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, 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 the Company as specified in its charter)
Colorado 84-1116515
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(State of incorporation) (I.R.S. Employer Identification No.)
12403 South 450 East, Bldg. D2, Suite A, Salt Lake City, Utah 84020
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(Address of principal executive offices) (Zip Code)
The Company's telephone number, including area code: (801) 619-9320
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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)
Indicate by checkmark whether the Company (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 Company
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 the Company'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: $10,571
Aggregate market value of the voting stock held by non-affiliates of Golden
Eagle International, Inc. as of April 12, 2000 was approximately $ 14,118,519.
The estimate is based on the last sale price per share ($.16 on April 12,
2000) and 88,240,745 shares estimated to be held by non-affiliates.
At December 31, 1999, there were 128,053,812 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
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PART I
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Item 1. Business Development
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(a) GENERAL
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Golden Eagle International, Inc., formerly Beneficial Capital Financial
Services Corp. (hereinafter referred to as "Golden Eagle" or "the Company"),
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, the Company 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 the Company 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 the Company 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, formerly the Corporate Secretary-Treasurer
and a director of the Company. The Company's new management that resulted
from this change of control changed Golden Eagle's business focus into the
minerals industry. Through a subsidiary, Eagle Mining of Bolivia, Ltd.,
Golden Eagle acquired a contract for mining rights in the state of La Paz,
Bolivia, as more completely described below. In addition, in November 1999,
Golden Eagle acquired outright all right, title and interest in two
substantial mining claims or concessions surrounding its previous land
holdings under contract.
Golden Eagle's Bolivian advisors recommended to management that it conduct
operations in Bolivia through subsidiaries. Initially, the Company formed
Golden Eagle Bolivia Mining S.A. ("GEBM") in January 1996, and Eagle Mining of
Bolivia ("EMB") in October 1996, to conduct Golden Eagle's operations and to
hold its contract property interest 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. However, the Company
itself chose to own the title to the two larger claims acquired in November
1999.
EMB's initial constitution, the equivalent of its Articles of
Incorporation, provided that Golden Eagle 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.
As indicated above, in 1996 Golden Eagle, through EMB, acquired contract
mining interests in mineral properties in Bolivia, South America, which are
prospectively valuable for gold (referred to herein as the "Cangalli
properties"). The Cangalli properties have no established reserves pursuant
to Guide 7 of the SEC Regulations, but a significant amount of gold
mineralization has been identified. The exploration work and property
investigations thatGolden Eagle has accomplished on the Cangalli properties are
described in more detail in Item 1(b), below. The Company's subsidiary, GEBM,
has achieved no significant operating revenues from these properties, although
to date it has been able to produce and sell approximately 21,000 grams of
gold, with post-royalty revenues of $163,000. (Hereinafter, all references to
Golden Eagle's holding subsidiary, "EMB", or its operating subsidiary, "GEBM",
or Golden Eagle International, Inc. itself, shall all be referred to as "Golden
Eagle" or "the Company", unless specific references to the Company or its
subsidiaries are required for clarity.)
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Also as indicated above, the Company's acquisition in November 1999 of two
substantial mining claims or concessions in the Tipuani River Valley, resulted
in a combined total of the two claims of 44,046 acres (referred to herein as
"the Tipuani Valley properties"). The Tipuani Valley properties surround the
Cangalli properties, and all three properties combined total 48,998 acres
under contractual control or owned outright by the Company in the historic
Tipuani Gold Mining District. The Tipuani Valley properties have undergone
general reconnaissance and prospecting by the Company's geologists and by
independent geologists, geophysicists and mining engineers. In addition, a
number of geological and production studies have been performed on various
sites and mines within the Tipuani Valley properties over the course of the
known 400-year history of the Tipuani Gold Mining District. The Company has
assembled and reviewed those studies during the evaluation phase on
considering whether to make the Tipuani Valley properties acquisition. The
Tipuani Valley properties have no established reserves pursuant to Guide 7 of
the SEC Regulations, but gold mineralization has also been identified within
those claims.
Golden Eagle's majority-owned subsidiary, GEBM, continued through 1999,
and to the date of the filing of this report, as the operator of the Cangalli
interior mine and surface operations. GEBM, at one point during 1997, had 106
employees and operated three full shifts in the Cangalli shaft and underground
workings for purposes of interior mine rehabilitation and maintenance.
However, as of December 31, 1999, GEBM employed a considerably smaller staff
working principally in maintenance and pumping operations in the Cangalli
mine.
Prior to acquiring the contract mining rights on the 11 concessions
comprising 2,004 hectares (4,952 acres) constituting the Cangalli properties
in 1996, Golden Eagle attempted to acquire several properties within the
United States. These U.S. properties were not acquired, in part, because the
Company's due diligence investigation did not support the representations made
by the property owners.
In 1998, Golden Eagle entered into an agreement with two consulting
companies (which are not affiliated with the Company) to provide certain
services to Golden Eagle on a non-exclusive basis. These services included
introducing the Company to investment bankers and accredited investors. These
services did not include the offer or sale of securities. Golden Eagle 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,
the Company agreed in principle to pay these same entities a total of an
additional 1,000,000 shares of its restricted common stock as a fee for
similar services to be rendered during 1999, with the added services of public
relations activities included in the new agreement.
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 the Company 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 that are beyond Golden
Eagle's ability to predict or control and that 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 the Company'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. The Company disclaims any obligation to
update any forward-looking statement made herein.
(b) BUSINESS OF ISSUER
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The Cangalli Properties
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In October 1995, Golden Eagle 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
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Paz) followed in December 1995, with the Company'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 Golden Eagle, 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 the Company's counsel in
Bolivia, this contract was not "protocolized" (recorded) with the Bolivian
Notary of Mines. Golden Eagle 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 the Company 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 initial 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.
During the fourth quarter of 1999, the Company instituted a program of
purchasing individual shares from shareholders in the United Cangalli Gold
Mining Cooperative, Ltd. ("UCL"). Golden Eagle had previously disclosed its
strategy in the fourth quarter of 1998 and the first quarter of 1999, of
purchasing UCL's ownership interest in the Cangalli properties to decrease the
"cooperative risk factor" and to eliminate UCL's royalty interest. However, a
series of negotiations during 1999 with UCL's Board of Directors, and a
special committee formed to analyze UCL's sale of the Cangalli properties, did
not result in a satisfactory agreement for the sale/purchase. Thereafter,
Golden Eagle began purchasing UCL shares individually. UCL's Board of
Directors resisted the Company's efforts to have those acquired shareholdings
transferred on UCL's roster of shareholders, and negotiations regarding the
transfers with UCL's Board continued for several months, and finally into the
first quarter of 2000. At the date of the filing of this report, the UCL
Board of Directors has agreed to record the share transfers, and the process
is underway. The Company has requested a Special General Assembly of UCL's
membership to ratify its Board's decision to recognize the Company's shares.
After this approval of the general membership is received, Golden Eagle will
continue its acquisition efforts until its goals stated above are reached.
The Company cannot assure that it will be successful in acquiring a majority
interest (60 shares) in UCL, but management expects to be able to do so by the
third quarter of 2000.
The Company 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 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 the
Company's subsidiary's contract position and right to the quiet pursuit of its
contract rights of exploration,
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development, and mining will remain undisturbed. Over the course of the
contract between Golden Eagle's subsidiary and UCL, approximately four years,
the Company has received informal and formal complaints from UCL's
administration regarding the Company's contract compliance. However, Golden
Eagle believes it has always been able to satisfactorily resolve any complaint
or dispute. The Company'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 the Company'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 have
attempted to disrupt the Company's relationship with UCL. However, the
Company 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.
The Tipuani Valley Properties
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In November 1999, the Company acquired two substantial mining claims or
concessions in the Tipuani River Valley by committing to pay the annual mining
claims fees (patents) of $17,825, resulting in a combined total of the two
claims of 44,046 acres (referred to herein as "the Tipuani Valley
properties"). The Tipuani Valley properties surround the Cangalli properties.
The combined acreage of the Tipuani Valley and Cangalli properties totals
48,998 acres, which are under contractual control or owned outright by the
Company in the historic Tipuani Gold Mining District. The Tipuani Valley
properties have undergone general reconnaissance and prospecting by the
Company's geologists and by independent geologists, geophysicists and mining
engineers. In addition, a number of geological and production studies have
been performed on various sites and mines within the Tipuani Valley properties
over the course of the known 400-year history of the Tipuani Gold Mining
District by national and international agencies and companies. The Company
has assembled and reviewed those studies during the evaluation phase while
considering whether to make the Tipuani Valley properties acquisition. The
Tipuani Valley properties have no established reserves pursuant to Guide 7 of
the SEC Regulations, but gold mineralization has been identified within those
claims.
History of the Tipuani/Cangalli District of Bolivia
----------------------------------------------------
Note: The Company has relied upon an independent geological consulting
firm and historical information for the following history, and cannot
assure its accuracy.
Gold mining in the Tipuani Gold Mining District, in which the Cangalli
and Tipuani Valley properties are found, can be traced back to pre-Inca times
(1000 to 1500 A.D.). During the Inca dominion, gold placers were worked in
the Tipuani River and her tributary rivers, the Ancoma and Yani, and also in
the gold-bearing quartz veins of the Cordillera (the high Andes mountains).
Early Spanish historians recorded that the province of Larecaja, in which
the Tipuani Gold Mining District 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
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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, which 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.
Golden Eagle's Operations
-------------------------
Golden Eagle's operations are subject to significant risks and
uncertainties that should be of concern to prospective investors and current
shareholders that include, but are not limited to, the following:
Working Capital Shortages. Although the operations in Bolivia are
carried on through the Company's majority-owned subsidiaries, the financing of
those operations is solely dependent on the Company's ability to provide
capital resources. From November 1997 through the date of the filing of this
report, Golden Eagle experienced significant cash shortages in its operating
funds. During January 1997, the Company negotiated a one-time, short-term
bridge loan for
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$240,000 from a Texas bank. On March 6, 1997, this same Texas bank agreed to
loan Golden Eagle $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, the Company 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, 2000; there are, however, no further funds that can
be advanced under this line of credit. As a result of these capital
shortages, Golden Eagle has been forced to issue its restricted common stock
in private placements as compensation to some employees and consultants, as
well as for equipment. These issuances result in dilution to current and
future shareholders. For example, Golden Eagle issued a total of 14,070,000
shares of restricted common stock to individuals (non-affiliates) for a total
of $769,000 during 1999. (See, Note E--Stockholders' Equity, p. F-13,
Financial Statements attached hereto). The Company 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 the Company on commercial terms. Thus, Golden
Eagle 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 the Company's liquidity
shortages and capital requirements.)
Golden Eagle has $4,664,376 in current liabilities, which come due at
various times commencing in May 2000. The Company does not have, and will not
have, sufficient funds to pay those liabilities unless it is able to raise
sufficient capital or unless those creditors accept equity in satisfaction
for, or to renew, the debt. There can be no assurance that the Company will
be able to meet these financial obligations.
Golden Eagle's operations and future planning, based on the foregoing
discussion, are 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 the Company's future operations, are
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 and Chaco Mesa, again, are
dependent on its ability to raise additional financing. Golden Eagle cannot
assure that market confidence will enable it 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, Golden Eagle'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.
In 1998 and 1999, Golden Eagle projected that its subsidiary, GEBM, would
enter into commercial scale production. To date, however, the Company'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. The Company's subsidiary, GEBM, has achieved no significant
operating revenues from the Cangalli properties, and has not reached its goal
of commercial production, although to date it has been able to produce and
sell approximately 21,000 grams of gold, with post-royalty revenues of
$163,000. All revenues generated to date were used in the Bolivian
operations. Although Golden Eagle believes that it will be able to generate
additional revenues from mining gold from the Cangalli and Tipuani Valley
properties, there can be no assurance that any revenues received will exceed
expenses incurred. Management concluded that fine gold recovery losses, and
the failure to reach high enough tonnages to even out the "nugget effect" or
erratic deposition of the gold in the deposit, were the primary causes of the
failure to achieve a greater level of production. In response, during 1998
and 1999, Golden Eagle contracted Bolivian and American metallurgists to study
the losses and design a circuit and mining operation that would solve the
specific problems. On August 2, 1999, Golden Eagle announced that it had
received a new metallurgical report regarding the Cangalli gold deposit from
Ronald L Atwood, Ph.D., a metallurgical consultant and former chief
metallurgist
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for Newmont Mining. (See, "Investigations by Independent Consultants", in the
section that follows below.) Management expects that the Bolivian operations
will continue to experience fine gold losses until the installation of fine
gold recovery circuits on the Company's metallurgical plants can be
accomplished on the Cangalli properties. These fine gold losses might
jeopardize the profitability of those operations, and therefore, Golden
Eagle's economic viability. In addition, during 2000 the Company expects to be
able to begin to implement Dr. Atwood's operational plan, discussed at length
in the following section, to increase production tonnages and even out the
"nugget effect" or erratic distribution of gold in the deposit.
Due to these technical and financial issues on staging its own
operations, In the fourth quarter of 1998, Golden Eagle's management also
contracted the services of Behre Dolbear & Co., Inc., a well-respected,
international firm that consults to the minerals industry worldwide to
evaluate the Cangalli gold deposit. (See, "Investigation by Independent
Consultants", in the following section.) The Company established having this
report in hand as one of its criteria for inviting intended joint venture
partners onto the Cangalli properties. On June 22, 1999, the Company
announced that it had received the results of the Behre Dolbear study. While
the Company considered Behre Dolbear's report to be favorable, the Company
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 continues to implement its UCL share acquisition program
referred to above, notwithstanding its working capital shortages, with the
strategic objectives of eliminating the UCL royalty on the Cangalli
properties, and eliminating the "cooperative risk factor". While the Company
cannot assure that this strategy will be accomplished or, if accomplished,
will be successful, Golden Eagle does believe that the benefits of such an
approach are worth pursuing.
In addition, the Company continues to carry out its program of acquiring
title of the surrounding claims in the Paleo-Tipuani Trend. The 44,046-acre
acquisition made and announced by the Company in November 1999 was a very
important step in exerting a dominant position in the historic Tipuani Gold
Mining District. Nevertheless, Golden Eagle's management believes that it is
essential, from various strategic perspectives, to consolidate these
acquisitions, as well as any smaller contained claims, and continue a program
of proving their value through exploration.
Any shareholder, or potential shareholder, should carefully weigh in
making any investment decision regarding Golden Eagle's stock the foregoing
highly significant factors, and the other factors described in this annual
report, including, without limitation: volatility of commodity prices;
volatility of the Company's stock prices and the lack of an established market
for the Company's securities; the environmental risks associated with mining
activities; the lack of proven mineral reserves; the risks and difficulties
associated with international operations in general, and operations in South
America, in particular; the concentration of the Company's assets in a single
area in Bolivia; the significant dependence on management and management's
relative inexperience with certain aspects of large open pit and underground
mining operations; and the "cooperative risk factor" discussed above in "The
Company's Operations: Business Atmosphere," Item 1. As a result of these
factors, however, the Company 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.
------------------------------------------
The Company has assembled over one hundred geological reports and
professional articles written on the subject of the Tipuani Gold Mining
District in general, or specific mining operations within the District. The
following, however, are reports on the Cangalli and Tipuani Valley properties
based on studies commissioned directly by Golden Eagle specifically for the
evaluation of mining claims it owns, or which are under its contractual
control.
* The Trites Report. In December 1995, Golden Eagle retained Albert
F. Trites, a Denver-based geologist who had received his B.S. in
geology from the Colorado School of Mines, and his M.S. in geology
from Columbia University, to perform an initial reconnaissance of
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the Cangalli gold deposit. Mr. Trites' initial verbal report back
to the Company was very favorable, and he was retained to carry out
a sampling program on the "Chaco" and "Cangalli Mine" sections of
the Cangalli properties. Mr. Trites provided his report to the
Company's Board of Directors in January 1996, "Gold Deposits of the
Tipuani Basin, Bolivia with Proposed Development and Mining of the
Cangalli and Chaco Deposits". In that report, Mr. Trites estimated
a gold "reserve" in the Chaco section; and a gold "reserve block" in
the "Cangalli Mine" section. While the Company was encouraged by
Mr. Trites' report, it concluded that a sufficient basis did not
exist for the estimation of a "reserve" pursuant to Guide 7, SEC
Regulations, FSLR Section 3831. The Company concluded that it
needed more information, and a more detailed sampling of the gold
deposit on the Cangalli properties.
* The First Paravicini Report. To evaluate its conclusions regarding
the prospective value of the Cangalli properties, Golden Eagle
retained the consulting firm of Mr. Guido Paravicini, Eng., M.A., an
independent Bolivian mining engineer and geophysicist. Mr.
Paravicini had received his B.S. in Mining Engineering from the
Technical University of Oruro in Oruro, Bolivia; his M.A. in
Geophysics from Washington University in St. Louis, Missouri; and
had completed his course work for his Ph.D. in Geology from Harvard
before his scholarship was terminated for economic reasons and he
was unable to defend his dissertation. Commencing in December 1996,
Mr. Paravicini carried out a review of the geological literature
relevant to the Tipuani Gold Mining District in which the Cangalli
and Tipuani Valley concessions are located. In addition, Mr.
Paravicini, and his team of exploration field geologists, samplers,
panners, and other auxiliary personnel, conducted field studies and
sampling. Mr. Paravicini's findings and recommendations are found in
his report of April 1997, Technical Geological Report on the Gold
Deposits at Cangalli, Bolivia. Mr. Paravicini had estimated a
substantial Indicated Resource of gold, and an extremely large
Inferred Resource of gold. However, Mr. Paravicini's report highly
recommended additional exploration and confirmation work that would
be required to further establish the gold mineralization, and
estimate reserves, if any.
* The Second Paravicini Report. In July 1997, Mr. Paravicini and his
team of exploration field geologists began a sampling and geological
mapping program on the Cangalli properties. In May 1998, Mr.
Paravicini issued his final report based on that field work,
"Technical Geological and Sampling Report: Resources and Reserves on
the Gold Deposits at Cangalli, Bolivia", which confirmed the
existence of significant gold mineralization on the Cangalli
properties under Golden Eagle's subsidiary's control. In his final
report, Mr. Paravicini estimated substantial gold reserves in the
"Chaco" and "Cangalli Mine" sections of the Cangalli properties, as
well as substantial resources on a broader section. However, after
further analysis of Mr. Paravicini's results, the Company concluded
that he had not established "reserves" on the Cangalli properties
pursuant to Guide 7 of the SEC Regulations, and the Company did not
declare a reserve in its filings with the SEC, nor did it use a
reserve in its accounting to determine whether to expense or
capitalize exploration costs.
* The Behre Dolbear Report. On October 7, 1998, Golden Eagle entered
into a consulting agreement with Behre Dolbear & Co., Inc. ("Behre
Dolbear") of Denver, Colorado, an internationally recognized
minerals industry consulting firm. Behre Dolbear's report, "Report
on Results of Gold Sampling Program: Cangalli Area, Bolivia", was
given to Golden Eagle in June 1999. The report was the result of a
field sampling program and historical literature search regarding
gold production in the Tipuani Gold Mining District, performed by
Behre Dolbear geologists beginning with site work in October 1998,
and culminating with a site visit in February 1999. Behre Dolbear's
report stated that its sampling "confirms that alluvial gold is
present in the Cangalli conglomerate. Gold occurrence is erratic,
but extends over significant vertical and horizontal sections."
Behre Dolbear further stated: "The extent of the deposition of
Cangalli conglomerates is impressive." In its summary, Behre
Dolbear's report states:
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"Based on specific observations within Golden Eagle's Cangalli
landholding and the sample results, Behre Dolbear noted that:
** "visible alluvial gold was recovered from 68 of 73 samples
[93%] of Cangalli conglomerate taken from six widely separated
areas, indicating that the Cangalli conglomerate is mineralized
over an extensive vertical and horizontal section, albeit in
the erratic, non-predictive manner typical of most alluvial
deposits;
** "gold recovered from the samples indicates grades ranging from
zero to 5.64 g Au/m3. The mineralization is very erratic,
sometimes changing from less than 0.01 g Au/m3 to greater than
1.0g Au/m3 in a vertical distance of 1-meter;
** "using 0.8 g Au/m3 as a threshold grade of gold sufficient to
warrant further consideration, 17 of 73 samples of the Cangalli
conglomerate were in excess of this exploration target grade
from four areas: Chaco [0.91, 0.96, 1.09, 1.14, 1.31, 1.80,
and 4.56 g Au/m3], Isuhuaya [0.92, 1.01, 1.14, 1.40, 1.53, and
3.64 g Au/m3], Flor de Mayo [1.10, 2.41 and 2.79 g Au/m3], and
Cangalli (within the town limits) [5.64 g Au/m3];
** "the four surface areas, Chaco, Isuhuaya, Flor de Mayo and
Cangalli, are considered potential targets for further
exploration to determine the extent of the higher grade
material;
** "while no samples were taken from the Cangalli underground
mine, the operation was visited and based on the observations
of the Behre Dolbear personnel [two unsupervised mine runs
which averaged 4.28 g Au/m3 and 21.55 g Au/ton], further
consideration is recommended to confirm the existence of high
grade material; and
** "the Paleozoic bedrock in the Camino Maderero area sampled is
not a potential source of primary gold mineralization.
** "Behre Dolbear took a limited number of samples during the
investigation. The program was not designed as a
representative sample analysis for various reasons, including
the areal extent of the property (approximately 40 square
kilometers [24 square miles]), the thickness of the
conglomerate (500 m [1,600 feet] to 2,500 m [8,000 feet] in
thickness), and access to various sites (steep hills and
valleys, many with +75 degree slopes)."
While the Company was also encouraged by the Behre Dolbear report,
Behre Dolbear had consistently represented that its study was not
intended to confirm or estimate gold reserves or resources on the
Cangalli properties.
* The Atwood Report. On August 2, 1999, the Company announced that it
had received a new metallurgical report regarding the results of a
study relating to its Cangalli, Bolivia gold deposit from Ronald L
Atwood, Ph.D., a metallurgical consultant and former chief
metallurgist for Newmont Mining. Dr. Atwood was then also a member
of Golden Eagle's technical advisory board, and is currently a
member of Golden Eagle's Board of Directors. Dr. Atwood expressed
his opinion in the report that operating costs at the Cangalli site
(including general and administrative costs and an allocable share
of corporate overhead) could range from $31 to $123 per ounce of
gold produced, depending on the feed grade and tonnage being mined.
Dr. Atwood also expressed his opinion that the difficulty other
consultants have identified in recovering fine gold in Cangalli can
be overcome with certain specified technology and equipment. Dr.
Atwood's report, "Report of Investigation on the Cangalli, Bolivia
Gold Deposit Recovery of Fine Gold with a Mine Plan and Economic
Projections," was the result of his fieldwork on Golden Eagle's
Cangalli site, as
10
<PAGE>
well asbench testing and laboratory analysis, although there can be
no assurance that this work and these technologies can be scaled up
for large-scale production. Dr. Atwood visited and investigated the
Cangalli gold deposit several times since March 1997. His most
recent work was performed between April and June 1999.
Dr. Atwood's most significant findings reported to Golden Eagle are
in three categories:
** Fine gold recoveries. Other consultants have raised concerns
that traditional mining and recovery methods used in the
Cangalli area will not result in the recovery of a significant
amount of the "fine gold" known to be present in the deposit.
Dr. Atwood stated in his report, "Based on the work performed,
the gold recoveries in the Chaco area [of the Cangalli gold
deposit] can be expected to be in excess of 95%." He further
stated, "Through enhanced acceleration in the centrifugal
concentrator systems we have demonstrated that the historical
fine gold losses suffered in the Cangalli area can be
resolved."
** Cost per ounce of gold produced. Dr. Atwood expressed his
opinion in the report that operating costs at the Cangalli site
(including general and administrative costs and an allocable
share of corporate overhead) will range from $31 to $123 per
ounce of gold produced, depending of the feed grade and tonnage
being mined. (It should be noted that Dr. Atwood's cost per
ounce projections were not based on estimates of resources or
reserves. Dr. Atwood based his projections on information from
sampling data collected on the Cangalli site by other consulting
geologists, geophysicists and mining engineers.)
** Recommendation regarding operations. Dr. Atwood recommended in
his report that Golden Eagle consider installing a
400-ton-per-hour, 8,800-ton-per-day, mining operation and
recovery plant at the Chaco Playa site. He provided a mine plan
and economic projections for his recommended operation based on
various scenarios. His estimated cost for the plant
construction, mining equipment acquisition, and operating and
administrative costs during the start-up phase was $3 million,
but ramping up operations could begin with a smaller investment.
Dr. Atwood stated that he believes that his recommended mine
plan would be the best and most cost-effective method for
creating positive cash flow for the company, while also
gathering a significant amount of information regarding the
Cangalli gold deposit.
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. Golden Eagle's management is currently pursuing various funding
options. However, there can be no assurance that Golden Eagle will be able to
obtain a sufficient amount of financing on commercially reasonable terms, if
at all.
Management Experience. The Company's management has been expanded to add
experience in mining operations in large-scale underground and surface mining,
although management would still have to rely on third party experts for final
feasibility and operational expertise. Terry C. Turner, Golden Eagle's
President and Chairman, has 17 years of mining administration, exploration and
legal experience in Bolivia. In December 1999, Ronald L Atwood, Ph.D., became
a member of the Company's Board of Directors, and Vice President for
Development. Dr. Atwood has over 30 years of experience in metallurgical
engineering, and has worked for major mining companies in the operation of
some of the largest open pit and underground mines in the world. In addition,
in December 1999, Victor Hugo Bretel, an architect with substantial
engineering and earthmoving experience, became President of Golden Eagle's
operating subsidiary, GEBM, in Bolivia. Mr. Bretel has over 30 years of
experience in Peru and Bolivia in construction and civil works projects
involving large earthmoving techniques. In June 1997, the Company 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, have contributed, and will continue to contribute, to Golden
Eagle's progress toward bringing its Cangalli and Tipuani
11
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Valley properties into commercial production. All of the above-described
executives in the Company, including the Technical Advisory Board, are
described in more detail under "Management," Part III, Item 9, below.
Geography and Climate in the Area of the Cangalli and Tipuani Valley
Properties. Golden Eagle's properties and substantially all of its operations
are conducted in remote areas of the province of Larecaja in the state of La
Paz in the South American country of Bolivia. Bolivia is a landlocked country
straddling the central Andes Mountains in west central South America. It is
bounded on the north and east by Brazil, on the southeast by Paraguay, on the
south by Argentina, and on the west by Chile and Peru. Sucre is the
judicial/constitutional capital and La Paz the administrative capital of
Bolivia.
The Tipuani Gold Mining District, where the Cangalli and Tipuani Valley
properties are located, is in the west-central portion of Bolivia that 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, and
through, the Cangalli and Tipuani Valley 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 Gold Mining District, and specifically as discussed in
this annual report regarding the Company'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 Golden Eagle'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.
The Company 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 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,
12
<PAGE>
repeatedly, assurances from UCL's president and board of directors that the
Company'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 four years, the Company has received
informal and formal complaints from UCL's administration regarding the
Company's contract compliance. However, Golden Eagle believes it has always
been able to satisfactorily resolve any complaint or dispute. The Company'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 the Company'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 have attempted to disrupt the Company's
relationship with UCL. However, the Company 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.
To underscore and promote amicable relations between Golden Eagle 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, then-President of GEBM and EMB,
attended, as well as Terry C. Turner, the Company's President, and Mary A.
Erickson, the Company's former Corporate Secretary. 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 the Company's shareholders.
As a reciprocal gesture, the Company's Board of Directors and officers,
together with Mr. Velasquez, attended UCL's annual general assembly on
February 27, 1999 in Cangalli, Bolivia. The Company's Board and officers were
received very cordially, and the same agenda discussed in Miami, Florida, was
discussed at length during a daylong meeting with UCL's entire membership.
During the fourth quarter of 1999, the Company instituted a program of
purchasing individual shares from shareholders in UCL. Golden Eagle had
previously disclosed its strategy in the fourth quarter of 1998, and the first
quarter of 1999, of purchasing UCL's ownership interest in the Cangalli
properties to decrease the "cooperative risk factor" and to eliminate UCL's
royalty interest. However, a series of negotiations during 1999 with UCL's
Board of Directors, and a special committee formed to analyze UCL's sale of
the Cangalli properties, did not result in a satisfactory agreement for the
sale/purchase. Thereafter, Golden Eagle began purchasing UCL shares
individually. UCL's Board of Directors resisted the Company's efforts to have
those acquired shareholdings transferred on UCL's roster of shareholders, and
negotiations regarding the transfers with UCL's Board continued for several
months, and finally into the first quarter of 2000. At the date of the filing
of this report, the UCL Board of Directors has agreed to record the share
transfers, and the process is underway. The Company has requested a Special
General Assembly of UCL's membership to ratify its Board's decision to
recognize the UCL shares purchased by the Company. After this approval of the
general membership is received, Golden Eagle will continue its acquisition
efforts until its goals stated above are reached. The Company cannot assure
that it will be successful in acquiring a majority interest (60 shares) in
UCL, but management expects to be able to do so within the second quarter of
2000.
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 in South America for its own stability. Management has not noted
any significant civilian unrest or high incidences of crime affecting Golden
Eagle's
13
<PAGE>
operations, and management does not believe that, in the current situation,
such problems are likely to have a materially adverse effect. 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 materially adverse impact on Bolivia and
the Company's operations.
In all jurisdictions it is important for businesses to maintain good
relations with governments and the governmental leaders. Golden Eagle's
management has attempted to do so. The Company 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, Golden Eagle's President, Terry C.
Turner; its Vice President for Development, Ronald L Atwood, Ph.D.; its former
Secretary/Treasurer, Mary A. Erickson; and the members of its Technical
Advisory Board: 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 that 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 and Tipuani Valley properties under its control.
In addition to the foregoing, 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 the Company's corporate objectives.
Principal products or services and their markets
------------------------------------------------
The Company has begun its operations as a minerals and metals exploration
company with very limited production; however, it 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. (Golden
Eagle 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 1998 and 1999, gold
experienced a substantial decline in price in the international markets.)
Distribution methods of the products or services
------------------------------------------------
When, if ever, Golden Eagle is successful in commencing and maintaining
commercial production operations in its proposed business activities, it will
utilize distribution methods that are customarily employed within the mining
industry. The Company does not contemplate that it would be employing any
distribution methods that would be considered innovative or unusual. Golden
Eagle has established 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. Golden Eagle 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.
----------------------------------------------------------------
14
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The Company is an insignificant participant among the firms that engage
in the same line of business (mining) that it has chosen as its principal area
of business concentration. Many of the Company's competitors are companies
with significantly greater financial and personnel resources, as well as
technical expertise, than Golden Eagle. The combined financial resources and
management experience of the Company's officers and directors are very limited
and the Company has encountered, and will continue to encounter, substantial
competitive disadvantages compared to its competitors.
Sources and availability of raw materials
and the names of principal suppliers.
----------------------------------------
As of December 31, 1999, Golden Eagle 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.
--------------------------------------------
Golden Eagle is currently somewhat 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 that may be produced. This concentration, or single focus,
creates a risk that Golden Eagle's management has termed the "cooperative risk
factor," which should be reviewed more carefully in "Business Atmosphere,"
Part I (b), page 7. However, the Company's management believes that it has
implemented two important strategies to decrease this concentration or
dependence. First, the acquisition of the Tipuani Valley properties decreases
the dependence on the Cangalli properties; and, second, the acquisition of
shares in UCL gives the Company a voice in UCL's affairs, and eventually may
result in the Company's control of UCL.
Patents, trademarks, licenses, franchises, concessions,
royalty agreements or labor contracts, including duration.
---------------------------------------------------------
The Company, 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 through 2019, and is renewable for an
additional 25 years through 2044.
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 Golden Eagle, nor its subsidiaries, are obligated to receive
approval of their principal products or services. Some activities in which
the Company's subsidiaries are engaged do require permitting, such as the
harvesting of lumber for mine timbers and the transport of explosives.
However, UCL has had those permits for many years, and Golden Eagle's
subsidiaries are allowed to piggyback onto those permits and any others that
are occasionally required for moving heavy equipment, etc.
Effect of existing or probable governmental regulations on the business.
-----------------------------------------------------------------------
Golden Eagle 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 the Company to incur any delays in commencing operations but may
directly affect its ability to continue operations once commenced.
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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.
-----------------------------------
Golden Eagle 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.
-------------------------------------------------------
Golden Eagle proposes to engage in an industry that is historically
subject to assertive, time consuming, and expensive compliance with
environmental law. There is, and can be, no assurance that the Company, 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.
Golden Eagle has, however, retained an engineering firm to monitor its
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, 1999, Golden Eagle employed four full-time personnel,
consisting of its President, Administrative Vice President, Vice President for
Development, and its Corporate Secretary/Treasurer. While certain of these
individuals periodically engage in other activities, due to the amount of time
required to fulfill their obligations with the Company they are considered
full time. In addition, the Company had at year end several consultants and
advisors as necessary to provide assistance to management.
Also at December 31, 1999, Golden Eagle's majority-owned subsidiary,
GEBM, employed 20 personnel including its President, Victor Hugo Bretel; 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.
Item 2. Property
--------
Golden Eagle's executive office in the United States is located at 12403
South 450 East, Bldg. D2, Suite A, Salt Lake City, Utah 84020. This suite of
offices consists of four executive offices, reception space, filing areas and
copy and faxing facilities. The Company pays $1,000 per month on a one year,
renewable lease which expires in 2002.
In 1997, the Company 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. The company's President,
Terry C. Turner, is also the President of BCCC, and the Company's Vice
President for Development, Ronald L Atwood, Ph.D. is the Vice President of
BCCC. Golden Eagle's Board of Directors has received notice of, and approved
of, Mr. Turner and Dr. Atwood's dual roles. Additionally, the Company's Board
has received full disclosure as to any conflicts of interest which may develop
from this relationship, and has instructed Mr. Turner and Dr. Atwood to
disclose any conflicts which may arise in the future. At the time of this
report, Mr. Turner and Dr. Atwood are the sole directors of Golden Eagle.)
Golden Eagle'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 heavy earthmoving equipment and general support equipment
for the mining industry. 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
16
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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 Land cruiser and one Toyota mine
pickup truck.
In November 1999, the Company acquired two substantial mining claims or
concessions in the Tipuani River Valley by committing to pay the annual mining
claims fees (patents) of $17,825 on the claims, resulting in a combined total
of the two claims of 44,046 acres (referred to herein as "the Tipuani Valley
properties"). The Tipuani Valley properties surround the Cangalli properties.
The combined acreage of the Tipuani Valley and Cangalli properties totals
48,998 acres, which are under contractual control or owned outright by the
Company in the historic Tipuani Gold Mining District. The Tipuani Valley
properties have undergone general reconnaissance and prospecting by the
Company's geologists and by independent geologists, geophysicists and mining
engineers. In addition, a number of geological and production studies have
been performed on various sites and mines within the Tipuani Valley properties
over the course of the recorded 400-year history of the Tipuani Gold Mining
District by national and international agencies and companies. The Company
has assembled and reviewed those studies during the evaluation phase while
considering whether to make the Tipuani Valley properties acquisition. The
Tipuani Valley properties have no established reserves pursuant to Guide 7 of
the SEC Regulations, but gold mineralization has been identified within those
claims.
Item 3. Legal Proceedings
-----------------
At year-end there were no actual or threatened legal proceedings against
Golden Eagle, 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 the Company;
the Company's former president (who resigned in May of 1996); the Company's
former corporate secretary/treasurer (who resigned in October of 1999); the
Company's former public relations firm (which had not performed work for the
Company since before May 1996); and two individuals who were neither officers
nor directors of the Company, regarding acts which had occurred between 1994
and mid-1996. Among the allegations made in the SEC's Complaint were that the
Company and the individuals involved had issued press releases that were false
and misleading in an attempt to hype the value of Golden Eagle's stock.
On May 22, 1998, the Company issued a press release that discussed a
number of aspects, including the estimate of proven gold reserves, from a
report on the Cangalli properties prepared by an independent consulting
geophysicist and mining engineer, Mr. Guido Paravicini. The staff of the SEC
raised concerns regarding the accuracy of that report and interviewed both
Golden Eagle's President and Mr. Paravicini. As a result of subsequent
internal review of the Paravicini report, the Company's management concluded
that Mr. Paravicini's reserve estimate did not meet the definition of reserves
of Guide 7 of SEC Regulations.
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 a May 22, 1998, press release regarding the
Paravicini geological report regarding the Cangalli gold deposit.
In February 1999, Golden Eagle settled the above civil action on its own
behalf by entering into a consent agreement, neither admitting nor denying any
of the allegations in the SEC's action, but consenting to the issuance of an
injunction not to violate certain securities laws in the future. Pursuant to
that consent agreement, on March 4, 1999, the Federal District Court for the
District of Colorado entered an injunction ordering the company not to violate
certain securities laws in the future. Golden Eagle was not assessed any
civil or monetary penalty.
17
<PAGE>
The Company was also advised that on June 30, 1999, its former president,
Ronald A. Knittle, who resigned in May 1996, and its former corporate
secretary, Mary A. Erickson, who resigned in October 1999, settled all
allegations against them in the above action by entering into a consent
agreement, neither admitting nor denying any of the allegations in the SEC's
action, but consenting to the issuance of an injunction against future
violations of certain securities laws and an order for disgorgement. Pursuant
to that consent agreement, on September 21, 1999, the Federal District Court
for the District of Colorado entered an injunction ordering the two former
officers not to violate certain securities laws in the future and disgorgement
was waived.
The Company's former public relations firm was dismissed from the above
action. The two additional individuals who had never been officers or
directors of Golden Eagle also settled with the SEC, one in 1998 and the other
in 1999, by similarly entering into consent agreements, without admitting or
denying any of the allegations against them, for the issuance of injunctions
against future violations of certain securities laws.
The only defendant remaining in the SEC's civil action at year-end 1999,
was Golden Eagle's President, with the only issue remaining bearing on the
Company's May 22, 1998, press release regarding its receipt of a geological
report on its Cangalli gold deposit. That matter came to trial in the Federal
District Court of Denver, Colorado, on February 14, 2000. On February 18,
2000, after four days of testimony before the Court from both fact and expert
witnesses, the Court ruled that the SEC had not proven that Golden Eagle's
President had committed any of the alleged securities violations and entered
judgment for the Company's President on all claims, dismissing the SEC's
complaint. The Court further found that Golden Eagle's President acted
reasonably in believing that the consulting firm's report about the Cangalli
gold deposit was accurate based on the due diligence performed regarding the
consultant, based on the highly reputed status of the consultant, and based on
the technical advice from Ronald L Atwood, Ph.D., a member of the Company's
Technical Advisory Board.
Civil Action Related to Arizona Investment
------------------------------------------
Golden Eagle is the plaintiff in Case No. 96-043428 in Superior Court,
Pinal County, Arizona. The Company sued Mineral Mountain Mining Co. and James
and Diane Brown alleging fraud and misrepresentations and for refund of monies
paid and benefits received. 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. The Company had 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 the Company
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 the Company $20,000. However,
defendants have not observed the terms of the Settlement Agreement, and the
Company 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, the Company engaged a person it believed was an independent
mining engineer as a consultant. In 1996, the consultant claimed the Company
liable for unpaid services and expenses totaling $78,440. The Company
believes that the consultant misrepresented his professional credentials, did
not provide the services contracted, usurped business opportunities, and
tortiously interfered with the Company.
On November 25, 1998, this consultant filed a spurious criminal complaint
for fraud against Golden Eagle'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. Golden
Eagle's President and Vice President have been unfortunately compelled by the
consultant's
18
<PAGE>
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.
This consultant has filed a spurious labor action against the Company
with the Ministry of Labor in Bolivia, as well as an additional spurious civil
action against GEBM. However, Golden Eagle and GEBM assert, and will continue
to assert, that no jurisdiction could conceivably exist in Bolivia for an
action by the consultant, and that his misrepresentation of professional
credentials and attempted extortion of Golden Eagle's officers will,
necessarily, be dealt with severely by Bolivian authorities.
Litigation/Potential Litigation With Former Employees/Officers
--------------------------------------------------------------
On June 29, 1998, a former employee and officer of the Company 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). The Company believes, and asserted in
its Answer and Counterclaim, that the former employee/officer did not earn the
compensation sought, breached his employment agreement with the Company,
violated his fiduciary duty while acting as an officer for the Company,
violated his duties of good faith and loyalty to the Company, breached his
obligation to avoid self-dealing to the Company's detriment, disclosed
confidential information, failed to return the Company's property including
trade secrets, created a competing corporation contrary to the non-compete
provision of his employment agreement, interfered with the Company's
prospective business advantages, took actions to defame or disparage the
Company's business, engaged in unfair competition with the Company, and
tortiously interfered with the Company's business relations.
In March 2000, Golden Eagle was informed by the District Court for the
City and County of Denver that the above-referenced action had been dismissed
by the Court due to the former employee's failure to prosecute the case
diligently. However, at the date of the filing of this report, the former
employee's new counsel has contacted the Company to indicate that the action
may be refiled.
Golden Eagle is committed to vigorously pursue its defense against this
employee/officer, as well as prosecute its claims against him.
In September 1999, Sonia Orihuela de Velasquez, the wife of GEBM's
president, Rene Velasquez, filed an executive action in the District Court of
La Paz against Rene Velasquez, naming as a corollary party GEBM, Golden
Eagle's operating subsidiary, to recover principal and interest on operating
advances that she had given GEBM during the her husband's tenure as GEBM's
president. This action was the direct result of GEBM's Board of Directors'
decision to open discussions with Mr. Velasquez regarding his resignation, and
the Board's appointment of an interim representative to continue operations
during the pendency of negotiations with Mr. Velasquez. GEBM is defending
this on this action and believes that the matter will be resolved during 2000.
In December 1999, Rene Velasquez was replaced as president of GEBM by
Victor Hugo Bretel. Mr. Velasquez subsequently filed a labor action and a
civil action against GEBM and the Company in December 1999, to recover
principal and interest on operating advances that he had made to GEBM, fees
for the rental of equipment to GEBM, and for some back wages and benefits. The
Company itself is defending on the basis of never having had any labor or
contract relationship with Mr. Velasquez. GEBM is defending on this action and
believes that the matter will be resolved during 2000.
Civil Action Against the Company
--------------------------------
Subsequent to year end, on February 3, 2000, two individuals filed a
lawsuit in the District Court for Denver City and County, Colorado (Pappas v.
Golden Eagle International,
19
<PAGE>
Inc., et al., Civil No. 00CV0518) naming the Company as a party, and two
individuals, alleging that plaintiffs had not received 80,000 shares of
free-trading common stock of the Company sold to them by the two third party
individuals. The plaintiffs further allege that the Company was responsible
because the two third parties were its agents. Plaintiffs allege that they
paid $8,000 in the purported transaction, but are seeking $190,000 in damages.
The Company has denied in its Answer any involvement in the transaction, and
has denied that the two third parties were its agents for any purpose. The
Company will continue to vigorously defend itself in this litigation and
expects to prevail. However, litigation is subject to many uncertainties and
the Company is unable to predict the outcome of this matter.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
None
PART II
Item 5. Market for Golden Eagle's Common Equity and
Related Stockholder Matters
----------------------------
(a) Market Information
Since late 1994 through the first quarter of 1999, Golden Eagle was
publicly traded under the symbol "MINE" on the OTC Bulletin Board that 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 the Company 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, which recently has gone on-line with some of its
quotation by accessing "Level II". The "pink sheet" status of Golden Eagle's
securities has created a substantial problem with liquidity for shareholders
and potential shareholders interested in trading the Company's securities.
Once Golden Eagle became current on its filings of annual and quarterly
reports, its securities were eligible to quoted on the OTC Bulletin Board upon
the filing by a prospective market maker of a Form 211 pursuant to the
Securities Exchange Act of 1934, and in accordance with SEC Rule 15c2-11. In
February 1999, one of Golden Eagle's market makers filed the requisite Form
211 with the NASD requesting the quotation of the Company's securities to the
OTC Bulletin Board. The Company's market maker, a registered broker-dealer,
exchanged correspondence with the NASD and provided necessary documentation.
However, the market maker withdrew its Form 211 application in mid-1999.
In January 2000, another market maker in Golden Eagle's securities filed
a Form 211 application with the NASD for the quotation of the Company's common
stock on the OTC Bulletin Board. This market maker provided all of the
necessary documentation and exchanged correspondence with the NASD. However,
again, this market maker withdrew its Form 211 application during the first
days of April 2000.
Four other broker-dealers have requested due diligence packages from the
Company, and have tentatively offered to file Form 211 applications with the
NASD. However, there can be no assurance that the NASD will find the Form 211
applications, and accompanying documentation, adequate. Until Golden Eagle
receives formal notice that one of its market
20
<PAGE>
maker's Form 211 applications has been approved, the market for the Company's
common stock will be impaired.
Golden Eagle'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 the
Company's common stock. Golden Eagle 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 Golden Eagle before
relying upon that statement.
There is a significant amount of the Company's 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 Golden Eagle'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.
Golden Eagle is authorized to issue Eight Hundred Million (800,000,000)
Common Shares, of which 128,053,812 shares are outstanding as of December 31,
1999. In addition, the Company 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 Golden Eagle's common stock
during the last two years and the current fiscal year.
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
Second Quarter $.125 $.343
Third Quarter $.03 $.26
Fourth Quarter $.02 $.10
2000 Low Bid High Bid
-------------- -------- --------
First Quarter $.03 $.375
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 create a significant price fluctuation.
Holders
As of December 31, 1999, there were approximately 803 shareholders of
record of Golden Eagle's common stock. This number does not include an
undeterminable number of beneficial holders who own their shares through
broker-dealers, nominees, and otherwise.
(c) Dividends
The Company has never paid a cash dividend on its common stock and has no
present intention to declare or pay cash dividends on the common stock in the
foreseeable future. The Company intends to retain any earnings that it may
realize in the foreseeable future to finance its operations. Future
dividends, if any, will depend on earnings, financing requirements and other
factors.
21
<PAGE>
Item 6. Management's Discussion and Analysis of Financial
Condition and Results of Operations
-----------------------------------
Liquidity and Capital Resources
-------------------------------
At December 31, 1999, and subsequently, Golden Eagle has had significant
working capital shortages. In fact, since its inception through the present
time, the Company's current liabilities have exceeded current assets. At
times, this situation has created significant hardship for the Company in
meeting its obligations to pay its bills currently, although at December 31,
1999, the Company was able to pay, or subsequently arrange for the payment of,
a substantial portion of its subsidiary's salaries and Christmas bonuses to
its Bolivian employees, as well as most of its suppliers' billings and other
current expenses. As discussed below, the Company's working capital deficit
is due to short-term loans made from affiliates and unrelated parties, bank
debt, accrued compensation, and accounts payable. Golden Eagle has $4,664,376
in current liabilities, which come due at various times commencing in May
2000. The Company does not have, and will not have, sufficient funds to pay
those liabilities unless it is able to raise sufficient capital or unless
those creditors accept equity in satisfaction for, or to renew, the debt.
There can be no assurance that the Company will be able to meet these
financial obligations.
To shed more light on the Company's financial position during 1999, it is
important to understand Golden Eagle's recent financial history. During the
first half of 1997, the Company obtained loans from an unaffiliated Texas
bank that were guaranteed by an affiliate of the Company or unaffiliated
family members of that affiliate. Golden Eagle acquired the first loan, a
short-term bridge loan in the total amount of $240,000, in February 1997. The
Company 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 2000. The loan bears interest at 8.5% per annum and was
collateralized by Mary Erickson, a former officer and director of the Company.
Ms. Erickson personally guaranteed repayment of the amounts due and pledged
13,500,000 shares of the Company's restricted common stock owned by Golden
Eagle Mineral Holdings, Inc. (a significant shareholder of the Company 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 the Company at the time of these transactions. As a fee for
consideration of the family members' guarantees of the $1 million loan, the
Company issued a total of 20,000,000 shares of restricted common stock that
was valued at $.10 per share. The Company pays monthly interest on this loan,
and owes the outstanding original principal.
However, during 1998, the Company 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, 1999 was $55,626. This loan was due on
December 31, 1998; however, it has been extended on two different occasions,
and is now due June 1, 2000. During the fourth quarter of 1999, this
engineering firm negotiated with the Company's management for the payment of
some portion of its outstanding indebtedness using restricted shares of the
Company's common stock. On January 6, 2000, Golden Eagle's Board of Directors
approved the issuance of 13,000,000 restricted shares of common stock to this
engineering firm in exchange for the reduction of the Company's debt in the
amount of $390,000.00. As of the date of that conversion, the Company owed
this engineering firm a balance of $93,510.23.
The Company also has used its common stock directly to raise capital and
to satisfy some of its obligations. During 1999, the Company issued a total
of 14,070,000 shares of restricted common stock to accredited investors
(non-affiliated) at a price of between $.10 to $.20 per share. These private
placements 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 the Company's
22
<PAGE>
working capital obligations associated with its exploration, evaluation,
rehabilitation and maintenance activities in Bolivia; to meet the Company s
commitments under its agreement with UCL; and to pay its general and
administrative expenses in the United States and Bolivia. Funds were also used
for the purchase of individual shares in UCL, and for acquisition costs and
claims fees (patents) for the Tipuani Valley properties.
The Company'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 the Company 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, the Company may incur certain liabilities, although no such
claims have, to the Company's knowledge, been asserted to date.
This situation has continued during the first quarter of 2000. Golden
Eagle entered into a Debenture Agreement with an accredited investor and
current shareholder during the first quarter of 2000, for $300,000. The terms
of the debenture are: a one year term at an interest rate of 10% per annum;
and a right of conversion of principal and interest, or any part thereof, at
the election of the note holder to restricted shares of common stock in the
Company at the lesser of $.03 or one-half of the market for the three trading
days prior to conversion.
The Company has also continued to make private placements during the
first quarter of 2000 with accredited investors who are current shareholders,
to secure the necessary financing to allow it to continue its exploration,
evaluation, rehabilitation and maintenance activities in Bolivia; to meet the
Company's commitments under its agreement with UCL; and to pay its general and
administrative expenses in the United States and Bolivia. Although the
Company has been successful in obtaining funds to date, there can be no
assurance that the Company will be able to continue to be successful in doing
so. The Company's ability to finance its operations will, in the end, be
dependent on its ability to generate cash flow from operations, of which there
can be no assurance.
The Company's subsidiary, GEBM, has achieved no significant operating
revenues from the Cangalli properties, and has not reached its goal of
commercial production, although to date it has been able to produce and sell
approximately 21,000 grams of gold, with post-royalty revenues of $163,000.
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 the Cangalli and Tipuani Valley
properties, there can be no assurance that any revenues received will exceed
expenses incurred.
The company 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.
During the fourth quarter of 1999, the Company instituted a program of
purchasing individual shares from shareholders in UCL at the price of $5,000
per share or Certificate of Interest. The Company had purchased three shares
outright, and had made varying deposits on 42 other shares by the time of the
filing of this report. Golden Eagle had previously disclosed its strategy in
the fourth quarter of 1998, and the first quarter of 1999, of purchasing UCL's
ownership interest in the Cangalli properties to decrease the "cooperative
risk factor" and to eliminate UCL's royalty interest. However, a series of
negotiations during 1999 with UCL's Board of Directors, and a special
committee formed to analyze UCL's sale of the Cangalli properties, did not
result in a satisfactory agreement for the sale/purchase. Thereafter, Golden
Eagle began purchasing UCL shares individually. UCL's Board of Directors
resisted the Company's efforts to have those acquired shareholdings
transferred on UCL's roster of shareholders, and negotiations regarding the
transfers with UCL's Board continued for several months, and finally into the
first quarter of 2000. At the date of the filing of this report, the UCL
Board of Directors has agreed to record the share transfers, and the process
is underway. The Company has requested a Special General Assembly of UCL's
membership to ratify its Board's decision to recognize the UCL shares
purchased by the Company. After this approval of the general membership is
received, Golden
23
<PAGE>
Eagle will continue its acquisition efforts until its goals stated above are
reached. The Company cannot assure that it will be successful in acquiring a
majority interest (60 shares) in UCL, but management expects to be able to do
so within the second quarter of 2000. Golden Eagle has received private
placement funds that have been used in this acquisition process, but it may
require more funding to carry out its ultimate goals with respect to
controlling UCL, of which there can be no assurance. (Please see "The
Company's Operations: Working Capital Shortages," Item 1(b).)
Given the Company's working capital shortages and current world market
conditions for commodities, including low prices for minerals and metals (with
the price of gold at approximately $280 per troy ounce), the Company's
management has set the following priorities for the use of proceeds as they
become available:
* Maintenance of current operations, contractual payments, and land
patent payments;
* Consolidating the acquisition of the Tipuani Valley properties and
any additional surrounding or adjacent landholdings within the
Paleo-Tipuani Trend;
* Acquisition of a majority of shares or ownership interests in UCL,
and thereby a controlling interest in the Cangalli properties;
* Implementation of recommendations from the geological and
metallurgical reports, including, but not limited to:
** Constructing a metallurgical recovery plant at Chaco
Playa, Chaco Mesa, and Chaco Face begin commercial
production.
** Entering second-stage resource confirmation work with the
Company's geological consulting firm.
** 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 the Company requires significant infusions of working and operating
capital, and the Company cannot assure that it will be successful in raising
that capital through a secondary offering, private placements or debt
financing.
In summary, therefore, the Company believes that it does not have
sufficient liquidity or all of the necessary capital resources to complete the
purchase of the shares of the majority of UCL's members or to accomplish its
other operational objectives. However, the Company's management expects to
accomplish those objectives as operational necessary and sufficient operating
funds come available. Golden Eagle's current status, together with the risks
associated with exploring for gold in Bolivia, and the currently low price of
gold, all combine to make it more difficult for it to raise such funds on
reasonable terms. Issues that should be of concern to prospective investors
include (without limitation) the significant working capital shortage, the
lack of proven mineral reserves, the difficulties associated with
international operations, the concentration of the Company's assets in a
single area in Bolivia, the significant dependence on management, and the
"cooperative risk factor" discussed above in "The Company's Operations:
Business Atmosphere," Item 1.
Results of Operations
---------------------
The Company'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 ($163,000 in
post-royalty revenues since entering into the contract on the Cangalli
properties over a four year period of time while conducting rehabilitation,
maintenance and exploration of the mine and properties), Golden Eagle's
general, administrative
24
<PAGE>
and other costs have vastly outstripped the resources it has generated through
operations. As described above in "Liquidity and Capital Resources," the
Company has been dependent on loans from affiliated and unaffiliated parties
(including certain family members of affiliates), private placements and
debt/equity financing, to meet its working capital obligations and to finance
the Company'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 the Company's
results of operations during 1999 compared with 1998.
Golden Eagle incurred operating expenses totaling $1,452,321 in 1999, as
compared to $1,789,752 in 1998, a decrease of 19%. As a result of having
limited revenues from operations, the Company incurred operating losses of
($1,446,050) in 1999 and ($1,737,281) in 1998, a decrease of 17%.
The Company has accrued compensation and related payroll taxes of
approximately $1,243,738 through December 31, 1999. (Neither the Company's
President nor its Secretary/Treasurer were paid any compensation in 1998, 1999
or to date in 2000, although salaries are continuing to accrue at the rate of
$200,000 per year for the President, and continued to accrue at the rate of
$150,000 per year for the Corporate Secretary/Treasurer up to her resignation
in October 1999.) In addition, during 1999 the Company paid consultants
approximately $299,000 in stock. The combination of 1999 compensation and
consulting fees totaled approximately $936,000 compared to $1,125,000 in 1998,
a decrease of 17%. Compensation costs are expected to increase in 2000 and
beyond if the Company is successful in expanding its operations.
The Company's costs and operating expenses for 1999 actually decreased
as to general and administrative expenses, totaling $1,195,645, compared to
$1,512,347 in 1998, a 21% decrease. Exploration expenses in 1999 continued to
decrease, totaling $174,608 compared to $195,348 in 1998 as a result of
decreased exploration activities conducted on the properties during 1999. In
addition, depreciation remained virtually the same in 1999, $82,068 compared
to $82,057 in 1998.
Legal expenses in 1999 decreased as a result of efforts to settle the SEC
civil action against the Company, some previous officers and a current
officer; litigation activity decreased with one of the Company's former
officers regarding issues surrounding the employee's contract and his tortious
activities; and efforts to update the corporate records and SEC filings. The
expenses totaled approximately $85,000 in 1999, as compared to $110,000 in
1998. Accounting and other professional expenses in 1999 decreased from 1998,
due to decreased exploration expenses and accounting fees: approximately
$68,000, compared to $87,000 in 1998. The Company expects that future legal,
accounting and other professional expenses will increase in 2000 due to
increased administrative activity on the Company's part regarding production
efforts, and litigation matters both in the U.S. (the trial in Denver between
February 14-18, 2000) and in Bolivia.
Capital expenditures for property and equipment increased slightly in
1999 to $8,084. By comparison, 1998 results show capital expenditures of
$749. These small capital investments underscore the fact that the Company is
not yet in commercial production and has made substantial capital investments
over the past three years to carry out exploration, rehabilitation and
maintenance activities.
The Company incurred almost identical interest expenses in 1999 of
$340,716, as compared to 1998 interest of $339,715. Loan interest costs will
increase during 2000 because of increased borrowings through debenture
agreements, or other loan arrangements, necessary to maintain liquidity for
operating purposes. As of December 31, 1999, capitalized costs related to the
Bolivian prospect are principally $100,000 paid for prospect acquisition
rights and $800,029 for mining equipment.
25
<PAGE>
The Company had a net loss for 1999 of ($1,774,827), compared to its net loss
in 1998 of ($2,073,025), resulting in a per share loss in both 1998 and 1999
of ($.02). The Company anticipates that the trend of net losses will continue
in 2000, as it invests further in exploration on its Cangalli and Tipuani
Valley properties, 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
---------------------------------------
The company has not experienced any impact from the effects of inflation
during the last three operating periods, 1997, 1998 or 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.
Year 2000 Compliance
--------------------
The year 2000 ("Y2K"), in the estimation of Golden Eagle's management,
did not present the anticipated problems for computer programs, as well as
other embedded technologies which use date recognition methods or
time-sensitive logic based upon two digits. However, the Company continues to
be vigilant regarding unanticipated post-Y2K computer-related issues that may
arise.
To its knowledge, and its ability to verify, Golden Eagle concluded that
all banks, airlines, vendors, utilities, and other third parties with which
the Company had dealings, were Y2K compliant in all material respects. The
Company itself further made an effort to ensure that its internal computing
systems were compliant and experienced no Y2K-related problems, and to the
date of the filing of this report is unable to determine any material effect
on the Company's financial condition, results of operations or cash flow.
Item 7. Financial Statements
-------------------
Please refer to pages F-1 through F-18.
Item 8. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure
-----------------------------------------
There were no disagreements with the Company's accountants on any matters
of accounting principles, practices or financial statement disclosures during
1999 through the present.
PART III
Item 9. Directors and Executive Officers of the Company and
Compliance with Section 16(a) of the Exchange Act.
-------------------------------------------------
The following table sets forth certain information concerning the
directors and executive officers of the Company (including its subsidiaries)
as of December 31, 1999. These people continue to hold the stated positions
as of April 12, 2000:
Name Age Position Term of Office
- ------------------- ---- ------------------------------ --------------
Terry C. Turner (1) 47 President, Chairman &
CEO 2/14/97-present
Ronald L. Atwood, Ph.D. 58 Vice President for
Development & Director 2/21/99-present
26
<PAGE>
Harlan M.
(Mac)Delozier III 56 Administrative Vice
President 3/1/97- present
Jennifer T. Evans 21 Secretary/Treasurer 11/12/99-present
Victor Hugo Bretel 54 President, GEBM 12/14/99-present
___________
(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. Jennifer T. Evans is Mr. Turner's daughter. No other family
relationships exist among the officers and directors.
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 the
Company 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 the Company, and such person's service
with the Company, is as follows:
Terry C. Turner is President, CEO and a Chairman of the Board of the
Company, 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 the State Bar
Association of the State (Department) of La Paz, Bolivia 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 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 private Bolivian copper exploration and mining company located in La Paz,
Bolivia. (The Company's Board of Directors has received notice of, and
approved of, Mr. Turner's dual role. Additionally, the Company's Board has
received full disclosure as to any conflicts of interest that may develop from
this relationship, and has instructed Mr. Turner to disclose any conflicts
which may arise in the future.) During the entire period of 1983 through 1997,
Mr. Turner was 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 Golden Eagle in February 1997, Mr.
Turner was corporate counsel in Bolivia for the Company 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 that can be
awarded by the state government in Bolivia.
27
<PAGE>
Ronald L Atwood, Ph.D. was appointed to the position of Vice President
for Development and a director for the Company on December 21, 1999. 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 was a professor of metallurgy at Michigan Tech
(1972-74) and the University of Idaho (1974-75). Dr. Atwood has served on the
board of Newmont Exploration, as well as Chief Metallurgist for Foote Mineral
(1975-82), Director of Research for Newmont Gold (1986-87) and Newmont
Metallurgical Services (1987-89), all divisions of Newmont Mining. Dr. Atwood
also currently serves as Vice President and a director of Bolivian Copper
Chemical Company, S.A., in La Paz, Bolivia, a private copper mining company.
(The Company's Board of Directors has received notice of, and approved of, Dr.
Atwood's dual role. Additionally, the Company's Board has received full
disclosure as to any conflicts of interest that may develop from this
relationship, and has instructed Dr. Atwood to disclose any conflicts which
may arise in the future.) 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 that can be awarded by the state government in
Bolivia.
Harlan M. (Mac) Delozier III was appointed to the position of
Administrative Vice President for Bolivian Operations for Golden Eagle
International, Inc. on March 1, 1997. Mr. Delozier is a 1966 graduate of
Oklahoma State University, where he received Bachelor of Arts degrees in
Political Science, Foreign Language and History. He served in the Peace Corps
in Bolivia from 1966-1971 and was a cattle rancher in Beni, Bolivia from
1972-1990. From 1976 to 1980 he was a representative of Homeline/Textron in
Bolivia, and from 1980-1981 was manager of gold mining operations for Kerani,
in the Murillo Province, La Paz, Bolivia. From 1981 to 1985, Mr. Delozier was
the purchasing agent for the U.S. Embassy Commissary in La Paz, Bolivia and
was an exporter for leather products to Chile and Peru from 1986-1988. From
1989 until his appointment with Golden Eagle in 1997, Mr. Delozier was an
international sales representative for Toyota, Chevrolet, and Hyundai in
Bolivia. From May 1997 to date, Mr. Delozier has also served as Executive
Vice President of Bolivian Copper Chemical Company, S.A., a Bolivian copper
exploration and mining company located in La Paz, Bolivia. (The company's
Board of Directors has received notice of, and approved of, Mr. Delozier's
dual role. Additionally, the Company's Board has received full disclosure as
to any conflicts of interest that may develop from this relationship, and has
instructed Mr. Delozier to disclose any conflicts which may arise in the
future.)
Jennifer T. Evans was appointed as the Company's Corporate
Secretary/Treasurer by the Board of Directors on November 12, 1999. Ms. Evans
resided in La Paz, Bolivia from 1983 to 1986, and again from 1994 through
1997. She is fluent in Spanish and associated with the Company's La Paz office
personnel while residing there. Ms. Evans has studied at the University of
Utah and the Salt Lake Community College, and is currently finishing her B.A.
degree in Spanish. Ms. Evans is the daughter of Golden Eagle's President,
Terry C. Turner.
Victor Hugo Bretel was appointed as President of Golden Eagle Bolivia
Mining, S.A. ("GEBM"), on December 14, 1999. Prior to that time, Mr. Bretel
had served for three months as the interim representative for the GEBM Board
of Directors during the transition from Mr. Velasquez' presidency to that of
Mr. Bretel. Mr. Bretel is an architect and engineer who graduated from the
National University of Engineering in Lima, Peru, in 1969. From 1966 through
1979, Mr. Bretel supervised construction and civil works projects in Lima,
Peru. From 1980 to the date of his appointment as President of GEBM, Mr.
Bretel supervised construction and civil works projects in La Paz, Bolivia.
As general manager of COPROFI, Ltd., an engineering consulting firm in La Paz,
Bolivia, Mr. Bretel has worked with Golden Eagle for two years on projects on
the Company's properties within the Tipuani Gold Mining District involving
topography; civil works and earthmoving; environmental impacts and
governmental relations. Mr. Bretel resigned his position with COPROFI to serve
as GEBM's President.
28
<PAGE>
Technical Advisory Board
-------------------------
In addition to relying on its management, in May 1997, the Company's
Board of Directors formed a Technical Advisory Board to assist with the
evaluation, exploration and operation of its current Bolivian gold prospect,
and any future acquisitions. This Advisory Board initially consisted of three
members with broad backgrounds and extensive experience with major mining
companies. One of the Advisory Board's members has joined the Company as Vice
President for Development and on its Board of Directors. The remaining two
members are the following:
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 American 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 that 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 Committee of the SME-AIME on several
occasions. Dr. Hausen is a member of the Mineralogical 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 Commission, 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 that 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 the Company's officers and directors, and persons
who own more than 10% of a registered class of the Company's equity
securities, to file reports of ownership and changes in ownership of equity
securities of the Company with the Securities and Exchange Commission and
NASDAQ. Officers, directors and greater-than-ten-percent shareholders are
required by Securities and Exchange Commission regulations to furnish the
Company 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, the Company believes that during the period from
January 1, 1997 through 1999, 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 the Company
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
29
<PAGE>
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 the Company's subsidiaries became equivalent to an
executive officer of the Company. He filed his Form 3 in March 1999.
Mac Delozier became an executive officer of the Company and, therefore,
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 the Company'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 the Company's common stock, constituting more
than 10% of the outstanding stock at the time. She filed her Form 3 in
November 1998.
Ronald L Atwood, Ph.D., became a director and an executive officer, and
therefore, a Section 16(a) reporting person in December 1999. He filed his
Form 3 in April 2000.
Jennifer T. Evans became an executive officer, and therefore, a Section
16(a) reporting person in November 1999. She filed her Form 3 in April 2000.
Victor Hugo Bretel became a Section 16(a) reporting person in December
1999 when his position with the Company's subsidiary, GEBM, became equivalent
to an executive officer of the Company. He filed his Form 3 in April 2000.
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, 1999. 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 Company and any subsidiary.
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
----------------------------- -------------------------------
Awards Payouts
------------------- ---------
Securities All
Re- Underlying Other
Name and stricted Options & LTIP Compensa-
Position Year Salary Bonus Other Awards SAR's Payouts tion
- -----------------------------------------------------------------------------------------------------
<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 1999 $0 $0 $0 0 5,000,000(B) $0 $0
Rene Velasquez 1997 $0(C) $0 2,000,000(D) (D) 0 $0 $0
President
of GEBM 1998 $0 $0 $0 0 0 $0 $0
and
EMB 1999 $0 $0 $0 0 0 $0 $0
Victor Hugo Bretel 1999 $1,000(E) $0 $0 0 0 $0 $0
President
of GEBM
___________
</TABLE>
<PAGE> 30
(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 or 1999. This accrued but unpaid salary is a liability
of the Company but bears no interest.
(B) Includes 10,000,000 options that vested in November 1998, and 5,000,000
options that vested in 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 Company but
bears no interest.
(D) The Company granted Mr. Velasquez 2,000,000 shares of restricted stock
in May 1997 valued at $.10 per share.
(D) Mr. Bretel was appointed December 14, 1999, and was paid a one-half
month's salary. Mr. Bretel is compensated at the monthly rate of
$2,000.
There are no plans to pay bonuses or deferred compensation to employees
of the Company. However, its President and its former Secretary/Treasurer
have accrued salary during 1999 at the rate of $350,000 per annum, which sum
will be paid to these individuals as the Company is able; $982,126 has been
accrued through December 31, 1999.
The Company has no plans that 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 the Company had employment agreements with Ms. Erickson in the
past, the Company 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 the Company's other employees.
Options/SAR Granted During Years Ended December 31, 1999 and 1998
-----------------------------------------------------------------
No stock appreciation rights were granted to any person in 1999.
However, in October 1998, the Company granted Mr. Turner and its former
Director, Secretary/Treasurer and President, Ms. Erickson, options to acquire
shares of the Company's common stock in consideration of their continued
efforts on behalf of the Company, their willingness to defer their salary, and
their financial assistance to the Company, including loans they and their
family members made to the Company or guaranteed for the benefit of the
Company. 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 is as follows:
Terry C. Turner: 15,000,000 restricted shares currently vested.
Mary A. Erickson: 10,000,000 restricted shares currently vested. (The Board
of Directors approved Ms. Erickson's resignation on
October 1, 1999, as sufficient to satisfy the vesting
requirement of the 5,000,000 options that were to vest on
November 1, 1999.)
Aggregated Option/SAR Exercises and Fiscal Year-End Option/SAR Value Table
-------------------------------------------------------------------------
No executive officer exercised any options or stock appreciation rights
during the 1999 fiscal year.
Long Term Incentive Plan - Awards in Last Fiscal Year
----------------------------------------------------
31
<PAGE>
The Company has no long-term incentive plans, and consequently made no
such awards in fiscal year 1999.
Defined Benefit or Actuarial Plan Disclosure
---------------------------------------------
In October 1998, the Company adopted a medical insurance plan for its
employees, which plan became effective on November 1, 1998. The Company
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. The Company 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 1999, except for
compensation of Officers who are also Directors, which are described in the
Summary Compensation Table above. The Company's Technical Advisory Board
members accrued compensation for a total of approximately $12,000 in 1997 and
1998, in connection with certain consulting services rendered by them, which
was paid in full in the fourth quarter of 1999 or the first quarter of 2000.
Except as described herein, no officer or director of the Company 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 Company.
Employment Contracts and Termination of Employment and
Change-in-Control Arrangements.
----------------------------------
The Company has no compensation plan or arrangement with respect to any
executive officer which plan or arrangement results or will result from the
resignation, retirement or any other termination of such individual's
employment with the Company. The Company has no plan or arrangement with
respect to any such persons that will result from a change in control of the
Company or a change in the individual's responsibilities following a change in
control.
Report on Repricing of Options/SARs
------------------------------------
Not applicable, as no options or SARs were repriced during the fiscal
year ended December 31, 1999.
Item 11. Security Ownership of Certain Beneficial Owners and Management
--------------------------------------------------------------
At December 31, 1999, the Company 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, 1999
with respect to the ownership of the Common Stock for all directors,
individually; all executive officers named in the compensation table; all
executive officers and directors as a group; and all beneficial owners of more
than five percent of the Common Stock.
Name of Shares owned Percent
beneficial owner beneficially (1) of class
- -------------------------------------------- ---------------- ------------
Mary A. Erickson 24,441,467 (2) 19.0%
12403 So. 450 East, Bldg. D2, Suite A
Salt Lake City, Utah 84020
Terry C. Turner 15,000,000 (3) 11.7%
12403 So. 450 East, Bldg. D2, Suite A
Salt Lake City, Utah 84020
32
<PAGE>
Herbert M. Seydler, Jr. and Ravia Seydler 12,861,600 (4) 10.0%
c/o Hirsch & Westheimer, P.C.
700 Louisiana, 25th Floor
Houston, TX 77002
Betty Jane Seydler 12,510,000 (5) 9.8%
c/o Hirsch & Westheimer, P.C.
700 Louisiana, 25th Floor
Houston TX 77002
Ronald L Atwood, Ph.D. 0 0
All officers and directors
as a group (5 persons) 15,000,000 11.7%
_________________
(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 The
company, and 800,000 shares have been pledged as collateral to certain family
members for amounts owed to those family members. Also includes 10,000,000
shares underlying stock options issued to Ms. Erickson, of which all are
presently exercisable.
(3) Comprises 15,000,000 shares underlying stock options issued to Mr.
Turner, of which all are presently exercisable.
(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.
The Company knows of no arrangement, the operation of which may, at a
subsequent date, result in change in control of the Company, except the pledge
by Golden Eagle Mineral Holdings, Inc. of 13,500,000 restricted shares to
Frost Bank described above in Note (2). This loan is not in default.
Item 12. Certain Relationships and Related Transactions
----------------------------------------------
Stock Issuances
----------------
Golden Eagle Mineral Holdings, Inc. ("GEMH"), became a controlling
shareholder of the Company in November 1994, when it acquired 20,000,000
shares of the Company's restricted common stock. GEMH paid the Company a
secured promissory note payable to the Company 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 the Company.
Herbert M. and Ravia Seydler (the "H. Seydlers") are Mary Erickson's
parents (Ms. Erickson is Golden Eagle's former Corporate Secretary/Treasurer
who resigned October 1, 1999);
33
<PAGE>
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 the Company as a result of the April 1997
transaction described hereafter, neither was an affiliate of the Company.
During 1996, B. Seydler had advanced $450,000 to the Company on an
unsecured basis. As of January 1, 1997 Golden Eagle also owed approximately
$314,000 to the H. Seydlers. In April 1997, the Company 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 the Company. The Company 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 the Company without the guarantees from the two trusts. Furthermore, the
Company 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 believed that its agreements with H. Seydler, B. Seydler,
and their trusts, were in the best interests of the Company 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
Company, 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 Company because of their stock ownership.
Loans to the Company from Affiliates
------------------------------------
As described elsewhere in this Annual Report, the Company has suffered
chronic working capital shortages. To provide short-term relief to the
Company, Ms. Erickson (the Company's former Secretary/Treasurer who resigned
on October 1, 1999) and certain of her family members have advanced funds to
the Company. In addition, Ms. Erickson and certain of her family members have
guaranteed certain of the Company'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%. All of the loans
are unsecured loans and are due January 1, 2001; however, due to the related
party nature of these transactions, the Company has classified them as current
liabilities. In the Company's opinion, the loans are significantly more
favorable to the Company than could have been obtained from any other source;
in fact, given the Company'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 the Company on any terms or
conditions.
In addition, as described elsewhere in this Annual Report, Mr. Velasquez
(former President of the Company's subsidiaries in Bolivia) and Mr. Turner
(the Company's President) have advanced funds to the Company for operations in
Bolivia.
Loan 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
34
<PAGE>
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
1999 Family Members (3) $ 96,919 $1,079,062
Mary Erickson $ (5,000)
$ 6,500
$ 16,784) $ 44,966
Rene Velasquez $ (10,639) $ 158,577
Terry Turner $ 39,286
$ (100,333) $ (28,847)
Ronald Atwood $ (500) $ 4,931
(1) The company made all the described repayments in cash except as follows:
(2) Including $25,000 canceled in repayment of a promissory note payable to
The company 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 The
company 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 the Company 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 the Company $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 the Company $1 million pursuant to
a revolving line of credit agreement (which has now been
35
<PAGE>
extended to June 1, 2000). The loan bears interest at the prime rate (8.25%
as of September 30, 1999). In addition, the loan is personally guaranteed by
Ms. Erickson and GEMH, including a pledge of 13,500,000 shares of the
Company'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 the Company's assets. As a fee for consideration of the
family members' guarantees of the $1 million loan, the Company issued a total
of 20,000,000 shares of restricted common stock that 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 the Company's 1997 operations on the Cangalli properties. As
of December 31, 1999, 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, a former officer.
Said notes have been extended to January 1, 2001, are unsecured and personally
guaranteed by the officer and her husband.
Formation of Bolivian Subsidiaries
----------------------------------
The Company formed Golden Eagle Bolivia Mining, S.A., ("GEBM") in January
1996 to conduct its operations in Bolivia. Golden Eagle initially owned 74%
of GEBM and later acquired an additional 19% from its Bolivian partners, for a
total of 93%. The Company formed a second subsidiary, Eagle Mining of
Bolivia, Ltd. ("EMB") in October 1996 to own the contract for the mining
rights. The Company owns 84% of EMB; an affiliate of the Company, Mary A.
Erickson, owns 3%; and Rene Velasquez (a Bolivian national who is the former
President of the Company's subsidiaries) owns 13%. Mr. Velasquez' 13%
ownership in EMB resulted from the initial agreement between the Company and
Mr. Velasquez, which resulted in the Company's introduction to the United
Cangalli Gold Mining Cooperative, Ltd. ("UCL") and the original business
opportunity. Ms. Erickson's 3% ownership was taken in partial consideration
for the loans and advances made to the Company by Ms. Erickson and her family.
EMB's initial constitution, the equivalent of its Articles of Incorporation,
provided that Golden Eagle 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 the Company, own any interest in the Company'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, 1999 F-4
Consolidated Statement of Operations for the years ended
December 31, 1999 and 1998 and from
July 21, 1988 (inception) through
December 31, 1999 F-5
Consolidated Statement of Cash Flows for the years ended
December 31, 1999 and 1998 and from
July 21, 1988 (inception) through
December 31, 1999 F-6
Consolidated Statement of Stockholders' Equity (Deficit)
for the years ended December 31, 1999 and
1998 and from July 21, 1988 (inception)
36
<PAGE>
through December 31, 1999 F-7
Notes to Consolidated Financial Statements F-8 through F-18
(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 Company's registration statement on
Form 10-SB that became effective June 17, 1994.
** Incorporated by reference from the Company's Form 8-K reporting an event
of December 19, 1996.
(c) Reports on Form 8-K:
The following reports on Form 8-K were filed during the year ended
December 31, 1999, and subsequently:
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 24, 1999, reporting an event under Item 5 of Form 8-K
June 30, 1999, reporting an event under Item 5 of Form 8-K
August 3, 1999, reporting an event under Item 5 of Form 8-K
October 11, 1999, reporting an event under Item 5 of Form 8-K
January 3, 2000, reporting an event under Item 5 of Form 8-K
March 20, 2000, 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, the Company has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
GOLDEN EAGLE INTERNATIONAL, INC.
/s/ Terry C. Turner
April 12, 2000 ---------------------
President
37
<PAGE>
Pursuant to the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the Company and in the
capacities and on the dates indicated.
GOLDEN EAGLE INTERNATIONAL, INC.
/s/ Terry C. Turner
April 12, 2000 ---------------------------------------------------------
Terry C. Turner, Director and Principal Executive Officer
/s/ Ronald L. Atwood
April 12, 2000 ----------------------------------------------------------
Ronald L Atwood, Ph.D., Director
/s/ Jennifer T. Evans
April 12, 2000 ---------------------------------------------------------
Jennifer T. Evans, Corporate Secretary- Treasurer,
Principal Financial Officer and Principal Accounting
Officer
38
<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> 39
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS'
March 24, 2000
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, 1999, and the related consolidated statements of operations, cash
flows and changes in stockholders' equity (deficit) for the years ended
December 31, 1999 and 1998, and the related amounts included in the cumulative
amounts for the period from July 21, 1988 (inception) to December 31, 1999.
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
99% of total consolidated assets as of December 31, 1999 and all of its
revenues. 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, 1999
and for the years ended December 31, 1999 and 1998, and the related amounts
included in the cumulative amounts for the period from July 21, 1988
(inception) to December 31, 1999 is based solely on the report of the other
auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the accompanying consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
Golden Eagle International, Inc. at December 31, 1999, and the results of its
operations and its cash flows for the years ended December 31, 1999 and 1998,
and the related amounts included in the cumulative amounts for the period from
July 21, 1988 (inception) to December 31, 1999, 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, 1999 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 in
a single undeveloped area. 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.
/s/ Oatley Bystrom & Hansen
Greenwood Village, Colorado
F-2
<PAGE> 40
INDEPENDENT AUDITOR'S REPORT
March 24, 2000
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, 1999, and the related
statements of operations and cash flows for the year 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 audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit 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. as of December 31, 1999, and the results of its operations and its cash
flows for the year 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.
/s/ Pozo and Associates
La Paz, Bolivia
F-3
<PAGE> 41
______________________________________________________________________________
Golden Eagle International, Inc.
(A Development Stage Company)
Consolidated Balance Sheet
______________________________________________________________________________
December 31,
1999
------------
ASSETS
CURRENT ASSETS
Cash $ 1,490
Prepaid expense other costs 64,171
------------
Total current assets 65,661
------------
PROPERTY AND EQUIPMENT
Mining equipment 800,029
Acquisition cost of mining prospect 100,000
Office equipment 61,123
Vehicles 59,796
------------
1,020,948
Less accumulated depreciation (222,706)
------------
798,242
------------
OTHER ASSETS
Advance royalties 90,568
Deposits 5,868
------------
96,436
------------
$ 960,339
============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Loans from related parties $ 1,258,688
Bank loan payable 1,000,000
Other note payable 462,250
Accounts payable 384,751
Accrued compensation and taxes 1,243,738
Accrued interest payable 314,949
------------
Total current liabilities 4,664,376
------------
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
128,053,812 shares 12,803
Additional paid-in capital 9,244,577
Deficit accumulated during the development stage (12,961,417)
------------
Total stockholders' (deficit) (3,704,037)
------------
$ 960,339
============
See accompanying notes.
F-4
<PAGE> 42
______________________________________________________________________________
Golden Eagle International, Inc.
(A Development Stage Company)
Consolidated Statement of Operations
______________________________________________________________________________
July 21, 1988
(Inception)
Year Ended Through
December 31, December
1999 1998 31, 1999
------------- ------------- -------------
REVENUES $ 6,271 $ 52,471 $ 160,201
COSTS AND OPERATING EXPENSES
General and administrative 1,195,645 1,512,347 7,572,779
Exploration 174,608 195,348 1,046,403
Depreciation 82,068 82,057 223,251
------------- ------------- -------------
Total costs and operating expenses 1,452,321 1,789,752 8,842,433
------------- ------------- -------------
OPERATING (LOSS) (1,446,050) (1,737,281) (8,682,232)
------------- ------------- -------------
OTHER INCOME (EXPENSE)
Interest expense (340,716) (339,715) (971,560)
Interest income 934 903 15,483
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 - - (17,314)
Other income 11,167 5,826 33,134
Other expenses (162) (2,758) (23,210)
------------- ------------- -------------
Total other income (loss) (328,777) (335,744) (4,273,885)
------------- ------------- -------------
NET INCOME (LOSS) $ (1,774,827) $ (2,073,025) $(12,956,117)
============= ============= =============
EARNINGS (LOSS) PER SHARE $ (0.02) $ (0.02) $ (0.38)
============= ============= =============
WEIGHTED AVERAGE SHARES OUTSTANDING 116,423,811 103,856,108 34,117,226
============= ============= =============
See accompanying notes.
F-5
<PAGE> 43
______________________________________________________________________________
Golden Eagle International, Inc.
(A Development Stage Company)
Consolidated Statement of Cash Flows
______________________________________________________________________________
<TABLE>
<CAPTION>
July 21, 1988
(Inception)
Year Ended Through
December 31, December
1999 1998 31, 1999
------------- ------------- -------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (1,774,827) $ (2,073,025) $(12,956,117)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Stock issued for services 299,000 463,000 2,983,919
Stock issued for accrued interest 23,650 113,963 164,884
Depreciation expense 82,068 82,057 223,251
Loss on retirement of vehicle, equipment and other - 2,758 8,235
Stock issued for loan pledges and renewals - - 2,500,000
Write-down of mining prospect - - 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 (8,084) (50,429) (64,171)
Income tax refund receivable - 8,946 -
Payables and accrued liabilities 634,106 312,311 1,943,438
------------- ------------- -------------
Net cash flows (used for) operating activities (744,087) (1,140,419) (4,324,769)
------------- ------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in property and equipment (8,083) (749) (1,611,264)
Advances royalties (45,934) 27,280 (90,568)
Deposits 6,407 26,500 (7,368)
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 (47,610) 53,031 (1,679,998)
------------- ------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Loans from related parties 142,704 333,996 1,907,909
Repayment on loans from related parties (133,256) (4,000) (568,632)
Proceeds from other notes payable 53,200 441,540 634,298
Repayments of other notes payable (39,766) - (108,912)
Proceeds from convertible debentures - 125,000 413,500
Proceeds from bank loan - - 1,000,000
Common stock issued 769,000 120,000 2,791,158
Stock issuance costs - - (63,064)
------------- ------------- -------------
Net cash flows from financing activities 791,882 1,016,536 6,006,257
------------- ------------- -------------
NET INCREASE (DECREASE) IN CASH 185 (70,852) 1,490
CASH - BEGINNING OF PERIOD 1,305 72,157 -
------------- ------------- -------------
CASH - END OF PERIOD $ 1,490 $ 1,305 $ 1,490
============= ============= =============
See accompanying notes.
F-6
</TABLE>
<PAGE> 44
<TABLE>
<CAPTION>
____________________________________________________________________________
Golden Eagle International, Inc.
(A Development Stage Company)
Consolidated Statement of Stockholders' Equity (Deficit)
_____________________________________________________________________________
Additional
Common Stock Paid-in Accumulated
Shares Amount Capital Deficit Total
------------- --------- ------------ ----------- ------------
<S> <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 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 to $.282)
less $41,644 issuance costs 10,469,750 1,047 244,002 - 245,049
Issued for services in 1995 ($.07 per share) 2,337,333 234 171,749 - 171,983
Convert notes payable in 1995 ($.15625
per share) 800,000 80 124,920 - 125,000
Issued or cash in 1996 ($.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 to related parties 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
Issued in 1997 for conversion of debenture
and note payable ($.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
Other (70) - 2,625 - 2,625
Net loss for the periods - - - (9,108,265) (9,108,265)
------------- --------- ------------ ----------- ------------
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)
Issued for cash ($.02 to $.10 per share) 14,070,000 1,407 767,593 - 769,000
Issued for services ($.04 to $.10 per share) 4,385,927 438 298,562 - 299,000
Issued for interest ($.03 to $.10 per share) 380,000 38 23,612 - 23,650
Net loss for the year - - - (1,774,827) (1,774,827)
------------- --------- ------------ ----------- ------------
Balance at December 31, 1999 128,053,812 $ 12,803 $ 9,244,577 (12,961,417) $(3,704,037)
============= ========= ============ =========== ============
See accompanying notes.
F-7
</TABLE>
<PAGE> 45
_______________________________________________________________________________
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 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 (the "Cangalli
properties"), and a prospect which is owned outright by the Company (the
"Tipuani Valley properties"), in the Tipuani Gold Mining District of the
Republic of Bolivia.
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 a former 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, the Cangalli properties, consisting of 4,952 acres 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. As of December 31, 1999, these obligations
had been met and $91,789 is reflected as advance royalties in the
accompanying balance sheet.
F-8
<PAGE> 46
______________________________________________________________________________
Golden Eagle International, Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
_____________________________________________________________________________
The Company owns all right, title and interest in two mining claims or
concessions, the Tipuani Valley properties, acquired in November 1999
totaling 44,046 acres, which surround the Cangalli properties. The Company
is not required to pay any royalty on the Tipuani Valley properties as long
as it pays annual claim fees of $17,825. The combined total of the Cangalli
properties and the Tipuani Valley properties is 48,998 acres, all of which is
prospectively valuable for gold.
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, 1999 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
in a single undeveloped area. 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
F-9
<PAGE> 47
_____________________________________________________________________________
Golden Eagle International, Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
_____________________________________________________________________________
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.
Foreign Currency
- ----------------
The Company's functional currency and its foreign activities are conducted
primarily in U.S. dollars. Foreign currency transaction gains recorded in
1999 and 1998 were $1,344 and $5,904, 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.
F-10
<PAGE> 48
_______________________________________________________________________________
Golden Eagle International, Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
_____________________________________________________________________________
Stock Based Compensation
- ------------------------
The Company utilizes the intrinsic value method for stock-based compensation.
Under this method, compensation expense is recognized for the amount by which
the market price of the common stock on the date of grant exceeds the
exercise price of an option.
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.
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 1999 and 1998, the
Company paid interest of $192,293 and $161,170, respectively. Non-cash
investing and financing transactions during the periods consists of the
following:
1999 Shares Amount
- ------- ---------- -----------
Common stock issued to advisors and
consultants for services. 4,385,927 $ 299,000
Common stock issued in lieu of interest. 380,000 23,650
----------- -----------
4,765,927 $ 322,650
=========== ===========
1998
- -----
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
===========
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 1999 and 1998 and the inclusion of stock options
would be antidilutive.
F-11
<PAGE> 49
____________________________________________________________________________
Golden Eagle International, Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
_____________________________________________________________________________
Concentrations
- --------------
Concentrations include: reliance on a single area containing two mining
prospects 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, 1999, the carrying amount of net of assets
(assets less liabilities) located in Bolivia was approximately $98,000, a
decrease of $33,000 during the year.
Fair Value of Financial Instruments
- -----------------------------------
Due to their short-term nature, the carrying value of our current financial
assets and liabilities approximates their fair values. The fair value of our
borrowings, if recalculated based on current interest rates, would not
significantly differ from the recorded amounts.
Note C - Loans and Notes Payable
Bank note payable at its prime interest rate
(8 1/2% at December 31, 1999). Interest due monthly
until June 1, 2000 when principal and unpaid
interest are due. Secured by substantially all
assets of the Company, pledge of certain assets of
relatives of a former officer, and 13.5 million
shares of Company stock of the former officer. $ 1,000,000
Note payable 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 1, 2000. On January 7,
2000, $390,000 converted to common stock (see Note H). 428,084
Other, unsecured. 34,166
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. 450,000
12% notes payable issued from November 1996 through
December 1998 to relatives of an officer, unsecured,
due January 1, 2001. 629,062
24% advances from a former officer of a subsidiary,
unsecured, due on demand. 158,577
8% to 24% loans from officers, unsecured, due on demand. 21,049
-------------
F-12
<PAGE> 50
_____________________________________________________________________________
Golden Eagle International, Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
_____________________________________________________________________________
$ 2,720,938
=============
Note D - Income Taxes
The Company has not recorded an income tax provision for 1999 or 1998 due to
the Company's inability to carryback losses.
Deferred tax liabilities and deferred tax assets reflect the net effects of
temporary differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for income tax
purposes. The valuation allowance has been established due to the
uncertainty of future taxable income, which is necessary to realize the
benefits of the deferred tax assets. The Company had net operating loss
(NOL) carryforwards of approximately $8.3 million at December 31, 1999, which
begin to expire in 2005. These NOL's are subject to annual utilization
limitations due to prior ownership charges.
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
$1.2 million of the loss carryforward has been offset by a valuation
allowance of the same amount, an increase of $210,000 in 1999.
Note E - Stockholders' Equity
Common Stock Issued
- -------------------
From October to December 1998, the Company issued 1,200,000 shares of common
stock for $120,000 ($.10 per share).
During 1998, 3,704,172 shares of common stock were issued to financial
advisors and public relations consultants for services with an estimated
value of $463,000.
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).
F-13
<PAGE> 51
______________________________________________________________________________
Golden Eagle International, Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
_____________________________________________________________________________
In 1999, the Company issued 14,070,000 shares of common stock for $769,000
($.20 to $.10 per share).
During 1999, 4,385,927 shares of common stock were issued to financial
advisors and public relations consultants for services with an estimated
value of $299,000. Also during 1999, 380,000 shares were issued to creditors
in lieu of interest at an estimated value of $23,650 ($.03 to $.10 per
share).
Convertible Debt
- ----------------
During 1996, the Company issued $188,500 of 6% convertible debentures to a
foreign corporation. On December 15, 1997, the holder converted $20,000 of
the debentures and accrued interest of $17,757 into 429,060 shares of common
stock ($.088 per share). During 1998, the remaining $168,500 of debentures
and $3,092 of related accrued interest were converted into 2,773,447 shares
of common stock at approximately $.062 per share.
On October 23, 1997, the Company issued a $100,000 debenture, which was
converted on February 19, 1998, along with accrued interest of $3,370, to
3,062,821 shares co common stock at $.03375 per share. On April 24, 1998,
the Company issued a $125,000 debenture, which was converted on October 15,
1998 along with $35,000 of accrued interest, to 2,560,000 shares of common
stock at $.0625 per share.
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
vested November 1, 1999. As of December 31, 1999, none of the options had
been exercised.
Pro forma information regarding the fair value of stock options is determined
at the date of grant using the Black-Scholes option pricing model with the
following weighted-average assumptions for the year ended December 31, 1998:
risk free interest rates of 5%; no dividend yield, volatility factor of the
expected market price of the Company's common stock of 197%; and a
weighted-average expected life of the options of 36 months. As there were no
option grants in 1999 no assumptions have been provided for 1999.
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.
F-14
<PAGE> 52
______________________________________________________________________________
Golden Eagle International, Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
_____________________________________________________________________________
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, 1999:
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
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. For
the year ended December 31, 1999 there was no significant effect of applying
the fair value method on net loss or loss per share as no options were
granted.
Note F - Related Party Transactions
From 1994 through 1999, a former officer and current major stockholder
advanced funds to the Company on an unsecured basis at 8%. During 1999,
$6,500 was loaned the Company and $16,784 repaid. As of December 31, 1999,
$44,966 loan principal plus accrued interest of $1,238 was outstanding. Due
its related party nature, the loan is included in current liabilities. In
addition, as of December 31, 1999, $463,677 was owed the former officer for
salary in arrearage.
During 1996, notes payable totaling $450,000 at an interest rate of 10 1/2%,
were issued to a relative of the former officer discussed above. The notes
are unsecured but personally guaranteed by the former officer and her
husband. As of December 31, 1999 the $450,000 loan principal and accrued
interest of $188,399 was outstanding (an increase of $63,371). Due to their
related party nature, the loan is included in current liabilities.
From 1995 through 1999, relatives of the former officer advanced funds to the
Company on an unsecured basis at 12%. During 1999, $96,919 was loaned the
Company and $5,000 repaid; in 1998, the relatives loaned the Company
$170,790. As of December 31, 1999, $629,062 of loan principal plus accrued
interest of $54,186 was outstanding. Due to its related party nature the
notes are included in current liabilities.
From 1997 through 1999, the Company's president advanced funds on an
unsecured basis. In 1998, a vehicle acquired in 1997 for stock valued at
$35,000 was sold to the president at its estimated fair value, $27,575.
Payment was accomplished by reducing outstanding loans owed to the president.
In addition, in 1998 the president
F-15
<PAGE> 53
was repaid $9,500 cash and advanced the Company $33,425. In 1999, the
president was paid $100,333 and loaned the Company $39,286, resulting in net
cumulative advances of $28,847 due the Company as of December 31, However, as
of December 31, 1999, $520,012 was also owed the president for salary in
arrearage.
Through December 31, 1999, officers of GEBM have loaned it a total of
$163,508 (in equipment rentals and cash). These loans bear interest at 24%
per annum, are unsecured, and due on demand.
Note G - Commitments and Contingencies
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 filed a
counter-claim. In March 2000, the action was dismissed by the court,
however, the Company has been contacted indicating that the action may be
refiled. Litigation is subject to many uncertainties and the Company is
unable to predict the outcome of this matter.
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. The
consultant has filed an administrative labor action with the Bolivian
Ministry of Labor, and a civil action in the District of La Paz. In
addition, the Company has been compelled by the consultant's actions to bring
a criminal complaint against the consultant for fraudulent use of
professional credentials and misrepresentation. 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
- -------------
October 7, 1999, the Company entered into a one-year lease of an office in
Draper, Utah for $1,000 per month. Rent paid for the office during 1999 was
$4,000. The Company has an option to renew the lease for an additional
F-16
<PAGE> 54
_____________________________________________________________________________
Golden Eagle International, Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
_____________________________________________________________________________
two-year period and is responsible for the cost of utilities, insurance,
taxes, and common area expenses. The Company's president has personally
guaranteed payment of the lease.
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 $20,000
and $18,000 in 1999 and 1998, respectively.
Future minimum lease payments for both office leases are as follows:
Year ended December 31,
2000 $ 28,988
2001 19,992
2002 9,996
--------
$ 58,976
========
Note H - Events Subsequent to December 31, 1999 (Unaudited)
Conversion of Notes Payable
- ---------------------------
On January 6, 2000, $390,000 of a note payable to a Bolivian consulting
engineering firm (see note C) was converted to 13 million shares of common
stock ($.03 per share). On March 4, 2000, a $25,000 note payable to an
individual on December 31, 1999 was converted to 933,333 shares of common
stock ($.0268 per share).
Issuance of Convertible Debenture
- ---------------------------------
On February 10, 2000, the Company entered into a Convertible Debenture
Agreement with an accredited investor and current shareholder in the amount
of $300,000. The terms of the Convertible Debenture are: a one year term;
interest accruing at 10% per annum; conversion of loan amount and any accrued
interest, or any part of those sums, at the election of the holder, to shares
of common stock of the Company; a conversion rate of $.03 per share or
one-half of the average closing price during the last three days prior to
conversion.
Short-term Loan
- ---------------
On January 14, 2000, the Company borrowed $25,000 from an individual pursuant
to a three-percent, 90-day promissory note that is secured by 500,000 shares
of unissued common stock. As additional compensation, the lender also
received 100,000 shares of common stock. At the Company's option, it
extended the due date of the loan from April 14, 2000 to April 28, 2000 for
100,000 additional shares of common stock. The Company's president also
personally guaranteed the obligation.
F-17
<PAGE> 55
____________________________________________________________________________
Golden Eagle International, Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
_____________________________________________________________________________
Sale of Common Stock to Investors
- ----------------------------------
From January through March 24, 2000, the Company issued 6,063,335 shares of
common stock to investors (non-affiliates) for cash totaling $182,350 ($.03
per share).
Issuances of Common Stock to Advisors
- --------------------------------------
Through March 24, 2000, the Company agreed to issue a total of 168,674 shares
of common stock to a financial advisor as compensation for identification of
prospective investors and financial public relations..
During 1999, the Company had contracted the services of a consulting
metallurgical firm, an employee of which is also an officer and director of
the Company, to carry out metallurgical and feasibility studies, as well as
perform laboratory and bench testing and analysis, on its Cangalli prospect.
As of March 2000, the Company owed this consulting firm $63,173.99 for
services and expenses. On March 16, 2000, the Company satisfied this
indebtedness in its entirety by issuing 2,005,800 restricted shares of common
stock ($.03) to the consulting firm.
Contingencies Resulting from Litigation
- ---------------------------------------
On February 3, 2000, two individuals filed a lawsuit in the District Court
for Denver City and County naming the Company as a party, alleging that they
had not received 80,000 shares of free-trading common stock of the Company
sold to them by two third parties. The plaintiffs further allege that the
Company was responsible because the two third parties were its agents.
Plaintiffs allege that they paid $8,000 in the purported transaction, but are
seeking $190,000 in damages. The Company has denied in its Answer any
involvement in the transaction, and has denied that the two third parties
were its agents for any purpose. The Company will continue to vigorously
defend itself in this litigation and expects to prevail. However, litigation
is subject to many uncertainties and the Company is unable to predict the
outcome of this matter.
F-18
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 1,490
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 65,661
<PP&E> 1,020,948
<DEPRECIATION> (222,706)
<TOTAL-ASSETS> 960,339
<CURRENT-LIABILITIES> 4,664,376
<BONDS> 0
0
0
<COMMON> 12,803
<OTHER-SE> (3,716,840)
<TOTAL-LIABILITY-AND-EQUITY> 960,339
<SALES> 6,271
<TOTAL-REVENUES> 6,271
<CGS> 0
<TOTAL-COSTS> 1,452,321
<OTHER-EXPENSES> 162
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 340,716
<INCOME-PRETAX> (1,774,827)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,774,827)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,774,827)
<EPS-BASIC> (0.02)
<EPS-DILUTED> (0.02)
</TABLE>
