimum of $3 million in the project (no specific term,
other than the 25-year life of the contract, was fixed to fulfill this
obligation); and

* providing to UCL $200,000 for reduction of UCL's prior obligations,
including $100,000 in the form of a loan, or advanced royalty payment
(which is repayable out of production), and $100,000 in the form of a
grant, or land-right acquisition payment.

History of the Tipuani/Cangalli District of Bolivia
---------------------------------------------------

Gold mining in the Cangalli area can be traced back to pre-Inca times (1000
to 1500 A.D.). During the Inca dominion, gold placers were worked in the Tipuani
River and her tributary rivers, the Ancoma and Yani, and also in the
gold-bearing quartz veins of the Cordillera (the high Andes mountains).

Early Spanish historians recorded that the province of Larecaja, in which
Cangalli is located, contributed about 126 kg (4,051 ozt) of gold per year to
the Inca Emperor at Illabaya. For this and other purposes, a network of roads
was constructed in Bolivia and Peru, some of which are still in use today.

During the Spanish rule, after the "Conquest", the Indians stopped all
mining. They destroyed roads, blocked entrances to the mines, and established a
death penalty for those disclosing to the conquerors the whereabouts of any
mining centers.

After many hardships and loss of life, the Spaniards re-started their
mining attempts from 1562 to 1566 at Roman Playa on the Tipuani River. Great
amounts of gold were produced. The use of iron tools and gunpowder for mining
was inaugurated about 1571. In 1602, the Spaniards reached the site where the
town of Tipuani now stands (2 km upriver from Cangalli). For the first time,
they met Portuguese expeditions in search of gold advancing up the Amazon
tributaries from Brazil. During the years thereafter, several pitched battles
were waged over these goldfields between the Spanish and Portuguese, and one was
fought on the current site of the Cangalli township. In 1620, black workers were
imported from Brazil into the Bolivian goldfields as large fortunes were being
made with great success. In 1780, the revolt of mitayos, or slave workers,
stopped the mining in the area for a few years.

In 1782, a miner named Rodriguez and the two Novos brothers successfully
worked the Tipuani River terraces. Andres Coll and Idelfonso Villamil Blanco,
and their descendants, worked in the area until 1867. Villamil was the first to
exploit the rich lower terraces and river gravels below water level. Also during
this period, several foreign-based companies arrived from Great Britain, the
United States, Germany, and other countries.

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At the beginning of the 20th century, the Bolivian Gold Exploration Company
(BOLGO) introduced the first methods of mechanized work. Acting as a modern
large enterprise, BOLGO leased its large concessions to the Companie Aramayo de
Mines en Bolivia in 1932, who in turn spent a lot of time, money and energy to
efficiently mine the gold deposits in their concessions. They were the first to
sink deep shafts into the Cangalli conglomerate to work the terraces in
Unutuluni, some 15 km (9 mi) upriver from the town of Tipuani.

In 1952, all of the BOLGO and Aramayo concessions were nationalized by the
Bolivian Government and administered through the Bolivian Miners' Bank, which
leased them to the Federation of Mining Cooperatives. This group preferred to
work the river gravels using small vertical shafts and adits to make contact
with the bedrock, even beneath the river itself. Some of the upper terraces were
also worked by the cooperatives by booming and sluicing when sufficient water
was available.

In 1956, a North American company, South American Placers, Inc. ("SAPI"),
obtained large concessions in the lower Tipuani, Challana, Mapiri, Coroico, and
Kaka Rivers. It began dredging at Teoponte on the Kaka River in 1959, and
continued working successfully for nearly 30 years. This SAPI dredge set records
for gold production for day, month and year during its active work period at the
mouth of the Tipuani River. In the 1960's, the Tidewater Co. and Condor Mining,
Inc. entered the same areas with some success.

Due to the perceived near-exhaustion of the best known deposits of river
gravels, many people have abandoned the Tipuani area. Lately, others have been
trying to work the remaining river areas and terraces, while making some
technical improvements such as deeper shafts and better underground workings.

Historical sources have estimated that the total production of gold from
the Tipuani District (in which the Cangalli properties lie) may reach figures
close to 200 tons (6,430,000 ozt) of gold for each of the 16th, 17th, and 18th
centuries. It was near 200 tons (6,430,000 ozt) for the 19th century and about
500 tons (16,052,500 ozt) for the 20th century. Therefore, for its known history
of almost 1,000 years of mining, according to these historical sources, the
Tipuani District may have produced no less than 1,000 metric tons of gold, or
more than 32 million troy ounces. Based on information from Aramayo Company
records from the 1930s and 1940s, the ore grades mined were usually very high,
from a few tens of grams to many troy ounces of gold per cubic meter.
(Registrant has relied upon an independent geological consulting firm, and
historical information, for the foregoing history, and cannot assure its
accuracy.)

Registrant's Operations
-----------------------

Working Capital Shortages. Although the operations in Bolivia are carried
on through Registrant's majority-owned subsidiaries, the financing of those
operations is solely dependent on Registrant's ability to provide capital
resources. From November 1997 through the date of the filing of this report,
Registrant experienced significant cash shortages in its operating funds. During
January 1997, Registrant negotiated a one-time, short-term bridge loan for
$240,000 from a Texas bank. On March 6, 1997, this same Texas bank agreed to
loan Registrant $1 million pursuant to a revolving line of credit. This loan is
guaranteed by affiliates. (See, "Certain Relationships and Related
Transactions," Item 12.) The first proceeds from the revolving line of credit
were used to retire the short-term bridge loan. In addition, Registrant paid its
interest payments on the revolving line of credit during 1997, and subsequently
through the filing of this report. This line of credit has been renewed and is
due June 1, 1999; there are, however, no further funds that can be advanced
under this line of credit. As a result of these capital shortages, Registrant
has been forced to issue Registrant's common stock in private placements as
compensation to some employees and consultants, as well as for equipment. These
issuances do result in dilution to current and future shareholders. Registrant
continues to require working capital and is not likely to receive any
significant cash flow from operations in the foreseeable future. It is not
likely that any unaffiliated party will advance debt to Registrant on commercial
terms. Thus, Registrant may have to continue financing its operations through
the sale of equity if it can do so in accordance with all legal requirements on
terms acceptable to the Board of Directors. (See, "Management's Discussion and
Analysis," Part II, Item 6, for further information regarding Registrant's
liquidity shortages and capital requirements.)

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Activities on the Cangalli Properties. To date, Registrant's operations on
the Cangalli properties under contract (which have all been conducted through
GEBM, with EMB as the holding company for the contract interests) have consisted
of exploration work (including a limited amount of production) and documentary
investigation. To accomplish the work necessary on the properties, in February
1997, Registrant purchased metallurgical and mining equipment in Bolivia for
$319,319, using $20,000 in cash, and the balance through the issuance of
2,993,161 shares of Registrant's restricted common stock. (See, "Certain
Relationships and Related Transactions," Part III, Item 12, of this Annual
Report.) The majority of the equipment acquired in this purchase was transported
to the Cangalli mine site and put into operation on the properties in 1997. In
addition, during 1997, Registrant's operating subsidiary, GEBM, purchased all of
UCL's machinery, equipment, real property, installations, warehouses, and
dwellings, for $200,000. GEBM also rented during 1997 a substantial amount of
earth-moving equipment for opening its other work fronts at the Cueva Playa
open-pit operation, the Cueva Playa Lower Terrace operation, and the Cangalli
tailings operation.

During the 1997 fiscal year (through December 31, 1997), Registrant,
through its Bolivian subsidiaries, completed a substantial amount of work on the
Cangalli properties. These activities included ongoing rehabilitation and
exploration of the Cangalli shaft, and exploration of several open-pit mining
sites within the concession area. Some of this work continued during early 1998,
but two material factors affected work on the property during the latter part of
1997 and early 1998:

* The "El Nino" world-wide weather phenomenon which resulted from warmer
water temperatures in the Pacific Ocean off the coast of South
America. The impacts of "El Nino" included substantial increases in
rainfall over the usual precipitation received during the normal
Bolivian rainy season. The super-saturation of the soil in the Tipuani
River Basin caused a mudslide in the town of Mokotoro, 15 kilometers
upriver from the Cangalli properties, which resulted in over 60
deaths. The extremely wet weather caused Registrant to reduce mining
operations and to implement costly de-watering and mine timber
replacement measures in the Cangalli shaft.

* Registrant's inability to finance any significant operations, other
than its overall exploration work, on the property in 1998. (See,
"Management's Discussion and Analysis," Part II, Item 6, below.)

In early 1997, Registrant had projected that its subsidiaries would enter
into commercial scale production by September 1997. During 1997, however,
Registrant's gold production had primarily been the product of its exploration
work on the properties. While the Bolivian subsidiary did improve its production
figures over the results of previous months, overall production during 1997 did
not reach the goal of commercial production. Management concluded that fine gold
recovery losses were the primary cause of the failure to achieve a greater level
of production. In response, at the end of the fourth quarter of 1997, Registrant
contracted a well-respected Bolivian metallurgist to study the losses and design
a circuit which would solve the problem. Management expects that the Bolivian
operations will continue to experience fine gold losses until the installation
of fine gold recovery circuits on Registrant's metallurgical plants can be
accomplished on the Cangalli properties. These fine gold losses might jeopardize
the profitability of those operations, and therefore, Registrant's economic
viability. Any shareholder, or potential shareholder, should carefully weigh
this highly significant factor in any investment decision regarding Registrant's
common stock. As a result of these factors, however, Registrant continues to be
a development stage company as that term is defined in SFAS No. 7, which has not
yet produced minerals in commercial quantities.

Investigations by Independent Consultants. To evaluate its conclusions
regarding the prospective value of the Cangalli properties, Registrant retained
Mr. Guido Paravicini, Eng., M.A., an independent Bolivian mining engineer and
geophysicist. Commencing in December 1996, Mr. Paravicini carried out a review
of the geological literature relevant to the Tipuani Mining District in which
the Cangalli concessions are located. In addition, Mr. Paravicini, and his team
of exploration field geologists, samplers, panners, and other auxiliary
personnel, conducted field studies and sampling. Mr. Paravicini's
recommendations in his reports of January and April, 1997 included additional
exploration and confirmation work which would be required to further establish
the mineralization. In July, 1997, Mr. Paravicini, and his team of exploration
field geologists, began an extensive sampling and geological mapping program on
the Cangalli property. As reported, Mr. Paravicini's initial results underscored
two principle points regarding the Cangalli properties:

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* first, that the Cangalli property continued to show very promising
sampling results on a wide-spread basis; and

* second, that the bedrock underlying the Quaternary deposit on the site
was also mineralized.

In May 1998, Mr. Paravicini issued his final report which confirmed the
existence of significant gold mineralization on the Cangalli properties under
Registrant's subsidiary's control, but further analysis of Mr. Paravicini's
results indicated that he had not established "reserves" on the properties.

Management Experience. Registrant's management has only limited experience
in mining operations and no experience in large-scale underground or surface
mining operations. Rene Velasquez, a Bolivian national who is president and CEO
of Registrant's operating and holding subsidiaries, has over 25 years of
experience operating small open-pit mining operations in the Tipuani River
Basin. Mr. Velasquez successfully operated an open-pit operation at Cangalli,
Bolivia for several years in the 1980's for other, unaffiliated companies, when
the particular gold deposit he and his company were working was deemed to have
been exhausted. In addition, Terry C. Turner, Registrant's President and
Chairman, has 15 years of mining administration, exploration and legal
experience in Bolivia. In June 1997, Registrant formed a Technical Advisory
Board to assist management in analyzing the data being assembled relating to the
Cangalli properties. The members of the Technical Advisory Board, all
experienced executives formerly with major mining companies, are described in
more detail under "Management," Part III, Item 9, below.

Geography and Climate of the Cangalli Deposit. Registrant's properties and
substantially all of its operations are conducted in remote areas of the
province of Larecaja in the state of La Paz in the South American country of
Bolivia. Bolivia is a landlocked country straddling the central Andes Mountains
in west central South America. It is bounded on the north and east by Brazil, on
the southeast by Paraguay, on the south by Argentina, and on the west by Chile
and Peru. Sucre is the judicial/constitutional capital and La Paz the
administrative capital of Bolivia.

The Tipuani Valley, where the Cangalli properties are located, is in the
west-central portion of Bolivia which is dominated by the Andes Mountains. In
Bolivia, the Andes are divided into two great mountain chains, or cordilleras,
separated by a broad upland plateau known as the Altiplano. The Eastern
Cordillera (in which the Tipuani Valley is located) rises abruptly from the
eastern Altiplano and is dominated by the snow-capped peaks of Illampu (6,326
m/20,754 ft) and Illimani (6,402 m/21,004 ft). Narrow, steep-sided valleys,
known as Yungas, are deeply incised into these eastern slopes, the more notable
being those in which the cities of Cochabamba, Sucre, and Tarija are located.
Between the Western and Eastern Cordilleras is the Altiplano, which has an
average elevation of about 3,600 m (11,810 ft) and is one of the highest
populated areas in the world. The Altiplano is about 840 km (520 mi) long and an
average of 140 km (87 mi) wide and is dominated at its northern end by Lake
Titicaca, the world's highest navigable lake, located on the Peruvian border.

The Bolivian climate is harsh much of the year, as is reflective of its
mountainous location. However, internal transportation within Bolivia is good,
with paved, gravel, or dirt all-weather roads to the edge of the Cangalli
properties. Access may become difficult during the rainy season
(November-March), but is never at issue for more than a short period.

Business Atmosphere. Mining and subsistence agriculture continue to
dominate Bolivia's economy, as they have since the 16th century. Efforts are
being made to expand manufacturing, stimulate commercial agriculture, and
otherwise diversify the economy. Although employing less than 3% of the labor
force, mining has traditionally provided most of Bolivia's exports. In colonial
times, Bolivia was one of the world's principal producers of silver. After 1870,
tin replaced silver as the main export. In the 1980's, zinc mining surpassed
that of tin. Other important metals are antimony, tungsten, lead, copper,
silver, and gold, most found together with tin and zinc. Major oil and natural
gas deposits are located in the eastern llanos, or plains, near Santa Cruz, and
natural gas is now a major export.

After the 1952 revolution, the principal tin mining enterprises, which had
been foreign-owned, were taken over by the state. As described above, many local
cooperatives were then formed to hold the rights to mine in Bolivia. In spite of
an aggressive program of privatization in the 1980's and 1990's, Bolivia's
largest mining company remains government-owned. In addition, mining
cooperatives continue to exert a substantial amount of political influence in
Bolivia, although diminished from their heyday in the 1980's.

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Registrant believes that a substantial and material risk exists, which
Management has termed the "cooperative risk factor." This risk relates to
various aspects of Registrant's relationship with the UCL, an organization
consisting of 118 members of all socio-economic, education, and political levels
and criteria. Registrant's Management has sought and received, repeatedly,
assurances from UCL's president and board of directors that Registrant's
subsidiary's contract position and right to the quiet pursuit of its contract
rights of exploration, development, and mining will remain undisturbed. Over the
course of the contract between Registrant's subsidiary and UCL, approximately 2
1/2 years, Registrant has received informal and formal complaints from UCL's
administration regarding Registrant's contract compliance. However, Registrant
believes it has always been able to satisfactorily resolve any complaint or
dispute. Registrant's management believes that this problem resolution process
will continue for the life of the contract, 25 years from January 1996. Factors
which are somewhat out of Registrant's management's control regarding the
"cooperative risk factor" are: tortious interference by unrelated third parties,
force majeure, commodities and metals market fluctuations, or the failure of
governmental institutions to support Registrant's legitimate rights vis-a-vis
some illegal action on the part of UCL or third parties. Registrant is aware
that certain third parties are attempting to disrupt Registrant's relationship
with UCL. Registrant has defended, and intends to continue to defend, its rights
aggressively. Although management believes it will be able to defend its rights,
there can be no assurance that it will be successful. While Registrant's
management's analysis is very positive for future relations, any potential
investors or current shareholders must take notice of the "cooperative risk
factor," and weigh it carefully when making any investment decision regarding
Registrant's securities.

Relationship with Local and National Governments. Although Bolivia is a
democratic republic and has had democratically-elected presidents since 1982, it
has been the subject of military coups in the past. Inflation in Bolivia appears
to be under control at the current time (averaging less than 10% annually), but
other economic signs are not so favorable. The per capita income in Bolivia is
less than $1,000 per year and literacy is less than 80%. Bolivia has a negative
balance of trade (importing more goods than it exports), and is significantly
dependent on the stability of the other countries of South America for its own
stability. Management has not noted any significant civilian unrest or high
incidences of crime affecting Registrant's operations, and management does not
believe that, in the current situation, such problems are likely to have a
material adverse affect. However, should the Latin American economy in general,
or the economy of Bolivia in specific, suffer adverse changes, times of
political and economic unrest would likely return, and it would likely have a
material adverse impact on Bolivia and Registrant's operations.

In all jurisdictions, it is important for businesses to maintain good
relations with governments and the governmental leaders. Registrant's management
has attempted to do so. Registrant has kept the local and national political
leaders informed as to its proposed operations, and has attempted to utilize
local management and laborers in all appropriate positions. As a result of these
efforts, Registrant's President, Terry C. Turner; its Secretary/Treasurer, Mary
A. Erickson; and the members of its Technical Advisory Board: Ronald L. Atwood
Ph.D.; Donald Hausen, Ph.D.; and Max Staheli; were all awarded the Medal of
Civic Merit by the Prefect (Governor) of the State of La Paz, Bolivia during
1997 for their work in promoting investment in the Bolivian mining industry, and
for their contribution to the progress within the La Paz state. The Medal of
Civic Merit is the highest honor which can be awarded by the state government in
Bolivia. Consequently, management believes that its relationship with the
national and state governments is good, and does not anticipate any unusual
difficulties as it continues its work of exploring and developing the Cangalli
properties under its control and the identification of mineral resources.

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. (Registrant has sold the gold resulting from
its exploration and development activities within the Bolivian gold market,
which is subject to the same international conditions affecting all gold
markets. In 1997 and 1998, gold experienced a substantial decline in price in
the international markets.)

8
<PAGE>

Distribution methods of the products or services
------------------------------------------------

When, if ever, Registrant is successful in commencing and maintaining
commercial production 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. 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, and has used this network of buyers for its gold sales to date.
Registrant has not yet determined if it will sell any of the commercial
production of these precious metals or minerals which may result from its
operations 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.

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 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, 1997 and October 20, 1998, Registrant required no
significant raw materials, other than mine timbers and routine mining supplies.
If it ever conducts substantial, sustained mining operations, in Bolivia or
elsewhere, it will need more significant quantities of 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.
-------------------------------------------

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. 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. Concentration, or single
focus, creates a risk which Registrant's management has termed the "cooperative
risk factor," which should be reviewed more carefully in "Business Atmosphere,"
Part I(b), page 7.

Patents, trademarks, licenses, franchises, concessions, royalty agreements
or labor contracts, including duration.
---------------------------------------------------------------------------

Registrant, through 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 as described above. This contract has a duration of
25 years, and is renewable for an additional 25 years.

9
<PAGE>

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 Registrant, nor either of its subsidiaries, are obligated to
receive approval of their principal products or services. Some activities in
which Registrant'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 Registrant'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.
------------------------------------------------------------

At December 31, 1997 and October 20, 1998, Registrant employed four
full-time personnel, consisting of its president, executive vice president,
corporate secretary/treasurer, and one administrative assistant. While certain
of these individuals periodically engage in other activities, due to the amount
of time required to fulfill their obligations with Registrant they are
considered full time. In addition, Registrant had at year end several
consultants and advisors as necessary to provide assistance to management.

Also at December 31, 1997, Registrant's majority-owned subsidiary, GEBM,
employed 60 personnel including its president, Rene Velasquez; one purchasing
agent; one secretary; one accountant; 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 superintendent, one geologist, one mechanical engineer,
one topographer, one mine accountant, two warehouse supervisors, one personnel
manager, two shift foremen, and 46 miners, including drillers, muckers, hoist
operators, and other essential support personnel.

Item 2. Property
--------

Registrant's executive office in the United States is located at 4949 South
Syracuse, Suite 300, Denver, Colorado 80237. This office and associated services
are leased from a non-affiliated third party at a cost of approximately $190 per
month on a month-to-month basis. This consists of access to a single office,
conference room facilities, secretarial services, and other administrative
services in an executive suites complex.

As of February 14, 1997, Registrant also leased offices from an
unaffiliated party in La Paz, Bolivia located at Avenida Arce, Plaza Isabel La
Catolica, Edificio Torre de las Americas, and utilized, at no cost, computer
equipment, fax machine and general office furnishings owned by Terry C. Turner.
The office consisted of approximately 900 square feet and cost approximately
$600 per month.

10
<PAGE>

In July, 1997, Registrant leased office space at Av. 16 de julio, No. 1525,
Edif. Mutual La Paz Penthouse. These offices are in the heart of the La Paz
business district in the city center and consist of 2,500 square feet at a cost
of $1,666 per month. (This office space is shared with a private mining company,
Bolivian Copper Chemical Company, S.A., ["BCCC"], which contributes one-third of
the office lease costs, phones, and utilities. Registrant's president, Terry C.
Turner, is also the president of BCCC. Registrant's Board of Directors has
received notice of, and approved of, Mr. Turner's dual role. Additionally,
Registrant's Board has received full disclosure as to any conflicts of interest
which may develop from this relationship, and has instructed Mr. Turner to
disclose any conflicts which may arise in the future.)

Registrant's operating subsidiary, GEBM, owns the mining equipment which is
located on the Cangalli properties under its control or at its warehouse in El
Alto, Bolivia, 15 kilometers from its La Paz offices. This equipment includes
two D85 Komatsu bulldozers, an electric generating set, two compressors, jaw
crusher, 150 ton-per-hour ball mill, thickener, classifier, spiral recovery
equipment, centrifugal bowls, vibrating tables, a one-by-five-meter rotating
trommel, 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. In addition,
GEBM acquired during 1997 all of UCL's equipment which included one Caterpillar
933 front-end loader, real property in proximity to the Cangalli shaft, as well
as the dwellings found thereon, two warehouses, the mine shaft head frame, a
mine hoist, assorted pumps, an electric generating set, all electrical
installations, an inventory of parts, assorted tools, mine rail and cars, two
double-deck shaker screens, and various other pieces of mining equipment. GEBM
also owns one Toyota Landcruiser purchased during 1996 and one Toyota mine
pickup truck.

Item 3. Legal Proceedings
-----------------

At year end there were no actual or threatened legal proceedings against
Registrant, any Officer, Director or affiliate, except as follows:

SEC Investigation and Enforcement Action
----------------------------------------

On May 22, 1998, Registrant issued a press release which discussed a number
of aspects of a report on the Cangalli properties prepared by an independent
consultant, Mr. Guido Paravicini. The staff of the SEC's Central Regional Office
raised concerns regarding the accuracy of that report and interviewed both
Registrant's president and Mr. Paravicini. As a result of subsequent internal
review of the Paravicini report, Registrant's management has concluded that the
techniques used by Mr. Paravicini were insufficient to justify the calculations
made, and the term "reserves" may be an inaccurate characterization of the
mineralization found on the properties under Registrant's subsidiary's control
in the Cangalli district. Based on the information that Mr. Paravicini and
others have developed regarding the Cangalli district in general, and
Registrant's properties in specific, management still believes that there is
significant gold mineralization within Registrant's properties, and ongoing
verification work has been undertaken by Behre Dolbear & Company, Inc., an
internationally-recognized consultant to the mining industry.

As a result of the foregoing, Registrant developed material reservations
regarding the May 1998 report by its independent consultant, Mr. Paravicini.
Management is continuing to analyze the Paravicini report and other available
information regarding the Cangalli property. Management's initial conclusion is
that Registrant has focused on too broad an area within the property and
believes that a greater likelihood of success can be realized were Registrant to

11
<PAGE>

focus on a smaller target area for more extensive sampling and analysis. The
staff of the regional office of the SEC has advised Registrant that it is
contemplating a recommendation to the full Commission that it amend the pending
civil action to include other violations which allegedly may have resulted from
the May 22, 1998 press release.

Registrant and its management are continuing to discuss the resolution of
these issues with the regional staff of the Securities and Exchange Commission,
but have denied any wrongdoing which may be actionable under the federal
securities laws.

Civil Action Related to Arizona Investment
------------------------------------------

Registrant is Plaintiff in Case No. 96-043428 in Superior Court, Pinal
County, Arizona. Registrant sued Mineral Mountain Mining Co. and James and Diane
Brown alleging fraud and misrepresentations and for refund of monies paid and
benefits received. This suit arose out of a letter of intent with Mineral
Mountain Mining Co. ("MMMC") to acquire a 50% equity interest in MMMC, at the
time the owner of the Silver Bar Mine, located near Apache Junction, Arizona.
Registrant has advanced substantial funds to MMMC in reliance upon
representations made and in anticipation of the closing of a definitive
agreement in the first quarter of 1995.

During this time, management 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. In view of such facts, Registrant declined to close the
transaction. Consequently, no acquisition of the property was made and
Registrant filed litigation to recover its damages. This case was settled and
defendants agreed to pay Registrant $20,000. However, defendants have not
observed the terms of the Settlement Agreement, and Registrant has moved for the
entry of a judgment against defendants on the terms and conditions of that
Settlement Agreement.

Potential Litigation With Consultant
------------------------------------

During 1995, Registrant engaged a person it believed was an independent
mining engineer as a consultant. In 1996, the consultant claimed Registrant
liable for unpaid services and expenses totaling $78,440. Registrant believes
that the consultant misrepresented his professional credentials, did not provide
the services contracted, usurped business opportunities, and tortiously
interfered with Registrant. No litigation has been filed to date between the
parties and Registrant is still assessing its position. An evaluation as to the
outcome of this matter cannot be made at this time.

In addition, this consultant has threatened to bring a legal action in
Bolivia; however, Registrant believes that no jurisdiction would exist for such
an action, and that this consultant's misrepresentation of his professional
credentials would be dealt with severely by Bolivian authorities.

Potential Litigation With Former Employees/Officers
---------------------------------------------------

On June 29, 1998, a former employee and officer of Registrant filed suit
for enforcement of the terms of an employment contract. Registrant believes, and
asserted in its Answer and Counterclaim, that the former employee/officer did
not earn the compensation sought, breached his employment agreement with
Registrant, violated his fiduciary duty while acting as an officer for
Registrant, violated his duties of good faith and loyalty to Registrant,
breached his obligation to avoid self-dealing to Registrant's detriment,
disclosed confidential information, failed to return Registrant's property
including trade secrets, created a competing corporation contrary to the
non-compete provision of his employment agreement, interfered with Registrant's
prospective business advantages, took actions to defame or disparage
Registrant's business, engaged in unfair competition with Registrant, and
tortiously interfered with Registrant's business relations. Registrant is
committed to vigorously pursue its defense against this employee/officer, as
well as prosecute its claims against same. In addition, Registrant is
contemplating bringing an action against other employees/officers who have
combined with this former employee/officer in a competing corporation and in
carrying out the tortious acts and competing activities mentioned above.

Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------

None

12
<PAGE>

PART II
-------

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
---------------------------------------------------------------------

Since late 1994, Registrant has been publicly-traded under the symbol
"MINE" on the OTC Bulletin Board which is operated under the supervision of the
National Association of Securities Dealers, Inc. The OTC Bulletin Board is a
securities market utilizing a sophisticated computer and telecommunications
network. Market participants comprise market makers generally dealing in "penny
stocks", independent dealers who commit capital and stocks and compete with each
other for orders. The OTC Bulletin Board has adopted rules that require
companies quoted on its system to be current in their reporting obligations to
the SEC, among other things. The Securities and Exchange Commission has adopted
rules, such as Rule 15c2-6, which impose restrictions on a broker-dealer's
ability to trade in penny stocks.

On June 22, 1998 the SEC issued a ten-day suspension of trading of
Registrant's securities, until July 6, 1998, on the OTC Bulletin Board. At the
end of that ten-day suspension, Registrant's securities again began trading on
the "pink sheets," a less-sophisticated manual system for posting relevant
market information. The "pink sheet" status of Registrant's securities has
created a substantial problem with liquidity for shareholders and potential
shareholders interested in trading Registrant's securities. Once Registrant is
current on its filings of annual and quarterly reports, its securities can
return to the OTC Bulletin Board upon the filing by a prospective market maker
of a Form 211 pursuant to the Securities Exchange Act of 1934. There can be no
assurance, however, that any market maker will file on behalf of the Registrant.
Until a market maker so files, the liquidity of the market for Registrant's
common stock will be impaired.

Registrant is authorized to issue Eight Hundred Million (800,000,000)
Common Shares, of which approximately 108,594,903 shares are outstanding as of
October 20, 1998. In addition, Registrant is authorized to issue Ten Million
(10,000,000) Preferred Shares. No shares of Preferred Stock have been issued.
The following table shows the high and low bid of Registrant's Common Stock
during the last two years and the current fiscal year.

1996 Low Bid High Bid
-------------------------------------------------------------

First Quarter $.21875 $.75
Second Quarter $.25 $.96875
Third Quarter $.0625 $.5625
Fourth Quarter $.1875 $.59375

1997 Low Bid High Bid
-------------------------------------------------------------

First Quarter $.21875 $.84375
Second Quarter $.21875 $.71875
Third Quarter $.1625 $.38
Fourth Quarter $.10 $.30

1998 Low Bid High Bid
-------------------------------------------------------------

First Quarter $.05 $.19
Second Quarter $.075 $.55
Third Quarter $.1875 $1.75

It should be noted that, in some cases, these prices may have been
established with a very low trading volume. As a result, a small trading volume
may result in significant price fluctuation.

<PAGE>

(b) Holders

As of September 30, 1998, there were approximately 631 shareholders of
record of Registrant's Common Stock. This number does not include an
undeterminable number of beneficial holders who own their shares through
broker-dealers, nominees, and otherwise.

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. 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
------------------------------------------------------------------------

Liquidity and Capital Resources
-------------------------------

At December 31, 1997, and subsequently, Registrant has had significant
working capital shortages. In fact, since its inception through the present
time, Registrant's current liabilities have exceeded current assets. This
situation has created significant hardship for the Registrant in meeting its
obligations to pay its bills currently, although at December 31, 1997,
Registrant was able to pay or subsequently arrange for the payment of all
salaries and Christmas bonuses for its Bolivian operations, as well as most of
its suppliers' billings and other current expenses. As discussed below,
Registrant's working capital deficit is currently due to short-term loans made
from affiliates and unrelated parties, and no substantial amount of current
liabilities are due to suppliers or trade creditors.

During the first half of 1997, Registrant had a working capital surplus as
a result of loans obtained from an unaffiliated Texas bank which were guaranteed
by an affiliate of Registrant or unaffiliated family members of that affiliate.
Registrant acquired the first loan, a short-term bridge loan in the total amount
of $240,000, in February 1997. Registrant then acquired a second, term loan in
the total amount of $1,000,000 in May 1997. The term loan repaid the bridge loan
and is currently due and payable June 1999. Both loans bear interest at 8.5% per
annum and were collateralized by Mary Erickson, an officer and director of
Registrant. Ms. Erickson personally guaranteed repayment of the amounts due and
pledged 13,500,000 shares of Registrant's common stock owned by Golden Eagle
Mineral Holdings, Inc. (a significant shareholder of Registrant as described
below in Item 11, "Security Ownership of Certain Beneficial Owners and
Management"). These loans were further collateralized by assets owned and
guarantees issued by Ms. Erickson's family members; these family members were
not affiliates of Registrant at the time of these transactions. As a fee for
consideration of the family members' guarantees of the $1 million loan,
Registrant issued a total of 20,000,000 shares of Common Stock which was valued
at $.10 per share.

After expending the working capital provided by the bank loan to purchase
equipment and for operations, and in order to obtain the liquidity necessary to
continue Registrant's operations in late 1997, Registrant obtained $100,000 by
the issuance of a 10% convertible debenture on October 23, 1997 to a foreign
corporation. This debenture is convertible at the lesser of $.16 per share or
50% of the average closing bid price during the three-day period prior to the
notice of conversion. These funds were used primarily for working capital and
operating expenses. This debenture was subsequently converted to 3,062,821
shares of Registrant's common stock in October 1998.

In 1998, Registrant issued a $250,000 convertible debenture to a foreign
corporation at 8%, of which $125,000 was exercised. This debenture was
convertible at 50% of the average closing bid price during the three-day period
prior to the notice of conversion. These funds were used primarily for working
capital and operating expenses. The $125,000 issued under this debenture was
converted to 2,560,000 shares of Registrant's common stock in October 1998.

Registrant's majority-owned subsidiary, GEBM, received loans totaling
$35,850 in cash from Registrant's president, Terry C. Turner, and $90,331 (in
equipment rentals and cash) from GEBM's president, Rene Velasquez. The funds
provided by these loans were used to maintain Registrant's ongoing operations in
Bolivia. These loans bear interest at 24% per annum and are repayable upon

14
<PAGE>

demand. In 1998, Mr. Turner received substantial repayment of his debt and
accrued interest through the conveyance of a vehicle owned by Registrant, valued
at $27,575, and payment of $9,500 in cash. Mr. Velasquez has not indicated an
intention to require repayment of his loan at the present time, although
Registrant deems the debt due and payable.

Registrant also used its common stock directly to raise capital and to
satisfy some of its obligations. During 1997, Registrant issued a total of
10,126,350 shares to ten unaffiliated, accredited investors at a price of $.10
per share. The funds received from these investors were also used to satisfy
Registrant's working capital obligations associated with its exploration and
evaluation activities in Bolivia, and to meet Registrant's goals under its
agreement with the UCL. Also in 1997, Registrant satisfied some of its liquidity
requirements by issuing shares of its common stock to purchase equipment and to
pay non-U.S. persons for services rendered to Registrant. As noted above,
Registrant also issued shares of common stock to certain affiliates and their
unaffiliated family members as consideration for guaranteeing and
collateralizing loans made to Registrant.

Registrant's ability to use its capital stock and other securities to raise
working capital and to pay its indebtedness is subject to extensive federal and
state regulation. Although Registrant has exerted its best efforts to comply
with all applicable regulations, there can be no assurances that it has been
able to do so. To the extent there may be any non-compliance, Registrant may
incur certain liabilities, although no such claims have, to Registrant's
knowledge, been asserted to date.

This situation has continued during 1998. Registrant has been required to
seek financing from other sources, including affiliates and their family
members, to allow it to continue its exploration and evaluation operations on
its Bolivian properties, and to pay its general and administrative expenses in
the United States and Bolivia. Although Registrant has been successful in
obtaining funds to date, there can be no assurance that Registrant will be able
to continue to be successful in doing so. Registrant's ability to finance its
operations will, in the end, be dependent on Registrant's ability to generate
cash flow from operations, of which there can be no assurance.

To date, Registrant has only been able to achieve limited cash flow from
the limited non-commercial mining operations it has conducted. During 1997
Registrant produced approximately 13,678 grams of gold, which it sold for
approximately $126,000 (before payment of $25,000 in royalties). These funds
were all used in the Bolivian operations. Although Registrant believes that it
will be able to generate a significant amount of additional revenues from mining
gold from its properties, no reserves have been established to date, Registrant
has not developed a formal mining plan, and there can be no assurance that any
revenues received will exceed the expenses incurred.

Registrant has no significant capital commitments other than to continue to
evaluate and explore its properties in Bolivia with the goal of achieving
commercial production if the properties are capable of producing gold
commercially.

In addition, Registrant has offered to purchase the interests
("Certificados de Aporte" or "Certificates of Contribution") from each of UCL's
118 members. If the offer is accepted, and if certain conditions precedent are
met, Registrant will pay each member approximately $10,000, including $3,000
cash and the balance in shares of Registrant's common stock. Among the
conditions precedent that must be met before the offer can be completed is
compliance with U.S. and Bolivian securities laws, as well as acceptance by the
UCL members.

In summary, therefore, Registrant believes that it does not have sufficient
liquidity or capital resources to purchase the interests of the UCL members or
to accomplish its other operational objectives. Registrant's current status
makes it more difficult for Registrant to raise such funds on reasonable terms.
Issues that Registrant believes would be of concern to prospective investors
include (without limitation) the pending litigation filed by the Securities and
Exchange Commission, the significant working capital shortage, the lack of
proven mineral reserves or a mine plan, the difficulties associated with
international operations, the concentration of Registrant's assets in a single
prospect in Bolivia, the significant dependence on management, and the
"cooperative risk factor" discussed above in Item 1, page 9.

15
<PAGE>

Results of Operations
---------------------

Registrant's operations have resulted in significant losses and negative
cash flow from operations during the past several years. Notwithstanding the
limited amount of revenues generated from mining operations ($101,000 in
post-royalty revenues in 1997), Registrant's general and administrative and
other costs have vastly outstripped the resources generated by Registrant's
operations. As described above in "Liquidity and Capital Resources," Registrant
has been dependent on loans from affiliated and unaffiliated parties (including
certain family members of affiliates) to meet its working capital obligations
and to finance Registrant's continuing operating losses. There can be no
assurance that Registrant will be able to continue to finance its operating
losses in such a manner.

The following sets forth certain information regarding Registrant's result
of operations during 1997 compared with 1996.

Registrant incurred operating expenses totaling $2,524,710 in 1997, as
compared to $1,982,768 in 1996, an increase of 27%. As a result of having
limited revenues from operations, Registrant incurred operating losses of
($2,423,251) in 1997 and ($1,982,768) in 1996, an increase of 22%.

Registrant accrued compensation and related payroll taxes of approximately
$717,000 in 1997. (Registrant's president was paid salary of $48,592 and
Registrant's secretary/treasurer was not paid salary in 1997; in 1998, neither
Registrant's president nor the secretary/treasurer has been paid any
compensation, although salaries are continuing to accrue at the rate of $200,000
per year for the president and $150,000 per year for the secretary/treasurer.)
In addition, during 1997 Registrant paid consultants approximately $693,000
(including issuance of common stock valued at $400,000 to a Bolivian consulting
engineering firm, $126,000 to an investor relations consultant, and $70,000 to
two public relations firms). The combination of 1997 compensation and consulting
fees of $1,410,000 compared to $1,422,000 in 1996, a decrease of 1%.
Compensation costs are expected to increase in 1998 and beyond if Registrant is
successful in expanding its operations.

Registrant's costs and operating expenses for 1997 actually decreased as to
general and administrative expenses, totaling $1,848,603, compared to $1,926,921
in 1996. However, exploration expenses in 1997 increased significantly, totaling
$1,030,000 in 1997 (including $402,609 of 1997 costs written down in 1997)
compared to $520,000 in 1996 (including $470,853 of 1996 costs written down in
1997) as a result of increased exploration activities conducted on the property
during 1997. In addition, depreciation increased in 1997 to $48,501, from $7,006
in 1996, representing an increase of 592%. This increase in depreciation is due
principally to the acquisition of mining equipment.

Legal expenses in 1997 decreased significantly as a result of Registrant's
counsel in Bolivia joining the Company as its president and CEO in 1997. The
expenses totaled $75,001 in 1997, as compared to $229,037 in 1996. Accounting
and other professional expenses in 1997 were materially larger than in 1996 due
to efforts required in bringing Registrant's accounting current. 1997 expenses
for accounting and consulting engineering totaled $108,310, while 1996
accounting and other professional expenses were $34,373. Registrant expects that
future legal, accounting and other professional expenses will increase in 1998.
These increased costs are due to the SEC investigation of Registrant's
activities, the Arizona litigation effort, negotiations with a former consultant
regarding the settlement of issues surrounding consultant's contract, litigation
with one of Registrant's former officers regarding issues surrounding employee's
contract and this officer's tortious activities, and efforts to update the
corporate records and SEC filings. In addition, these expenses will increase as
a result of efforts to audit and confirm previous geological studies provided to
Registrant and to further verify mineralization on the Cangalli deposit by Behre
Dolbear & Company, Inc., internationally-recognized consultants to the mining
industry.

Capital expenditures for property and equipment increased significantly in
1997 to $822,192, as Registrant funded exploration costs and investment on the
Bolivian mining prospect. By comparison, 1996 results show capital expenditures
of $741,696. This reflects an increase in 1997 of 11%.

16
<PAGE>

Registrant incurred interest expenses in 1997 of $184,204, as opposed to
1996 interest of $79,141. The increased amount of loans led to this 133%
increase. This increased interest cost will continue, and probably rise
significantly, in 1998 because of increased borrowings necessary to maintain
liquidity for operating purposes. During 1997, due to uncertainties regarding
the recoverability of Registrant's investment in the Bolivian prospect,
Registrant elected to write-down $873,462 of costs previously capitalized,
including $470,853 which were incurred in 1996. As of December 31, 1997,
capitalized costs related to the Bolivian prospect are principally $100,000 paid
for prospect acquisition rights and $813,529 for mining equipment.

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 subsequently converted the debentures
into 2,993,161 shares of common stock as provided for in the agreement. All
voting rights associated with the stock issued were placed in a voting trust
with the Company's board of directors as trustee. The Company has recorded the
stock issued at $299,316 ($.10 per share), the estimated value of its stock at
the date of the transaction.

Registrant had a net loss for 1997 of ($5,963,554), compared to its net
loss in 1996 of ($2,058,742). Registrant anticipates that the trend of net
losses will continue in 1998, as it invests further in exploration on its
Cangalli prospect and in general and administrative expenses in the United
States and Bolivia, without generating significant revenues from those efforts.

Impact of Inflation and Changing Prices
---------------------------------------

Registrant has not experienced any impact from the effects of inflation
during the last three operating periods, 1995, 1996, or 1997. Bolivian
inflation, while astronomical at points during the early 1980's, has been
relatively stable, at less than 10% since 1985, and during the last three years
has been less than 8% per annum.

Y2K Issues
----------

Registrant does not foresee any negative impacts as to its business as a
result of Year 2000 issues, other than those which may generally affect the
North and South American populations at large, such as banking disruptions,
power failure, inconveniences due to governmental slowdowns, and other similar
effects, if any. Registrant has attempted to analyze any potential, specific
impacts, but cannot guarantee that its business activities will not be impacted.
Generally, software available in South America is less likely to be Y2K
compliant, but Registrant does not believe that a requirement to replace its
existing hardware or software, if necessary, will materially affect Registrant.

Item 7. Financial Statements
--------------------

Please refer to pages F-1 through F-23.

Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
----------------------------------------------------------------------

There were no disagreements with Registrant's accountants on any matters of
accounting principles, practices or financial statement disclosures during 1997
through the present.

PART III

Item 9. Directors and Executive Officers of 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 Registrant (including its subsidiaries) as of December
31, 1997. These people continue to hold the stated positions as of October 20,
1998.

17
<PAGE>
<TABLE>
<CAPTION>

Name Age Position Term of Office
---- --- -------- --------------

<S> <C> <C> <C>
Mary A. Erickson (1) 41 Secretary, Treasurer &
Director 11/8/94 to 7/4/96

President & Director 7/4/96 to 2/14/97

Secretary, Treasurer &
Director 2/14/97 to present

Terry C. Turner (1) 45 President, Chairman &
CEO 2/14/97 to present

Harlan M. (Mac) Delozier III 54 Executive Vice President 3/1/97 to present

Rene Velasquez 54 President & Director,
GEBM, EMB 3/15/96 to present
-----------
</TABLE>

(1) Director, Eagle Mining of Bolivia, Ltd. and Golden Eagle Bolivia
Mining, S.A.

No arrangement exists between any of the above officers and directors
pursuant to which any one of those persons was elected to such office or
position.

Directors hold office until the next meeting of shareholders and until a
successor is elected and qualified, or until their resignation. Executive
officers are elected at annual meetings of the Board of Directors. Each such
officer holds office for one year or until a successor has been duly elected and
qualified or until death, resignation or removal. No director of Registrant is a
director of another company having securities registered under Section 12 of the
Securities Exchange Act of 1934 or a company registered under the Investment
Company Act of 1940.

Biographical Information
------------------------

A brief summary of the business experience of each person who is currently
an officer or director of Registrant, and such person's service with Registrant,
is as follows:

Terry C. Turner is President and a director of Registrant, appointed to
such positions 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 also a member of the Bolivian College of Lawyers (Bolivian Bar
Association) and is the first American attorney admitted to practice law in
Bolivia.

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
General Counsel to Minas del Glaciar, S.A., La Paz, Bolivia, which was a mineral
exploration company. From 1995 to 1997 Mr. Turner was in private practice in La
Paz, Bolivia. From 1995 to date, Mr. Turner has also served as President and a
Director of Bolivian Copper Chemical Company, S.A., a Bolivian copper
exploration and mining company. 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

18
<PAGE>

January 1996 until his appointment with Registrant in February 1997, Mr. Turner
was corporate counsel in Bolivia for Registrant and its subsidiaries, Golden
Eagle Bolivia Mining, S.A. and Eagle Mining of Bolivia, Ltd. Mr. Turner was
awarded the Medal of Civic Merit by the Prefect (Governor) of the State of La
Paz, Bolivia, during 1997 for his work in promoting investment in the Bolivian
mining industry, and for his contribution to the progress within the La Paz
state. The Medal of Civic Merit is the highest honor which can be awarded by the
state government in Bolivia.

Mary A. Erickson is corporate Secretary, Treasurer, and a director of
Registrant, having served in such capacities since November 1994. She served as
President from July 4, 1996 to February 14, 1997. She is the sole shareholder of
Golden Eagle Mineral Holdings, Inc., one of Registrant's principal shareholders.
Prior to her association with Registrant, Ms. Erickson was an officer and
director of Timberline Consultants, Inc., an investor relations consulting firm,
from January 1991 until September 1, 1994. Ms. Erickson was awarded the Medal of
Civic Merit by the Prefect (Governor) of the State of La Paz, Bolivia, during
1997 for her work in promoting investment in the Bolivian mining industry, and
for her contribution to the progress within the La Paz state. The Medal of Civic
Merit is the highest honor which can be awarded by the state government in
Bolivia.

Harlan M. (Mac) Delozier III was appointed to the position of Executive
Vice President for Bolivian Operations for Golden Eagle International, Inc. on
March 1, 1997. Mr. Delozier is a 1966 graduate of Oklahoma State University,
where he received Bachelor of Arts degrees in Political Science, Foreign
Language and History. He served in the Peace Corps in Bolivia from 1966-1971 and
was a cattle rancher in Beni, Bolivia from 1972-1990. From 1976 to 1980 he was a
representative of Homeline/Textron in Bolivia, and from 1980-1981 was manager of
gold mining operations for Kerani, in the Murillo Province, La Paz, Bolivia.
From 1981 to 1985, Mr. Delozier was the purchasing agent for the U.S. Embassy
Commissary in La Paz, Bolivia and was an exporter for leather products to Chile
and Peru from 1986-1988. From 1989 until his appointment with Golden Eagle in
1997, Mr. Delozier was an international sales representative for Toyota,
Chevrolet, and Hyundai in Bolivia. From May 1997 to date, Mr. Delozier has also
served as Executive Vice President of Bolivian Copper Chemical Company, S.A., a
Bolivian copper exploration and mining company. (Registrant's Board of Directors
has received notice of, and approved of, Mr. Delozier's dual role. Additionally,
Registrant's Board has received full disclosure as to any conflicts of interest
which may develop from this relationship, and has instructed Mr. Delozier to
disclose any conflicts which may arise in the future.)

Rene Velasquez is 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.

Technical Advisory Board
------------------------

In addition to relying on its management, in May, 1997 the Company's Board
of Directors formed a Technical Advisory Board to assist the Company with the
evaluation, exploration and operation of its current Bolivian gold prospect, and
any future acquisitions. This Advisory Board will initially consist of three
members with broad backgrounds and extensive experience with major mining
companies. They are as follows:

Max S. Staheli. Mr. Staheli received a B.A. in Finance and an MBA from the
University of Utah. He has worked for KPMG Peat, Marwick & Co. in Honolulu,
Hawaii in the late 60's, and nine years as a manager with Atlantic Richfield Co.
(1973-82). Mr. Staheli spent the last 14 years with Barrick Gold Corporation,
most recently as their Controller of South American Operations headquartered in
Lima, Peru. Mr. Staheli developed and implemented administrative policies and
procedures for Barrick's launch into South America. He also successfully built
the corporate structure for Barrick's extensive exploration and development
program, which included Bolivia. Mr. Staheli was instrumental in the rapid
growth of Barrick Gold Corporation in the South Amercan market between 1994-96.
Mr. Staheli was awarded the Medal of Civic Merit by the Prefect (Governor) of
the State of La Paz, Bolivia, during 1997 for his work in promoting investment
in the Bolivian mining industry, and for his contribution to the progress within
the La Paz state. The Medal of Civic Merit is the highest honor which can be
awarded by the state government in Bolivia.

19
<PAGE>

Donald M. Hausen, Ph.D. Dr. Hausen received a B.S. in Geology from Idaho
State College, an M.S. in Geology from the University of Oregon, and a Ph.D. in
Geology from Columbia University in New York. He has served as the Chairman of
the Process Mineralogy Commitee of the SME-AIME on several occasions. Dr. Hausen
is a member of the Mineralogic Society of America; Society of Economic
Geologists; CIM; Ore. Geol. Reviews (Editorial Advisory Board); and the
International Congress of Applied Mineralogy. Dr. Hausen has worked for the U.S.
Army Corps of Engineers, U.S. Bureau of Mines, Atomic Energy Commision, Union
Carbide Nuclear Company, Newmont Exploration Limited (Chief Mineralogist,
1964-87), and Newmont Metallurgical Services (Chief Mineralogist, 1987-90). Dr.
Hausen was awarded the Medal of Civic Merit by the Prefect (Governor) of the
State of La Paz, Bolivia, during 1997 for his work in promoting investment in
the Bolivian mining industry, and for his contribution to the progress within
the La Paz state. The Medal of Civic Merit is the highest honor which can be
awarded by the state government in Bolivia.

Ronald L Atwood, Ph.D. Dr. Atwood received a B.S. in Metallurgical
Engineering, and a Ph.D. in Metallurgy from the University of Utah. He has
published nine papers on various aspects of metallurgy. He holds numerous
patents in the field of extractive metallurgy. Dr. Atwood has been a professor
of metallurgy at Michigan Tech (1972-74) and the University of Idaho (1974-75).
Dr. Atwood has served on the board of Newmont Exploration, as well as Chief
Metallurgist for Foote Mineral (1975-82), Director of Research for Newmont Gold
(1986-87) and Newmont Metallurgical Services (1987-89), all divisions of Newmont
Mining. Dr. Atwood currently serves as Vice President of Bolivian Copper
Chemical Company, S.A., in La Paz, Bolivia, which has recently entered into an
agreement with an Australian resource company for the development of a large
copper deposit in Bolivia. Dr. Atwood was awarded the Medal of Civic Merit by
the Prefect (Governor) of the State of La Paz, Bolivia, during 1997 for his work
in promoting investment in the Bolivian mining industry, and for his
contribution to the progress within the La Paz state. The Medal of Civic Merit
is the highest honor which can be awarded by the state government in Bolivia.

Compliance with Section 16(a) of the Securities Exchange Act of 1934
--------------------------------------------------------------------

Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires Registrant's officers and directors, and persons who
own more than 10% of a registered class of Registrant's equity securities, to
file reports of ownership and changes in ownership of equity securities of
Registrant with the Securities and Exchange Commission and NASDAQ. Officers,
directors and greater-than-ten-percent shareholders are required by Securities
and Exchange Commission regulations to furnish Registrant with copies of all
Section 16(a) filings.

Based solely on its review of the copies of the reports it received from
persons required to file, Registrant believes that during the period from
January 1, 1997 through 1998, all filing requirements applicable to its
officers, directors and greater-than-ten-percent shareholders were complied
with, except as follows:

Terry C. Turner became a director and executive officer of Registrant and
(therefore) subject to the Section 16(a) filing requirements in February 1997.
Mr. Turner filed his Form 3 in October, 1998.

Golden Eagle Mineral Holdings, Inc. ("GEMH"), an affiliate of Mary A.
Erickson, became subject to the Section 16(a) filing in November 1994. Ms.
Erickson became subject to the filing requirements at the same time. Although
they filed the initial Form 3 that was required and filed subsequent Forms 4,
the subsequent forms were not complete, and certain transactions occurred that
were not reported. In October 1998, GEMH and Ms. Erickson filed seven Forms 4
reporting events in November 1994, December 1994, May 1995, June 1995, October
1995, November 1996 (amending an earlier report), and December 1997.

Rene Velasquez became a Section 16(a) reporting person in June 1996 when
his position with Registrant's subsidiaries became equivalent to an executive
officer of Registrant. It is expected that this Form 3 will be filed on or
before November 10, 1998.

Mac Delozier became a Section 16(a) reporting person in March 1997. He
filed his Form 3 in October 1998.

20
<PAGE>

The Herbert M. Seydler, Jr. Trust became subject to the reporting
requirements of Section 16(a) in June 1997 when it acquired, directly and
indirectly, 12,500,000 shares of Registrant's common stock, constituting more
than 10% of the outstanding stock at the time. He filed his Form 3 in November
1998.

The Betty Jane Seydler Trust became subject to the reporting requirements
of Section 16(a) in June 1997 when it acquired, directly and indirectly,
12,500,000 shares of Registrant's common stock, constituting more than 10% of
the outstanding stock at the time. This Form 3 was filed in November 1998.

Item 10. Executive Compensation
----------------------

Summary Compensation Table
--------------------------

The following table sets forth information regarding compensation paid to
the chief executive officers of Golden Eagle International, Inc. for the year
ended December 31, 1997. No other person who is currently an executive officer
of Golden Eagle earned salary and bonus compensation exceeding $100,000 during
any of the last three years. The table below includes all compensation paid to
them by the Registrant and any subsidiary.
<TABLE>
<CAPTION>

Annual Compensation Long Term Compensation
------------------------- --------------------------------
Awards Payout
------------------------ ------
Securities
Underlying All
Name and Restricted Options & LTIP Other
Position Year Salary Bonus Other Awards SAR's Payout Compensation
- -----------------------------------------------------------------------------------------------------------------

<S> <C> <C> <C> <C> <C> <C> <C> <C>
Terry C. Turner 1997 $48,592(A) $0 $2,250 $0 $0 $0 $0
Chairman,
President &
Chief Executive
Officer

Mary A. Erickson 1996 $0(B) $0 $0 $0 $0 $0 $0
Chief Executive
Officer 7-4-96 1997 $0 $0 $0 $0 $0 $0 $0
through
2-17-97;
Secretary,
Treasurer &
Director

Rene Velasquez 1996 $0(C) $0 $0 $400,000(D) $0 $0 $0
President of
GEBM and 1997 $0 $0 $0 $200,000(E) $0 $0 $0
EMB

- -----------
</TABLE>

(A) Mr. Turner has accrued salary at the rate of $200,000 per year since
February 17, 1997, although only $48,592 was paid in 1997 and no salary has
been paid in 1998. This accrued but unpaid salary is a liability of the
Registrant but bears no interest.
(B) Ms. Erickson has accrued salary at the rate of $50,400 per year through
July 1, 1997 and $150,000 per year thereafter. No salary has been paid to
Ms. Erickson since November 1994. This accrued but unpaid salary is a
liability of the Registrant but bears no interest.
(C) Mr. Velasquez has accrued salary at the rate of $60,000 per year since
March 15, 1996. No salary has been paid to Mr. Velasquez since that time.
This accrued but unpaid salary is a liability of the Registrant but bears
no interest.
(D) Registrant granted Mr. Velasquez 2,000,000 shares of restricted stock in
October 1996 valued at $.20 per share.
(E) Registrant granted Mr. Velasquez 2,000,000 shares of restricted stock in
May 1997 valued at $.10 per share.

There are no plans to pay bonuses or deferred compensation to employees of
the Company. However, its president and its secretary/treasurer have accrued
salary for the year ending December 31, 1997, in an aggregate amount of
$276,408, which sum will be paid to these individuals as Registrant is able. An
additional $341,667 has been accrued through October 31, 1998, for a total
cumulative unpaid salary of $717,489.

21
<PAGE>

Registrant has no plans which result in the payment or accrual for payment
of any amounts to any executive officer in connection with his or her
resignation, retirement, or other termination, or change of control or change in
the executive officer's responsibilities.

Although Registrant had employment agreements with Ms. Erickson in the
past, Registrant did not consider those agreements to be material. In any event,
those agreements have been terminated by mutual consent. There are no employment
agreements with Registrant's other employees.

Registrant acquired a vehicle during the 1997 fiscal year for the use of
Mr. Turner. Registrant conveyed that vehicle to Mr. Turner in January 1998 in
partial satisfaction of a debt.

Options/SAR Granted During Year Ended December 31, 1997
-------------------------------------------------------

During fiscal 1997, no stock options were granted by Registrant to any of
its employees or officers. During the same period, no stock appreciation rights
were granted to any person, and there were no outstanding options. During
October 1998, Registrant granted Mr. Turner and Ms. Erickson options to acquire
shares of Registrant's common stock in consideration of their continued efforts
on behalf of Registrant, their willingness to defer their salary, and their
financial assistance to Registrant, including loans they and their family
members made to Registrant or guaranteed for the benefit of Registrant. These
options are exercisable at $.16 per share, 100% of the closing price on October
20, 1998, the date the options were granted. Each of the options expires on
November 1, 2001. The number of shares subject to the options are as follows:

Terry C. Turner: 10,000,000 shares currently vested and 5,000,000 shares
which will vest and become exercisable if Mr. Turner is
still employed by, or an officer or director of, the
Registrant on November 1, 1999.

Mary A. Erickson: 5,000,000 shares currently vested and 5,000,000 shares
which will vest and become exercisable if Ms. Erickson
is still employed by, or an officer or director of, the
Registrant on November 1, 1999.

Aggregated Option/SAR Exercises and Fiscal Year-End Option/SAR Value Table
--------------------------------------------------------------------------

No executive officer exercised any options or stock appreciation rights
during the 1997 fiscal year.

Long Term Incentive Plan - Awards in Last Fiscal Year
-----------------------------------------------------

Registrant has no long-term incentive plans, and consequently made no such
awards in fiscal year 1997.

Defined Benefit or Actuarial Plan Disclosure
--------------------------------------------

As of December 31, 1997, the Registrant had not adopted a medical
insurance, life insurance, or other benefit plan for its employees. The
Registrant adopted a medical insurance plan for its employees in October 1998,
which plan will become effective on November 1, 1998. Registrant currently has
no stock ownership or other profit-sharing or pension plans, but may adopt such
plans in the future. Registrant has no retirement plans and, therefore, has made
no contributions to any such plan on behalf of the named officers.

Compensation of Directors
-------------------------

There was no Director Compensation for the fiscal year 1997, except for
compensation of Officers who are also Directors which is described in the
Summary Compensation Table above. Members of Registrant's Technical Advisory
Board accrued compensation in the amount of $12,000 in 1997 in connection with
certain consulting services rendered by them.

Except as described herein, no officer or director of the Registrant has
been or is being paid any cash compensation, or is otherwise subject to any
deferred compensation plan, bonus plan or any other arrangement and
understanding whereby such person would obtain any cash compensation for his
services for and on behalf of the Registrant.

22
<PAGE>

Employment Contracts and Termination of Employment and Change-in-Control
Arrangements.
---------------------------------------------------------------------------

Registrant has no compensation plan or arrangement with respect to any
executive officer which plan or arrangement results or will result from the
resignation, retirement or any other termination of such individual's employment
with the Company. Registrant has no plan or arrangement with respect to any such
persons which will result from a change in control of the Company or a change in
the individual's responsibilities following a change in control.

Report on Repricing of Options/SARs
-----------------------------------

Not applicable, as no options or SARs were repriced during the fiscal year
ended December 31, 1997.

Item 11. Security Ownership of Certain Beneficial Owners and Management
--------------------------------------------------------------

At October 26, 1998, Registrant had only one class of outstanding voting
securities, its common stock (referred to herein as the "Common Stock"). The
following table sets forth information as of October 26, 1998 with respect to
the ownership of the Common Stock for all directors, individually; all executive
officers named in the compensation table; all executive officers and directors
as a group; and all beneficial owners of more than five percent of the Common
Stock.

Name of Shares owned Percent
beneficial owner beneficially (1) of class
---------------- ---------------- --------

Mary A. Erickson 19,441,467 (2) 17.1%
4949 S. Syracuse St., Ste. 300
Denver CO 80237

Terry C. Turner 10,000,000 (3) 8.4%
4949 S. Syracuse St., Ste. 300
Denver CO 80237

Herbert M. Seydler, Jr. and Ravia Seydler 12,861,600 (4) 11.8%
c/o Hirsch & Westheimer, P.C.
700 Louisiana, 25th Floor
Houston TX 77002

Betty Jane Seydler 12,510,000 (5) 11.5%
c/o Hirsch & Westheimer, P.C.
700 Louisiana, 25th Floor
Houston TX 77002

All officers and directors
as a group (3 persons) 33,441,467 27.1%

- -----------------

(1) As used in this section, the term beneficial ownership with respect to a
security is defined by Rule 13d-3 under the Securities Exchange Act of 1934
as consisting of sole or shared voting power (including the power to vote
or direct the vote) and/or sole or shared investment power (including the
power to dispose or direct the disposition) with respect to the security
through any contract, arrangement, understanding, relationship or
otherwise. Unless otherwise indicated, beneficial ownership is of record
and consists of sole voting and investment power.

(2) Includes 14,441,467 shares owned indirectly and beneficially by Ms.
Erickson as sole shareholder of Golden Eagle Mineral Holdings, Inc., the
record holder of the shares, of which 13,500,000 shares have been pledged
to Frost National Bank as collateral on a revolving line of credit issued

23
<PAGE>

to Registrant, and 800,000 shares have been pledged as collateral to
certain family members for amounts owed to those family members. Also
includes 5,000,000 shares underlying stock options issued to Ms. Erickson,
of which all are presently exercisable. Does not include options to acquire
an additional 5,000,000 shares exercisable at $.16 per share, which vest on
November 1, 1999.

(3) Comprises 10,000,000 shares underlying stock options issued to Mr. Turner,
of which all are presently exercisable. Does not include options to acquire
an additional 5,000,000 shares exercisable at $.16 per share, which vest on
November 1, 1999.

(4) Includes 11,250,000 shares owned by The Herbert M. Seydler, Jr. Trust,
1,250,000 shares owned jointly by Herbert M. Seydler, Jr. and Ravia
Seydler; 360,000 shares directly owned by Ravia Seydler; and 1,600 shares
directly owned by Herbert M. Seydler, Jr.

(5) Includes 11,250,000 shares owned by The Betty Jane Seydler Trust; 1,250,000
shares owned directly by Betty Jane Seydler, which were erroneously issued
in the name of The Betty Jane Seydler Trust; and 10,000 shares owned
directly by Betty Jane Seydler.

Registrant knows of no arrangement of the operation of which may, at a
subsequent date, result in change in control of the Company, except the pledge
by Golden Eagle Mineral Holdings, Inc. of 13,500,000 shares to Frost Bank
described above in Note (2). This loan is not in default.

Item 12. Certain Relationships and Related Transactions
----------------------------------------------

Stock Issuances
---------------

Golden Eagle Mineral Holdings, Inc. ("GEMH"), became a controlling
shareholder of Registrant in November 1994 when it acquired 20,000,000 shares of
Registrant's restricted common stock. GEMH paid Registrant a secured promissory
note payable to Registrant in the amount of $25,000 at ten percent interest, due
on demand. GEMH paid this note in full with all accrued interest in 1995. Since
then, GEMH has transferred certain of these shares to repay certain of GEMH's
financial obligations incurred as a result of GEMH's investment in Registrant.

Herbert M. and Ravia Seydler (the "H. Seydlers") are Mary Erickson's
parents; Betty Jane Seydler ("B. Seydler") is Ms. Erickson's aunt. Neither the
H. Seydlers nor B. Seydler control, are controlled by, or are under common
control with Ms. Erickson. They each maintain separate households from Ms.
Erickson and her family. Until the H. Seydlers and B. Seydlers became
significant shareholders of Registrant as a result of the April 1997 transaction
described hereafter, neither was an affiliate of Registrant.

During 1996, B. Seydler had advanced $450,000 to Registrant on an unsecured
basis. As of January 1, 1997 Golden Eagle also owed approximately $314,000 to
the H. Seydlers. In April 1997, Registrant agreed to issue 5,000,000 shares of
its restricted common stock to H. Seydler, B. Seydler, and H. Seydler's trust in
payment of accrued interest of $25,000 and for their renewal and extension of
these loans for three years.

Also in April 1997, Mr. Seydler's trust and a related trust established for
the benefit of B. Seydler guaranteed the repayment of a $1,000,000 loan from
Frost Bank of Houston, Texas, made to Registrant. The Registrant issued
10,000,000 shares of its restricted common stock to each of the H. Seydler Trust
and the B. Seydler Trust for their guarantee of the obligation to Frost Bank. In
the opinion of management, Frost Bank would not have made the loan to Registrant
without the guarantees from the two trusts. Furthermore, Registrant was unable
to repay the loans due to H. Seydler or his trust, or B. Seydler, at the time
they agreed to extend the obligations. Consequently, the Board of Directors
believes that its agreement with H. Seydler, B. Seydler, and their trusts were
in the best interests of the Registrant and its shareholders, and were more
favorable than the terms that could have been obtained from unrelated parties,
if any terms for similar transactions could have been obtained. Based on its
discussion with Frost Bank, among others, the Board of Directors doubts that any
other party would have assisted the Registrant as did H. Seydler, B. Seydler,
and their trusts. As a result of these transactions, however, H. Seydler, B.
Seydler, and their trusts have become affiliates of the registrant because of
their stock ownership.

24
<PAGE>

Loans to Registrant from Affiliates
-----------------------------------

As described elsewhere in this Annual Report, Registrant has suffered
chronic working capital shortages. To provide short-term relief to Registrant,
Ms. Erickson (Registrant's Secretary/Treasurer) and certain of her family
members have advanced funds to Registrant. In addition, Ms. Erickson and certain
of her family members have guaranteed certain of Registrant's obligations, as
outlined below. In each case, loans from Ms. Erickson accrued interest at 8% per
annum, while loans from her family members accrued interest at 10.5% and 12%.
Each of the loans are unsecured loans due January 1, 2000; however, due to the
related party nature of these transactions, Registrant has classified them as
current liabilities. In Registrant's opinion, the loans are significantly more
favorable to Registrant than could have been obtained from any other source; in
fact, given Registrant's financial condition and lack of profitable operations
or assets within the United States, it is unlikely that any unaffiliated person
would have advanced funds to Registrant on any terms or conditions.

In addition, as described elsewhere in this Annual Report, Mr. Velasquez
(president of Registrant's subsidiaries in Bolivia) and Mr. Turner (Registrant's
president) have advanced funds to Registrant for operations in Bolivia.

Balance
Amount Outstanding
Date Affiliated Lender (Repayment) 1 at Year End
----------------------------------------------------------------------

1994 Mary A. Erickson $44,107 $44,107

1995 Mary A. Erickson $265,163

1995 Mary A. Erickson (185,719) 2 $123,551

1995 Family members 3 $32,683

1995 Family members 3 ($8,092) $24,591

1996 Mary A. Erickson $84,500

1996 Mary A. Erickson $169,417 4

1996 Mary A. Erickson ($116,500) $268,975 5

1996 Family members 3 $645,658 $724,068 5

1996 Rene Velasquez $41,900 $41,900

1997 Family members 3 $239,687
($165,000) 6 $832,509 5

Rene Velasquez $48,431 $90,331

Terry Turner $35,850 $35,850

1998 Family members 3 $159,179
($47,000) $944,583

1 Registrant made all the described repayments in cash except as follows:

2 Including $25,000 canceled in repayment of a promissory note payable to
Registrant in connection with the issuance of shares to Golden Eagle
Mineral Holdings, discussed above.

25
<PAGE>

3 It should be noted that, although these persons are related to Ms.
Erickson, these persons are not affiliated with Ms. Erickson or Registrant
inasmuch as they are adults, not living with Ms. Erickson, and not
controlling, controlled by, or under common control with, Ms. Erickson.

4 Unreimbursed expenses incurred for the benefit of Registrant and unpaid
salary.

5 Including accrued interest.

6 Excluding $25,000 in abated interest.

On February 11, 1997, Frost National Bank loaned Registrant $240,000
pursuant to a short-term bridge loan at the bank's prime rate, due August 1,
1997. In April 1997, the same bank loaned Registrant $1 million pursuant to a
revolving line of credit agreement (which has now been extended to June 1,
1999). The loan bears interest at the prime rate (8.25% as of September 30,
1998). In addition, the loan is personally guaranteed by Ms. Erickson and GEMH,
including a pledge of 13,500,000 shares of Registrant restricted common stock
owned by GEMH, as described above. The loan is further secured by certain assets
of Ms. Erickson's unaffiliated family members and all of Registrant's assets. As
a fee for consideration of the family members' guarantees of the $1 million
loan, Registrant issued a total of 20,000,000 shares of Common Stock which was
valued at $.10 per share. The proceeds from the $1 million loan were used to
retire the earlier $240,000 bank bridge loan and for other working capital
expenses incurred in connection with Registrant's 1997 operations on the
Cangalli properties. As of September 30, 1998, there were no funds available
under the line of credit.

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.

Formation of Bolivian Subsidiaries
----------------------------------

Registrant formed Golden Eagle Bolivia Mining, S.A., ("GEBM") in January
1996 to conduct its operations in Bolivia. Registrant initially owned 74% of
GEBM and later acquired an additional 19% from its Bolivian partners, for a
total of 93%. Registrant formed a second subsidiary, Eagle Mining of Bolivia,
Ltd. ("EMB") in October 1996 to own the contract for mining rights and,
eventually, to operate the property. Registrant owns 84% of EMB; an affiliate of
Registrant, Mary A. Erickson, owns 3%; and Rene Velasquez (a Bolivian national
who is the president and CEO of Registrant's subsidiaries) owns 13%. Mr.
Velasquez' 13% ownership in EMB resulted from the initial agreement between
Registrant and Mr. Velasquez, which resulted in Registrant's introduction to the
United Cangalli Cooperative and the original business opportunity. Ms.
Erickson's 3% ownership was taken in partial consideration for the loans and
advances made to Registrant by Ms. Erickson and her family. EMB's initial
constitution, the equivalent of its Articles of Incorporation, provided that
Registrant will act as the funding shareholder, providing any necessary
operating or development capital to EMB as a "capital contribution" and not as a
loan. The other EMB shareholders are not liable for their share of any capital
contributions; all EMB shareholders share profits in accordance with their
interests. Neither Mr. Velasquez nor Ms. Erickson, or any other officer of
Registrant, own any interest in Registrant's other subsidiary, GEBM.

26
<PAGE>

Item 13. Exhibits, Financial Statement Schedules and Reports on Form 8-K
---------------------------------------------------------------

(a) Financial Statements

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, 1997 F-4

Consolidated Statement of Operations for the years
ended December 31, 1997 and 1996 and from July 21,
1988 (inception) through December 31, 1997 F-5

Consolidated Statement of Cash Flows for the years
ended December 31, 1997 and 1996 and from July 21,
1988 (inception) through December 31, 1997 F-6

Consolidated Statement of Stockholders' Equity
(Deficit) for the years ended December 31, 1997
and 1996 and from July 21, 1988 (inception)
through December 31, 1997 F-7 and F-8

Notes to Consolidated Financial Statements F-9 through F-23

(b) Exhibits

The following exhibits are filed with this Form 10-KSB or incorporated
herein by the following references:

3.1 Articles of Incorporation as amended *
3.2 Bylaws *
10.1 Mineral Concession with the United Cangalli Gold Mining
Cooperative, Ltd. ^
22.1 Subsidiaries
Golden Eagle Bolivia Mining S.A., incorporated under the
laws of Bolivia Eagle Mining of Bolivia, Ltd., incorporated
under the laws of Bolivia

* Incorporated by reference from the Registrant's registration
statement on Form 10-SB which became effective June 17, 1994.
^ Incorporated by reference from Registrant's Form 8-K reporting an
event of December 19, 1996.

The following reports on Form 8-K were filed during the last quarter
of the year ended December 31, 1997, and subsequently:

October 30, 1997 reporting an event under Item 5 of Form 8-K.
December 30, 1997 reporting an event under Item 5 of Form 8-K.
July 7, 1998, reporting an event under Item 5 of Form 8-K
July 24, 1998, reporting an event under Item 5 of Form 8-K
September 25, 1998, reporting an event under Item 5 of Form 8-K
October 8, 1998, reporting an event under Item 5 of Form 8-K

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.

October 31, 1998 /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.

October 31, 1998 /s/ Terry C. Turner
----------------------------------------
Director and Principal Executive Officer

October 31, 1998 /s/ Mary A. Erickson
----------------------------------------
Director, Principal Financial Officer
and Principal Accounting Officer

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 and F-8

Notes to Consolidated Financial Statements F-9

F-1
<PAGE>

Oatley Bystrom & Hansen
A Professional Corporation of CPA's
6061 South Willow Drive, Suite 230
Greenwood Village, Colorado 80111
(303) 770-8383 C Fax (303) 721-6925

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS'

October 20, 1998

To the Board of Directors
Golden Eagle International, Inc.
Denver, Colorado

We have audited the accompanying consolidated balance sheet of Golden Eagle
International, Inc. (a development stage company) and subsidiaries as of
December 31, 1997, and the related consolidated statements of operations, cash
flows and changes in stockholders' equity (deficit) for the years ended December
31, 1997 and 1996, and the related amounts included in the cumulative amounts
for the period from July 21, 1988 (inception) to December 31, 1997. 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 audits. We did not audit the financial statements of Golden Eagle Bolivia
Mining, S.A., a 93% owned subsidiary, which statements reflect total assets and
revenues constituing 84% and 100%, respectively, of the related 1997
consolidated totals. Those financial statements were audited by other auditors
whose report has been furnished to us, and our opinion, insofar as it relates to
the amounts included for Golden Eagle Bolivia Mining, S.A. as of December 31,
1997 and for the years ended December 31, 1997 and 1996, and the related amounts
included in the cumulative amounts for the period from July 21, 1988 (inception)
to December 31, 1997 is based solely on the report of the other auditors.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we 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.
We believe that our audits provide a reasonable basis for our opinion.

In our 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, 1997, and the results of its
operations and its cash flows for the years ended December 31, 1997 and 1996,
and the related amounts included in the cumulative amounts for the period from
July 21, 1988 (inception) to December 31, 1997, 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 discussed in Note A to the financial statements, the Company had
significant working capital and stockholders' deficits as of December 31, 1997
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. In
addition, the Company's ability to conduct future operations remains subject to
other risks, including inexperienced management, operations in isolated regions
of Bolivia, and the concentration of efforts on a single undeveloped prospect.
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 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.

F-2
<PAGE>

BERTHIN AMENGUAL Y ASOCIADOS

1.1 INDEPENDENT AUDITOR'S REPORT

To the Board of Directors and Shareholders
Golden Eagle Bolivia Mining S.A.
La Paz, Bolivia

We have audited the balance sheet of Golden Eagle Bolivia Mining S.A. (the
"Company", - in the development stage) as of December 31, 1997, and the related
statements of operations and cash flows for the year ended on December 31, 1997,
and the statement of cash flows from January 23, 1996 (inception of the Company)
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 audits.

We conducted our audits 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 our audits provide 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. at December 31, 1997, and the results of its operations and its cash flows
for the year ended December 31, 1997, and its cash flows from January 23, 1996
(inception of the Company) to December 31, 1996 in conformity with generally
accepted accounting principles.

The financial statements referred to above assume 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. At present the
Company's operations has not achieved significant levels of production and
substantial additional financing is required in order to attain commercial
levels. Unless the Company obtains significant additional financing, there is
substantial doubt about whether the Company can continue as a "going concern".
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.

BERTHIN AMENGUAL Y ASOCIADOS

/s/ Hugo Berthin Amengual (Partner)
-----------------------------------------
Lic. Hugo Berthin Amengual
MAT. PROF. No. CAUB 0482
RUC 2190931

La Paz - Bolivia
June 17, 1998

F-3

<PAGE>

- -----------------------------------------------------------------------------------
Golden Eagle International, Inc.
(A Development Stage Company)
Consolidated Balance Sheet
- -----------------------------------------------------------------------------------
December 31,
1997
- -----------------------------------------------------------------------------------
ASSETS

CURRENT ASSETS
<S> <C>
Cash $ 72,157
Prepaid expense and other costs 5,658
Income tax refund receivable 8,946
- -----------------------------------------------------------------------------------
Total current assets 86,761
- -----------------------------------------------------------------------------------

PROPERTY AND EQUIPMENT

Mining equipment 813,529
Acquisition cost of mining prospect 100,000
Vehicles 94,796
Office equipment 45,933
- -----------------------------------------------------------------------------------
1,054,258
Less accumulated depreciation (70,389)
- -----------------------------------------------------------------------------------
983,869
- -----------------------------------------------------------------------------------

OTHER ASSETS
Advance royalties 71,914
Deposits 38,775
- -----------------------------------------------------------------------------------
110,689
- -----------------------------------------------------------------------------------

$ 1,181,319
===================================================================================

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

CURRENT LIABILITIES
Loans from related parties $ 946,819
Convertible debentures 268,500
Other note payable 7,276
Accounts payable 191,635
Payable to related parties 128,361
Accrued compensation and taxes 533,085
Accrued interest payable 101,944
Other accrued liabilities 41,996
- -----------------------------------------------------------------------------------
Total current liabilities 2,219,616
- -----------------------------------------------------------------------------------

BANK LOAN PAYABLE 1,000,000
- -----------------------------------------------------------------------------------

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 95,359,112 shares 9,534
Additional paid-in capital 7,065,734
Deficit accumulated during the development stage (9,113,565)
- -----------------------------------------------------------------------------------
Total stockholders' (deficit) (2,038,297)
- -----------------------------------------------------------------------------------
$ 1,181,319
===================================================================================

F-4

See accompanying notes.
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
Golden Eagle International, Inc.
(A Development Stage Company)
Consolidated Statement of Operations
- ----------------------------------------------------------------------------------------------------

July 21, 1988
Year Ended (Inception)
December 31, Through
--------------------------- December
1997 1996 31, 1997
- ----------------------------------------------------------------------------------------------------

<S> <C> <C> <C>
REVENUES $ 101,459 $ -- $ 101,459

COSTS AND OPERATING EXPENSES

General and administrative 1,848,603 1,926,921 4,864,787
Exploration 627,606 48,841 676,447
Depreciation 48,501 7,006 59,126
- ---------------------------------------------------------------------------------------------------

Total costs and operating expenses 2,524,710 1,982,768 5,600,360
- ---------------------------------------------------------------------------------------------------

OPERATING (LOSS) (2,423,251) (1,982,768) (5,498,901)
- ---------------------------------------------------------------------------------------------------

OTHER INCOME (EXPENSE)

Loan financing costs, net (2,475,000) -- (2,475,000)
Write-down of mining prospect (873,462) -- (873,462)
Interest expense (184,204) (79,141) (291,129)
Interest income 193 -- 13,646
Gain on marketable securities -- 19,167 124,336
Commissions -- -- 6,708
Write off advances to Mineral Mountain Mining Co. -- -- (78,000)
Write off loan to investment advisor -- -- (15,000)
Loss on sale of equipment -- (16,000) (17,314)
Other income 12,460 -- 16,141
Other expenses (20,290) -- (20,290)
- ---------------------------------------------------------------------------------------------------

Total other income (loss) (3,540,303) (75,974) (3,609,364)
- ---------------------------------------------------------------------------------------------------

NET INCOME (LOSS) $ (5,963,554) $ (2,058,742) $ (9,108,265)
===================================================================================================

EARNINGS (LOSS) PER SHARE $ (.08) $ (.05) $ (.83)
===================================================================================================

WEIGHTED AVERAGE SHARES OUTSTANDING 76,564,776 44,130,185 10,964,608
===================================================================================================

See accompanying notes

F-5
</TABLE>

- --------------------------------------------------------------------------------
Golden Eagle International, Inc.
(A Development Stage Company)
Consolidated Statement of Cash Flows
- --------------------------------------------------------------------------------------------------------------------------

July 21, 1988
Year Ended (Inception)
December 31, Through
-------------------------- December
1997 1996 31, 1997
-------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C>
Net income (loss) $(5,963,554) $(2,058,742) $(9,108,265)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Stock issued for loan pledges and renewals 2,500,000 -- 2,500,000
Stock issued and issuable for services 816,000 1,230,842 2,221,919
Write-down of mining prospect 873,462 -- 873,462
Depreciation expense 48,501 7,006 59,126
Stock issued for conversion of accrued interest 27,271 -- 27,271
Loss on retirement of equipment and other 4,163 -- 5,477
Loss (gain) from investments -- (19,167) (114,670)
Write off advances to Mineral Mountain Mining Co. -- -- 78,000
Write off loan to investment advisor -- -- 15,000
Fair value of officer salary expensed -- -- 20,000
Changes in operating assets and liabilities:
Prepaid expense and other costs 25,239 (21,231) (5,658)
Income tax refund receivable -- (8,946) (8,946)
Payables and accrued liabilities 481,874 258,440 997,021
- ------------------------------------------------------------------------------------------------------------------------

Net cash flows (used for) operating activities (1,187,044) (611,798) (2,440,263)
- ------------------------------------------------------------------------------------------------------------------------

CASH FLOWS FROM INVESTING ACTIVITIES
Investment in property and equipment (822,192) (741,696) (1,602,432)
Advance royalties (71,914) -- (71,914)
Deposits (35,500) (2,100) (40,275)
Proceeds from investment sales -- 29,589 184,380
Advances to Mineral Mountain Mining Co. -- -- (78,000)
Loan to investment advisor -- -- (15,000)
Purchase of investment securities -- -- (59,478)
Purchase of subsidiary (net of cash acquired) -- -- (2,700)
- ------------------------------------------------------------------------------------------------------------------------

Net cash flows (used for) investing activities (929,606) (714,207) (1,685,419)
- ------------------------------------------------------------------------------------------------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from bank loan 1,000,000 -- 1,000,000
Loans from related parties 221,329 812,023 1,431,209
Repayment on loans from related parties (98,174) (116,500) (431,376)
Proceeds from other notes payable -- 29,136 139,558
Repayments of other notes payable (58,724) (10,422) (69,146)
Proceeds from convertible debentures 100,000 188,500 288,500
Common stock issued and issuable 1,012,635 402,030 1,902,158
Stock issuance costs -- -- (63,064)
- ------------------------------------------------------------------------------------------------------------------------

Net cash flows from financing activities 2,177,066 1,304,767 4,197,839
- ------------------------------------------------------------------------------------------------------------------------

NET INCREASE (DECREASE) IN CASH 60,416 (21,238) 72,157

CASH - BEGINNING OF PERIOD 11,741 32,979 --
- ------------------------------------------------------------------------------------------------------------------------

CASH - END OF PERIOD $ 72,157 $ 11,741 $ 72,157
========================================================================================================================

F-6
</TABLE>

Golden Eagle International, Inc.
(A Development Stage Company)
Consolidated Statement of Stockholders' Equity (Deficit)
- -------------------------------------------------------------------------------------------------------
Common
Common Stock Stock
------------------------- Issuable
Shares Amount
- -------------------------------------------------------------------------------------------------------
<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, $.00125 per share:
Note receivable from affiliate 20,000,000 2,000 --
Legal services 375,000 37 --
Issued for cash in June and August 1995 ($.01 to
$.05 per share), less $41,644 issuance costs 10,052,250 1,005 --
Issued for services in 1995 ($.07 per share) 2,009,000 201 --
Convert notes payable in 1995 ($.15625 per share) 800,000 80 --
Payment of note by affiliate -- -- --
Issuable for cash in 1995 ($.125 to $.282 per share),
417,500 shares -- -- 80,000
Issuable in 1995 for services and additional consideration
for loan ($.07 per share), 328,333 shares -- -- 22,983
Other (70) -- --
Net loss for the periods -- -- --
- -----------------------------------------------------------------------------------------------------

Balance at December 31, 1995 38,478,675 3,848 102,983

Collection of receivable January 9, 1996 -- -- --
Shares previously subscribed issued 568,333 57 (52,983)
Issued for cash ($.05 to $.25 per share) 21,150 2 --
Issuable for cash ($.10 to $.20 per share),
2,207,000 shares -- -- 396,500
Issued for services ($.07 to $.30 per share) 5,448,985 545 --
Net loss for the year -- -- --
- -----------------------------------------------------------------------------------------------------

Balance at December 31, 1996 44,517,143 4,452 446,500

Shares previously subscribed issued 2,407,000 238 (446,500)
Issued for cash ($.10 per share) 10,126,350 1,013 --
Issued to related parties for loan guarantees
and renewals ($.10 per share) 25,000,000 2,500 --
Issued for services ($.03 to $.17 per share) 9,276,398 928 --
Issued for equipment ($.10 per share) 2,993,161 299 --
Issued for conversion of debenture and
note payable ($.09 and $.26 per share) 689,060 69 --
Issued for vehicle ($.10 per share) 350,000 35 --
Net loss for the year -- -- --
- ------------------------------------------------------------------------------------------------------

Balance at December 31, 1997 95,359,112 $ 9,534 $ --
======================================================================================================

F-7

<PAGE>

Golden Eagle International, Inc.
(A Development Stage Company)
Consolidated Statement of Stockholders' Equity (Deficit)
Continued
- --------------------------------------------------------------------------------------------------------------------
Additional
Paid-in Stockholder Accumulated
Capital Recivable Deficit Total
- --------------------------------------------------------------------------------------------------------------------

Inception July 21, 1988 $ -- $ -- $ -- $ --

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, $.00125 per share:
Note receivable from affiliate 23,000 (25,000) -- --
Legal services 432 -- -- 469
Issued for cash in June and August 1995 ($.01 to
$.05 per share), less $41,644 issuance costs 164,044 -- -- 165,049
Issued for services in 1995 ($.07 per share) 148,799 -- -- 149,000
Convert notes payable in 1995 ($.15625 per share) 124,920 (20,000) -- 105,000
Payment of note by affiliate -- 25,000 -- 25,000
Issuable for cash in 1995 ($.125 to $.282 per share),
417,500 shares -- -- -- 80,000
Issuable in 1995 for services and additional consideration
for loan ($.07 per share), 328,333 shares -- -- -- 22,983
Other 2,625 -- -- 2,625
Net loss for the periods -- -- (1,085,969) (1,085,969)
- ---------------------------------------------------------------------------------------------------------------------

Balance at December 31, 1995 568,198 (20,000) (1,091,269) (436,240)

Collection of receivable January 9, 1996 -- 20,000 -- 20,000
Shares previously subscribed issued 52,926 -- -- --
Issued for cash ($.05 to $.25 per share) 5,528 -- -- 5,530
Issuable for cash ($.10 to $.20 per share),
2,207,000 shares -- -- -- 396,500
Issued for services ($.07 to $.30 per share) 1,230,297 -- -- 1,230,842
Net loss for the year -- -- (2,058,742) (2,058,742)
- ---------------------------------------------------------------------------------------------------------------------

Balance at December 31, 1996 1,856,949 -- (3,150,011) (842,110)

Shares previously subscribed issued 446,262 -- -- --
Issued for cash ($.10 per share) 1,011,622 -- -- 1,012,635
Issued to related parties for loan guarantees
and renewals ($.10 per share) 2,497,500 -- -- 2,500,000
Issued for services ($.03 to $.17 per share) 815,072 -- -- 816,000
Issued for equipment ($.10 per share) 299,017 -- -- 299,316
Issued for conversion of debenture and
note payable ($.09 and $.26 per share) 104,347 -- -- 104,416
Issued for vehicle ($.10 per share) 34,965 -- -- 35,000
Net loss for the year -- -- (5,963,554) (5,963,554)
- ---------------------------------------------------------------------------------------------------------------------

Balance at December 31, 1997 $ 7,065,734 $ -- $(9,113,565) $(2,038,297)
=====================================================================================================================

See accompanying notes

F-8
</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, South
America.

Organization of Subsidiaries and Bolivian Mining Activities
- -----------------------------------------------------------

In January 1996, the Company organized a Bolivian corporation, Golden Eagle
Bolivia Mining, S.A. ("GEBM"). The Company has a 93% ownership in GEBM; two
Bolivian citizens own the remaining seven percent. 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 contract with a
Bolivian gold mining cooperative, United Cangalli Gold Mining Cooperative, Ltd.
("UCL"). The Company has an 84% ownership in EMB; a Bolivian citizen owns 13%,
and an officer (and former president) owns the remaining three percent. As a
shareholder in GEBM, the Company has elected to dissolve GEBM and cease all
operations in its name. All continuing operations by the Company in Bolivia will
be carried out by EMB.

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
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, the Company is obligated to
pay UCL $200,000: $100,000 as prospect acquisition rights and $100,000 for
advance royalties. In 1997, the $100,000 for acquisition rights and $71,914 for
advance royalties were paid. Subsequent to December 31, 1997, the balance due
for the advance royalties was paid.

During 1997, due to uncertainties about the presence of Bolivian mineral
reserves, the Company elected to write-down $873,462 of prospect exploration and
development costs previously capitalized, including $470,853 incurred in 1996.
As of December 31, 1997, capitalized costs related to the prospect are
principally $100,000 of acquisition rights paid to UCL and $813,528 of mining
equipment.

F-9
<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, 1997 and has incurred substantial losses since its inception. The
Company presently has no substantial product or producing properties and
requires significant additional financing to satisfy its outstanding obligations
and commence operations. In addition, the Company's ability to conduct future
operations remains subject to other risks, including inexperienced management in
open-pit and high-volume mining, operations in isolated regions of Bolivia, and
the concentration of efforts on a single undeveloped prospect. Unless the
Company successfully obtains suitable significant additional financing
arrangements there is substantial doubt about the Company's ability to continue
as a going concern.

Management's plans to address these matters include private placements of stock,
obtaining short-term loans, seeking suitable joint venture relationships, and
putting the prospect being developed into production.

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.

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.
Significant areas requiring the use of management estimates relate to the
determination of mineral reserves, useful lives for depreciation, depletion and
amortization, and valuation of deferred taxes. Actual results inevitably will
differ from those estimates, and such differences may be material to the
financial statements.

F-10
<PAGE>

Foreign Currency
- ----------------

The Company's functional currency and its foreign activities are conducted
primarily in U.S. dollars.

Revenue Recognition
- -------------------

Mineral sales, to date related to limited amounts of gold produced through
exploratory and development work, are recognized when produced, net of related
production royalties.

Property, Equipment and Mineral Development
- -------------------------------------------

Property and equipment are recorded at cost. Costs associated with the
acquisition 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 as follows:

Mining equipment 7-8 years
Vehicles 5 years
Office equipment 4-10 years

Mineral exploration costs are expensed as incurred. When it has been determined
that a mineral property can be economically developed, the costs incurred to
develop such property, including costs to further delineate the ore body and
remove overburden to initially expose the ore body, are capitalized. Such costs
and estimated future development costs are amortized using a unit-of production
basis over the estimated life of the ore body. On-going development expenditures
to maintain production are charged to operations as incurred.

Significant expenditures directly related to the acquisition of exploration
interests are capitalized. If a mineable ore body is discovered, such costs are
amortized using a unit-of-production method. If no mineable ore body is
discovered, such costs are expensed in the period in which it is determined the
property has no future economic value.

F-11
<PAGE>

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 1997 and 1996, the Company paid
interest of $156,826 and $13,258, respectively. Non-cash investing and financing
transactions during the periods consists of the following:
<TABLE>
<CAPTION>

1997 Shares Amount
- ---- ------ ------
<S> <C> <C>
Common stock issued to related parties for loan guaranties and renewals 25,000,000 $ 2,500,000
Common stock issued to employees and others for services 9,276,398 816,000
Common stock issued to individual for mining equipment 2,993,161 299,316
Common stock issued upon conversion of note payable, accrued interest
and convertible debentures 689,060 104,416
Common stock issued to individual for vehicle 350,000 35,000
----------- -----------
38,308,619 $ 3,754,732
=========== ===========
1996
- ----
Common stock issued to employees and others for services 5,448,985 $ 1,230,842
=========== ===========
</TABLE>

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).

Concentrations
- --------------

Concentrations include: reliance on a single area mining prospect in an isolated
region of a foreign country; limited financial capacity of related parties
and/or others to continue funding operations; and, reliance on the future
stability, capacity and cooperation of UCL. UCL controls locally available
prospect site labor, services, supplies and infrastructure support. If the
Company is successful in commencing sustained commercial levels of production in
Bolivia, it will need significant quantities of mining equipment and supplies
that are presently in short supply or unavailable. Also, high import tariffs may
make equipment either very expensive or of restricted availability; and
transportation of heavy equipment in the region poses practical difficulties and
is weather dependent.

F-12
<PAGE>

Note C - Long-term Debt and Notes Payable

Bank note payable at the prime interest rate (8 1/4 % at
December 31, 1997) dated January 31, 1997. Interest due
quarterly beginning July 1, 1997, until June 1, 1998
when principal and unpaid interest is due. Secured by
substantially all assets of the Company, pledge of
certain assets of relatives of an officer (and former
president) until January 31, 2002, and 13.5 million
shares of Company stock of the officer. June 1, 1998
the due date was extended to June 1, 1999 with interest
payments required monthly beginning July 1, 1998. $1,000,000

6% Convertible debentures issued in 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. The
conversion rate was subsequently reduced to 50% of the
closing bid price, and a total of 2,773,447 shares were
issued in 1998 upon conversion of the debentures plus
accrued interest of $3,932. 168,500

10% Convertible debenture issued October 23, 1997 to a
foreign corporation, due March 24, 1998, convertible to
common stock at the lesser of 50% of the average
closing bid price for three days prior to notice or
$.16 per share. February 19, 1998, 3,062,821 shares
were issued upon conversion of the debenture and
accrued interest of $3,370. 100,000

Other, 6% note payable, unsecured, due October 31, 1998. 7,276

Borrowings from Related Parties:
- --------------------------------

10.5%notes payable issued in 1996 to a relative of an
officer, unsecured, due January 1, 2000, personally
guaranteed by the officer and her husband. Classified
as current liability due to related party nature. 450,000

12% notes payable issued from November 1996 through
December 1997 to relatives of an officer, unsecured,
due January 1, 2000. Classified as current liability
due to related party nature. 314,389

24% advances from officers of a subsidiary, unsecured, due
on demand. 90,330

8% loans issued in 1996 by an officer, unsecured, due
January 1, 2000. Classified as current liability due to
related party nature. 55,250

24% advances from the Company's president, unsecured, due
on demand. 35,850

Other 1,000
---------

2,222,595

Less current maturities (1,222,595)
----------

Long-term maturities $1,000,000
==========

F-13

<PAGE>
- --------------------------------------------------------------------------------
Golden Eagle International, Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------

Note D - Income Taxes

As of December 31, 1997, the Company had net operating loss carryforwards
totaling approximately $9 million that may be offset against future taxable
income, if any. These loss carryforwards expire in varying amounts from 2005
through 2012. Furthermore, use of the loss carryforwards are limited by certain
changes in the Company's ownership. The primary temporary difference between
reported book and tax income is the recognition of stock as compensation for
book purposes.

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
$1,350,000 of the loss carryforward has been offset by a valuation allowance of
the same amount, an increase of $889,000 in 1997.

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
- -------------------

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.

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-14
<PAGE>
- --------------------------------------------------------------------------------
Golden Eagle International, Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------

November 8, 1994, the Company issued 20 million 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 ten percent 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 per
share 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 from 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 was 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).

During 1997, a total of 10,126,350 shares of common stock was issued to ten
individual investors (non-affiliates) for a total of $1,012,635 ($.10 per
share).

During 1997, a total of 9,276,398 shares of common stock was issued to employees
and others for services with an estimated total value of $816,000 (4,000,000
shares at $.032 per share; 2,200,000 shares at $.10 per share; 2,666,666 shares
at $.15 per share; and 409,732 shares at $.17084 per share).

F-15
<PAGE>
- --------------------------------------------------------------------------------
Golden Eagle International, Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------

During April 1997, a $1 million bank loan (see Note C) was 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, the Company issued 20
million shares and an additional 5 million shares of common stock for renewals
and extensions of loans from the relatives, less $25,000 in previously accrued
interest. The 25 million restricted shares were recorded at $2.5 million ($.10
per share), the estimated fair value based on the sale of restricted stock to
individual investors in April 1997. The cost of the pledges, renewals and
extensions ($2.5 million less $25,000 of abated interest) was expensed in 1997
since the bank loan is subject to annual renewal. As part of the arrangement,
the Company was to assume a $165,000 personal loan of the officer, as partial
offset of Company amounts owed the officer. In 1998, the Company was released
from its agreement to assume by offset the $165,000 loan.

Convertible Debt
- ----------------

During 1996, the Company issued $188,500 of 6% debentures to a foreign
corporation which are convertible to common stock at the lesser of 80% of the
OTC Bulletin Board closing bid price the day prior to notice or $.30 per share
(see Note C). December 15, 1997, the holder converted $20,000 of the debentures
plus accrued interest of $17,757 into 429,060 shares of common stock ($.088 per
share). During 1998, the conversion factor was reduced from 80% to 50% and the
holder converted the remaining $158,500 of debentures and $3,932 of related
accrued interest into 2,773,447 shares of common stock at conversion rates of
ranging from $.056 to $.065 per share.

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. The agreement was closed on February
10, 1997. The debenture holder subsequently converted all the debentures into
2,993,161 shares of common stock as provided for in the agreement. 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. The Company has recorded the stock
issued at $299,316 ($.10 per share), the estimated value of its stock at the
date of the transaction.

On October 23, 1997, the Company issued a $100,000 Convertible Debenture to a
foreign corporation which is convertible to common stock at the lesser of 50% of
the OTC Bulletin Board average closing bid price for the three days prior to
notice or $.16 per share. On February 19, 1998, 3,062,821 shares were issued
upon conversion of this debenture and related accrued interest of $3,370 at a
conversion rate of $.03375 per share.

On March 27, 1997, the holder of a $50,000 note payable converted the note and
accrued interest $16,659 into 260,000 shares of common stock ($.25638 per
share).

F-16
<PAGE>
- --------------------------------------------------------------------------------
Golden Eagle International, Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------

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. In 1997, the officer was repaid $48,800 on the loan. As of December
31, 1997, $55,250 plus accrued interest of $1,520 was owed the officer (a net
decrease of $42,788 during 1997). The loans are unsecured and due January 1,
2000. The loans are included in current liabilities due to related party nature.

In addition, as of December 31, 1997, $214,360 owed the officer for out-of
pocket operating expenses and unpaid salary is included in accounts payable, a
net increase of $44,943 during 1997. As of December 31, 1997 a combined total of
$271,130 was owed the officer for loans, accrued interest and amounts included
in accounts payable (a combined net increase of $2,155).

During 1996, the officer (and former president) discussed above received three
percent 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.

During 1996, four one-year notes payable, totaling $450,000 at an interest rate
of 10'%, were issued to a relative of an officer (and former president). On
March 22, 1997 the notes were renewed with an extended due date of January 1,
2000. Due to related party nature of the loans, the notes are included in
current liabilities. In April 1997, $12,500 of accrued interest was abated in
partial payment of the issuance of common stock for a loan guarantee and renewal
(see below). As of December 31, 1997, $450,000 and accrued interest of $67,949
is outstanding (a net increase of $51,258 during 1997). The notes are unsecured
but are personally guaranteed by the officer (and former president) and her
husband.

During 1995, relatives of an officer (and former president) advanced the Company
a total of $32,683 and were repaid $8,092. 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. In 1997, the
relatives were repaid $165,000, of which $161,230 was applied to principal and
the balance to accrued interest. Also in 1997, additional advances totaling
$239,687 were made to the Company. On March 22, 1997 the notes were renewed with
an extended due date of January 1, 2000. Due to related party nature of the
loans, the notes are included in current liabilities. In April 1997, $12,500 of
accrued interest was abated in partial payment of the issuance of common stock
for a loan guarantee and renewal. As of December 31, 1997, $314,389 and accrued
interest of $171 is outstanding (a net increase of $69,528 during 1997). The
loans are unsecured.

F-17
<PAGE>
- --------------------------------------------------------------------------------
Golden Eagle International, Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------

During 1995, the Company issued 80,000 shares of common stock, valued at $.07
per share, to a relative of a former president for services.

During 1997, the Company issued 4 million shares of common stock to a relative
of a former president for services valued at $84,000 ($.032 per share).

During March 1997, $5,000 loaned by a relative in December 1996 was repaid with
interest.

Through December 31, 1997, officers of GEBM have loaned the subsidiary a total
of $126,181 to support operations in Bolivia. The loans bear interest at 24% per
annum, are unsecured, and due on demand. $84,900 of the loans are for rent
charged by an officer for the use of mining equipment.

Note G - Commitments and Contingencies

Securities and Exchange Commission Investigation
- ------------------------------------------------

On May 7, 1998 the Securities and Exchange Commission (the 'Commission') filed a
civil injunctive action in the United States District Court of Colorado against
the Company, one current officer and a former officer of the Company. The
primary allegations relate to the possible distribution of unregistered
securities and the publication of misleading statements regarding the Company's
interest in a joint venture with Mineral Mountain Mining Company and the Silver
Bar Mine (see below). Management intends to contest the case vigorously but has
and will continue to explore potential settlement opportunities, and believes it
unlikely the Company will suffer any financial losses as a result of the action.
There is no disposition of this matter as of October 20, 1998.

F-18
<PAGE>
- --------------------------------------------------------------------------------
Golden Eagle International, Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------

The Commission staff has also informed the Company that it is investigating the
issue of whether a May 22, 1998 Company press release may have violated federal
securities laws. The staff has questioned whether the Company and its president
issued the press release concerning a geological report and related mineral
reserves on its Bolivian prospect without factual basis as to the validity of
the report. As a result of a subsequent internal review of the report,
management has concluded that the techniques used in the report were
insufficient to justify the calculations made although it still believes that
there is significant gold mineralization within the prospect. Management is
continuing to discuss the resolution of these issues with SEC staff, but have
denied any wrongdoing. It is impossible to determine at present whether the
earlier filed injunctive action will be amended to include the allegations
related to the press release, however, management believes it unlikely the
Company would suffer any financial losses as a result.

Former Officer and Other Employees
- ----------------------------------

In June 1998, a former officer filed a lawsuit against the Company seeking
540,659 shares of common stock for compensation in 1995 and 1996 pursuant to an
employment agreement. The Company vigorously denies the allegations and claims
the employee breached the employment agreement, including its fiduciary and
confidentiality provisions. As a result, the Company has filed a counter-claim.
Trial of the dispute is scheduled for trial August 30, 1999 in Denver District
Court. Litigation is subject to many uncertainties and the Company is unable to
predict the outcome of this matter.

The Company is considering a claim against two other former employees, the
former officer discussed above, and a company formed by the individuals that is
alleged to have usurped corporate opportunities of the Company and tortuously
interfered in its operations.

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 approximately $78,440. The Company believes the
consultant did not provide the services contracted, usurped business
opportunities, and tortuously interfered with the Company. No litigation has
been filed to date and the Company is still assessing damages it 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-19
<PAGE>

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 50% 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 provided 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 advances of $78,000).

Principals of MMMC subsequently refused to execute or acknowledge the agreement.
January 18, 1996, the Company filed suit against MMMC and two of its principals
for breach of the joint venture agreement. Accordingly, the $78,000 in advances
to MMMC was written off in the 1995 financial statements. The case subsequently
settled for $20,000; however, defendants have failed to comply with the
settlement agreement, and the matter is pending before the court for
disposition. Litigation is subject to many uncertainties and the Company is
unable to predict the outcome of this matter.

Obligations to Bolivian 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 invest a minimum of $3 million in
the Cangalli prospect. In addition, the Company is obligated to pay UCL
$200,000: $100,000 for prospect acquisition rights and $100,000 for advance
royalties. As of December 31, 1997, the $100,000 acquisition rights and $71,914
of the advance royalties had been paid. Subsequent to December 31, 1997, the
balance of the advance royalties was paid. (See Note A.)

Obligations to Issue Common Stock to Advisors (see below and Note H)
- --------------------------------------------------------------------

The Company is obligated to issue common stock to financial and public relations
advisors for services. The public relations obligation is pursuant to agreements
dated October 29, 1997 and effective August 1, 1997, with two individuals at
$7,000 each per month, as determined by the average first three days trading
price for the quarter. In the event the stock certificates are not issued within
15 calendar days of the quarter additional shares equal to five percent per
month shall be issued. The agreements are for six-month term's automatically
renewable for an additional six months unless either party objects in writing
within 30 days. In 1997, a total of 409,732 shares were issued and in 1998
through October 31, 1998 an additional 864,524 shares have been issued.

F-20
<PAGE>
- --------------------------------------------------------------------------------
Golden Eagle International, Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------

Office Leases
- -------------

July 1, 1997, the Company entered into a five-year office lease in La Paz,
Bolivia at $1,666 per month. The office previously was leased on a month-to
month basis at $1,500 per month. Rental expense paid for the office was $18,996
and $16,850 in 1997 and 1996, respectively. Future minimum lease payments are as
follows:

Year ended December 31,
1998 $ 19,992
1999 19,992
2000 19,992
2001 19,992
2002 9,996
---------
$ 89,964
=========

The Company also leases an executive suite in Denver, Colorado on a month-to
month basis at $188 per month.

Note H - Events Subsequent to December 31, 1997 (Unaudited)

1998 Operations
- ---------------

During 1998, the Company has been unable to conduct significant operations
because of adverse weather conditions in Bolivia (the so-called El Nino
phenomenon) and due to substantial working capital shortages.

Extension of Bank Note Payable
- ------------------------------

On June 1, 1998, the $1 million bank note payable due June 1, 1998 was extended
for an additional year and required interest payments were changed from monthly
to quarterly effective July 1, 1998 (see Note C).

Sale of Common Stock to Investors
- ---------------------------------

In 1998, the Company has issued a total of 800,000 shares of common stock to
five individual investors for cash received through October 23, 1998, totaling
$80,000.

Convertible Debentures
- ----------------------

March 26, 1998, the Company issued a $250,000 ten percent Convertible Debenture
to a foreign corporation which is convertible to common stock at the lesser of
50% of the OTC Bulletin Board average closing bid price for three days prior to
notice or $.16 per share (see Note C). The Debenture requires quarterly interest

F-21
<PAGE>
- --------------------------------------------------------------------------------
Golden Eagle International, Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------

payments beginning June 30, 1998 and was due June 30, 1998. As of October 14,
1998, $125,000 of the Debenture had been funded. On October 15, 1998, the
Debenture holder and the Company agreed to conversion of the $125,000 debenture
plus accrued interest and penalty totaling $35,000 into 2,560,000 shares of
common stock at a conversion rate of $.0625. In addition, the Company agreed to
file a registration statement covering the issued shares within 90 days and
granted the holder the right to purchase up to $200,000 of stock within 30 days
of the effectiveness of the registration statement in the event additional
securities are registered.

During 1998, all outstanding debentures as of December 31, 1997 and accrued
interest of $7,302 were converted into 5,836,268 shares of common stock (see
Note E).

Shareholder Loans and Obligations to Issue Common Stock
- -------------------------------------------------------

Through October 20, 1998, a total of $367,754 had been borrowed on an unsecured
basis from a Bolivian consulting engineering firm at 15% per annum. In addition,
the same consulting firm paid a financial advisor with 666,666 shares of the
Company's common stock for 1998 services provided by the advisor on behalf of
the Company. As consideration for the transfer of stock, the Company is
obligated to issue 999,999 shares of common stock to the consulting firm prior
to January 1, 1999.

A significant shareholder paid two financial advisors and an investor relations
firm a total of 450,000 shares of the Company's common stock for 1998 services.
As consideration for the transfer of stock, the Company is obligated to issue
675,000 shares of common stock to the shareholder prior to January 1, 1999.

Issuance of Common Stock to Advisors
- ------------------------------------

In October 1998, the Company formalized agreements to issue a total of 1.5
million shares of common stock to two financial advisors as compensation for
identification of prospective investors in 1998 and January 1999. One million of
these shares are to be issued immediately and 200,000 shares are to be issued
October 31, 1998 and January 31, 1999. The agreements also provide the advisors
the right (but not the obligation) to purchase up to $100,000 of privately
offered securities.

From January through October 1998, the Company became obligated to issue a total
of 864,524 shares of common stock to two public relations advisors for services
(see Note G).

F-22
<PAGE>
- --------------------------------------------------------------------------------
Golden Eagle International, Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------

Grant of Stock Options to Officers
- ----------------------------------

On October 20, 1998, the Company granted options, covering 25 million shares of
common stock to two officers at an exercise price of $.16 per share until
November 1, 2001; 15 million of the options vest immediately and 10 million on
November 1, 1999.

Other Related Party Transactions
- --------------------------------

In January 1998, a vehicle acquired in 1997 for stock valued at $35,000 (see
Note B) was sold to the Company's president at its estimated fair value,
$27,575. From January through October 1998, relatives of an officer (and former
president) loaned the Company approximately $159,000 and were repaid $47,000. In
addition, the officer (and former president) was repaid $9,300 of out-of pocket
expenses, which had been accrued at December 31, 1997. (See Notes C and F.)

F-23

<ARTICLE> 5

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 72,157
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 86,761
<PP&E> 1,054,258
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<TOTAL-ASSETS> 1,181,319
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<BONDS> 1,000,000
0
0
<COMMON> 9,534
<OTHER-SE> (2,047,831)
<TOTAL-LIABILITY-AND-EQUITY> 1,181,319
<SALES> 101,459
<TOTAL-REVENUES> 101,459
<CGS> 0
<TOTAL-COSTS> 2,524,710
<OTHER-EXPENSES> 3,356,099
<LOSS-PROVISION> 0
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<INCOME-PRETAX> (5,963,554)
<INCOME-TAX> 0
<INCOME-CONTINUING> (5,963,554)
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<EXTRAORDINARY> 0
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<NET-INCOME> (5,963,554)
<EPS-PRIMARY> (.08)
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</TABLE>