Advantego Corp - Quarter Report: 2006 March (Form 10-Q)
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X] Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1934 for quarter period ended
March 31, 2006
[ ] Transition report under Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from __________ to __________.
Commission file number 0-23726
GOLDEN EAGLE INTERNATIONAL, INC.
(Exact name of Golden Eagle as specified in its charter)
| Colorado | 84-1116515 | ||
| (State of incorporation) | (IRS Employer Identification No.) | ||
9661 South 700 East, Salt Lake City, UT 84070
(Address of principal executive offices) (Zip Code)
Golden Eagle’s telephone number, including area code: (801) 619-9320
Former Address if Changed Since Last Report
Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the issuer was required to file such reports), and (2) has been subject to the filing requirements for the past 90 days.
[ X ] Yes [ ] No
Indicate by check mark whether the registrant is an accelerated filer as dined in Rule 12b-2 of the Exchange Act
[ ] Yes [ X ] No
At March 31, 2006, there were 753,942,724 shares of common stock outstanding. At May 8, 2006, there were 757,017,724 shares of common stock outstanding
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
The unaudited Financial Statements for the nine months ended March 31, 2006 are attached hereto and by reference incorporated herein. Please refer to pages F-1 through F-8 following the signature page.
Item 2. Management’s discussion and analysis of financial condition and results of operations
Forward-looking statements and risks
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, 2005. The terms “the Company,” “we,” “our” or “us” refer to Golden Eagle International, Inc. This discussion contains forward-looking statements based on our current expectations, assumptions, and estimates. The words or phrases “believe,” “expect,” “may,” “anticipates,” or similar expressions are intended to identify “forward-looking statements.” Actual results could differ materially from those projected in the forward-looking statements as a result of a number of risks and uncertainties pertaining to our business, including: (a) possible future disruptions of mining operations at our Cangalli mine and the possibility that we may be required to move the mine and plant to an alternate location in order to resume production, which may cause material disruptions in our operations and negatively effect our potential revenues; (b) volatility of gold and copper prices on the commodity markets may negatively effect our potential revenues; (c) because our common stock is a penny stock and we lack an established market for our securities, you may have difficulty selling your securities; (d) our common stock is subject to price volatility; (e) we are subject to environmental risks that may lead to additional costs; (f) our international operations, including Bolivia and potentially elsewhere in South America, are subject to risks of political instability, civil unrest and insurrection , which may cause disruptions or termination of our operations; (g) because our productive assets primarily consist of our Cangalli gold mine in Bolivia, should its gold mining operations be adversely affected , our operations generally as well as our potential revenues will be negatively affected; (h) if we are unable to obtain debt or equity financing, we will be unable to proceed with our operational plan; (i) we may be dependent upon third parties to conduct certain aspects of our mining operations, including our business, mining and processing plans; (j) there is substantial doubt about our ability to continue as a going concern; and (k) our ability to generate future revenues is dependent upon our ability to commence mining operations at our Buen Futuro prospect, which requires a minimum $10 million investment; and/or our ability to re-commence operations at our Cangalli mine, which will require settlement of the dispute between the UCL and the Bolivian Government as well as meeting startup costs of $500,000 to $1,000,000, all of which will require financing we may be unable to secure.
Overview
Should we receive adequate financing, we intend to meet our land acquisition, mining claim, and other payments, acquire mining and processing equipment for our Buen Futuro gold and copper prospect, and resume our mining operations at our Cangalli mine or in the Tipuani Gold District. Our business model has attempted, and will continue to attempt, to develop revenue from the sale of gold, copper and other minerals, which is dependent upon adequate financing and successful mining operations.
Uncertainties and Trends
Our possible revenues are dependent now, and in the future, upon the following factors:
| o | Our ability to secure financing for our operations; |
| o | Our ability to conduct successful mining operations; |
| o | Worldwide commodity prices, including gold and copper and their price volatility; |
| o | Worldwide and local commodity prices for petroleum-related products, chemicals and solvents; |
| o | The nationalization of the Bolivian oil and gas fields by the President of Bolivia on May 1, 2006; |
| o | Threatened increases by the Bolivian government in the complementary mining tax (the Bolivia minerals severance tax), the business income tax on net earnings, patent;fees (claims fees) per hectare claimed for staking and maintaining mining claims; |
| o | Threatened changes in the Bolivian Mining Code that may result in unanticipated consequences and impacts; |
| o | The Bolivian Constitutional Convention in July of 2006 that may produce changes to Bolivia’s Political Constitution that may result in unanticipated consequences and impacts; |
| o | General social and civil unrest, disturbances, blockades, protests and other activities historically associated with Bolivian politics; |
| o | Inflation, which has historically been an issue in Bolivia, but for the past two decades has been controlled through monetary policy. |
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Capital Expenditures and Requirements
We have material capital commitments that will require us to obtain adequate financing to meet our obligations and are subject to risks of default and forfeiture of property and mining claim rights. The occurrence of any such risks will negatively effect our operations and potential revenues. These commitments are:
| 1) | Our accounts payable and accrued expenses of $406,365, which include accrued wages, trade payables and general obligations. These obligations will either shortly become due, are currently due, or are in some cases more than 90 days past due. Also included in this amount is our obligation to pay $138,000 of the debt we assumed in 2002 from United Cangalli Gold Mining Cooperative, Ltd. ("UCL"). We have paid $60,641 and currently owe $77,359. Pending the outcome of the dispute between with the UCL and the Bolivian government, we have suspended all payments on this debt. This debt is included in accrued expenses. |
| 2) | Our other notes payable totaling $1,172,591 payable to non-affiliates. Of this amount $153,000 is current. An additional $23,967 is for a loan on an aircraft, which we are currently in the process of selling. An additional $995,623 of notes payable represents a note that is in default. We are currently negotiating with the note holder, which is also a shareholder, to resolve the default situation. While we cannot guarantee we will be able to reach any agreement with this note holder we believe that the note holder will not take any action, which will negatively impact our ability to remain a going concern. |
| 3) | Our note payable to a director in the amount of $135,000 which bears an interest rate of 8% per annum and is payable on demand. |
| 4) | Our debenture payable to a shareholder, in the amount of $249,000, which bears an interest rate of 7% per annum and matures on May 2, 2007 and which is convertible into our common stock. |
| 5) | Our obligation to make remaining payments totaling $5,500 plus accrued interest of $16,000 to the previous owners of the Buen Futuro property. The interest payable is included in accrued interest. |
| 6) | Our obligation to pay accrued interest of $139,932 on notes and contracts payable, which is expensed each quarter and accrued. We are currently negotiating with note holders for relief on interest payable obligations. |
| 7) | Our obligation for monthly lease payments of $1,395 until August 2006 for our Salt Lake City office rent at which time we may cancel the remaining two year terms of our lease by paying a two month penalty. Additionally we have an obligation to make monthly lease payments of $500 per month through July 10, 2006 for our Santa Cruz office rent and $180 per month through October 31, 2006 for our La Paz office rent. |
| 8) | Our obligation to pay to the Bolivian government mining claim fees over the next 5 years of approximately $0.40 per acre per year in order to maintain our claim to the mineral rights on property under our control. The claim fees on our Buen Futuro claims are approximately $54,000 per year. Based on our analysis of the minimum amount of acreage needed to maintain the integrity of our deposit and mine plans on Tipuani-Cangalli property; we currently have concessions on approximately 12,000 acres, which results in a claim fee of approximately $5,000 per year. We intend to maintain all of our claims in the ancient Tipuani River paleochannel and should we resolve our outstanding issues there and receive financing, we intend to mine on our Tipuani-Cangalli claims. All mining claim payments have been made for 2006. We have total required annual mining claim payments of approximately $59,000 per year. |
| 9) | Our commitment to make $2 million in production expenditures for the Buen Futuro prospect by November 23, 2005. However, as we were not in production by that date we are required to pay a penalty of $1,500 per month until November 23, 2006. If at that date we are still not in production we will be required to make penalty payments of $3,000 per month until we are in production at Buen Futuro. We have classified these payments as a contractual obligation as well as $3,000 per month we are obligated to pay the seller of the property a consulting fee until which time we are in production. |
| 10) | 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 $564,166 in the region qualify to be applied against this obligation leaving a remaining obligation of $435,834. |
| 11) | Our commitment to recommence production in the Tipuani Gold District with an expected cost of approximately $500,000. to recommence operations in the region. We are however, under no contractual obligation to resume mining at Cangalli or in the Tipuani valley. |
| 12) | We believe that our cost to dismantle, ship our Gold Bar mill and plant, and re-erect it in Bolivia, will be approximately $3,500,000. While it continues to be part of our business plan, we are under no contractual obligation to do so; as such, we do not include these estimated costs in the following chart. |
| 13) | A commitment to make $2 million in production expenditures for the Buen Futuro prospect by November 23, 2005. As we were not in production by that date we are required to pay a penalty of $1,500 per month until November 23, 2006. If at that date we are still not in production we will be required to make penalty payments of $3,000 per month until we are in production at Buen Futuro. We believe that we have met this commitment with the acquisition of the Gold Bar mill and plant and other developmental expenditures since the Gold Bar mill and plant acquisition has no other purpose than to go to the Buen Futuro site for installation and production, and is committed to that end. |
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The following chart summarizes our contractual capital commitments as discussed above:
| Contractual Cash Obligations | Total | Less than 1 year | 1 to 3 years | 3 to 5 years | ||||||||||
| Accounts Payable & Accrued Expenses | $ | 406,365 | $ | 406,365 | $ | - | $ | - | ||||||
| Other Notes Payable | 1,172,591 | 1,172,591 | - | - | ||||||||||
| Related Party Payable | 135,000 | 135,000 | - | - | ||||||||||
| Debenture Payable | 249,000 | - | 249,000 | - | ||||||||||
| Contracts Payable | 5,500 | 5,500 | - | - | ||||||||||
| Accrued Interest | 139,932 | 139,932 | - | - | ||||||||||
| Building Leases | 11,130 | 11,130 | - | - | ||||||||||
| Mining Claim Fees | 236,000 | - | 118,000 | 118,000 | ||||||||||
| Production Penalties consulting fees | 348,000 | 60,000 | 144,000 | 144,000 | ||||||||||
| Buen Futuro Exploration | 435,834 | - | 435,834 | - | ||||||||||
| Total Contractual Cash Obligations | $ | 3,139,352 | $ | 1,930,518 | $ | 946,834 | $ | 262,000 | ||||||
Costs to maintain our properties have higher priority then other current capital requirements, which have led to some of our creditors being on a delayed-payment schedule.
Should we be unable to obtain third party funding in excess of $7,000,000, it is unlikely we will be able to meet the above commitments over the next 3-year period and move the Gold Bar Mill and plant and commence mining at Buen Futuro, which will necessitate our attempting to negotiate additional extensions with our creditors, which there is no assurance we will successful in doing. Historically we have financed our capital requirements through the sale of our gold production, which ceased in May 2004, and through short-term loans from affiliates and non-affiliates, as well as from private placement of our securities to accredited investors. There is no assurance that we will be successful in financing our operations. Ultimately, our ability to finance our operations will be dependent on our ability to generate additional 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 will also conduct negotiations with other mining companies regarding a possible merger or joint ventures to obtain economies of scale and access to capital markets.
Critical Accounting Policies
In August 2001, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 143, Accounting for Asset Retirement Obligations. SFAS No. 143 addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. The provisions of SFAS No. 143 are effective for fiscal years beginning after June 15, 2002. We have evaluated the impact of this statement and have adopted this standard. To date we have not taken any expenses based on this policy; however, we anticipate we will in the future.
We have adopted SFAS 144, “Accounting for the Impairment and Disposal of Long-Lived Assets,” which requires long-lived assets held and used to be reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. We review for the impairment of long-lived assets whenever events or changes in circumstances indicate 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 and would be calculated based on discounted cash flows.
Stock based compensation from time to time we issue shares of common stock as payment for services to consultants and employees. Any stock issued for this purpose is priced and accounted for at the actual closing market price on the day of issue. The total number of shares issued times the closing stock price is booked as an expense.
Non-cash impact of share-for-share options exchange; Our Board of Directors may occasionally grant options to our officers. The vesting period for options granted is one year and a non-cash option expense is booked at the time the options are granted. At the time options are exercised, the grantee may exercise shares in a like-kind, share-for-share exchange for net stock issued to them at the market price of the stock on the date of the transaction. The price is multiplied by the total net number of shares that are received to come up with the compensation expense.
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Mineral exploration costs are expensed as incurred. Mine infrastructure development costs incurred prior to establishing proven and probably reserves are expensed. When it has been determined 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 as incurred and are amortized using the units-of-production (“UOP”) method over the estimated life of the ore body based on estimated recoverable ounces mined from proven and probable reserves. If no mineable ore body is discovered, such costs are expensed.
To the extent development costs benefit the entire ore body, they are amortized over the estimated life of the ore body. Costs incurred to access specific ore blocks or areas that only provide benefit over the life of that area are amortized over the estimated life of that specific area. The capitalized cost basis, subject to depletion expense, are calculated on a formula based on the number of tons of ore that are expected to be mined against the total tons in proven and probable reserves and extrapolated to the number of tons in the area of influence of the mine.
Mineral interests and other intangible assets include acquired mineral rights and royalty interests in production, development and exploration stage properties. The amount capitalized related to a mineral or royalty interest represents its fair value at the time it was acquired.
Results of Operations
The following sets forth certain information regarding our results of operations for the three months ending March 31, 2006 compared with the same period in 2005
(b) Three Months Ended March 31, 2006/Three Months Ended March 31, 2005
Revenues. During the three months ended March 31, 2006 and March 31, 2005, we had revenues of $0.
Operating Loss. Operating losses decreased by $172,826 or 26% to $490,080 for the three months ended March 31, 2006, from $662,906 for the three months ended March 31, 2005. The decrease in operating loss was primarily due to a decrease in general and administrative expenses including wages and exploration and development costs.
Exploration and Development Expenses. Exploration and development costs decreased by $76,299 or 45.5% to $91,535 for the three months ended March 31, 2006 from $167,834 during the same period in 2005. The decrease in exploration and development expenses is attributable to elimination of the exploration and development at the Cangalli concession. Buen Futuro also saw a decrease in exploration and development costs during the first quarter 2006; however, development and engineering work at the site continued at a slower pace.
General & Administrative Expenses. General and administrative expense decreased by $92,795 or 19.5% to $383,370 for the three months ended March 31, 2006 from $476,165 during the three months ended March 31, 2005. The decrease in our general administrative expense is primarily attributable to a reduction in wages, rent, legal and accounting, telephone and travel and a general across the board decrease in expenses in most categories as a result of implementing cost controls following the shut down of the Cangalli operation.
Depreciation and Depletion Expenses. Depreciation and depletion decreased by $3,732 or 19.7% to $15,175 during the three months ended March 31, 2006 from $18,907 during the same period of 2005. This decrease was due to the reduction of machinery and equipment and the full depreciation of other assets.
Interest Expense. Interest expense for the three-month period ended March 31, 2006 increased by $15,569 or 58.5% to $42,176 from $26,611 during the same period in 2005. The increase was due to the addition of $153,000 to other notes payable and a $249,000 debenture payable as well as penalty interest related to the Buen Futuro contract payable.
Net Loss. Net loss for the three-month period ended March 31, 2006 decreased by $188,205 or 27.3% to $500,162 from $688,367 during the same 2005 period. The decrease was due to the decrease in exploration and development costs and general and administrative expenses.
Liquidity and capital resources
Our auditors have issued a going concern opinion on our audited financial statements for the fiscal year ended December 31, 2005 as we had a significant working capital deficit as of December 31 2005 and we had substantial losses since our inception. These and other matters raise substantial doubt about our ability to continue as a going concern. We cannot continue to satisfy our current cash requirements for a period of twelve months through our existing capital. We anticipate total operating expenditures of approximately $1,870,000 pending adequate financing over the next twelve months, in the following areas:
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| o | General and administrative expenses of $1,200,000; |
| o | Exploration and development expenses of $500,000; and |
| o | Interest Expense of $170,000. |
Our current cash balance of $100,000 as of May 8, 2006 will satisfy our cash requirements for approximately two months. If necessary, we intend to raise additional cash by means of equity and or debt financing. We have substantial commitments as summarized under our Capital Commitments and Requirements Section that are subject to risks of default and forfeiture of property and mining rights. If we are unable to meet our obligations, or negotiate satisfactory arrangements, we may have to liquidate our business and undertake any or all the steps outlined below.
| o | Significantly reduce, eliminate or curtail our business operating activities so as to reduce operating costs; |
| o | Sell, assign or otherwise dispose of our assets, if any, to raise cash or to settle claims by creditors; |
| o | Pay our liabilities in order of priority, if we have available cash to pay such liabilities; |
| o | If any cash remains after we satisfy amounts due to our creditors, distribute any remaining cash to our shareholders in an amount equal to the net market value of our net assets; |
| o | File a Certificate of Dissolution with the State of Colorado to dissolve our corporation and close our business; |
| o | Make the appropriate filings with the Securities and Exchange Commission so that we will no longer be required to file periodic and other required reports with the Securities and Exchange Commission; and |
| o | Make the appropriate filings with the National Association of Security Dealers to affect a delisting of our stock. |
If we have any liabilities that we are unable to satisfy and we qualify for protection under the U.S. Bankruptcy Code, we may voluntarily file for reorganization under Chapter 11 or liquidation under Chapter 7. Our creditors may also file a Chapter 7 or Chapter 11 bankruptcy action against us. If our creditors or we file for Chapter 7 or Chapter 11 bankruptcy, our creditors will take priority over our stockholders. If we fail to file for bankruptcy under Chapter 7 or Chapter 11 and we have creditors; such creditors may institute proceedings against us seeking forfeiture of our assets, if any.
We do not know and cannot determine which, if any, of these actions we will be forced to take. If any of these foregoing events occur, you could lose your entire investment in our shares.
No Revenues from our Bolivian operations.
We have had no revenues from our Bolivian operations since June 2004. We were forced to cease production from our Cangalli prospect because of a local farmer's strike and legal issues not associated with our operations that resulted from the UCL's failure to comply with Bolivian labor law, which impacted negatively on the quiet enjoyment of our mining rights. We have no assurance when, if ever, we will be able to recommence production from the Cangalli prospect; accordingly, we have determined that we will no longer claim previously reported reserves for the Cangalli property.
We have yet to produce revenues from our Precambrian properties in eastern Bolivia or our Buen Futuro prospect found in those properties. Assets.
As of March 31, 2006, we had total assets of $6,167,642 compared to total assets of $6,329,787 as of December 31, 2005. These assets include current assets, such as cash and prepaid expenses. Our current assets decreased to $142,715 as of March 31, 2006 from $223,368 as of December 31, 2005. This $80,653 decrease was the result of a reduction in cash of $24,788, which was used to pay expenses and a decrease in prepaid expenses of $55,865 to $137,358 at March 31, 2006, from 223,368 at December 31, 2005. The decrease in prepaid expenses resulted from a decrease in S-8 stock that was issued to pay Bolivian employees that had not been distributed as of the period end. An offsetting entry appears in accounts payable for these wages.
| March 31, 2006 | December 31, 2005 | |||||||
| Mining equipment | $ | 1,317,904 | $ | 1,383,021 | ||||
| Gold Bar mill and plant | 3,980,000 | 3,980,000 | ||||||
| Mine development costs | 529,618 | 529,618 | ||||||
| Mining properties | 1,814,501 | 1,821,451 | ||||||
| Office equipment | 122,976 | 122,794 | ||||||
| Vehicles and Aircraft | 72,808 | 72,808 | ||||||
| Accumulated depreciation and depletion and Impairment | (1,812,879 | ) | (1,803,273 | ) | ||||
| Fixed assets net | 6,024,927 | 6,106,419 | ||||||
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Stockholder’s Equity.
As of March 31, 2006, our stockholders’ equity was $4,059,255 as compared to $4,386,011 as of December 31, 2005. The $326,756 net decrease in stockholders’ equity was primarily the result of net loss incurred during the quarter.
Plan of Operations
Our current strategy is to further develop the potential of our Buen Futuro gold and copper project in eastern Bolivia during 2006 by carrying out a program of in-fill drilling, performing additional metallurgical studies, securing final environmental permitting, and improving and finalizing our feasibility work performed there to date. We also intend to finish our exploration and feasibility work on the gold deposits of the B and C Zones of our Precambrian properties in eastern Bolivia, which are located approximately 3.2 miles from the A Zone of our Buen Futuro project, by September of 2006. Once that feasibility work is completed, and if it is positive, we intend to implement the recommended mine plan, to construct the recommended recovery circuit and enter into operations by year-end 2006. In addition, we intend to complete the necessary exploration and feasibility work on our Rio Mojos gold project in western Bolivia by April 2007 and determine our best course of action there. Moreover, we intend to implement the results of our feasibility work by carrying out a well defined mine plan and constructing the most appropriate milling and mineral recovery facilities on these two projects. Finally, we intend to continue our efforts to resolve those issues impeding the development of our Cangalli mine. All of the foregoing, and related plans stated below, are contingent upon receiving an estimated $11.5 million of financing as detailed immediately below:
To accomplish our strategy we intend to:
| o | Obtain estimated financing of $1.5 million for the costs pertaining to our in-fill drilling, metallurgical studies and final feasibility work for our Buen Futuro (A Zone), B & C Zone and Rio Mojos projects. |
| o | Carry out an in-fill drilling program using reverse circulation and auger drilling that would be under the supervision of Dr. Michael H. Biste, our geologist on the Buen Futuro project, as well as under the supervision of an internationally experienced geological engineering firm. Our "in-fill" drilling program will entail drilling in between our existing grid of drill holes, and trench and pit sampling sites, so that our computer modeling can more accurately project the grade and quantity of existing gold and copper mineralization for our feasibility study. |
| o | Carry out detailed metallurgical studies at our Buen Futuro project on the sampling that results from our in-fill drilling program under the supervision of our metallurgical team in Bolivia, as well as under the supervision of an internationally experienced geological engineering firm, to ensure the most efficient and economical treatment of our gold and copper ore. |
| o | Obtain an estimated $3.5 million for the dismantling of our Gold Bar Mill and Plant located in Eureka, Nevada, and for shipping it and re-erecting it on our Buen Futuro site in eastern Bolivia. |
| o | Finalize our environmental permitting and feasibility study on our Buen Futuro project and obtain an estimated $6.5 million to implement the recommended mine plan, and milling and recovery circuit, to put the project into operation. |
| o | Explore the gold deposits on the B and C Zones on our Precambrian properties in eastern Bolivia; perform metallurgical testing; secure our environmental permitting; finalize our feasibility study; implement our mining plan and construct our recovery plant, by year-end 2006. |
| o | Secure our environmental exploration permit for our Rio Mojos project, finalize mapping and topographical work that is currently in process, and carry out field exploration, metallurgical testing and other work necessary to produce a final feasibility study and mine plan by April of 2007. |
| o | Continue our discussions with government officials in Bolivia's new administration, and others, relative to the issues impeding the development of our Cangalli gold mine. |
Since we currently have only a limited amount of cash on hand and a substantial working capital deficit, our ability to implement any or all of these planned strategies requires significant infusions of working and operating capital; however, we cannot assure we will be successful in raising capital through a secondary offering, private placements or debt financing to meet our cash needs.
In order to assist in financing our planned operations, we will continue to seek joint venture partners, as well as merger and acquisition candidates, or other industry participants who would enter into joint development efforts of our Tipuani Gold District or Precambrian prospects; however, there is no assurance that any potential joint-venture or merger partners will be interested in evaluating these prospects or in negotiating an agreement with us on reasonable or acceptable terms. .
Impact of inflation and changing prices
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We have not experienced any material impact from the effects of inflation during the last three annual operating periods, 2003, 2004 or 2005, or during the first three months of 2006.
Off balance sheet arrangements
None
Item 3. Quantitative and qualitative disclosures about market risk
We do not have any market risk sensitive instruments. Since operations in Bolivia are in dollar denominated accounts, we do not believe that we have any material foreign currency risk. Our principal market risk is due to fluctuating gold and copper prices, which directly affect our potential revenues. The volatility of the market price for our shares directly impacts our ability to raise the capital we need to continue operations and to finance our operating losses. We previously managed the volatility of gold prices by holding some of our gold production for sale at a later time when we believe that prices will increase; should we generate revenues, we plan to manage such volatility in the future in the same manner, if necessary. We have not used futures contracts or other methods of hedging to protect ourselves from price fluctuations, and we have no intention of doing so in the near future.
Item 4. Controls and procedures
As required by Rule 13a-15 under the Securities Exchange Act of 1934, we carried out an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer and our Principal Financial and Accounting Officer. Following this inspection, these officers concluded that the Company’s disclosure controls and procedures are effective as of March 31, 2006, the end of the period covered by this report. There have been no changes in our internal controls or in other factors, which have materially affected, or are reasonably likely to materially affect, internal controls subsequent to the date we carried out the evaluation.
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in the Company reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in Company reports filed under the Exchange Act is accumulated and communicated to management, including the Company’s Chief Executive Officer and the Company’s Principal Financial Officer as appropriate, to allow timely decisions regarding required disclosure.
There have been no changes to our internal control over financial reporting during the past quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II – OTHER INFORMATION
Item 1. Legal proceedings
There are no pending or threatened legal proceedings against us.
Item 2. Unregistered sales of equity securities and use of proceeds
On January 17, 2006, we sold 4,127,273 shares of our common stock to Edmundo Arauz at $0.011 per share or an aggregate of $45,400. We relied upon Sections 4(2) and 4(6) of the Securities Act and Regulation S for the offer and sale. We believed that Sections 4(2) and 4(6) were available because the offer and sale did not involve a public offering, there was no general solicitation or general advertising involved in the offer or sale and the purchaser was an accredited investor. We placed restrictive legends on the certificates representing these securities issued to Edmundo Arauz stating that the securities were not registered under the Securities Act and are subject to restrictions on their transferability and resale.
On March 20, 2006, we sold 846,154 shares of our common stock to Ron Dove at $0.013 per share or an aggregate of $11,000. We relied upon Sections 4(2) and 4(6) of the Securities Act and Regulation S for the offer and sale. We believed that Sections 4(2) and 4(6) were available because the offer and sale did not involve a public offering, there was no general solicitation or general advertising involved in the offer or sale and the purchaser was an accredited investor. We placed restrictive legends on the certificates representing these securities issued to Ron Dove stating that the securities were not registered under the Securities Act and are subject to restrictions on their transferability and resale.
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Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
No matters have been submitted to a vote of our security holders during the quarter ended March 31, 2005.
Item 5. Other Information:
Political Developments in Bolivia
On May 1, 2006 President Evo Morales of Bolivia nationalized Bolivia’s oil and natural gas industry ordering foreign energy companies to send their supplies to the state-owned energy company for industrialization. President Morales warned that companies who rejected the decree would have to leave Bolivia.
We believe that the nationalization of the Bolivian oil and natural gas industry on May 1, 2006, should not affect our ownership and development of gold and copper mining projects in Bolivia. In a statement released by the Bolivian government, the Minister of Mining and Metallurgy, Walter Villaroel, stated, “The mining policy does not contemplate nationalization, and even less the incorporation, of private companies.” We believe that Bolivia’s national government has repeatedly expressed its support for private mining companies and that recent events bearing on the natural gas industry will not affect Golden Eagle’s gold and copper projects. We are moving forward in a careful and deliberate manner with our strategy for developing our Bolivian mining projects and pending adequate financing we still believe that with the current prices for gold and copper our projects can produce value for our shareholders. While we do not believe that our properties in Bolivia will be nationalized, we do expect that it may now be more difficult for us to raise the required financing to complete the development of our gold and copper projects in Bolivia.
Change in Directors and Chairman of the Board of Directors
On May 5, 2006 H. Roy Shipes resigned as the Chairman of our Board of Directors and as a director. On the same date, Mr. Terry C. Turner, one of our directors and our Chief Executive Officer and President, was elected as the Chairman of our Board of Directors. On May 9, 2006 Mr. H.E. “Gene” Dunham was appointed to serve as a director on our Board of Directors.
Shareholders Meeting
We anticipate holding our annual shareholders’ meeting within the second or third quarters of 2006. We will inform our shareholders of the date of the annual shareholders’ meeting.
Item 6. Exhibits:
Exhibits required by Item 601 of Regulation SK
| 31. | Certifications pursuant to Rule 13a-14(a) |
| 31.1 | Certification of the Chief Executive Officer |
| 31.2 | Certification of the Chief Financial Officer |
| 32. | Certifications pursuant to 18 U.S.C.ss.1350. |
| 32.1 | Certification of the Chief Executive Officer |
| 32.2 | Certification of the Chief Financial Officer |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Golden Eagle has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
GOLDEN EAGLE
INTERNATIONAL, INC.
(Golden Eagle)
9
By: /s/ Terry C. Turner —————————————— Terry C. Turner President and Principal Executive Officer Date: May 12, 2006 |
By: /s/ Tracy A. Madsen —————————————— Tracy A. Madsen Corporate Secretary/Treasurer and Principal Financial Officer Date: May 12, 2006 |
10
Exhibit 31.1
CERTIFICATION PURSUANT TO
SECURITIES EXCHANGE
ACT OF 1934: RULES 13a-14, 13a-15, 15d-14, and 15d-15
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Terry C. Turner, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of Golden Eagle International, Inc. |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| (a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| (b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principals; |
| (c) | evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; |
| (d) | disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
| 5. | The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions); |
| (a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
| (b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: May 12, 2006 |
/s/ Terry C. Turner Terry C. Turner Principal Executive Officer |
11
Exhibit 31.2
CERTIFICATION PURSUANT TO
SECURITIES EXCHANGE
ACT OF 1934: RULES 13a-14, 13a-15, 15d-14, and 15d-15
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Tracy A. Madsen, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of Golden Eagle International, Inc. |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| (a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| (b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principals; |
| (c) | evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; |
| (d) | disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
| 5. | The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions); |
| (a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
| (b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: May 12, 2006 |
/s/ Tracy A. Madsen Tracy A. Madsen Principal Financial Officer |
12
EXHIBIT 32.1
CERTIFICATION PURSUANT
TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002
| In connection with the Quarterly Report of Golden Eagle International, Inc. (the “Company”) on Form 10-Q for the period ended March 31, 2006 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Terry C. Turner, Principal Executive Officer, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that: |
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. |
13
Date: May 12, 2006 |
/s/ Terry C. Turner Terry C. Turner President and Principal Executive Officer |
EXHIBIT 32.2
CERTIFICATION PURSUANT
TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002
| In connection with the Quarterly Report of Golden Eagle International, Inc. (the “Company”) on Form 10-Q for the period ended March 31, 2006 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Tracy A. Madsen, Principal Financial Officer, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that: |
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. |
Date: May 12, 2006 |
/s/ Tracy A. Madsen Tracy A. Madsen Principal Chief Financial Officer |
14
| Golden Eagle International, Inc. Condensed Consolidated Balance Sheets | March 31, 2006 |
December 31, 2005 |
||||||||||||
| ASSETS | ||||||||||||||
| CURRENT ASSETS | ||||||||||||||
| Cash | $ | 5,357 | $ | 30,145 | ||||||||||
| Prepaid expenses | 137,358 | 193,223 | ||||||||||||
| Total current assets | 142,715 | 223,368 | ||||||||||||
| PROPERTY AND EQUIPMENT | ||||||||||||||
| Mining equipment and property | 1,317,904 | 1,383,021 | ||||||||||||
| Plant and Mill Idle | 3,980,000 | 3,980,000 | ||||||||||||
| Mine development costs | 529,618 | 529,618 | ||||||||||||
| Mineral properties | 1,814,501 | 1,821,451 | ||||||||||||
| Office equipment | 122,976 | 122,794 | ||||||||||||
| Vehicles and aircraft | 72,808 | 72,808 | ||||||||||||
| 7,837,806 | 7,909,692 | |||||||||||||
| Less accumulated depreciation and depletion | (1,812,879 | ) | (1,803,273 | ) | ||||||||||
| Total property and equipment | 6,024,927 | 6,106,419 | ||||||||||||
| Total Assets | $ | 6,167,642 | $ | 6,329,787 | ||||||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||||||||
| CURRENT LIABILITIES | ||||||||||||||
| Accounts payable | $ | 316,654 | $ | 306,329 | ||||||||||
| Accrued expenses | 89,711 | 93,125 | ||||||||||||
| Current portion of contract payable | 5,500 | 40,000 | ||||||||||||
| Other notes payable | 1,172,591 | 1,019,591 | ||||||||||||
| Related party payable | 135,000 | 135,000 | ||||||||||||
| Accrued interest payable | 139,932 | 100,731 | ||||||||||||
| Total current liabilities | 1,859,387 | 1,694,776 | ||||||||||||
| Convertible debenture | 249,000 | 249,000 | ||||||||||||
| Total liabilities | 2,108,387 | 1,943,776 | ||||||||||||
| Commitments and contingencies | - | - | ||||||||||||
| STOCKHOLDERS' EQUITY | ||||||||||||||
| Preferred stock, par value $.01 per share; | ||||||||||||||
| 10,000,000 shares authorized, none issued | - | - | ||||||||||||
| Common stock, par value $.0001 per share; 800,000,000 authorized shares; | ||||||||||||||
| 753,942,724 and 744,687,518 issued and outstanding shares, | ||||||||||||||
| respectively | 75,394 | 74,469 | ||||||||||||
| Additional paid-in capital | 48,587,471 | 48,414,990 | ||||||||||||
| Accumulated (deficit) | (44,603,610 | ) | (44,103,448 | ) | ||||||||||
| Total stockholders' equity | 4,059,255 | 4,386,011 | ||||||||||||
| $ | 6,167,642 | $ | 6,329,787 | |||||||||||
The footnotes are an integral part of these financial statements
F-1
| Golden Eagle International, Inc. | ||||||||||||||
| Condensed Consolidated Statements of Operations | ||||||||||||||
| March 31, 2006 |
March 31, 2005 |
|||||||||||||
| REVENUES | $ | - | $ | - | ||||||||||
| OPERATING EXPENSES | ||||||||||||||
| Exploration and development | 91,535 | 167,834 | ||||||||||||
| General and administration | 383,370 | 476,165 | ||||||||||||
| Depreciation and depletion | 15,175 | 18,907 | ||||||||||||
| Total operating expenses | 490,080 | 662,906 | ||||||||||||
| OPERATING (LOSS) | (490,080 | ) | (662,906) | |||||||||||
| OTHER INCOME (EXPENSE) | ||||||||||||||
| Interest expense | (42,176 | ) | (26,611) | |||||||||||
| Other, net | 32,093 | 1,150 | ||||||||||||
| Total other income (expense) | (10,083 | ) | (25,461) | |||||||||||
| Loss before income taxes | (500,162 | ) | (688,367) | |||||||||||
| Income Taxes | - | - | ||||||||||||
| NET (LOSS) | $ | (500,162 | ) | $ | (688,367) | |||||||||
| BASIC AND DILUTED (LOSS) PER SHARE | $ | (.001 | ) | $ | (.01) | |||||||||
| WEIGHTED AVERAGE SHARES OUTSTANDING | 751,198,936 | 604,472,262 | ||||||||||||
The footnotes are an integral part of these financial statements
F-2
| Golden Eagle International, Inc. | ||||||||
| Condensed Consolidated Statements of Cash Flows | ||||||||
| For the Three Months Ended (Unaudited) | ||||||||
| March 31, 2006 |
March 31, 2005 |
|||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net (loss) | $ | (500,162 | ) | $ | (688,367 | ) | ||
| Adjustments to reconcile net (loss) | ||||||||
| to net cash (used) by operating activities: | ||||||||
| Stock issued for services | 42,257 | 131,532 | ||||||
| Stock issued for exploration and development | 74,749 | - | ||||||
| Other | - | 1,263 | ||||||
| Depreciation and depletion | 9,606 | 18,907 | ||||||
| Loss on sale of assets | 10,185 | - | ||||||
| Assets written off | 6,950 | - | ||||||
| Changes in operating assets and liabilities | ||||||||
| Decrease in prepaid expense and other costs | 55,865 | 89,204 | ||||||
| Increase (Decrease) in accrued expense | (3,414 | ) | 4,332 | |||||
| Decrease in accounts payable | 10,325 | 188,458 | ||||||
| Increase in accrued interest | 39,201 | 17,164 | ||||||
| Net cash flows (used by) operating activities | (254,438 | ) | (237,507 | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Investment in property and equipment | 54,750 | (136,612 | ) | |||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Borrowings from related parties | 153,000 | 130,000 | ||||||
| Repayments to related parties | - | (603 | ) | |||||
| Proceeds from other notes payable | - | 70,000 | ||||||
| Payment of contract payable | (34,500 | ) | - | |||||
| Common stock sold | 56,400 | 131,000 | ||||||
| Net cash flows provided by financing activities | 174,900 | 330,397 | ||||||
| NET (DECREASE) IN CASH | (24,788 | ) | (43,722 | ) | ||||
| CASH - BEGINNING OF PERIOD | 30,145 | 51,580 | ||||||
| CASH - END OF PERIOD | $ | 5,357 | $ | 7,858 | ||||
The footnotes are an integral part of these financial statements
F-3
| Golden Eagle International, Inc. | ||||||||||||||
| Notes to Condensed Consolidated Financial Statements (Unaudited) | ||||||||||||||
Note A – Basis of Presentation
| The accompanying financial statements are unaudited. However, in our opinion, the accompanying financial statements reflect all adjustments, consisting of only normal recurring adjustments, necessary for fair presentation. Interim results of operations are not necessarily indicative of results for the full year. These financial statements should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2005. |
| Although we had produced gold from our Cangalli properties through June 2004, we were forced to curtail our operations because of a farmer’s strike and then because of legal issues not associated with our operations (as described in more detail in our Form 10-K). We had expected that we would be permitted to recommence production, but inasmuch as we have been unable to recommence production for more than a year, we have determined that (as of June 30, 2005), it is no longer appropriate to describe the mineralization contained on the Cangalli prospect as “mineral reserves.” |
| In addition, in February of 2004 we announced estimated mineral reserves on our Buen Futuro prospect in eastern Bolivia. A component of that reserve estimation pursuant to Industry Guide 7 promulgated by the Securities and Exchange Commission was that a mineral reserve is “that part of a mineral deposit which could be economically and legally extracted or produced at the time of the reserve determination.” We have determined that for purposes of our filings under the Securities and Exchange Act of 1934, we will no longer estimate proven and probable gold and copper reserves on our Buen Futuro prospect until it is economically feasible for us to project with a high degree of certainty when we will be able to extract or produce those reserves. |
| Except for the historical information contained in this Form 10-Q, this Form contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed in this Report. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in this Report and any documents incorporated herein by reference, as well as the Annual Report on Form 10-K for the year ended December 31, 2004. |
Note B — Organization and Nature of Business
| For a complete description of our mineral prospects and the organization and nature of our business, please see our Form 10-K for the year ended December 31, 2005. |
F-4
| Going Concern Considerations |
| The 2005 audit opinion included an explanatory paragraph from our auditors indicating a substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements have been presented assuming Golden Eagle will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. We had a working capital deficit as of March 31, 2006 and have incurred substantial losses since our inception. We presently have no production having suspended operations at the Cangalli mine. Whether we resolve the cooperative pension issue with the Bolivian Ministry of Labor or begin construction on a new relocated mine and plant or commence operations at Buen Futuro, we will require significant additional financing. Unless we successfully obtain suitable significant additional financing arrangements or generate significant additional income, there is substantial doubt about our ability to continue as a going concern. Our plans to address these matters include private placements of stock in reliance on exemptions to registration found in Sections 4(2) and 4(6) of the Securities Act of 1933; obtaining short-term loans; seeking suitable joint venture relationships; and commencing mining operations at claims we own or on properties we may acquire. Our 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. |
| Reclassifications |
| Certain amounts for the three months ended March 31, 2005 have been reclassified to conform to the March 31, 2006 presentation. |
Note C – (Loss) Per Share
| Basic net income (loss) per share is computed by dividing net income (loss) attributable to the common shareholders by the weighted average number of common shares outstanding during the reporting period. Diluted net income per common share includes the potential dilution that could occur upon exercise of the options to acquire common stock computed using the treasury stock method. The treasury stock method assumes that the increase in the number of diluting shares is reduced by the shares, which could have been repurchased by us with the proceeds from the exercise of the options (which were assumed to have been made at the average market price of the common shares during the reporting period). Options have not been included in the computation of diluted income (loss) per share during all periods because their inclusion would have been anti-dilutive. As of March 31, 2006 we had no dilutive shares. |
Note D – Issuance of Common Stock
F-5
| During the quarter ended March 31, 2006, we raised $56,400 from the sale of 4,973,427 shares of our common stock to accredited investors (including some existing shareholders and other related and unrelated parties), pursuant to the exemptions from registration found in Sections 4(2) and 4(6) of the Securities Act of 1933. We also issued 1,581,471 shares of common stock valued at $42,257 in exchange for services provided and 2,700,308 shares valued at 77,750 for services provided for exploration and development. |
Note E – 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. Non-cash investing and financing transactions during the periods consist of the following: |
| Three months ended March 31, | ||||||
| 2006 | 2005 | |||||
| Issuance of stock in settlement of lawsuit recognized in 2004 | $ | - | $ | 2,050,000 | ||
| Issuance of stock in payment of services payable recognized in 2004 | - | 113,100 | ||||
| Issuance of stock in partial payment of contract payable | - | 25,000 | ||||
| Interest paid in stock | - | 3,000 | ||||
| Cash paid for interest for the three months ended March 31, 2006 and 2005 was $2,975 and $7,649, respectively. |
Note F – Notes Payable
| We have a note payable of $995,624 payable to two trusts which are also shareholders of our common stock. This note accrues interest at 8% annually and matured on December 28, 2005. As of March 31, 2006 we owed the trusts $98,283 in accrued interest and a $10,000 renewal fee. This note is currently in default. |
| We have a note outstanding in the amount of $23,967 for a Mooney aircraft previously located in Bolivia. The aircraft was returned to the United States during the quarter and we believe that it will be sold during the second quarter 2006. |
| During the first quarter 2006 we entered into a note payable with a stockholder in the amount of $153,000 at 8% interest per annum maturing on December 31, 2006. |
| Also during the first quarter of 2006 we borrowed on a short-term basis $5,500 from one of our officers and repaid the note during the quarter plus $150 in interest. We have an additional note outstanding to a director in the amount of $135,000 payable upon demand. |
F-6
Note G – Contract Payable
| We have a contract payable in the amount of $5,500. This amount plus $16,000 in penalty interest on the contract is now due and payable and we believe that we will finalize the payments for the purchase of our Buen Futuro concession during the second quarter 2006. |
Note H – Change in Directors
| On May 5, 2006 H. Roy Shipes resigned as the Chairman of our board of directors and as a director. On the same date, Mr. Terry C. Turner one of our directors and our CEO and President was elected as the Chairman of our Board of Directors. On May 9, 2006 Mr. H.E. “Gene” Dunham was appointed to serve on our board of director. |
F-7