SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[ X] Quarterly report under Section 13 or 15(d) of the Securities Exchang
Act of 1934 for quarter period ended
March 31, 1999
[ ] 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.
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(Exact name of Golden Eagle as specified in its charter)
Colorado 84-1116515
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(State of incorporation) (IRS Employer Identification No.)
4949 South Syracuse Street, Suite 300, Denver, CO 80237
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(Address of principal executive offices) (Zip Code)
Golden Eagle's telephone number, including area code: (303) 694-6101
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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
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(Title of class)
Check whether the issuer (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 issuer was required to file such
reports), and (2) has been subject to the filing requirements for the past 90
days.
[ X ] Yes [ ] No
At March 31, 1999, there were 110,952,885 shares of common stock outstanding.
Transitional Small Business Disclosure Format: [ ] Yes [ X ] No
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PART I - FINANCIAL INFORMATION
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Item 1. Financial Statements
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The unaudited Financial Statements for the Quarter Year ended March 31,
1999, are attached hereto. Please refer to pages F-1 through F-6.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
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Liquidity and Capital Resources
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At March 31, 1999, and subsequently, Golden Eagle has had significant
working capital shortages. In fact, since its inception through the first
quarter of 1999, Golden Eagle's current liabilities have substantially exceeded
current assets. This situation has created a significant hardship for Golden
Eagle in meeting its obligations to pay its bills currently, although at March
31, 1999, Golden Eagle was able to pay or was in the process of arranging for
the payment of all salaries for employees of its Bolivian operations, as well as
most of its suppliers' billings and other current expenses. As discussed below,
Golden Eagle's working capital deficit as of March 31, 1999 ($4,224,529) was
primarily due to short-term loans made from affiliates and unrelated parties,
and unpaid compensation to Golden Eagle's president and corporate secretary.
Golden Eagle has historically financed its significant operating losses and
cash flow deficits through working capital loans from affiliates and,
occasionally, from non-affiliates. In addition, Golden Eagle also used its
common stock directly to raise capital and to satisfy some of its obligations.
The situation requiring use of Golden Eagle's stock to raise working capital has
continued throughout 1999 and will result in dilution to Golden Eagle's current
shareholders (see Part II, Item 2, "Changes in Securities").
During the first quarter of 1999, Golden Eagle entered into an agreement
with two related entities (which are not affiliated with Golden Eagle) to
provide certain services in 1999 to Golden Eagle on a non-exclusive basis. These
services include introducing Golden Eagle to investment bankers and accredited
investors. In addition, these entities are providing Golden Eagle with financial
public relations. These services do not include the offer or sale of securities.
Golden Eagle has agreed to pay these entities a total of 1,500,000 shares of its
restricted common stock as a fee for these 1999 services.
Golden Eagle has also 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
Golden Eagle has been successful in obtaining funds to date, there can be no
assurance that Golden Eagle will be able to continue to be successful in doing
so. Golden Eagle's ability to finance its operations will, in the end, be
dependent on Golden Eagle's ability to generate cash flow from operations, of
which there can be no assurance.
In the first quarter of 1999, Golden Eagle borrowed $25,000 from an
unrelated individual pursuant to a promissory note bearing interest at two
percent per annum 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. Pursuant to the loan agreement, the Company opted to
extend the due date of the loan from May 3, 1999 to May 17, 1999, for 75,000
additional shares of common stock, which were issued on May 5, 1999. The
obligation is also personally guaranteed by the Company's president.
As of March 31, 1999, Golden Eagle's majority-owned subsidiary, GEBM, had
received loans totaling $14,291 in cash from Golden Eagle's president, Terry C.
Turner, and $158,976 (in equipment rentals and cash) from GEBM's president, Rene
Velasquez and his wife. The funds provided by these loans were used to maintain
Golden Eagle's ongoing operations in Bolivia. These loans bear interest at 24%
per annum and are repayable upon demand. In the first quarter of 1999, Mr.
Velasquez requested repayment of his loans and equipment rental amounts, and
Golden Eagle deems the loans and rental amounts due and payable. Golden Eagle is
presently negotiating the repayment on the loans and rental payments with Mr.
Velasquez.
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Golden Eagle'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 Golden Eagle 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, Golden
Eagle may incur certain liabilities, although no such claims have, to Golden
Eagle's knowledge, been asserted to date.
To date, Golden Eagle has only been able to achieve limited cash flow from
the limited non-commercial mining operations it has conducted. Specifically, to
date Golden Eagle has been able to produce and sell approximately 20,000 grams
of gold, with post-royalty revenues of $159,000. During the first quarter of
1999, Golden Eagle's operations in Bolivia produced post-royalty revenue of
$5,000. All revenues generated to date were used in the Bolivian operations.
Although Golden Eagle 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, and there can be no assurance that any revenues
received will exceed expenses incurred. In this regard, Golden Eagle has
contracted Ronald Atwood, Ph.D., to develop a feasible flow sheet for the
metallurgical plant required to recover the fine gold found at Cangalli which
has traditionally been lost. Dr. Atwood spent three weeks in the month of April,
1999 in Cangalli carrying out field studies on particle size and distribution,
material handling, and fine gold recoverability testing. Dr. Atwood is also
preparing a mine plan for submission to Golden Eagle's Board for consideration
and implementation, employing the newly-designed metallurgical plant. Golden
Eagle's ability to pursue any mine plan is dependent on a number of factors,
including obtaining necessary government and local consents and permits and,
most importantly, obtaining a significant amount of additional financing. There
can be no assurance that Golden Eagle will be able to obtain the necessary
permits when required, or that it will be able to obtain a sufficient amount of
financing on commercially reasonable terms, if at all.
During the first quarter of 1999, Golden Eagle, 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 potential open-pit mining sites within the
concession area.
Golden Eagle has no significant capital commitments pursuant to its
contract with UCL, 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. Golden Eagle is contractually
committed to investing $3 million in the development and exploration of the
Cangalli property over the 25-year life of the initial contract period. As a
result of meetings held with the president and general secretary of the UCL in
Miami, Florida on December 14 and 15, 1998, Golden Eagle's president and
corporate secretary committed to fulfill obligations to the cooperative of
$42,451 owing on the purchase of equipment from the cooperative and for
royalties on production. During the first quarter of 1999, that commitment was
met in full. In addition, Golden Eagle committed to the cooperative that it
would finish paying any and all back obligations owed to workers and suppliers
in the Cangalli district. Golden Eagle has subsequently met many of those
obligations, and has arranged for the payment of certain pending obligations.
Golden Eagle has offered to purchase the interests ("Certificados de
Aporte" or "Certificates of Contribution") from each of UCL's 118 members,
thereby buying out the Cooperative's interest in the Cangalli properties. 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. Golden Eagle's offer to UCL is still pending as of the filing of
this quarterly report, and its ability to purchase UCL is contingent upon Golden
Eagle's ability to obtain adequate financing, of which there can be no
assurance.
In addition, Golden Eagle believes that a substantial and material risk
exists, which Management has termed the "cooperative risk factor." This risk
relates to various aspects of Golden Eagle's relationship with the UCL, an
organization consisting of 118 members of all socio-economic, education, and
political levels and criteria. Golden Eagle's Management has sought and
received, repeatedly, assurances from UCL's president and board of directors
that Golden Eagle'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 Golden Eagle's
subsidiary and UCL, approximately 22 years, Golden Eagle has received informal
and formal complaints from UCL's administration regarding Golden Eagle's
contract compliance. However, Golden Eagle believes it has always been able to
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satisfactorily resolve any complaint or dispute. Golden Eagle'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 Golden
Eagle'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 Golden Eagle's legitimate rights vis-a-vis some illegal action on the
part of UCL or third parties. Golden Eagle is aware that certain third parties
are attempting to disrupt Golden Eagle's relationship with UCL. Golden Eagle 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. During the meetings with members of UCL's
board of directors in December 1998, Golden Eagle's president and corporate
secretary received written assurances that relations between UCL and Golden
Eagle are extremely cordial and in excellent condition. While Golden Eagle'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
Golden Eagle's securities.
To underscore and promote amicable relations between Golden Eagle and UCL,
as indicated above 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, Golden Eagle's President and Board
Chairman, and Mary A. Erickson, Golden Eagle's Corporate Secretary and Board
member. Golden Eagle 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 Golden Eagle's shareholders.
As a reciprocal gesture, Golden Eagle's Board of Directors and officers,
together with Mr. Velasquez, attended UCL's annual general assembly on February
27, 1999 in Cangalli, Bolivia. Golden Eagle'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 have been scheduled 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. Originally
scheduled for mid-April 1999, these meetings have been postponed until May 1999.
While Golden Eagle's management's analysis is very positive for future
relations, any potential investors or current shareholders must take notice of
the "cooperative risk factor," discussed above and weigh it carefully when
making any investment decision regarding Golden Eagle's securities.
However, regarding the purchase of UCL's interest in the Cangalli property,
as of the end of the first quarter of 1999, Golden Eagle did not have sufficient
liquidity or capital resources to purchase the interests of the UCL members or
to accomplish its other operational objectives. Although Golden Eagle's
management is optimistic about its ability to raise the necessary capital, there
can be no assurance that Golden Eagle will be able to raise capital when needed,
in the amounts needed, or on commercially reasonable terms. Golden Eagle's
current status with a recently-settled SEC investigation (to which its
management continues to be subject) and the enhanced regulatory scrutiny
resulting therefrom and its poor financial condition, among other conditions,
makes it more difficult for Golden Eagle to raise such funds on reasonable
terms. Issues that Golden Eagle believes would be of concern to prospective
investors include (without limitation), the significant working capital
shortages in the past, the lack of proven mineral reserves or a mine plan, the
difficulties associated with international operations, the concentration of
Golden Eagle's assets in a single prospect in Bolivia, and the significant
dependence on management.
During the last quarter of 1998 and the first quarter of 1999, Golden
Eagle'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. Golden Eagle's management believes that these
meetings foster an important atmosphere of trust and confidence in promoting
both Bolivia's national interests, as well as Golden Eagle's corporate
objectives.
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Because of technical and financial issues on staging its own operations,
Golden Eagle's management has decided that one of its important objectives must
be carrying out negotiations with potential joint-venture partners for the
development of the Cangalli gold deposit. As a condition precedent to beginning
those negotiations, Golden Eagle's management projected that within the fourth
quarter of 1998, or within the first quarter of 1999, Golden Eagle would have
the initial geological report from its current consulting firm, evaluating its
Cangalli gold deposit. Golden Eagle's management believed that it would be
important, taking into account all of the existing circumstances, to have 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. Golden
Eagle cannot assure that any potential joint venture partners will be interested
in evaluating the Cangalli prospects or in negotiating a relationship with
Golden Eagle.
Golden Eagle's management isdesirous of firming up other strategic issues
before inviting potential joint venture partners onto its Cangalli properties.
Foremost among these other strategic moves, Golden Eagle's management began
implementing a program of land acquisition during the fourth quarter of 1998
through the first quarter of 1999, which included, as indicated above,
negotiating the ownership of the Cangalli properties currently under Golden
Eagle's contractual control (thereby extinguishing the 18% UCL royalty and
eliminating the "cooperative risk" factor, 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 Golden Eagle's
management will strive to resolve pending issues for acquiring UCL's interest in
the Cangalli properties. Golden Eagle cannot assure that these meetings will
produce a positive result for Golden Eagle; however, these negotiations have
been advanced in previous meetings with UCL's leadership and general membership.
The completion of any acquisition by Golden Eagle of the surrounding properties
or the UCL interests is subject to the availability of adequate financing, of
which there can be no assurance.
Golden Eagle 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, Golden
Eagle'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.
On October 7, 1998, Golden Eagle 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 Golden Eagle to
identify sufficient resources on the Cangalli property for mining. Golden Eagle
previously reported the results of work by other consultants, but concluded that
the techniques used by those other consultants may have been insufficient to
justify the calculations made.
BD&C completed its first-phase field evaluation on certain designated
target areas within Golden Eagle's Cangalli gold deposit in October 1998. BD&C
advised Golden Eagle that its field geologist confirmed the existence of gold
mineralization on Golden Eagle's properties. The work BD&C has performed to date
confirms Golden Eagle'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 Golden Eagle 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 Golden Eagle's Cangalli properties. As a result of BD&C's
investigation, BD&C worked with Golden Eagle'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 Golden Eagle 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 fieldwork done in October 1998 and February 1999 had just been received
by Golden Eagle as of the date of this Report on Form 10-QSB, and is currently
being analyzed by the Company.
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Given Golden Eagle's working capital shortages and current world market
conditions for commodities, including minerals and metals, Golden Eagle's
management has set the following priorities for the use of proceeds as they
become available:
(a) Maintenance of current operations, contractual payments, and land
patent payments;
(b) Acquisition of surrounding or adjacent landholdings within the
Paleo-Tipuani Trend;
(c) Acquisition of UCL's ownership interests in the Cangalli properties;
(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
Golden Eagle'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 Golden Eagle requires significant infusions of working and operating capital,
and Golden Eagle cannot assure that it will be successful in raising that
capital through a secondary offering or private placements.
As noted, the future conduct of Golden Eagle'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 Golden Eagle will be able to conduct its operations as
contemplated. Certain statements contained in this report using the terms "may,"
"expects to," and other terms denoting future possibilities, are forward-looking
statements. The accuracy of these statements cannot be guaranteed as they are
subject to a variety of risks which are beyond Golden Eagle's ability to predict
or control and which may cause actual results to differ materially from the
projections or estimates contained herein. These risks include, but are not
limited to, the risks described above, and the other risks associated with
start-up mineral exploration operations, and Golden Eagle's operations with
insufficient liquidity and no historical profitability. It is important that
each person reviewing this report understands the significant risks attendant to
Golden Eagle's operations and that of its subsidiaries. As noted, the future
conduct of Golden Eagle'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. Golden Eagle
disclaims any obligation to update any forward-looking statement made herein.
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Results of Operations
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Golden Eagle's operations in the first quarter of 1999 resulted in
significant losses and negative cash flow. Notwithstanding the limited amount of
revenues generated from mining operations ($5,000 in post-royalty revenues in
the first quarter of 1999), Golden Eagle's general, administrative and other
costs have vastly outstripped the resources generated by Golden Eagle's
operations. As described above in "Liquidity and Capital Resources," Golden
Eagle has been dependent on loans from affiliated and unaffiliated parties
(including certain family members of affiliates), as well as stock issuances
through private placements, to meet its working capital obligations and to
finance Golden Eagle's continuing operating losses. There can be no assurance
that Golden Eagle will be able to continue to finance its operating losses in
such a manner.
The following sets forth certain information regarding Golden Eagle's
results of operations during the three months of the first quarter of 1999
compared with the same period in 1998.
Golden Eagle incurred operating expenses totaling $352,811 in the first
quarter of 1999, as compared to $456,935 in 1998, a decrease of 23%. As a result
of having limited revenues from operations, Golden Eagle incurred operating
losses of ($347,734) in 1999 and ($445,135) in 1998, a decrease of 22%.
As of March 31, 1999, Golden Eagle had accrued cumulative compensation and
related payroll taxes of approximately $990,700. (Golden Eagle's president, as
well as Golden Eagle's secretary/treasurer, were not paid any salary during the
first quarter of 1999; neither Golden Eagle's president nor the
secretary/treasurer has been paid any compensation subsequently during 1999,
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.)
Golden Eagle's costs and operating expenses for first quarter 1999
decreased slightly as to general and administrative expenses, totaling $301,959
compared to $369,927 during the same period in 1998, an 18% decrease. However,
first quarter 1999 exploration expenses decreased more substantially from
$55,970 in 1998 to $29,751 in 1999 (see following paragraph).
As of March 31, 1999, capitalized costs related to the Bolivian prospect
are principally $100,000 paid for prospect acquisition rights and $797,529 for
mining equipment.
Golden Eagle incurred interest expense in the first quarter of 1999 of
$76,934, as opposed to first quarter 1998 interest of $122,884. The decrease was
a result of less stock issued in 1999 for interest, leading to this 37% decline.
Interest costs will continue, and probably rise significantly, during the
balance of 1999 and through the forseeable future because of increased
borrowings necessary to maintain liquidity for operating purposes.
Golden Eagle had a net loss for the first quarter of 1999 of ($426,268), or
($.004) per share, compared to its net loss during the same period in 1998 of
($567,959), or ($.006) per share, a decrease of 25% and 33% per share,
respectively. Golden Eagle anticipates that the trend of net losses will
continue through the balance of 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.
Golden Eagle's continued ability to survive notwithstanding the continuing
losses is, as described above, its ability to raise necessary financing. This
cannot continue indefinitely and, eventually, Golden Eagle will have to generate
positive cash flows from its operating activities to be able to continue as a
going concern.
Impact of Inflation and Changing Prices
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Golden Eagle has not experienced any impact from the effects of inflation
during the last three operating periods, 1996, 1997, or 1998, and was not
impacted during the first quarter of 1999. 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.
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Year 2000 Compliance
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Although there can be no assurance, Golden Eagle does not anticipate that
it will suffer any adverse impact as a result of Year 2000 (Y2K) computer
software issues either as a result of third party non-compliance or as a result
of internal matters. None of the information technology or other software and
hardware systems utilized by Golden Eagle or its subsidiaries incorporates
technology that is incapable of recognizing dates beyond December 31, 1999.
In making the foregoing determination, Golden Eagle assessed embedded
systems contained in its office buildings, equipment, and other infrastructures.
As a result, Golden Eagle has not established a contingency plan to come into
effect in the event of a Y2K catastrophe, and management does not believe that
such a plan is necessary. Of course, Golden Eagle is dependent on facilities
outside of its control, such as electrical power supplies, banking facilities,
transportation facilities (such as airlines), and communications facilities.
Furthermore, Bolivia, the location of Golden Eagle's mineral property and its
significant operations, is an emerging-growth country. Based on Golden Eagle's
observation, although Bolivian facilities are attempting to address issues
associated with Y2K, it does not appear that the infrastructure (banking
facilities, communications facilities, transportation facilities, and electrical
power supplies, among other things) is as sensitive to the issues as in the
United States. Also, generally software available in Bolivia is less likely to
be Y2K compliant, but Golden Eagle does not believe that a requirement to
replace its existing hardware or software used in its Bolivian operations, if
necessary, will materially affect it.
While Golden Eagle believes, based on public reports and some notifications
they have received, that the outside facilities in the United States and Bolivia
are or will be Y2K compliant, Golden Eagle has no other basis for determining
their compliance. The operations of Golden Eagle would be significantly and
adversely affected if any of these outside facilities in the United States or
Bolivia are adversely affected by the millennium change or by other issues
related to Y2K.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
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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 Golden Eagle;
Golden Eagle's former president (who resigned in May of 1996); Golden Eagle's
current secretary/treasurer and a director; Golden Eagle's former public
relations firm (which had not performed work for Golden Eagle 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 Golden
Eagle and the individuals involved had issued press releases which were false
and misleading in an attempt to hype the value of Golden Eagle's stock.
On November 14, 1998, the SEC filed an Amended Complaint in the
above-referenced action, alleging that Golden Eagle and its president had an
inadequate basis for making the May 22, 1998, press release regarding a
geological report Golden Eagle had received from an independent geophysicist and
mining engineer regarding the Cangalli gold deposit.
In February 1999, Golden Eagle 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 Golden Eagle not to violate certain securities laws in the
future. Golden Eagle was not assessed any civil or monetary penalty. Although
Golden Eagle 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 that may be actionable under federal
securities laws.
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There are no other material pending or threatened legal proceedings except
as disclosed in Golden Eagle's annual report on Form 10-KSB for the year ended
December 31, 1998.
Item 2. Changes in Securities
---------------------
During the quarter ending March 31, 1999, Golden Eagle used its common
stock directly to raise capital and to satisfy some of its obligations. Golden
Eagle issued a total of 1,285,000 restricted common shares for cash to eight
unaffiliated, accredited investors and one unaffiliated unaccredited investor at
a price of $.10 per share. These offers and sales were accomplished pursuant to
the exemptions from registration found in Sections 4(2) of the Securities Act of
1933, as amended, and the rules thereunder. The funds received from these
investors were used to satisfy Golden Eagle's working capital obligations
associated with its exploration and evaluation activities in Bolivia, and to
meet Golden Eagle's goals under its agreement with the UCL. There was no
underwriter involved in these transactions.
In addition, during the second quarter of 1999 and as of May 7, 1999, three
of the investors mentioned in the foregoing paragraph purchased additional
restricted common shares for a total of 500,000 shares, and two additional
unaffiliated, accredited investors purchased 310,000 restricted common shares.
These shares were issued, and the funds used, under the same terms as described
in the foregoing paragraph.
Since late 1994 through the first quarter of 1999, Golden Eagle 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 reassigned the
"MINE" symbol to a NASDAQ company, and has assigned to Golden Eagle 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 Golden
Eagle's securities, until July 6, 1998, on the OTC Bulletin Board. At the end of
that ten-day suspension, Golden Eagle's securities again began trading on the
"pink sheets," a less-sophisticated manual system for posting relevant market
information. The "pink sheet" status of Golden Eagle's securities has created a
substantial problem with liquidity for shareholders and potential shareholders
interested in trading Golden Eagle's securities. Once Golden Eagle 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 Golden Eagle's market makers filed the requisite Form 211
with the NASD requesting the return of Golden Eagle's securities to the OTC
Bulletin Board. Golden Eagle's market maker, a registered 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 Golden Eagle has
received formal notice that its market maker's Form 211 application has been
approved, the market for Golden Eagle's common stock will be impaired.
Item 3. Defaults upon Senior Securities
-------------------------------
None.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
None.
Item 5. Other Information
-----------------
None.
Item 6. Exhibits and Reports on Form 8-K:
---------------------------------
The following exhibits are filed with this Form 10-QSB or incorporated
herein by the following references:
a. 27.1 Financial Data Schedules
9
<PAGE>
b. Reports on Form 8-K:
The following reports on Form 8-K were filed during the
quarter ended March 31, 1998, and subsequently, and are incorporated by
reference herein:
February 23, 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 5 of Form 8-K
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Golden Eagle has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
GOLDEN EAGLE INTERNATIONAL, INC.
(Golden Eagle)
May 7, 1999
by: /s/ Terry C. Turner
-----------------------------------
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 Golden Eagle and in the
capacities and on the dates indicated.
GOLDEN EAGLE INTERNATIONAL, INC.
May 7, 1999
by: /s/ Terry C. Turner
----------------------------------
Terry C. Turner,
Director and Principal Executive
Officer
May 7, 1999
by: /s/ Mary A. Erickson
----------------------------------
Mary A. Erickson,
Director, Principal Financial
Officer and Principal Accounting
Officer
10
<PAGE>
- --------------------------------------------------------------------------------
Golden Eagle International, Inc.
(A Development Stage Company)
Consolidated Financial Statements
- --------------------------------------------------------------------------------
PAGE
----
Consolidated Balance Sheet ............................................ F-1
Consolidated Statement of Operations .................................. F-2
Consolidated Statement of Cash Flows .................................. F-3
Consolidated Statement of Changes in Stockholders' Equity (Deficit) ... F-4
Notes to Consolidated Financial Statements ............................ F-5
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Golden Eagle International, Inc.
(A Development Stage Company)
Consolidated Balance Sheet
- -------------------------------------------------------------------------------------------------------------------
March 31, December 31,
1999 1998
- -------------------------------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 5,608 $ 1,305
Prepaid expense and other costs 58,030 56,087
- -------------------------------------------------------------------------------------------------------------------
Total current assets 63,638 57,392
- -------------------------------------------------------------------------------------------------------------------
PROPERTY AND EQUIPMENT
Mining equipment 797,529 813,529
Acquisition cost of mining prospect 100,000 100,000
Vehicles 59,796 59,796
Office equipment 70,059 46,682
- -------------------------------------------------------------------------------------------------------------------
1,027,384 1,020,007
Less accumulated depreciation (168,881) (147,780)
- -------------------------------------------------------------------------------------------------------------------
858,503 872,227
- -------------------------------------------------------------------------------------------------------------------
OTHER ASSETS
Advance royalties 83,123 44,634
Deposits 9,275 12,275
- -------------------------------------------------------------------------------------------------------------------
92,398 56,909
- -------------------------------------------------------------------------------------------------------------------
$ 1,014,539 $ 986,528
===================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Loans from related parties $ 1,335,522 $ 1,249,240
Bank loan payable 1,000,000 1,000,000
Other notes payable 472,179 448,816
Accounts payable 284,527 213,898
Payable to related parties 12,468 19,468
Accrued compensation and taxes 990,700 907,577
Accrued interest payable 192,771 166,526
Other accrued liabilities -- 1,863
- -------------------------------------------------------------------------------------------------------------------
Total current liabilities 4,288,167 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 and outstanding 110,952,885 and 109,217,885 shares, respectively 11,095 10,920
Additional paid-in capital 8,328,135 8,154,810
Deficit accumulated during the development stage (11,612,858) (11,186,590)
- -------------------------------------------------------------------------------------------------------------------
Total stockholders' (deficit) (3,273,628) (3,020,860)
- -------------------------------------------------------------------------------------------------------------------
$ 1,014,539 $ 986,528
===================================================================================================================
See accompanying notes.
F-1
<PAGE>
- --------------------------------------------------------------------------------------------------------------------
Golden Eagle International, Inc.
(A Development Stage Company)
Consolidated Statement of Operations
(Unaudited)
- --------------------------------------------------------------------------------------------------------------------
Three Months Ended July 21, 1988
March 31, (Inception)
----------------------------------- To March
1999 1998 31, 1999
- --------------------------------------------------------------------------------------------------------------------
REVENUES $ 5,077 $ 11,800 $ 159,007
COSTS AND OPERATING EXPENSES
General and administration 301,959 369,927 6,679,093
Exploration 29,751 55,970 901,546
Depreciation 21,101 31,038 162,284
- -------------------------------------------------------------------------------------------------------------------
Total costs and operating expenses 352,811 456,935 7,742,923
- -------------------------------------------------------------------------------------------------------------------
OPERATING (LOSS) (347,734) (445,135) (7,583,916)
- -------------------------------------------------------------------------------------------------------------------
OTHER INCOME (EXPENSE)
Interest expense (76,934) (122,884) (707,778)
Interest income 2,932 24 17,481
Loan financing costs, net -- -- (2,475,000)
Write-down of mining prospect -- -- (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 -- (2,758) (17,314)
Other income 484 2,794 22,451
Other expenses (5,016) -- (28,064)
- -------------------------------------------------------------------------------------------------------------------
Total other income (expense) (78,534) (122,824) (4,023,642)
- -------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) $ (426,268) $ (567,959) $ (11,607,558)
===================================================================================================================
BASIC EARNINGS (LOSS) PER SHARE $ (.004) $ (.006) $ (.412)
===================================================================================================================
WEIGHTED AVERAGE SHARES OUTSTANDING 109,682,385 97,753,730 28,141,497
===================================================================================================================
See accompanying notes.
F-2
<PAGE>
- --------------------------------------------------------------------------------------------------------------------
Golden Eagle International, Inc.
(A Development Stage Company)
Consolidated Statement of Cash Flows
(Unaudited)
- ---------------------------------------------------------------------------------------------------------------------
Three Months Ended July 21, 1988
March 31, (Inception)
-------------------------------- To March
1999 1998 31, 1999
----------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (426,268) $ (567,959) $(11,607,558)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Stock issued for services 37,500 187,000 2,722,419
Depreciation expense 21,101 31,038 162,284
Stock issued for accrued interest 7,500 79,448 148,734
Stock issued for loan pledges and renewals -- -- 2,500,000
Loss on retirement of vehicle, equipment and other -- 2,758 8,235
Write-down of mining prospect -- -- 873,462
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
Loss (gain) from investments -- -- (114,670)
Changes in operating assets and liabilities:
Prepaid expense and other costs (1,943) (403) (58,030)
Payables and accrued liabilities 171,134 123,769 1,480,466
- ------------
Net cash flows (used for) operating activities (190,976) (144,349) (3,771,658)
- ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in property and equipment (7,377) -- (1,610,558)
Advance royalties (38,489) (1,475) (83,123)
Deposits 3,000 500 (10,775)
Proceeds from investments 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 from (used for) investing activities (42,866) (975) (1,675,254)
- ---------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Loans from related parties 98,862 95,204 1,864,067
Repayments of loans from related parties (12,580) -- (447,956)
Proceeds from other notes payable 25,000 53,619 606,098
Repayments of other notes payable (1,637) -- (70,783)
Proceeds from bank loan -- -- 1,000,000
Proceeds from convertible debentures -- -- 413,500
Common stock issued 128,500 -- 2,150,658
Stock issuance costs -- -- (63,064)
- ---------------------------------------------------------------------------------------------------------------------
Net cash flows from financing activities 238,145 148,823 5,452,520
- ---------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH 4,303 3,499 5,608
CASH - BEGINNING OF PERIOD 1,305 72,157 --
- ---------------------------------------------------------------------------------------------------------------------
CASH - END OF PERIOD $ 5,608 $ 75,656 $ 5,608
=====================================================================================================================
See accompanying notes.
F-3
<PAGE>
- ------------------------------------------------------------------------------------------------------------------------------------
Golden Eagle International, Inc.
(A Development Stage Company)
Consolidated Statement of Stockholders' Equity (Deficit)
- ------------------------------------------------------------------------------------------------------------------------------------
Common Stock Additional
--------------------------- Paid-in Accumulated
Shares Amount Capital Deficit Total
- ------------------------------------------------------------------------------------------------------------------------------------
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 offering) 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 ($.003 per share) 2,640,830 264 7,659 -- 7,923
Issued in 1994 for note receivable
from affiliate ($.00125 per share) 20,000,000 2,000 23,000 -- 25,000
Issued in 1994 for legal services
($.00125 per share) 375,000 37 432 -- 469
Issued for cash in 1995
($.01 to $.282) less $41,644
issuance cost 10,469,750 1,047 244,002 -- 245,049
Issued for services in 1995
($.07 per share) 2,337,333 234 171,749 -- 171,983
Convert notes payable in 1995
($.15625 per share) 800,000 80 124,920 -- 125,000
Issued for cash in 1996
($.05 to $.25 per share) 2,250,650 222 401,808 -- 402,030
Issued for services in 1996
($.07 to $.30 per share) 5,448,985 545 1,230,297 -- 1,230,842
Issued for cash in 1997
($.10 per share) 10,126,350 1,013 1,011,622 -- 1,012,635
Issued in 1997 for loan guarantees
and renewals ($.10 per share) 25,000,000 2,500 2,497,500 -- 2,500,000
Issued in 1997 for services
($.03 to $.17 per share) 9,276,398 928 815,072 -- 816,000
Issued in 1997 for equipment
($.10 per share) 2,993,161 299 299,017 -- 299,316
Convert debenture and note in 1997
($.09 and $.26 per share) 689,060 69 104,347 -- 104,416
Issued in 1997 for vehicle
($.10 per share) 350,000 35 34,965 -- 35,000
Issued for cash in 1998
($.10 per share) 1,200,000 120 119,880 -- 120,000
Issued in 1998 for services
($.10 to $.16 per share) 3,704,172 370 462,630 -- 463,000
Conversion of debentures in 1997
($.03 to $.07 per share) 8,396,268 840 434,122 -- 434,962
Issued in 1998 for interest
($.13 per share) 558,333 56 72,444 -- 72,500
Other (70) -- 2,625 -- 2,625
Net loss for the periods -- -- -- (11,181,290) (11,181,290
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1998 109,217,885 10,920 8,154,810 (11,186,590) (3,020,860)
Issued for cash ($.10 per share) 1,285,000 129 128,371 -- 128,500
Issued for services ($.10 per share 375,000 38 37,462 -- 37,500
Issued for interest ($.10 per share) 75,000 8 7,492 -- 7,500
Net loss (unaudited) -- -- -- (426,268) (426,268)
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at March 31, 1999 (Unaudited) 110,952,885 $ 11,095 $ 8,328,135 $(11,612,858) $ (3,273,628)
===================================================================================================================================
See accompanyint notes.
F-4
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
Golden Eagle International, Inc.
(A Development Stage Company)
Notes to Condensed Consolidated Financial Statements
(Unaudited)
- --------------------------------------------------------------------------------
Note A - General
Golden Eagle International, Inc. (a development stage company, the "Company,")
was incorporated in Colorado on July 21, 1988. The Company is to engage in the
business of acquiring, developing, and operating gold, silver and other precious
mineral properties. Activities of the Company since November 1994 have been
primarily devoted to organizational matters and identification of precious
mineral properties considered for acquisition. Presently, substantially all of
the Company's operations and business interests are focused on a prospect in the
Tipuani River area of the Republic of Bolivia.
The accompanying unaudited condensed financial statements have been prepared in
accordance with the instructions to Form 10-QSB and do not include all of the
information and notes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all material
adjustments, consisting of only normal recurring adjustments considered
necessary for a fair presentation, have been included. These statements should
be read in conjunction with the financial statements and notes thereto included
in the Company's Form 10-KSB for the year ended December 31, 1998.
The financial statements include the accounts of Golden Eagle International,
Inc. and its subsidiaries Golden Eagle Bolivia Mining, S.A. and Eagle Mining of
Bolivia, Ltd. All intercompany transactions and balances have been eliminated.
The results of operations for the three months ended March 31, 1999, are not
necessarily indicative of the results for the remainder of 1999.
Note B - Earnings (Loss) Per Share
Basic earnings (loss) per share of common stock are computed using the weighted
average number of shares outstanding during each period plus common equivalent
shares (in periods in which they have a dilutive effect).
Note C - Arrangements to Issue Stock and Loan Secured by Stock
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. The shares are being accrued for as being issued ratably during the year.
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. Pursuant to the loan agreement, the
Company opted to extend the due date of the loan from May 3, 1999 to May 17,
1999, for 75,000 additional shares of common stock, which were issued on May 5,
1999. The obligation is also personally guaranteed by the Company's president.
F-5
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 5,608
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 63,638
<PP&E> 1,027,384
<DEPRECIATION> (168,881)
<TOTAL-ASSETS> 1,014,539
<CURRENT-LIABILITIES> 4,288,167
<BONDS> 0
0
0
<COMMON> 11,095
<OTHER-SE> (3,284,723)
<TOTAL-LIABILITY-AND-EQUITY> 1,014,539
<SALES> 5,077
<TOTAL-REVENUES> 5,077
<CGS> 0
<TOTAL-COSTS> 352,811
<OTHER-EXPENSES> 78,534
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 76,934
<INCOME-PRETAX> (426,268)
<INCOME-TAX> 0
<INCOME-CONTINUING> (426,268)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (426,268)
<EPS-PRIMARY> (.004)
<EPS-DILUTED> (.004)
</TABLE>
