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| MYNG.OB > SEC Filings for MYNG.OB > Form 10-Q on 20-May-2009 | All Recent SEC Filings |
20-May-2009
Quarterly Report
Golden Eagle International, Inc. is referred to herein as "we", "our" or "us".
Forward-looking statements and risks
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
The following discussion should be read in conjunction with our financial statements and related notes appearing elsewhere in this Form 10-Q and our Annual Report on Form 10-K for our fiscal year ended December 31, 2008.
The statements contained in this quarterly report on Form 10-Q that are not historical are "forward-looking statements" that involve a number of risks and uncertainties. These forward-looking statements include, among others, the following:
o our business and growth strategies;
o our ability to successfully and economically explore for and minerals;
o our ability to obtain all necessary approvals for the operation of the Jerritt Canyon Mill;
o our exploration and development prospects, projects and programs;
o anticipated trends in our business;
o our future results of operations;
o the risk of operations in Bolivia, a country that is no longer supportive of foreign investment, especially investment from the United States;
o our liquidity and ability to finance our activities;
o market conditions in our industries; and
o the impact of environmental and other governmental regulation.
These statements may be found under "Risk Factors", "Management's Discussion and Analysis of Financial Condition and Results of Operation", "Business and Properties" and other sections of this quarterly report. Forward-looking statements are typically identified by use of terms such as "may", "will", "could", "should", "expect", "plan", "project", "intend", "anticipate", "believe", "estimate", "predict", "potential", "pursue", "target" or "continue", the negative of such terms or other comparable terminology, although some forward-looking statements may be expressed differently.
The forward-looking statements contained in this quarterly report are largely based on our expectations, which reflect estimates and assumptions made by our management. These estimates and assumptions reflect our best judgment based on currently known market conditions and other factors. Although we believe such estimates and assumptions to be reasonable, they are inherently uncertain and involve a number of risks and uncertainties that are beyond our control. In addition, management's assumptions about future events may prove to be inaccurate. Management cautions all readers that the forward-looking statements contained in this quarterly report are not guarantees of future performance, and we cannot assure any reader that such statements will be realized or the forward-looking events and circumstances will occur. Actual results may differ materially from those anticipated or implied in the forward-looking statements due to a number of factors, including:
o the failure to obtain sufficient capital resources to fund our operations;
o an inability to obtain the necessary permits to conduct our operations;
o unsuccessful exploration activities;
o a decline in prices of the commodities that we may produce at the Jerritt Canyon mill (if we are able to produce any);
o the current worldwide economic climate which has reduced the availability of liquidity and credit available to companies, especially those without revenues or engaged in natural resources operations;
o incorrect estimates of required capital expenditures;
o unexpected increases in the cost of our operations as a result of general economic conditions or time delays;
o impact of environmental and other governmental regulation, including delays in obtaining permits; and
o hazardous and risky operations.
You should also consider carefully the statements under "Risk Factors" and other sections of this quarterly report, which address additional factors that could cause our actual results to differ from those set forth in the forward-looking statements.
All forward-looking statements speak only as of the date of this quarterly report. We do not intend to publicly update or revise any forward-looking statements as a result of new information, future events or otherwise. These cautionary statements qualify all forward-looking statements attributable to us or persons acting on our behalf.
Golden Eagle International, Inc. is referred to herein as "we", "our", or "us".
Overview
Our corporate headquarters are in Salt Lake City, Utah.
We are engaged in contract gold milling operations in the state of Nevada in the United States. We have also been involved in the business of minerals exploration, mining and milling operations in Bolivia through our Bolivian-based wholly-owned subsidiary, Golden Eagle International, Inc. (Bolivia); however we are engaged in no operations in Bolivia at this time as certain of those operations are suspended pending changes in the social/political and mine taxing environments in Bolivia while we have terminated our interest in other Bolivian projects We have entered into an agreement with Queenstake Resources USA, Inc. ("Queenstake USA"), a wholly-owned subsidiary of Yukon-Nevada Gold Corp., to operate the Jerritt Canyon gold mill located 50 miles north of Elko, Nevada.
Additionally we own the following gold mills:
Mill Location Status Gold Bar Mill Eureka, Nevada Owned C Zone Mill Ascension de Guarayos, Bolivia Owned
As of the 2008 year-end, we owned the following mineral prospects in Bolivia:
Tipuani-Cangalli prospect (1) Number Acres Status Cangalli claims 5,000 acres Owned Tipuani prospect 7,000 acres Owned
Precambrian Shield (2)
Precambrian prospect 111,500 acres Owned
Buen Futuro claim 2,500 acres Owned
Cobra claim 22,500 acres Owned
1 On March 1, 2009, we elected not to renew our mining concessions for the Tipuani-Cangalli prospect in western Bolivia, which consisted of 12,000 acres in the Tipuani River Valley.
2 On March 1, 2009, we elected to reduce our mining concessions in the Precambrian Shield in eastern Bolivia from 136,500 acres to 42,731 acres. We retained the Buen Futuro claims containing the A Zone on which we have generated the most drill and other sampling data, as well as the Gran Serpiente claims on which the C Zone gold mill and mine are located. We also retained the highly prospective Cobra claims on the northern end of the Ascension Gold-Copper Trend.
We entered into an agreement with Queenstake USA to operate the Jerritt Canyon gold mill located 50 miles north of Elko, Nevada on October 14, 2008. From mid September until March 23, 2009 we performed maintenance and environmental regulatory compliance functions at the mill and assisted the mill owner, Queenstake USA, in securing approval from the Nevada Division of Environmental Protection (NDEP) to restart milling operations at Jerritt Canyon. On March 25, 2009 approval was granted by the NDEP to recommence operations at the Jerritt Canyon mill.
None of our mining prospects are currently in the production stage. Our production operations on our Cangalli property ceased in June 2004 as a result of a local farmers' strike and certain legal issues particular to Bolivia with which we were not associated. Since then, the Bolivian government has become more hostile to investment from the United States, and we have reduced our operations in Bolivia significantly.
We also discontinued mining and milling operations on our C Zone mine and mill in December of 2009 due to the shortage of diesel fuel, political instability and a substantial change in the Bolivian tax structure for mining companies that severely limited our ability to become profitable on our Bolivian operations.
For the years ended December 31, 2008 and 2007, we reported net losses of $1,696,382 and $6,377,636, respectively. Our financial results over the past two years have been impacted by the shutdown of our production operations as discussed under Item 7 in connection with our financial results for the years ended December 31, 2008 and 2007. These results have carried forward through our first quarter results ending on March 31, 2009.
Any future financing will be used to: (a) support our contract maintenance work at the Jerritt Canyon gold mill in central Nevada; (b) refurbish and recommence gold milling operations at our Gold Bar mill located near Eureka, Nevada; and to the extent the political, security and tax situation in Bolivia permits us to do so: (i) maintain the infrastructure at our C Zone operations in eastern Bolivia; and (ii) continue exploration and feasibility studies on our A Zone claims in eastern Bolivia. We will also use our financing to maintain our corporate obligations.
Assets.
As of March 31, 2009, we had total net assets of $6,176,268 compared to total
assets of $6,123,914 as of December 31, 2008. These assets include current
assets, such as cash, accounts receivable and prepaid expenses. Our current
assets increased to $455,432 as of March 31, 2009 from $209,392 as of December
31, 2008.
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Current Assets March 31, 2009 December 31, 2008
-----------------------------------------------------------
Cash and cash equivalents $7,722 $54,883
Net accounts receivable(1) 386,718 84,482
Prepaid expenses 60,992 70,027
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Total current assets $455,432 $209,392
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(1) Net accounts receivable are all due from Queenstake Resources, USA, Inc. for the reimbursement of expenses related to the operation of the Jerritt Canyon mill as well as our cost-plus administration fee.
---------------------------------------------------------------------------------- Fixed Assets March 31, 2009 December 31, 2008 ---------------------------------------------------------------------------------- Mining equipment $614,348 $733,353 Gold Bar mill and plant (idle) 3,980,000 3,980,000 Mine development costs 752,339 752,339 Mineral properties 1,372,977 1,414,997 Office equipment 84,079 137,356 Vehicles 22,000 116,182 Accumulated depreciation and depletion and (1,104,908) (1,219,705) Impairment ---------------------------------------------------------------------------------- Fixed assets net $5,720,836 $5,914,522 ---------------------------------------------------------------------------------- |
Capital Expenditures and Requirements Our capital commitments are set out below: ----------------------------------------------------------------------------------- Contractual Cash Obligations Total Less than 1 year 1 to 3 years 3 to 5 years ----------------------------------------------------------------------------------- Accounts payable and accrued $533,140 $533,140 $- $- expenses Deferred wages 228,687 228,687 - - Other notes payable 355,100 355,100 - - Related party payable 105,000 105,000 - - Accrued interest 74,849 74,849 - - Debentures payable 453,000 249,000 204,000 - Exploration & production Buen 301,000 - 301,000 - Futuro Production penalties 180,000 36,000 72,000 72,000 consulting fees Mining claim fees 246,860 49,372 98,744 98,744 Building leases 5,782 5,782 - - ----------------------------------------------------------------------------------- Total contractual cash $2,483,418 $1,636,930 $675,744 $170,744 obligations ----------------------------------------------------------------------------------- |
We have material capital commitments that will likely require us to obtain adequate financing to meet these obligations. Because of our lack of liquidity we may be unable to pay these capital commitments and as such they are subject to risks of default which could result in the forfeiture of property and mining claim rights. The occurrence of any such risks will negatively affect our operations and potential revenues. These commitments are:
1. Our accounts payable and accrued expenses of $533,140, which include trade payables and general obligations. These obligations will either become due within the next month, are currently due, or are in some cases more than 90 days past due. Of the total accounts payable amount, $236,257 is related to accounts and wages payable at Jerritt Canyon and we are reliant on payments from Queenstake Resources USA, Inc. to meet these obligations.
2. Our deferred wages are payable to our officers in the United States in the amount of $109,195 and to employees in Bolivia in the amount of $119,492
3. We have notes payable, including:
a. A note totaling $117,600 payable to a Bolivian resident with an interest rate of 8% per annum maturing on December 31, 2009.
b. A note totaling $12,000 payable Dewey Williams with an interest rate of 8% that has subsequently been converted into a convertible debenture maturing on March 18, 2010.
c. A note totaling $5,500 payable to Lonestar Equity Group with an interest rate of 8% maturing on December 31, 2009.
d. A note totaling $220,000 payable to Casco Credit with and interest rate of 12% maturing on March 24, 2009.In the event of default, this note at the option of the holder became due and payable and the amount due began to accrue interest at a default rate of 5% per month. This note is secured by the Gold Bar mill located 25 miles north of Eureka, Nevada.
e. On April 11, 2007, we entered into a convertible note with our Chief
Financial Officer with an effective date of February 6, 2007, which
represents the date we verbally made this commitment. The note
covered the payment of contractual retention bonuses payable in our
common shares to our Vice President for U.S. Administration, Tracy
A. Madsen. This note was for $50,000, had a term of 2 years, and was
convertible into 5,555,555 shares of our common stock at the closing
price for our common stock on February 6, 2007, which was $.009. As
the market price and the conversion price on the date of commitment
were the same, no beneficial conversion feature was applied. Our
Board of Directors elected to use a convertible promissory note to
meet this retention bonus commitment because we did not have
sufficient common stock available and any grant of our Series B
shares to this officer would have granted him a favorable treatment
and a beneficial conversion interest that would have violated our
Code of Conduct and Ethics. As of December 31, 2008 we accrued
interest totaling $8,556. On February 6, 2009 the maturity date of
this note was extended until May 9, 2009.
f. On February 26, 2009 we borrowed $25,000 from our Chief Financial Officer pursuant to a short-term promissory note and, on the same date, an additional $30,000 from our Chief Executive Officer pursuant to a short-term promissory note. The proceeds from these notes were used to pay our patent fees (mining concession fees payable to the Bolivian government), which were due February 28, 2009, to retain our mining concessions on our Precambrian properties in eastern Bolivia. These promissory notes have a term of 4 months and mature on June 25, 2009. The notes accrue interest at 8% per annum, with a default rate of 12% per annum. At the current time the Company does not have sufficient resources to repay these notes, each of which is unsecured.
4. A debenture payable to a shareholder, Aloha Holdings, Inc., in the amount of $249,000, which bears interest at 7% per annum with a default rate of 10% per annum which matured on May 2, 2007, and is convertible into our common stock at $0.025 per share. The Company and Aloha mutually agreed to extend the maturity date of this note to May 2, 2009We are currently in default on this note and subject to the default rate of 10%, due to the failure to pay interest in a timely manner and as of March 31, 2009 we owe $22,149.75 in accrued interest. As a subsequent event, on April 15, 2009 we were informed that this debenture had been purchased by Golden Eagle Mineral Holdings, Inc ("GEMH).
5. As of March 31, 2009, we had seven Convertible Debentures outstanding totaling $204,000. Each of these debentures carries an interest rate of 8% per annum payable at maturity and matures two years from the date of the debenture. Each debenture, and its accrued interest, is convertible into restricted shares of our common stock at any time by the holder of the debenture. If converted into restricted common stock, the conversion shall be at 50% of the average closing price of our common stock for the five trading days prior to the date of the debenture, or 50% of the average closing price for our common stock for the five trading days prior to the notice of conversion within the first 120 days immediately following the purchase of the debenture, whichever is less provided that the minimum conversion price is not less than $.002 per share. These debentures are convertible into 102,000,000 shares of our restricted common stock. As these debentures carry a conversion rate that is less than market rate the rules of beneficial conversion apply. The difference between the conversion rate and the market rate is classified as a discount on the note and accreted over the term of the debenture, which in this case is 24 months. The face amount of the outstanding debentures is $204,000. On the balance sheet they have been discounted by $125,472 to $78,528. The discounted amount is accreted over the twenty-four month period or in its entirety if the debenture is converted during the term. During the quarter ended March 31, 2009, $36,923 was accreted to financing costs.
6. Our obligation to pay accrued interest on Items 3-5 in the amount of $74,849. Interest on these notes is expensed each quarter and accrued.
7. On December 29, 2008 we received from GEMH the tender of, and our board of directors approved the receipt by us into treasury of, 487,746,250 shares of our common stock owned by GEMH in exchange for one share of our Series C Contingent Convertible Preferred Stock. As a result of the conversion of 487,746,250 common shares into one Series C Preferred share we reduced the number of common shares outstanding by 487,746,250.
8. Our obligation for monthly lease payments of $1,563 per month for our Salt Lake City, Utah office, which terminates on July 31, 2009. We have the option of canceling the remaining lease by paying of one additional month's rent. Additionally, we have an obligation to make monthly lease payments of $188 per month for our Santa Cruz, Bolivia office until February 15, 2009. We are also obligated to pay $200 per month for our Santa Cruz, Bolivia warehouse rent until June 1, 2009.
9. Our obligation to pay to the Bolivian government mining claim fees for 2009 through 2014. We paid the 2009 claim fees in February of 2009 in the amount of $49,372. We allowed some of our claims to lapse and we renewed those claims which we felt held the greatest potential for future exploration and development.
10. Our commitment to make $2 million in production expenditures for the Buen Futuro prospect by November 23, 2005. Because we were not in production by that date, we have paid a penalty of $3,000 per month and must continue to do so until we are in production at Buen Futuro. We were also required to pay a consulting fee of $3,000 per month in cash and $2,000 per month in common stock to the seller of the property as a consulting fee until May 31, 2008. As of March 31, 2009, we owed $51,000 in production penalties, $19,000 in management fees payable in cash which are included in our accounts payable. Additionally, we owe $10,000 in management fees payable in stock to Dr. Michael Biste, one of the co-sellers of the property which is also included in our accounts payable.
11. Our obligation incurred in connection with the acquisition of the Buen Futuro prospect to spend $1 million in exploration over the three-year period ending December 12, 2006. We believe our expenditures of $699,000 in the region qualify to be applied against this obligation, leaving a remaining obligation of $301,000.
12. Our obligation to pay Livstar Management Services (Livstar), 5% of the compensation (not including reimbursement of expenses incurred) we receive as a result of our agreement with Queenstake Resources USA, Inc. through a settlement agreement entered into on October 31, 2008, which amended a Consulting Agreement entered into on June 2, 2007 which replaced an earlier agreement dated April 18, 2007. As of March 31, 2009, we owed Livstar $6,907 which is included in our accounts payable.
13. Our obligation to pay Blane Wilson, our Chief Operating Officer, 3% of the compensation (not including reimbursement of expenses incurred) we receive as a result of our agreement with Queenstake Resources USA, Inc. and 3% of any revenues that may be generated from our Gold Bar mill, as part of his employment contract. As of December 31, 2008, we owed Mr. Wilson $7,144 under this agreement which is included in our accounts payable.
Costs to maintain our properties have higher priority than other current capital requirements. As a result, we have delayed payment to some of our other creditors.
We have ongoing financing requirements pertaining to constructing the infrastructure necessary to continue our operations in the C Zone on our Precambrian properties, and then to later initiate operations on the A Zone Buen Futuro project. We no longer intend to move our Gold Bar mill and plant from Nevada to Bolivia; we will attempt to sell that asset or enter into a joint venture or toll refining arrangement regarding its operation.
Many of the foregoing obligations are past due, and we may not be able to timely pay others that become due in the near future. Should we be unable to generate sufficient revenues through the operation of the Jerritt Canyon mill (or other business operations) or raise additional funding from outside investors, industry participants, or other sources, we will be forced to attempt to negotiate extensions to certain of our obligations or take other actions to protect our interest in our properties. Historically, we have financed our capital requirements through short-term loans from affiliates and non-affiliates, as well as from private placements of our securities to accredited investors. There is no assurance that we will be successful in financing our business operations through the Jerritt Canyon Mill. Further, if we seek to raise additional capital through the sale of our debt or equity securities there is no assurance that capital will be available to us on reasonable terms, if at all. Ultimately, our ability to finance our operations will be dependent on our ability to generate positive cash flow from operations in amounts sufficient to support all of our financial obligations. We have attempted, and will continue to attempt, to develop new grant and funding sources from United States, Canada, and overseas government agencies, private lenders, and financial institutions. We may also conduct negotiations with other mining companies regarding a possible merger or joint ventures to obtain economies of scale and access to capital markets
Equity
Stockholders' equity decreased to $4,466,965 as of March 31, 2009 from $4,700,317 as of December 31, 2008 representing a $233,352, or a 5%, decrease in stockholders' equity. This stockholders' equity decrease was primarily due to our net loss during the quarter ended March 31, 2009 and a revaluation of fixed assets as a result of currency fluctuations.
We are authorized to issue 2,000,000,000 common shares; as of March 31, 2009, we had 1,834,784,819 shares outstanding. We have filed a preliminary proxy statement for a meeting of our shareholders at which they will be asked to approve an increase in our authorized common shares through a reverse stock split and other means. Because of our focus on other operational and administrative issues we have not been able to respond to SEC comments to that preliminary proxy statement, we have not filed an amendment thereto, and we have not scheduled a shareholders' meeting to consider that issue or other issues to be presented to the shareholders. Any matters to be presented to the shareholders for consideration will be presented in a definitive proxy statement.
In addition, we are authorized to issue 10,000,000 preferred shares, (a) we have designated 3.5 million as Series A shares, none of which have been issued; (b) an additional 4.5 of our preferred shares were designated as Series B preferred shares of which 80,000 are outstanding and convertible into 20,000,000 common shares; and (c) one share of our authorized preferred stock is designated as a Series C preferred share which is outstanding and convertible into 487,746,250 common shares if and when sufficient shares are authorized and available for conversion. We also have $453,000 in convertible debentures outstanding convertible into 112,000,000 shares of our common stock. Additionally, we have granted options to Blane Wilson our Chief Operating Officer totaling 40,468,042. Including all of our commitments for common shares (being outstanding shares of preferred stock which are convertible into common stock, including those that are subject to the availability of authorized and unissued shares prior to conversion, and outstanding convertible debentures) our outstanding common stock on a fully diluted basis as of March 31, 2009 would be 2,494,999,111. As noted above our articles of incorporation permit us to issue 2,000,000,000 shares of common stock.
The computation of diluted earnings per common share is based on the weighted average number of shares outstanding during the year plus the common stock equivalents as detailed in the following chart. The inclusion of these shares would have resulted in a weighted average shares fully diluted number that was anti-dilutive and as such they are excluded from the weighted average shares
basic and diluted calculation
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Fully diluted shares for the quarters ended March 31, 2009 2008
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Basic shares outstanding 1,834,784,819 1,789,587,277
Series B conversion 20,000,000 31,250,500
Series C conversion 487,746,250 -
Convertible debentures 112,000,000 10,000,000
Convertible notes payable - 18,832,485
Stock options (approved) 40,468,042 -
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Total 2,494,999,111 1,849,670,262
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Results of Operations
The following sets forth certain information regarding our results of operations for the three-month period ending March 31, 2009, compared with the same period in 2008.
(a) Three Months Ended March 31, 2009/Three Months Ended March 31, 2008
Revenues. During the three months ended March 31, 2009, we generated revenues . . .
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