GOLDEN EAGLE INTERNATIONAL INC, 10KSB, 1999-04-15

GOLDEN EAGLE INTERNATIONAL INC
10KSB, 1999-04-15
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, 1998.

[ ] 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. [ X ] Yes [ ] 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: $52,471

Aggregate market value of the voting stock held by non-affiliates of Golden
Eagle International, Inc. as of April 9, 1999 was approximately $16,351,204. The
estimate is based on the last sale price per share ($.25 on April 9, 1998) and
65,404,818 shares estimated to be held by non-affiliates.

At December 31, 1998, there were 109,217,885 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, and approximately 7,000 grams of gold in 1998 with an approximate
value (before royalty payments) of $65,030. (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.)

Registrant's majority-owned subsidiary, GEBM, continued through 1998, and
to the date of the filing of this report, as the operator of the Cangalli shaft
and surface operations. GEBM, at one point during 1997, had 106 employees;
however, at December 31, 1998, Registrant's majority-owned subsidiary, GEBM,
employed 42 personnel including its president, one purchasing agent, one
secretary, one accountant, and one administrative assistant in the
administrative offices in La Paz, Bolivia. The remaining 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 27 miners, including drillers, muckers, hoist
operators, and other essential support personnel. GEBM, and its sister
subsidiary, EMB, share a suite of offices, consisting of 2,500 square feet, with
Registrant in the La Paz city center business district.

<PAGE>

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, in part, 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 paid this entity a total of $400,000 in shares of
Registrant's restricted 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. In addition, in the first quarter of 1999, Registrant agreed in
principle to pay these same entities a total of an additional 1,500,000 shares
of its restricted common stock as a fee for similar services to be rendered
during 1999, with the addition of public relations activities included in the
new agreement.

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, (who resigned in May of 1996); Registrant's
current secretary/treasurer and a director, 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.

On November 14, 1998, the SEC filed an Amended Complaint in the
above-referenced action, alleging that Registrant and its president had
inadequate basis for making the May 22, 1998, press release regarding a
geological report Registrant had received from an independent geophysicist and
mining engineer.

In February 1999, Registrant entered into a Consent and Undertaking,
neither admitting nor denying any of the allegations in the SEC's action, but
resolving any and all issues as to the SEC's Complaint and Amended Complaint as
they relate to Golden Eagle International, Inc., by agreeing to the issuance of
a Permanent Injunction not to violate certain securities laws in the future.
Pursuant to that Consent and Undertaking, on March 4, 1999, the Federal District
Court for the District of Colorado entered a Final Judgment of Permanent
Injunction ordering Registrant not to violate certain securities laws in the
future. Registrant was not assessed any civil or monetary penalty. Although
Registrant has resolved the SEC's allegations against it, other defendants
remain in the civil action, including two current officers and directors, as
well as a former officer and director. Negotiations are currently underway for
the settlement of the allegations against the remaining defendants, but those
individuals have denied any wrongdoing which may be actionable under 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

<PAGE>

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 in this annual report, and the other risks
associated with start-up mineral exploration operations. 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

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's 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. This $200,000 obligation has
been met.

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

Note: Registrant has relied upon an independent geological consulting firm
and historical information for the following history, and cannot assure its
accuracy.

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).

<PAGE>

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, 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.

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.

<PAGE>

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 restricted 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.)

Registrant's operations and future planning, based on the foregoing
discussion, is limited to, and by, its ability to raise financing through equity
funding. Continued rehabilitation and maintenance of the Cangalli shaft, which
is a necessary component of Registrant's future operations, is dependent upon
this equity funding. Future projections for open pit operations on Chaco Playa
(the accumulated tailings from the decades-old Chaco face booming operations),
as well as the Chaco face, again, are dependent on its ability to raise
additional financing. Registrant cannot assure that market confidence will
enable the Registrant to raise needed additional debt or equity financing on
reasonable terms for further exploration, operations, and plant construction
capital.

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 normal precipitation received during the 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

<PAGE>

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 1997 and 1998, Registrant projected that its subsidiary, GEBM, would
enter into commercial scale production. To date, Registrant's gold production
has primarily been the product of its exploration work on the properties, as
well as unsuccessful attempts at mounting commercial open-pit operations. While
the Bolivian subsidiary did produce small quantities of gold, overall production
during 1998 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, through 1998, Registrant contracted Bolivian and American
metallurgists 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.

Due to these technical and financial issues on staging its own operations,
Registrant's management projected that within the fourth quarter of 1998, or
within the first quarter of 1999, Registrant would have the initial geological
report from its current consulting firm, evaluating its Cangalli gold deposit.
Registrant set having this report in hand as one of its criteria for inviting
intended joint venture partners onto the Cangalli properties. The delay in
receiving this report has delayed any negotiations with other potential joint
venture partners. Registrant cannot assure that any potential joint venture
partners will be interested in evaluating the Cangalli prospects or in
negotiating a relationship with Registrant.

Registrant's management was desirous of firming up other strategic issues
before inviting potential joint venture partners onto its Cangalli properties.
Foremost among these other strategic moves, Registrant's management began
implementing a program of land acquisition during the fourth quarter of 1998
through the first quarter of 1999, which included negotiating the ownership of
the Cangalli properties currently under Registrant's contractual control
(thereby extinguishing the 18% UCL royalty and eliminating the "cooperative
risk" factor explained below under "Business Atmosphere"), as well as acquiring
surrounding properties in the Paleo-Tipuani Trend. Meetings scheduled in
mid-April 1999 between an appointed negotiating committee from UCL and
Registrant's management will strive to resolve pending issues for acquiring
UCL's interest in the Cangalli properties. Registrant cannot assure that these
meetings will produce a positive result for Registrant; however, these
negotiations have been advanced in previous meetings with UCL's leadership and
general membership. The completion of any acquisition by Registrant of the
surrounding properties or the UCL interests is subject to the availability of
adequate financing, of which there can be no assurance.

Registrant also cannot assure that its current surrounding land acquisition
program will be successful in acquiring all, or even many, of the significant
land holdings in the Paleo-Tipuani Trend. Nevertheless, Registrant's management
believes that it is essential, from various strategic perspectives, to begin
these acquisitions and the formal legal proceedings required by Bolivian law to
perfect titles on these properties.

Any shareholder, or potential shareholder, should carefully weigh the
foregoing highly significant factors and the other factors described in this
annual report (including, without limitation, volatility of commodity prices,
environmental risks associated with mining activities, and the economic risks
associated with doing business in South America) 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

<PAGE>

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 a sampling and geological mapping program on the Cangalli
property. As reported, Mr. Paravicini's initial results underscored two
principle points regarding the Cangalli properties:

* first, that the Cangalli property continued to show very promising
sampling results;

* 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.

On October 7, 1998, Registrant entered into a consulting agreement with
Behre Dolbear & Co., Inc. ("BD&C") of Denver, Colorado, an internationally-known
consultant to the minerals industry. BD&C agreed to make a site visit to Golden
Eagle's Cangalli, Bolivia prospects and attempt to confirm the presence of gold
at a limited number of sites to determine the suitability of areas of the
prospect for further exploration and, based on the results of the foregoing
efforts, generate a work plan which, if successful, would enable Registrant to
identify sufficient resources on the Cangalli property for mining. Registrant
previously reported the results of work by other consultants, but concluded that
the techniques used by those other consultants were insufficient to justify the
calculations made.

BD&C completed its first-phase field evaluation on certain designated
target areas within Registrant's Cangalli gold deposit in October 1998. BD&C
advised Golden Eagle that its field geologist confirmed the existence of gold
mineralization on Registrant's properties. The work BD&C has performed to date
confirms Registrant's management's initial conclusion that earlier studies had
focused on too broad an area within the property and that a greater likelihood
of success could be realized by Registrant focusing on smaller target areas for
more extensive sampling and analysis.

In mid-February, 1999, BD&C carried out a further site review and
additional analysis on Registrant's Cangalli properties. As a result of BD&C's
investigation to date, BD&C is now working with Registrant's management to
identify target areas for more extensive sampling with the intent of identifying
sufficient resources to be considered for future possible mines.

BD&C has emphasized to Registrant that it is not in a position, at this
time, to confirm third party estimates or to make its own estimates of existing
or potential reserves or resources which the property may contain. BD&C's report
on its field work done in October 1998 and February 1999 is pending as of the
date of the filing of this report.

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 26 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 16 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

<PAGE>

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.

Weather, access, and remoteness issues (in general as they apply to Bolivia
and the Tipuani Mining District, and specifically as discussed in this annual
report regarding Registrant's Cangalli operations), create a number of risk
factors. These risk factors, and the other risks described herein, should be
carefully considered by shareholders and potential shareholders in evaluating
any investment in Registrant's securities.

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.

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
three 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.

<PAGE>

To underscore and promote amicable relations between Registrant and UCL,
UCL's president, German Nunez, and its General Secretary, Julio Duran, were
invited to a confirmation and planning meeting in Miami, Florida, December
15-17, 1998. Rene Velasquez, President of GEBM and EMB, attended, as well as
Terry C. Turner, Registrant's President, and Mary A. Erickson, Registrant's
Corporate Secretary. Registrant and UCL confirmed the existence of amicable and
productive relations between the two organizations. Discussions were held on
issues ranging from a buyout of UCL's interests in the Cangalli gold deposit to
integration of UCL's membership into the body of Registrant's shareholders.

As a reciprocal gesture, Registrant's Board of Directors and officers,
together with Mr. Velasquez, attended UCL's annual general assembly on February
27, 1999 in Cangalli, Bolivia. Registrant's Board and officers were received
very cordially, and the same agenda discussed in Miami, Florida, was discussed
at length during a day-long meeting with UCL's entire membership.

Meetings are scheduled for mid-April, 1999, with a committee appointed from
UCL's general membership for purposes of negotiating the buyout of UCL's
interests in the Cangalli gold deposit. This UCL negotiating committee was
authorized and empowered by the full UCL membership during its annual general
assembly in February, 1999, to negotiate a final resolution of all buyout
issues. 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.

During the last quarter of 1998 and the first quarter of 1999, Registrant's
officers attended several substantive meetings with Bolivian government
officials at the highest levels, including: Bolivia's President, Hugo Banzer;
the Minister of Economic Development, Jorge Pacheco; the Vice Minister of Mining
and Metallurgy, Rene Rengel; and the Governor of the State of La Paz, Luis
Alberto Valle, among others. Registrant's management believes that these
meetings foster an important atmosphere of trust and confidence in promoting
both Bolivia's national interests, as well as Registrant's corporate objectives.

<PAGE>

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.)

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, 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.

<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.

Registrant has retained an engineering firm to monitor Registrant's
subsidiary's compliance with environmental laws in Bolivia and to produce any
necessary reporting and filing.

Number of total employees and number of full-time employees.
------------------------------------------------------------

At December 31, 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, 1998, Registrant's majority-owned subsidiary, GEBM,
employed 42 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 27 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

<PAGE>

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.

In 1997, Registrant entered into a five-year office lease 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, with no escalation during the term of the
lease. (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 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 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 the
Registrant's stock.

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

<PAGE>

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
focus on a smaller target area for more extensive sampling and analysis.

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. When MMMC refused to enter into a
definitive agreement, no acquisition of the property was made and Registrant
filed litigation to recover its damages. Based on the recommendations of counsel
upon analysis of the ability of MMMC to pay any award of 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.

On November 25, 1998, this consultant filed a spurious criminal complaint
for fraud against Registrant's president and vice president in La Paz, Bolivia
for the collection of the consultant's claimed unpaid services and expenses.
After a short investigation by the National Bolivian Police in La Paz, the
consultant's criminal complaint was summarily dismissed. Registrant's president
and vice president have been unfortunately compelled by the consultant's actions
to begin a criminal proceeding against him in La Paz for malicious prosecution,
fraudulent use of professional credentials, misrepresentation, and extortion.
That criminal complaint has been investigated by the National Bolivian Police
and the case is proceeding to trial against the consultant.

Registrant continues to assert that no jurisdiction exists in Bolivia for
an action by the consultant, and that his misrepresentation of professional
credentials and attempted extortion of Registrant's officers will, necessarily,
be dealt with severely by Bolivian authorities.

<PAGE>

Litigation/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 (Paul Enright vs. Golden
Eagle International, Inc., 98-CV-5118, Div. 1, District Court, City and County
of Denver, State of Colorado). 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

PART II

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

(a) Market Information

During 1998, Registrant used its common stock directly to raise capital and
to satisfy some of its obligations. Registrant issued a total of 1,200,000
restricted common shares to eight unaffiliated, accredited investors at a price
of $.10 per share (as described in Note E to the Financial Statements). These
were accomplished pursuant to the exemptions from registration found in Sections
4(2) and 4(6) of the Securities Act of 1933, as amended, and the rules
thereunder. The funds received from these investors were 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. These were accomplished pursuant to the exemptions from
registration found in Sections 4(2) and 4(6) of the Securities Act of 1933, as
amended, and the rules thereunder.There was no underwriter involved in these
transactions.

Since late 1994 through the first quarter of 1999, Registrant was
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. ("NASD"). However, in February, 1999, the NASD assigned the "MINE"
symbol to a NASDAQ company, and has assigned to Registrant the trading symbol
"MYNG". 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
became current on its filings of annual and quarterly reports, its securities
were eligible to 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. In February, 1999, one of Registrant's market makers filed the
requisite Form 211 with the NASD requesting the return of Registrant's
securities to the OTC Bulletin Board. Registrant's market maker, a registered

<PAGE>

broker-dealer, has exchanged correspondence with the NASD, and has provided
necessary documentation. There can be no assurance, however, that the NASD will
find the Form 211, and accompanying documentation, adequate. Until Registrant
has received formal notice that its market maker's Form 211 application has been
approved, the market for Registrant's common stock will be impaired.

Registrant's common stock has been the subject of significant rumor and
innuendo published by unaffiliated parties on the Internet and in other media.
These rumors have had significant impact on the market for Registrant's common
stock. Registrant does not, and legally cannot, respond to each rumor, and must
advise its shareholders, and potential shareholders, to investigate the source
of any statement with respect to Registrant before relying upon that statement.

There is a significant amount of restricted stock overhanging the
over-the-counter market, although no person may sell restricted stock into the
over-the-counter market without first filing a Form 144 with the Securities and
Exchange Commission announcing his or her intention to make such sales, or until
after holding the shares for at least a two-year period.

The public market for Registrant's common stock is extremely volatile both
as to price and volume. There can be no assurance that the public market will
continue, or if it does so continue, that the market will stabilize.

Registrant is authorized to issue Eight Hundred Million (800,000,000)
Common Shares, of which approximately 109,217,885 shares are outstanding as of
December 31, 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.

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
Fourth Quarter $.062 $.35

1999 Low Bid High Bid
-------------------------------------------------------------
First Quarter $.125 $.450

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.

(b) Holders

As of December 31, 1998, there were approximately 656 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.

<PAGE>

Item 6. Management's Discussion and Analysis of Financial Condition and Results
of Operations
-----------------------------------------------------------------------

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

At December 31, 1998, 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, 1998,
Registrant was able to pay or subsequently arrange for the payment of a
substantial portion of its subsidiary's 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
due to short-term loans made from affiliates and unrelated parties, bank debt,
accrued compensation, and accounts payable.

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 restricted 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 restricted common stock which
was valued at $.10 per share.

However, during 1998, Registrant did not enjoy the benefits of the
availability of this revolving line of credit on the magnitude of the Texas bank
loan from 1997. Instead, an engineering firm in La Paz, Bolivia, provided
working and operating capital loans on an "as needed" basis during the course of
1998. Small operating loans from this engineering firm totaled $424,884. These
loans, advanced under a revolving line of credit, accumulated interest at 15%
per annum from the date of each disbursement. Interest accumulated through
December 31, 1998 was $27,792. This loan was due on December 31, 1998; however,
it has been extended to June 30, 1999. In the first quarter of 1998, this same
Bolivian engineering consulting firm paid a financial advisor 666,666 shares of
Registrant's common stock for services provided by the advisor on behalf of
Registrant. As consideration for the transfer of the stock, Registrant issued
999,999 shares of restricted common stock to the consulting firm.

Also, during the first quarter of 1998, a significant shareholder paid two
financial advisors and an investor relations firm 450,000 shares of Registrant's
common stock for services. As consideration for the transfer on behalf of
Registrant, 675,000 shares of Registrant's restricted common stock were issued
to this shareholder.

The foregoing two share issuances by Registrant were recorded at the
estimated value of the stock transferred, approximately $.13 per share, for a
total of $217,500, which was comprised of $145,000 for services and $72,500 as
interest expense.

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 was 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 February 1998.

In April 1998, Registrant issued a $250,000 convertible debenture to a
foreign corporation at 8%, of which only $125,000 was advanced to Registrant.
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

<PAGE>

primarily for working capital and operating expenses. The $125,000 advanced to
Registrant under this debenture was converted to 2,560,000 shares of
Registrant's common stock in October 1998. The $125,000 which remained under
this convertible debenture was not subsequently exercised.

Through December 31, 1998, Registrant's majority-owned subsidiary, GEBM,
received loans totaling $32,200 in cash from Registrant's president, Terry C.
Turner, and $169,216 (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 demand. In 1998, Mr. Turner received substantial repayment of
prior loans 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 1998, Registrant issued a total of
1,200,000 shares of restricted common stock to eight unaffiliated, accredited
investors at a price of $.10 per share. These were accomplished pursuant to the
exemptions from registration found in Sections 4(2) and 4(6) of the Securities
Act of 1933, as amended, and the rules thereunder. 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.

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 1999. 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 1998
Registrant produced approximately 7,000 grams of gold, which it sold for
approximately $65,030 (before payment of $12,559 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 a negotiated sum which will be determined in meetings
in mid-April, 1999, between Registrant and representatives of UCL. 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. Registrant will only be able to acquire these interests if it is
able to obtain a significant amount of working capital, of which there can be no
assurance. (Please see "Registrant's Operations: Working Capital Shortages,"
Item 1(b), page 6.)

Given Registrant's working capital shortages and current world market
conditions for commodities, including minerals and metals, Registrant's
management has set the following priorities for the use of proceeds as they
become available:

<PAGE>

(a) Maintenance of current operations, contractual payments, and land
patent payments;

(b) Acquisition of surrounding or adjacent landholdings within the
Paleo-Tipuani Trend;

(d) Receipt of pending geological and metallurgical reports from
consultants who have already performed the necessary fieldwork, or who
are currently concluding their field testing;

(e) Implementation of recommendations from the geological and
metallurgical reports, including, but not limited to:

i. Constructing a metallurgical recovery plant at Chaco Playa, Chaco
Face, begin commercial production;

ii. Entering second-stage resource confirmation work with
Registrant's geological consulting firm;

iii. Entering into negotiations, including site visits and initial
field studies, with interested joint venture partners.

As stated above, implementation of any or all of these planned strategies
by Registrant requires significant infusions of working and operating capital,
and Registrant cannot assure that it will be successful in raising that capital
through a secondary offering or private placements.

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 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 "Registrant's Operations: Business
Atmosphere," Item 1, page 10.

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 ($52,471 in
post-royalty revenues in 1998), 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 1998 compared with 1997.

Registrant incurred operating expenses totaling $1,789,752 in 1998, as
compared to $2,524,710 in 1997, a decrease of 29%. As a result of having limited
revenues from operations, Registrant incurred operating losses of ($1,737,281)
in 1998 and ($2,423,251) in 1997, a decrease of 28%.

Registrant has accrued compensation and related payroll taxes of
approximately $907,577 through December 31, 1998. (Neither Registrant's
president nor its secretary/treasurer were paid salary in 1998; in 1999, 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 1998 Registrant paid consultants approximately $563,202 in
cash and stock. The combination of 1998 compensation and consulting fees of

<PAGE>

$1,125,000 compared to $1,410,000 in 1997, a decrease of 20%. Compensation costs
are expected to increase in 1999 and beyond if Registrant is successful in
expanding its operations.

Registrant's costs and operating expenses for 1998 actually decreased as to
general and administrative expenses, totaling $1,512,347, compared to $1,848,603
in 1997. However, exploration expenses in 1998 decreased significantly, totaling
$195,348 compared to $627,606 in 1997 as a result of decreased exploration
activities conducted on the property during 1998. In addition, depreciation
increased in 1998 to $82,057 from $48,501 in 1997, representing an increase of
69%. This increase in depreciation is due principally to bringing into use a
substantial number of pieces of previously acquired mining equipment.

Legal expenses in 1998 increased significantly as a result of efforts to
settle the SEC investigation of Registrant's activities, 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. The expenses totaled approximately $110,000 in 1998, as
compared to $75,001 in 1997. Accounting and other professional expenses in 1998
decreased from 1997, due to decreased exploration expenses and accounting fees.
1998 expenses for accounting and other professional expenses totaled $86,938,
compared to $108,310 in 1997. Registrant expects that future legal, accounting
and other professional expenses will increase in 1999. These increased costs
will be due to Registrant's litigation with one of Registrant's former officers
regarding issues surrounding employee's contract and this officer's tortious
activities; ongoing efforts to maintain corporate records and SEC filings;
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;
and increased general and administrative expenses in connection with increased
corporate activity to the extent the Company's limited financing will allow.

Capital expenditures for property and equipment decreased significantly in
1998 to $749. By comparison, 1997 results show capital expenditures of $822,192
(excluding stock valued at $299,316 issued for mining equipment) as Registrant
funded exploration costs and investment on the Bolivian mining prospect. This
decrease resulted from Registrant not acquiring additional equipment for
operations due to evaluation of plant designs, and significant cash flow
shortages for such acquisitions.

Registrant incurred interest expenses in 1998 of $339,715, as opposed to
1997 interest of $184,204. The increased amount of loans led to this 84%
increase. This increased interest cost will continue, and probably rise
significantly, in 1999 because of increased borrowings necessary to maintain
liquidity for operating purposes. As of December 31, 1998, capitalized costs
related to the Bolivian prospect are principally $100,000 paid for prospect
acquisition rights and $813,529 for mining equipment.

Registrant had a net loss for 1998 of ($2,073,025), compared to its net
loss in 1997 of ($5,963,554). Registrant anticipates that the trend of net
losses will continue in 1999, 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, 1996, 1997 or 1998. 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.

Year 2000 Compliance
--------------------

The year 2000 ("Y2K") may present problems for computer programs, as well
as other embedded technologies which use date recognition methods or
time-sensitive logic based upon two digits. The date "00" may be recognized as
the year 1900, rather than the year 2000, resulting in widespread
miscalculations or system failures which could adversely affect business.

Registrant expects little impact of the Y2K issues on cash flow or
financial conditions. Nevertheless, Golden Eagle, in an attempt to prevent
financial risk including the loss of revenue and unanticipated costs, is

<PAGE>

devoting all resources necessary to resolve significant Y2K issues in a timely
fashion. The internal assessment phase is complete and all software for
computers utilized by Golden Eagle is, in all material respects, Y2K compliant.
With respect to banks with which Golden Eagle has material relationships,
Registrant intends to complete a verification of Y2K compliance by June 30,
1999. Such verification process includes contacting each vendor's information
technology department to determine the vendor's state of Y2K readiness, as well
as requesting written documentation outlining each vendor's Y2K compliance plan.
Y2K non-compliance by any bank in the United States or Bolivia where Registrant
has its bank accounts could adversely affect Registrant's assets and liquidity.

Estimated expenditures for Y2K issues are expected to be less than $1,000
for fiscal 1999. However, Golden Eagle is not able to determine the total costs
for its Y2K program, nor is it able to determine the material effect on
Registrant's financial condition, results of operations or cash flow.

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, 1998. These people continue to hold the stated positions as of April 12,
1999.
<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) 46 President, Chairman &
CEO 2/14/97 to present

Harlan M. (Mac) Delozier III 55 Executive Vice President 3/1/97 to present

Rene Velasquez 55 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.

<PAGE>
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
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

22
<PAGE>

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 Registrant's Board
of Directors formed a Technical Advisory Board to assist Registrant 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.

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

<PAGE>

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. He filed his Form 3 in March 1999.

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

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 October
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. She filed her Form 3 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, 1998. 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.

24
<PAGE>
<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 & 1998 $0 $0 $0 0 10,000,000(B) $0 $0
Chief Executive
Officer

Rene Velasquez 1996 $0(C) $0 $0 2,000,000(D) 0 $0 $0
President
of GEBM 1997 $0 $0 $0 2,000,000(E) 0 $0 $0
and
EMB 1998 $0 $0 $0 0 0 $0 $0
</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 was
paid in 1998. This accrued but unpaid salary is a liability of the
Registrant but bears no interest.
(B) Does not include 5,000,000 options which do not vest until November 1999.
(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
Registrant. However, its president and its secretary/treasurer have accrued
salary during 1998 in an aggregate amount of $350,000, which sum will be paid to
these individuals as Registrant is able; $678,951 has been accrued through
December 31, 1998.

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 debts owed him.

Options/SAR Granted During Year Ended December 31, 1998
-------------------------------------------------------

No stock appreciation rights were granted to any person in 1998. However,
in 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 restricted shares subject to the options are as
follows:

Terry C. Turner: 10,000,000 restricted shares currently vested and 5,000,000
restricted 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 restricted shares currently vested and 5,000,000
restricted 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.

<PAGE>

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

No executive officer exercised any options or stock appreciation rights
during the 1998 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 1998.

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

In October 1998, Registrant adopted a medical insurance plan for its
employees, which plan became effective on November 1, 1998. Registrant currently
has no stock ownership or other profit-sharing or pension plans, nor life
insurance or any other benefit plan for its employees, 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 1998, except for
compensation of Officers who are also Directors which is described in the
Summary Compensation Table above. Registrant's Technical Advisory Boardmembers
accrued compensation for a total of approximately $12,000 in 1997 in connection
with certain consulting services rendered by them, which remained unpaid through
1998.

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.

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 Registrant. Registrant has no plan or arrangement with respect to any such
persons which will result from a change in control of Registrant 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, 1998.

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

At December 31, 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 December 31, 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.

<PAGE>

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

Mary A. Erickson 19,441,467 (2) 17.8%
4949 S. Syracuse St., Ste. 300
Denver CO 80237

Terry C. Turner 10,000,000 (3) 9.2%
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 30.6%

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

(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
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 Registrant, except the pledge by
Golden Eagle Mineral Holdings, Inc. of 13,500,000 restricted shares to Frost
Bank described above in Note (2). This loan is not in default.

<PAGE>

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. Seydler 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.

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.

<PAGE>
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
(185,719) 2 $123,551

Family members 3 $32,683
($8,092) $24,591

1996 Mary A. Erickson $84,500
$169,417 4
($116,500) $268,975 5

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

Rene Velasquez $41,900 $41,900

1997 Mary A. Erickson $75 $55,250
($48,800)
($165,000) 7

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 $326,662
($47,000) $1,112,171 5

Mary Erickson $0 $55,250

Rene Velasquez $78,885 5 $169,216

Terry Turner $33,425
($37,075) $32,200

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.

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.

7 Cancellation of loan assumption.

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,

<PAGE>

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's 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 restricted 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 December 31, 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.

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, 1998 F-4

Consolidated Statement of Operations for the years ended
December 31, 1998 and 1997 and from July
21, 1988 (inception) through
December 31, 1998 F-5

Consolidated Statement of Cash Flows for the years ended
December 31, 1998 and 1997 and from July
21, 1988 (inception) through
December 31, 1998 F-6

Consolidated Statement of Stockholders' Equity (Deficit)
for the years ended December 31, 1998 and
1997 and from July 21, 1988 (inception)
through December 31, 1998 F-7

Notes to Consolidated Financial Statements F-8 through F-22

<PAGE>

(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, 1998, and subsequently:

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
November 13, 1998, reporting an event under Item 5 of Form 8-K
February 4, 1999, reporting an event under Item 5 of Form 8-K
March 17, 1999, reporting an event under Item 5 of Form 8-K
March 29, 1999, reporting an event under Item 7 of Form 8-K

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.

April 12, 1999 /s/ /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.

April 12, 1999 /s/ Terry C. Turner
----------------------------------------
Director and Principal Executive Officer

April 12, 1999 /s/ M. A. Erickson
-----------------------------------------
Director, Principal Financial Officer and
Principal Accounting Officer

<PAGE>
- --------------------------------------------------------------------------------
Golden Eagle International, Inc.
(A Development Stage Company)
Financial Statements
Table of Contents
- --------------------------------------------------------------------------------

PAGE
----

Reports of Independent Public Accountants F-2 and F-3

Financial Statements

Consolidated Balance Sheet F-4

Consolidated Statement of Operations F-5

Consolidated Statement of Cash Flows F-6

Consolidated Statement of Changes in
Stockholders' Equity (Deficit) F-7

Notes to Consolidated Financial Statements F-8

F-1

<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

April 7, 1999

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, 1998, and the related consolidated statements of operations, cash
flows and changes in stockholders' equity (deficit) for the years ended December
31, 1998 and 1997, and the related amounts included in the cumulative amounts
for the period from July 21, 1988 (inception) to December 31, 1998. 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 93% of total
assets as of December 31, 1998 and revenues constitute 100% of total 1998 and
1997 revenues, of the related 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, 1998 and for the years ended December 31, 1998
and 1997, and the related amounts included in the cumulative amounts for the
period from July 21, 1988 (inception) to December 31, 1998 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, based on our audit and the report of the other auditors, 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, 1998, and the results of its operations and its cash flows
for the years ended December 31, 1998 and 1997, and the related amounts included
in the cumulative amounts for the period from July 21, 1988 (inception) to
December 31, 1998, 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, 1998
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.

Oatley Bystrom & Hansen
Greenwood Village, Colorado

F - 2

<PAGE>
INDEPENDENT AUDITOR'S REPORT

To the Board of Directors and Shareholders
Golden Eagle Bolivia Mining S.A.
(A development stage enterprise)
La Paz, Bolivia

We have audited the balance sheet of Golden Eagle Bolivia Mining S.A. (a
development stage enterprise) as of December 31, 1998 and 1997, and the related
statements of operations and cash flows for the years then ended. The 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 statements presentation.
We believe that 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. (a development stage enterprise) as of December 31, 1998 and 1997, and the
results of its operations and its cash flows for the years then ended, 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 have 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
Member Firm
Pannell Kerr Forster - PKF Worldwide International

/s/ Lic. Hugo Berthin Amengual (Partner)

MAT PROF. No. CAUB 0482
RUC 2190931

La Paz - Bolivia
March 5, 1999

F - 3

<PAGE>
- --------------------------------------------------------------------------------
Golden Eagle International, Inc.
(A Development Stage Company)
Consolidated Balance Sheet
- --------------------------------------------------------------------------------
December 31,
1998
- --------------------------------------------------------------------------------
ASSETS

CURRENT ASSETS
Cash $ 1,305
Prepaid expense other costs 56,087
------------
Total current assets 57,392
------------

PROPERTY AND EQUIPMENT
Mining equipment 813,529
Acquisition cost of mining prospect 100,000
Vehicles 59,796
Office equipment 46,682
------------
1,020,007
Less accumulated depreciation (147,780)
------------
872,227
------------

OTHER ASSETS
Advance royalties 44,634
Deposits 12,275
------------
56,909
------------

$ 986,528
============

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

CURRENT LIABILITIES
Loans from related parties $ 1,249,240
Bank loan payable 1,000,000
Other notes payable 448,816
Accounts payable 213,898
Payable to related parties 19,468
Accrued compensation and taxes 907,577
Accrued interest payable 166,526
Other accrued liabilities 1,863
------------
Total current liabilities 4,007,388
------------

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 an
outstanding 109,217,885 shares 10,920
Additional paid-in capital 8,154,810
Deficit accumulated during the development stage (11,186,590)
------------
Total stockholders' (deficit) (3,020,860)
------------
$ 986,528
============

See accompanying notes.
F-4

- ---------------------------------------------------------------------------------------------------------------------
Golden Eagle International, Inc.
(A Development Stage Company)
Consolidated Statement of Operations
- ---------------------------------------------------------------------------------------------------------------------
July 21, 1985
Year Ended (Inception)
December 31, Through
----------------------------------- December
1998 1997 31, 1998
------------------------------------------------------------------------------------------------------------------

<S> <C> <C> <C>
REVENUES $ 52,471 $ 101,459 $ 153,930

COSTS AND OPERATING EXPENSES
General and administrative 1,512,347 1,848,603 6,377,134
Exploration 195,348 627,606 871,795
Depreciation 82,057 48,501 141,183
------------- ------------- -------------

Total costs and operating expenses 1,789,752 2,524,710 7,390,112
------------- ------------- -------------

OPERATING (LOSS) (1,737,281) (2,423,251) (7,236,182)
------------- ------------- -------------

OTHER INCOME (EXPENSE)
Interest expense (339,715) (184,204) (630,844)
Interest income 903 193 14,549
Loan financing costs, net -- (2,475,000) (2,475,000)
Write-down of mining prospect -- (873,462) (873,462)
Gain on marketable securities -- -- 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 -- -- (17,314)
Other income 5,826 12,460 21,967
Other expenses (2,758) (20,290) (23,048)
------------- ------------- -------------

Total other income (loss) (335,744) (3,540,303) (3,945,108)
------------- ------------- -------------

NET INCOME (LOSS) $ (2,073,025) $ (5,963,554) $ (11,181,290)
============= ============= =============

BASIC EARNINGS (LOSS) PER SHARE $ (.02) $ (.08) $ (.43)
============= ============= =============

WEIGHTED AVERAGE SHARES OUTSTANDING 103,856,108 76,564,776 26,210,426
============= ============= =============

See accompanying notes.

F-5

<PAGE>

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

July 21, 1988
Year Ended (Inception)
December 31, Through
----------------------------- December
1998 1997 31, 1998
-----------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (2,073,025) $ (5,963,554) $(11,181,290)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Stock issued for services 463,000 816,000 2,684,919
Stock issued for accrued interest 113,963 27,271 141,234
Depreciation expense 82,057 48,501 141,183
Loss on retirement of vehicle, equipment and other 2,758 4,163 8,235
Stock issued for loan pledges and renewals -- 2,500,000 2,500,000
Write-down of mining prospect -- 873,462 873,462
Loss (gain) from investments -- -- (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 (50,429) 25,239 (56,087)
Income tax refund receivable 8,946 -- --
Payables and accrued liabilities 312,311 481,874 1,309,332
------------ ------------ ------------

Net cash flows (used for) operating activities (1,140,419) (1,187,044) (3,580,682)
------------ ------------ ------------

CASH FLOWS FROM INVESTING ACTIVITIES
Investment in property and equipment (749) (822,192) (1,603,181)
Advance royalties 27,280 (71,914) (44,634)
Deposits 26,500 (35,500) (13,775)
Proceeds from investment sales -- -- 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 53,031 (929,606) (1,632,388)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Loans from related parties 333,996 221,329 1,765,205
Repayment on loans from related parties (4,000) (98,174) (435,376)
Proceeds from other notes payable 441,540 -- 581,098
Repayments of other notes payable -- (58,724) (69,146)
Proceeds from convertible debentures 125,000 100,000 413,500
Proceeds from bank loan -- 1,000,000 1,000,000
Common stock issued 120,000 1,012,635 2,022,158
Stock issuance costs -- -- (63,064)
------------ ------------ ------------

Net cash flows from financing activities 1,016,536 2,177,066 5,214,375
------------ ------------ ------------

NET INCREASE (DECREASE) IN CASH (70,852) 60,416 1,305

CASH - BEGINNING OF PERIOD 72,157 11,741 --
------------ ------------ ------------

CASH - END OF PERIOD $ 1,305 $ 72,157 $ 1,305
============ ============ ============

See accompanying notes.
F-6

</TABLE>
<PAGE>
<TABLE>
<CAPTION>

- -----------------------------------------------------------------------------------------------------------------------------------
Golden Eagle International, Inc.
(A Development Stage Company)
Consolidated Statement of Stockholders' Equity (Deficit)
- -----------------------------------------------------------------------------------------------------------------------------------
Common Stock Common Additional
---------------------- Stock Paid-in Accumulated
Shares Amount Issuable Capital Deficit Total
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Inception July 21, 1988 - $ - $ - $ - $ - $ -
Issued June 1, 1989 for cash
($.00006 per share) 1,666,665 167 - (67) - 100
Issued in 1990 for cash ($.003 to
$.03 per share) 666,665 67 - 10,033 - 10,100
50,000 to 1 stock split - - - 4,900 - 4,900
Issued in 1991 for cash ($.30074
per share from stock (268,335) 27 - 59,253 - 59,280
November 1, 1993, acquisition of subsidiary - - - 2,600 (5,300) (2,700)
Fair value of officer salary - - - 20,000 - 20,000
November 7, 1994, convert debt to
equity ($.003 per share) 2,640,830 264 - 7,659 - 7,923
Issued in 1994 for note receivable
from affiliate 20,000,000 2,000 - 23,000 - 25,000
Issued in 1994 for legal services
($.00125 per share) 375,000 37 - 432 - 469
Issued for cash in June and August 1995
($.01 to $.05 per share), less $41,644
issuance costs 10,052,250 1,005 - 164,044 - 165,049
Issued for services in 1995 ($.07 per share) 2,009,000 201 - 148,799 - 149,000
Convert notes payable in 1995 ($.15625
per share) 800,000 80 - 124,920 - 125,000
Issuable for cash in 1995 ($.125 to
$.282 per share), - - 80,000 - - 80,000
Issuable in 1995 for services and
additional consideration
for loan ($.07 per share), 328,333 shares - - 22,983 - - 22,983
Shares previously subscribed issued in 1996 568,333 57 (52,983) 52,926 - -
Issued for cash in 1996 ($.05 to
$.25 per share) 21,150 2 - 5,528 - 5,530
Issuable for cash in 1996 ($.10 to
$.20 per share), - - 396,500 - - 396,500
Issued for services in 1996 ($.07 to
$.30 per share) 5,448,985 545 - 1,230,297 - 1,230,842
Other (70) - - 2,625 - 2,625
Net loss for the periods - - - - (3,144,711) (3,144,711)
- ---------------------------------------------------------------------------------------------------------------------------------

Balance at December 31, 1996 44,517,143 4,452 446,500 1,856,949 (3,150,011) (842,110)

Shares previously subscribed issued 2,407,000 238 (446,500) 446,262 - -
Issued for cash ($.10 per share) 10,126,350 1,013 - 1,011,622 - 1,012,635
Issued to related parties for loan guarantees
and renewals ($.10 per share) 25,000,000 2,500 - 2,497,500 - 2,500,000
Issued for services ($.03 to $.17 per share) 9,276,398 928 - 815,072 - 816,000
Issued for equipment ($.10 per share) 2,993,161 299 - 299,017 - 299,316
Issued for conversion of debenture and
note payable ($.09 and $.26 per share) 689,060 69 - 104,347 - 104,416
Issued for vehicle ($.10 per share) 350,000 35 - 34,965 - 35,000
Net loss for the year - - - - (5,963,554) (5,963,554)
- ----------------------------------------------------------------------------------------------------------------------------------

Balance at December 31, 1997 95,359,112 9,534 - 7,065,734 (9,113,565) (2,038,297)

Issued for cash ($.10 per share) 1,200,000 120 - 119,880 - 120,000
Issued for services ($.10 to $.16 per share) 3,704,172 370 - 462,630 - 463,000
Issued for conversion of debentures and
accrued interest ($.03 to $.07 per share) 8,396,268 840 - 434,122 - 434,962
Issued for interest ($.13 per share) 558,333 56 - 72,444 - 72,500
Net loss for the year - - - - (2,073,025) (2,073,025)
- -----------------------------------------------------------------------------------------------------------------------------------

Balance at December 31, 1998 109,217,885 $10,920 $ - $ 8,154,810 $(11,186,590) $ (3,020,860)
====================================================================================================================================
</TABLE>

See accompanying notes.
F-7
<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 under contract
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's intent is
to eventually 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. In 1998, the $28,086
balance due for 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, 1998, capitalized costs
related to the prospect are principally $100,000 of acquisition rights paid
to UCL and $813,529 of mining equipment.

F-8

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

Going Concern Considerations
----------------------------
The accompanying financial statements have been presented assuming the
Company will continue as a going concern, which contemplates the
realization of assets and the satisfaction of liabilities in the normal
course of business. The Company had significant working capital and
stockholders' deficits as of December 31, 1998 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-9

Foreign Currency
----------------
The Company's functional currency and its foreign activities are conducted
primarily in U.S. dollars. Foreign currency transaction gains recorded in
1998 and 1997 were $5,904 and $1,825, respectively.

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. Ongoing 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.

Stock-Based Compensation
------------------------
The Company has elected to follow Accounting Principles Board ("APB")
Opinion No. 25, "Accounting for Stock Issued to Employees" and related
interpretations in accounting for its employee stock options. Under APB 25,
because the exercise price of employee stock options equals the market
price of the underlying stock on the date of grant, no compensation expense
is recorded. The Company has adopted the disclosure-only provisions of
Statement of Financial Accounting Standard ("SFAS") No. 123, "Accounting
for Stock-Based Compensation, " (see Note E).

F-10

<PAGE>

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

Long-Lived Assets
-----------------
The Company reviews for the impairment of long-lived assets, certain
intangibles, and associated goodwill, whenever events or changes in
circumstances indicate that the carrying value of an asset may not be
recoverable. An impairment loss would be recognized when the estimated
future cash flows are less than the carrying amount of the asset. 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.

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 1998 and 1997, the
Company paid interest of $161,170 and $156,826, respectively. Non-cash
investing and financing transactions during the periods consists of the
following:

1998 Shares Amount
---- ------ ------
Common stock issued to advisors
and consultants for services 3,704,172 $ 463,000
Common stock issued upon conversion
of convertible debentures,
and accrued interest 8,396,268 434,962
Common stock issued in lieu of interest 558,333 72,500
----------- -----------
12,658,773 $ 970,462
=========== ===========
Vehicle sold to president
for reduction of loans N/A $ 27,576
===========
1997
----
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
========== ===========

F-11

<PAGE>

Earnings (Loss) Per Share
-------------------------
Basic earnings per share are computed using the weighted average number of
shares outstanding during each period. Diluted earnings per share is
computed on the basis of the average number of common shares outstanding
plus the dilutive effect of outstanding stock options using the "treasury
stock" method.

The basic and diluted earnings per share are the same since the Company had
a net loss for 1998 and 1997 and the inclusion of stock options would be
antidilutive.

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. As of December 31, 1998, the carrying amount of net assets
located in Bolivia was approximately $131,000.

F-12

<PAGE>

Note C - Long-term Debt and Notes Payable

Bank note payable at its prime interest rate
(7 3/4% at December 31, 1998), dated
January 31, 1997. Interest due monthly
until June 1, 1999 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), and
13.5 million shares of Company stock of
the officer. $1,000,000

Note payable dated to a Bolivian consulting
engineering firm at 15% per annum; dated
January 7, 1998: unsecured; principal
and accrued interest due December 30,
1998, subsequently extended to June 30,
1999. 424,884

Other, unsecured. 23,932

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 1998 to relatives of an
officer, unsecured, due January 1, 2000.
Classified as current liability due to
related party nature. 537,143

24% advances from officers of a subsidiary,
unsecured, due on demand. 174,647

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. 32,200
----------
$2,698,056
==========

Note D - Income Taxes

As of December 31, 1998, the Company had net operating loss carryforwards
totaling approximately $6.9 million that may be offset against future
taxable income, if any. These loss carryforwards expire in varying amounts
from 2005 through 2018. 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 $1.0 million of the loss carryforward has been offset by a
valuation allowance of the same amount, a decrease of $318,000 in 1998.

F-13
<PAGE>
- --------------------------------------------------------------------------------
Golden Eagle International, Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------

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).

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.

F-14

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).

During April 1997, a $1 million bank loan (see Note C) was secured by the
pledge of certain assets of relatives of an officer for a period of five
years. 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), their estimated fair value. 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.

From October to December 1998, the Company issued a total of 1,200,000
shares of common stock to eight individuals (non-affiliates) for a total of
$120,000 ($.10 per share).

During 1998, a total of 3,704,172 shares of common stock were issued to
financial advisors and public relations consultants for services with an
estimated total value of $463,000.

F-15

During 1998, a Bolivian consulting engineering firm paid a financial
advisor 666,666 shares of the Company's common stock for services provided
by the advisor on behalf of the Company. As consideration for the transfer
of the stock, the Company issued 999,999 shares of common stock to the
consulting firm. Also during 1998, a significant shareholder paid two
financial advisors and an investor relations firm 450,000 shares of the
Company's common stock for services. As consideration for the transfer of
the stock, the Company issued the shareholder 675,000 shares of common
stock. The new shares issued by the Company were recorded at the estimated
value of the stock transferred, approximately $.13 per share, a total of
$217,500 ($145,000 for services and $72,500 as interest expense).

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 $168,500 of
debentures and $3,092 of related accrued interest into 2,773,447 shares of
common stock at an average conversion rate of approximately $.062 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 of $16,659 into 260,000 shares of common stock
($.25638 per share).

On April 24, 1998, the Company issued a $125,000 convertible debenture to a
foreign corporation. On October 15, 1998 the debenture was converted, along
with $35,000 of accrued interest, to 2,560,000 shares of common stock at
50% of the OTC Bulletin Board average closing bid price the day prior to
notice - $.0625 per share.

F-16

<PAGE>

Employee Stock Options and Pro Forma Stock Based Compensation
-------------------------------------------------------------
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. As of December 31, 1998, none of the
options had been exercised.

Pro forma information regarding net income (loss) and earnings (loss) per
common share is required by SFAS 123, and has been determined as if the
Company had accounted for its employee stock options under the fair value
method of that Statement. The fair value for these options was estimated at
the date of grant using the Black-Scholes option-pricing model with the
following weighted average assumptions:

Risk-free interest rate 5.0%
Dividend yield None
Volatility factor 197%
Weighted average expected life 36 months

The Black-Scholes valuation model was developed for use in estimating the
fair value of traded options, which have no vesting restrictions and are
fully transferable. In addition, option valuation models require the input
of highly subjective assumptions including the expected stock price
volatility. Because the Company's employee stock options have
characteristics significantly different from those traded options, and
because changes in the subjective input assumptions can materially affect
the fair value estimate, in management's opinion, the existing models do
not necessarily provide a reliable single measure of the fair value of its
employee stock options.

For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The
Company's pro forma net income (loss) and earnings (loss) per common share
were as follows for the year ended December 31, 1998:

Net Income (Loss) - as reported $(2,073,025)
Net Income (Loss) - pro forma $(4,567,998)

Earnings (Loss) Per Common Share - as reported $(.02)
Earnings (Loss) Per Common Share - pro forma $(.04)

Weighted average fair value of options
granted during the year $.15 per share

There were no options granted or outstanding during 1997. The pro forma
amounts may not be representative of future disclosures since the estimated
fair value of stock options is amortized to expense over the vesting period
and additional options may be granted in future years.

F-17

<PAGE>

Note F - Related Party Transactions

During 1994, an officer 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, 1998, $55,250 loan principal plus accrued interest of $6,232
was owed the officer (an increase of $4,712), respectively. The unsecured
loans are due January 1, 2000, and due to their related party nature, the
loans are included in current liabilities.

In addition, as of December 31, 1998, $369,082 was owed the officer
discussed above for out-of pocket operating expenses and unpaid salary and
is included in accounts payable, a net increase of $154,722 during 1998. As
of December 31, 1998 a combined total of $430,564 was owed the officer for
loans, accrued interest and amounts included in accounts payable (an
increase of $159,434 during 1998).

During 1996, the officer 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 the
officer's family.

During 1996, four one-year notes payable, totaling $450,000 at an interest
rate of 10 1/2%, were issued to a relative of an officer. The notes are
unsecured but personally guaranteed by the officer and her husband. In
April 1997, $12,500 of accrued interest was abated in partial payment for a
loan guarantee and renewal (see below). As of December 31, 1998 the
$450,000 loan principal and accrued interest of $125,028 was outstanding
(an increase of $57,079). March 22, 1997 the notes were renewed with an
extended due date of January 1, 2000; and due to their related party
nature, the notes are included in current liabilities.

During 1995, relatives of an officer advanced the Company $32,683 and were
repaid $8,092. In 1996, repayment of the advances was agreed to, providing
for interest at twelve percent, and the relatives loaned the Company an
additional $195,658. 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. In
April 1997, $12,500 of accrued interest was abated in partial for a loan
guarantee and renewal (see below). In 1998, the relatives loaned an
additional $170,790. As of December 31, 1998, $537,143 of loan principal
was outstanding (an increase of $222,754). March 22, 1997 these unsecured
notes were renewed with an extended due date of January 1, 2000; and due to
their related party nature the notes are included in current liabilities.

F-18

<PAGE>

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 1997, a $1 million bank loan (see Note C) was secured by the pledge
of certain assets of relatives of an officer for a period of five years. 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), their
estimated fair value. 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.

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. Payment was accomplished by reducing outstanding loans owed
to the officer by the Company. In addition, in 1998 the president was
repaid $9,500 cash and advanced the Company an additional $33,425. As of
December 31, 1998, the president was owed $32,200 for loans which bear
interest at 24% per annum, are unsecured, and due on demand.

Through December 31, 1998 officers of GEBM have loaned it a total of
$174,647 (in equipment rentals and cash). These loans bear interest at 24%
per annum, are unsecured, and due on demand.

Note G - Commitments and Contingencies

Securities and Exchange Commission Investigation
------------------------------------------------
On May 7, 1998 the Securities and Exchange Commission (the "SEC") 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 related to the possible distribution of
unregistered securities, 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), and subsequently, whether a
May 22, 1998 Company press release may have violated federal securities
laws.

In February 1999, the Company entered into an agreement, neither admitting
nor denying any of the allegations in the SEC's actions, but resolving any
and all issues as to the SEC's complaints as they relate the Company, by
agreeing to a permanent injunction not to violate certain securities laws
in the future. Pursuant to the consent, on March 4, 1999, the Federal
District Court for the District of Colorado entered a judgment ordering the
Company not to violate certain securities laws in the future. The Company
was not assessed any civil or monetary penalty. Although the Company has

F-19

<PAGE>

resolved the SEC's allegations against it, other defendants remain in the
civil action, including two current officers and directors. Negotiations
are currently underway for the settlement of the allegations against the
remaining defendants, but those individuals have denied any wrongdoing
under federal securities laws.

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 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
tortiously 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 tortiously 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.

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.

F-20

<PAGE>

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.

Office Leases
-------------
July 1, 1997, the Company entered into a five-year office lease in La Paz,
Bolivia at $1,666 per month. Rental expense paid for the office was $18,000
and $18,996 in 1998 and 1997, respectively. Future minimum lease payments
are as follows:

Year ended December 31,
2000 $ 19,992
2001 19,992
2002 9,996
--------
$ 49,980
========

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

Note H - Fair Value of Financial Instruments

Disclosures about the fair value of financial instruments are presented
below. The determination of fair value is subjective in nature and involves
uncertainties and significant matters of judgement and does not include
income tax considerations. Therefore, the results cannot be determined with
precision and cannot be substantiated by comparison to independent market
values and may not be realized in actual sale or settlement of the
instruments. Also, there may be inherent weaknesses in any calculation
technique, and changes in the underlying assumptions used could
significantly affect the results. The following table presents a summary of
the Company's financial instruments as of December 31, 1998:

F-21

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

Carrying Estimated
Amount Fair Value
Financial assets:
Cash and cash equivalents $ 1,314 $ 1,314

Financial Liabilities:
Notes and loans payable 2,698,056 2,698,056

The carrying amounts for cash and cash equivalents, accounts payable and
accrued expenses approximates fair value because of the short maturities of
these instruments. The fair value of notes and loans payable approximates
fair value because of the market rate of interest on the debt.

Note I - Events Subsequent to December 31, 1998 (Unaudited)

Short-term Borrowings
---------------------
On February 17, 1999, the Company borrowed $25,000 from an individual
pursuant to a two-percent promissory note that is secured by 500,000 shares
of unissued, restricted common stock. As additional compensation, the
lender also received 75,000 shares of restricted common stock. At the
Company's option, it may extend the due date of the loan from May 3, 1999
to May 17, 1999 for 75,000 additional shares of common stock. The
obligation is also personally guaranteed by the Company's president.

Sale of Common Stock to Investors
---------------------------------
In January and March 1999, the Company issued 1,060,000 shares of common
stock to eight individual investors (non-affiliates) for cash totaling
$106,000 ($.10 per share).

Issuance of Common Stock to Advisors
------------------------------------
In the first quarter of 1999, the Company agreed in principle to issue a
total of 1.5 million shares of common stock to two financial advisors as
compensation for identification of prospective investors and financial
public relations in 1999.

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

Through April 7, 1999, relatives of an officer loaned the Company $91,300
(see Note F).

F-22

<ARTICLE> 5

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<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 1,305
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<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 57,392
<PP&E> 1,020,007
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