Advantego Corp - Quarter Report: 2013 September (Form 10-Q)
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
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[X]
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Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for quarter period ended
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September 30, 2013
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[ ]
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Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from __________ to __________.
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Commission file number 0-23726
GOLDEN EAGLE INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
| Colorado | 84-1116515 |
| (State of incorporation) | (IRS Employer Identification No.) |
9653 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
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to the filing requirements for the past 90 days.
[ X ] Yes [ ] No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
[X] Yes [ ] No
Indicate by check mark whether the registrant is a large accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer and “smaller reporting company” in rule 12b-2 of the Exchange Act.
Large accelerated filer |_| Accelerated filer |_|
Non-accelerated filer |_| Smaller reporting company |X|
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
|_| Yes |X| No
At November 11, 2013, there were 23,366,328 shares of Company common stock outstanding.
1
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
The unaudited Financial Statements for the three and nine months ended September 30, 2013, are attached hereto and incorporated by reference herein. Please refer to pages F-1 through F-5 following the signature page.
Item 2. Management's discussion and analysis of financial condition and results of operations
Throughout this Quarterly Report on Form 10-Q Golden Eagle International, Inc. is referred to as “we”, “our”, “us”, the “Company” and “Golden Eagle.”
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Because we want to provide you with more meaningful and useful information, this Quarterly Report on Form 10-Q contains certain “forward-looking statements” (as such term is defined in Section 21E of the Securities Exchange Act of 1934, as amended). These statements reflect our current expectations regarding our possible future results of operations, performance and achievements. These forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, regulations of the Securities and Exchange Commission and common law.
Wherever possible, we have tried to identify these forward-looking statements by using words such as “anticipate,” “believe,” “estimate,” “expect,” “plan,” “intend,” and similar expressions. These statements reflect our current beliefs and are based on information currently available to us. Accordingly, these statements are subject to certain risks, uncertainties, and contingencies, including those set forth under the heading “Risk Factors” in our annual report on Form 10-K for the year ended December 31, 2012, which could cause our actual results, performance, or achievements to differ materially from those expressed in, or implied by, such statements. Readers are cautioned that forward-looking statements are not guarantees of future performance and that actual results or developments may differ materially from those expressed or implied in the forward-looking statements.
We are under no duty to update any of these forward-looking statements after the date of this report. You should not place undue reliance on these forward-looking statements.
Overview; Plan of Operations
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, 2012.
Assets and Operations
A. The Gold Bar Mill.
In 2004, we purchased the 3,500 to 4,500 ton-per-day (“tpd”) Gold Bar CIP gold mill (the “Gold Bar Mill” or the “Mill”) located 25 miles northwest of Eureka, Nevada. Initially, our plan was to disassemble the Gold Bar Mill and transport it to Bolivia to be reconstructed on our former A Zone project in eastern Bolivia. However, for various reasons we determined that the best course of action with regards to the Gold Bar Mill was to leave it in place and explore other options related to the Mill in Nevada. The Mill was not in operation when we acquired it, and it has not been in operation during our period of ownership. At the present time, the Gold Bar Mill is our only material capital asset. The Mill is currently listed on our balance sheet at a cost of $3,980,000. We continually evaluate this asset to determine if it requires impairment or an adjustment. Based on the valuations reports which we have received and the interest that has been shown by various parties for the Mill, we believe that the Mill has a value in excess of the book value on our balance sheet.
2
We are currently attempting to sell the mill for cash or stock or enter into a merger or joint venture arrangement. We have been actively trying to sell the mill for the past three years and we have been unsuccessful in our attempts thus far. While we believe there is value to the mill we can offer no guarantees that we will be able to find a buyer or joint venture/merger partner. In the event that we do sell the mill we may distribute any proceeds from the sale to the shareholders as a cash dividend. We can offer no assurances however, that there will be sufficient cash remaining from a sale to offer a dividend. If we are unable to sell the mill or if we do sell the mill and issue a cash dividend, we may be forced to place the company in a dormant status under which scenario we may no longer file the required reports that enable our shares to be traded in the public market.
In the event we enter into a joint venture, refurbish, or operate the milling facility on our own, we are likely to require a significant amount of additional capital. To bring the Mill back into operation would require a significant commitment both in terms of time and financial resources as we would need to take actions such as applying for various permits and constructing a new tailings impoundment facility for disposal. Even if we are able to bring the Gold Bar Mill back into operation, larger mining companies providing similar services with greater financial resources in the area may affect our ability to attract toll refining partners or customers.
Because the Gold Bar Mill is our principal remaining capital asset shareholder approval may be required if we choose to sell or transfer the Gold Bar Mill or enter into any type of merger arrangement. Although we are not currently involved in active business operations, because of the significant value of the Gold Bar Mill, we do not believe that we are a shell company as that term is defined in Rule 12b-2 of the Securities Exchange Act of 1934 (the “Exchange Act”).
B. Bolivia
As part of the sale of our Bolivian operations and assets during 2010, we received a 3% net smelter royalty on all minerals produced from the properties which may be sold, up to $3 million. The net smelter royalty will be paid to us on a quarterly basis if and when mineral production is achieved from the mining concessions previously owned by the Bolivian subsidiary, and will likely be subject to compliance with Bolivian law regarding the expatriation of capital. Through September 30, 2013, we have not received any payment or accrual of any obligations under the net smelter return, and we have no expectation of receiving any payments in the foreseeable future.
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C.
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Cash and Marketable Securities
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As of September 30, 2013 we held 3,528 shares of Veris Gold Corp. (“VG”) common stock. The market price of VG stock was $.567 per share as of September 30, 2013 with a remaining total market value of $2,000. We expect to sell the remaining shares of VG during the quarter ending December 31, 2013. However, the sale of these shares will not provide us with sufficient funds to meet all of our obligations. In order to remain a going concern we will be required to obtain other financing in the form of loans or through direct investment. We can offer no assurances that we will be successful in obtaining any additional funds. Failure to obtain other sources of financing may require us to place the company in a dormant status or liquidate any remaining assets.
Liquidity and capital resources
Going Concern
The audited financial statements dated December 31, 2012 and the unaudited financial statements dated September 30, 2013 were prepared on the going concern basis which assumes that adequate sources of financing will be obtained as required and that our assets will be realized and liabilities settled in the ordinary course of business. Accordingly, the consolidated audited financial statements did not include any adjustments related to the recoverability of assets and classification of assets and liabilities that might be necessary should we be unable to continue as a going concern. Should we be unable to sell the Gold Bar mill or enter into a joint venture or merger arrangement with another party it is unlikely that we can continue as a going concern. In this event, we will seek to obtain other forms of debt or equity financing to remain a going concern. However, we can offer no assurances that we will be successful in these efforts and it is likely that we would need to place the company in a dormant status due to a lack of cash to continue any sort of operations.
3
Working Capital
The following table sets forth our working capital position at September 30, 2013 as compared to December 31, 2012.
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September 30, 2013
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December 31, 2012
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Cash and cash equivalents
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$ | 14,083 | $ | 7,940 | ||||
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Marketable securities*
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2,000 | 113,918 | ||||||
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Prepaid expenses
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1,100 | 1,100 | ||||||
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Current Assets (Total)
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17,183 | 122,958 | ||||||
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Current Liabilities
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(747,911 | ) | (375,646 | ) | ||||
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Working Capital / (Deficit)
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$ | (730,728 | ) | $ | (252,688 | ) | ||
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* We held 65,470 VG shares (valued at $1.74 per share) at December 31, 2012, and 3,528 VG shares (valued at $.567 per share) at September 30, 2013.
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Our current liabilities as of September 30, 2013, totaled $747,911 compared to $375,646 as of December 31, 2012. Our working capital decreased at September 30, 2013, by $478,040 from December 31, 2012 to a deficit of $(725,728) from a deficit of $(252,688). The statement of cash flows indicates that this derived from a use of $413,373 in operating activities and was offset by $92,850 received from the sale of the VG shares. Additional funding was provided by a note payable to a related party in exchange for $60,000 in cash and a $266,667 note payable issued to an officer of the company in lieu of a required severance payment.
Because we have no continuing active business operations, we have no revenues from operations and our on-going cash flow commitments are related primarily to our office lease, salaries, accounting and legal expenses associated with maintaining our status as a company reporting under the Exchange Act. Inasmuch as we have no revenues, we can expect our working capital and available cash and other liquid assets to continue to decrease as we pay our corporate obligations. We have no prospects at the current time of generating any revenues from operations. We do not have sufficient funds available to continue as a going concern past December 2013. In order to remain a going concern, we will be required to raise additional funds through debt or stock sales which we cannot guarantee we will be able to do.
We expect to continue to focus our efforts on identifying and executing upon a strategic transaction with respect to the Gold Bar Mill. However, to date we have not been able to execute upon such a transaction or otherwise engage in any revenue producing activities with respect to the Gold Bar Mill.
Results of Operations
Three and nine Months Ended September 30, 2013
The following sets forth certain information regarding our results of operations for the three and nine month period ended September 30, 2013, compared with the same period in 2012.
General and administrative expenses. General and administrative expenses for the three month period ended September 30, 2013 decreased by $65,646 to $26,877 from $92, 523 during the same 2012 three month period. General and administrative expenses for the nine month period ended September 30, 2013 decreased by $244,004 to $174,311 from $418,315 during the same 2012 nine month period. This decrease was primarily the result of a decrease in wages due to the severance of our Chief Executive Officer as a full time employee during the three month period ended September 30, 2013 and other severe austerity measures put into place during the periods.
4
Severance fees. Severance Fees for the three and nine month period decreased from $350,000 during the 2012 periods to $266,667 during the same 2013 periods. On August 12, 2013, our Board of Directors, due to a lack of funds, terminated Tracy A. Madsen, without cause, as the Company’s President and Chief Executive Officer, Chief Financial Officer, Secretary and Treasurer. Mr. Madsen will remain as a member of the Board of Directors. Mr. Madsen agreed to forfeit any salary accrued during the period June 1, 2013 through August 12, 2013. In accordance with Mr. Madsen's employment agreement, we were required to pay him a severance fee of $266,667. As we did not have sufficient cash to pay this fee, we executed a Promissory Note and Security Agreement in the amount of $266,666.67 in favor of Mr. Madsen. Mr. Madsen agreed to accept the Promissory Note in lieu of payment of severance due to him. During the three month period ended September 30, 2012 a similar arrangement was entered into with our previous Chief Executive officer. We do not have any other employment contracts in place which would necessitate severance fees being paid.
Interest Expense. Interest expense for the three month period ended September 30, 2013, increased by $4,329 to $9,316 from $4,987 during the same 2012 three month period. Interest expense for the nine month period ended September 30, 2013, increased by $10,842 to $17,994 from $7,152 during the same 2012 nine month period. The increase was the result of interest on the note payable to our Chief Executive Officer and previous Chief Executive Officer that were entered into as payment for severance fees.
Loss on sale of securities. During the three month period ended September 30, 2013 we did not sell any shares of marketable securities. During the nine months ended September 30, 2013, we sold a total of 61,942 shares of VG common stock at prices ranging from $1.83 per share to $1.18 per share. We anticipate that we will sell all remaining shares of VG that we own during the quarter ending December 31, 2013.
Off balance sheet arrangements
None
Critical Accounting Policies
As of September 30, 2013 we did not have any accounting policies or practices that require significant judgment or estimation by our management.
Item 4. Controls and procedures
Our management, with the participation of our principal executive officer and our principal financial officer has evaluated the effectiveness of our disclosure controls and procedures as required by Exchange Act Rule 13a-15(b) as of September 30, 2013 (the end of the period covered by this report). Based on that evaluation, our principal executive officer and our principal financial officer have concluded that, because of the material weakness identified in our disclosure controls described in our annual report for the year ended December 31, 2012 on Form 10-K along with no material changes in controls, our disclosure controls and procedures were not effective as of September 30, 2013. Due to a lack of financial resources, we are not able to, and do not intend to, immediately take any action to remediate the material weaknesses identified.
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our 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 our reports filed under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and our principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.
5
There were no changes in our internal control over financial reporting during the quarter ended September 30, 2013, 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
We are not currently a party to any on-going litigation that is likely to have a material impact on our financial position, results of operations, or cash flows.
Item 1A Risk Factors.
There have been no material changes to the information included in risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2012.
Item 2. Unregistered sales of equity securities and use of proceeds.
We issued no additional shares of our common stock that have not been previously reported.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Reserved
Item 5. Other Information
On August 12, 2013, our Board of Directors, due to a lack of funds, terminated Tracy A. Madsen, without cause, as the Company’s President and Chief Executive Officer, Chief Financial Officer, Secretary and Treasurer. Mr. Madsen will remain as a member of the Board of Directors. Mr. Madsen agreed to forfeit any salary accrued during the period June 1, 2013 through August 12, 2013.
On August 12, 2013, Mr. Madsen also entered into a contract to serve as the President, Chief Executive Officer, Chief Financial Officer, Secretary and Treasurer on a contract basis through his company Avcon Services, Inc. Avcon Services, inc. will be paid $2,000 base per month plus expenses. Mr. Madsen has served as the Company’s Chief Executive Officer since June 27, 2012 and Chief Financial Officer, Secretary and Treasurer since February 13, 2003. The company agreed to pay Avcon the $2,000 agreed upon monthly rate for the period June 1, 2013 through August 12, 2013.
On August 12, 2013, in accordance with the termination of Tracy A. Madsen as the Company’s President and Chief Executive Officer, the Company executed a Promissory Note and Security Agreement in the amount of $266,666.67 in favor of Mr. Madsen. Mr. Madsen agreed to accept the Promissory Note in lieu of payment of severance due to him within 60 days after his termination. The Promissory Note matures August 11, 2014 and is subject to acceleration upon the occurrence of certain events listed therein. The Promissory Note carries an interest rate of 5% and is secured by the Company’s Gold Bar Mill property located in Eureka, Nevada.
Item 6. Exhibits:
Exhibits required by Item 601 of Regulation S-K:
| 10.1 | Incorporated by reference - Contractors Agreement between Golden Eagle International, Inc. and Avcon Services, Inc. on behalf of Tracy A. Madsen |
| 10.2 | Incorporated by reference - 5% Promissory Note and Security Agreement in favor of Tracy A. Madsen |
| 31. | Certifications pursuant to Rule 13a-14(a) |
| 31.1 Certification of the Chief Executive Officer and Chief Financial Officer | |
| 32. | Certifications pursuant to 18 U.S.C. §1350. |
| 32.1 Certification of the Chief Executive Officer and Chief Financial Officer | |
| 101 | Interactive Data Files required by Rule 405 of Regulation ST, and Item 601(101) of Regulation SK |
6
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.
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November 14, 2013
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GOLDEN EAGLE INTERNATIONAL, INC.
(Golden Eagle)
/s/ Tracy A. Madsen
Tracy A. Madsen
President, Principal Executive Officer and
Principal Accounting Officer |
7
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Golden Eagle International, Inc.
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Balance Sheets
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(unaudited)
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September 30,
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December 31,
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2013
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2012
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ASSETS
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CURRENT ASSETS
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| Cash & cash equivalents | $ | 14,083 | $ | 7,940 | ||||
| Marketable securities | 2,000 | 113,918 | ||||||
| Prepaid expenses | 1,100 | 1,100 | ||||||
| Total current assets | 17,183 | 122,958 | ||||||
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PROPERTY AND EQUIPMENT
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| Plant and mill - idle | 3,980,000 | 3,980,000 | ||||||
| Total property and equipment | 3,980,000 | 3,980,000 | ||||||
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Total Assets
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$ | 3,997,183 | $ | 4,102,958 | ||||
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LIABILITIES AND STOCKHOLDERS' EQUITY
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CURRENT LIABILITIES
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| Accounts payable and accrued expenses | $ | 45,723 | $ | 18,119 | ||||
| Notes payable, related parties | 676,667 | 350,000 | ||||||
| Accrued interest payable | 25,521 | 7,527 | ||||||
| Total current liabilities | 747,912 | 375,646 | ||||||
| Total Liabilities | 747,912 | 375,646 | ||||||
| Commitments and contingencies | - | - | ||||||
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STOCKHOLDERS' EQUITY
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| Preferred stock, par value $.01 per share; 10,000,000 shares authorized, | ||||||||
| 80,000 and 80,000 issued and outstanding | 800 | 800 | ||||||
| Common stock, par value $.0001 per share; 2,000,000,000 authorized shares; | ||||||||
| 23,366,328 and 23,366,328 issued and outstanding shares, respectively | 2,336 | 2,336 | ||||||
| Additional paid-in capital | 64,602,865 | 64,602,865 | ||||||
| Accumulated (deficit) | (61,338,409 | ) | (60,615,500 | ) | ||||
| Accumulated other comprehensive income (loss) | (18,321 | ) | (263,189 | ) | ||||
| Total stockholders' equity | 3,249,271 | 3,727,312 | ||||||
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Total Liabilities and Stockholders' Equity
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$ | 3,997,183 | $ | 4,102,958 | ||||
F-1
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Golden Eagle International, Inc.
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Statements of Operations and Other Comprehensive Income (Unaudited)
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| Three months ended | Nine months ended | |||||||||||||||
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September 30,
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September 30,
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September 30,
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September 30,
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2013
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2012
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2013
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2012
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REVENUES
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$ | - | $ | - | $ | - | $ | - | ||||||||
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OPERATING EXPENSES
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| General and administration | 26,877 | 92,523 | 174,311 | 418,315 | ||||||||||||
| Severence | 266,667 | 350,000 | 266,667 | 350,000 | ||||||||||||
| Depreciation and depletion | - | - | - | 51 | ||||||||||||
| Total operating expenses | 293,544 | 442,523 | 440,978 | 768,366 | ||||||||||||
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OPERATING (LOSS)
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(293,544 | ) | (442,523 | ) | (440,978 | ) | (768,366 | ) | ||||||||
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OTHER INCOME (EXPENSE)
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| Interest expense | (9,316 | ) | (4,987 | ) | (17,994 | ) | (7,152 | ) | ||||||||
| Loss on debt extinguishment | - | - | - | (65,207 | ) | |||||||||||
| Gain (Loss) on sale of securities | - | (34,424 | ) | (263,937 | ) | (126,436 | ) | |||||||||
| Total other (expense) | (9,316 | ) | (39,411 | ) | (281,931 | ) | (198,795 | ) | ||||||||
| Loss before income taxes | (302,860 | ) | (481,934 | ) | (722,909 | ) | (967,161 | ) | ||||||||
| Income taxes | - | - | - | - | ||||||||||||
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NET LOSS ON CONTINUING OPERATIONS
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(302,860 | ) | (481,934 | ) | (722,909 | ) | (967,161 | ) | ||||||||
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NET LOSS
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(302,860 | ) | (481,934 | ) | (722,909 | ) | (967,161 | ) | ||||||||
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Basic and diluted gain (loss) per share on continuing operations
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$ | (0.01 | ) | $ | (0.02 | ) | $ | (0.03 | ) | $ | (0.06 | ) | ||||
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Weighted average shares outstanding - basic and diluted
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23,366,328 | 23,366,328 | 23,366,328 | 16,368,796 | ||||||||||||
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OTHER COMPREHENSIVE INCOME
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| Unrealized gain (loss) on securities | 727 | 35,366 | 244,869 | 163,549 | ||||||||||||
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NET COMPREHENSIVE INCOME (LOSS)
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$ | (302,133 | ) | $ | (446,568 | ) | $ | (478,040 | ) | $ | (803,612 | ) | ||||
F-2
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Golden Eagle International, Inc.
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Statements of Cash Flows (Unaudited)
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For the Nine Months Ended
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September 30,
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September 30,
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2013
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2012
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CASH FLOWS FROM OPERATING ACTIVITIES
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| Net income (loss) | $ | (722,909 | ) | $ | (967,161 | ) | ||
| Adjustments to reconcile net income (loss) to net cash (used) by operating activities: | ||||||||
| Officer compensation contributed | - | 36,783 | ||||||
| Stock issued for services | - | 25,000 | ||||||
| Loss on debt extinguishment | - | 65,207 | ||||||
| Depreciation | - | 51 | ||||||
| Loss on sale of marketable securities | 263,937 | 126,436 | ||||||
| Changes in operating assets and liabilities | ||||||||
| Decrease (increase) in accounts receivable | - | 6,744 | ||||||
| Increase (decrease) in accounts payable | 27,604 | 9,963 | ||||||
| Increase (decrease) in accrued interest | 17,994 | 7,153 | ||||||
| Net cash flows (used by) operating activities | (413,373 | ) | (689,824 | ) | ||||
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CASH FLOWS FROM INVESTING ACTIVITIES
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| Proceeds from sale of marketable securities | 92,850 | 164,149 | ||||||
| Net cash flows provided by investing activities | 92,850 | 164,149 | ||||||
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CASH FLOWS FROM FINANCING ACTIVITIES
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| Stock issued for cash | - | 66,163 | ||||||
| Notes payable, related parties | 60,000 | - | ||||||
| Promissory note in lieu of severance payment | 266,667 | 350,000 | ||||||
| Net cash flows (used in) provided by financing activities | 326,667 | 416,163 | ||||||
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NET CHANGE IN CASH
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6,144 | (109,512 | ) | |||||
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CASH - BEGINNING OF PERIOD
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7,940 | 118,835 | ||||||
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CASH - END OF PERIOD
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$ | 14,083 | $ | 9,323 | ||||
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SUPPLEMENTAL CASH FLOW INFORMATION
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| Preferred and common stock issued for debt | $ | - | $ | 88,837.00 | ||||
| Cash paid for | ||||||||
| Interest | - | - | ||||||
| Income taxes | - | - | ||||||
F-3
Notes to Condensed Financial Statements
(Unaudited)
Note A – Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of the Company are presented in accordance with the requirements for Form 10-Q and Article 8-03 of Regulation S-X. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP’) have been condensed or omitted pursuant to such SEC rules and regulations. 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. These financial statements should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2012.
The preparation of financial statements in accordance with accounting principles generally accepted in the United States (“US GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying footnotes. Our actual results could differ materially from these estimates. 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, 2012.
The audited financial statements dated December 31, 2012 and the unaudited financial statements dated September 30, 2013 were prepared on a going concern basis which assumes that adequate sources of financing will be obtained as required and that our assets will be realized and liabilities settled in the ordinary course of business. Accordingly, the consolidated audited financial statements did not include any adjustments related to the recoverability of assets and classification of assets and liabilities that might be necessary should we be unable to continue as a going concern. Should we be unable to sell the Gold Bar mill or enter into a joint venture or merger arrangement with another party it is unlikely that we can continue as a going concern. In this event, we will seek to obtain other forms of debt or equity financing to remain a going concern. However, we can offer no assurances that we will be successful in these efforts and it is likely that we would need to place the company in a dormant status due to a lack of cash to continue any sort of operations.
Note B - Organization and Nature of Business
The Gold Bar Mill (“Mill”), our only remaining significant non-current asset, is currently idle and has been since we acquired it in 2004. We continue to monitor the Mill for impairment on a periodic basis or whenever circumstances arise that indicate the carrying amount of the Mill may not be recoverable. An impairment loss is recognized when the carrying value of the Mill exceeds the estimated undiscounted future cash flows. As of and through September 30, 2013, we have not recognized any impairment on the Mill.
Note C – Notes Payable, Related Parties
On July 27, 2012, in accordance with the termination of Terry C. Turner as the Company’s President and Chief Executive Officer, the Company executed a Promissory Note and Security Agreement in the amount of $350,000 in favor of Mr. Turner. Mr. Turner agreed to accept the Promissory Note in lieu of payment of severance due to him within 60 days after his termination. The Promissory Note matured on July 27, 2013 and is subject to acceleration upon the occurrence of certain events listed therein. On October 28, 2013 we agreed with Mr. Turner to extend the maturity date of this note to July 27, 2014. The Promissory Note is secured by the Company’s Gold Bar Mill property located in Eureka, Nevada.
F-4
Notes to Condensed Financial Statements
(Unaudited)
On August 12, 2013, in accordance with the termination of Tracy A. Madsen as the Company’s President and Chief Executive Officer, the Company executed a Promissory Note and Security Agreement in the amount of $266,666.67 in favor of Mr. Madsen. Mr. Madsen agreed to accept the Promissory Note in lieu of payment of severance due to him within 60 days after his termination. The Promissory Note matures August 11, 2014 and is subject to acceleration upon the occurrence of certain events listed therein. The Promissory Note carries an interest rate of 5% and is secured by the Company’s Gold Bar Mill property located in Eureka, Nevada. On October 28, 2013 we amended the promissory note with Mr. Madsen to begin accruing interest as of June 1, 2013
On August 2, 2013 we entered into a promissory note with Gulf Coast Capital, a related party, in the amount of $60,000 in exchange for cash which we are using for general and administrative purposes. This note bears an interest rate of 5% and matures on December 31, 2013.
During the nine months ended September 30, 2013 we recognized $17,994 of interest expense.
Note D – Recent Accounting Pronouncements
There are no recently issued accounting pronouncements that are expected to have a material impact on our financial position, results of operations, or cash flows.
Note E – Marketable Securities
As part of our settlement with Veris Gold Corp. (VG), we received 2,000,000 restricted common shares of VG with an initial fair value of $1,152,000 (utilizing the sale price quoted on the Toronto Stock Exchange of $.576 a Level 1 input). We have classified the shares as available for sale.
During the nine months ended September 30, 2013, we sold a total of 61,942 VG shares with gross proceeds of $94,812. As of September 30, 2013, we had 3,528 shares of VG remaining for sale. Subsequent adjustments to the fair value of the shares are reflected in the carrying amount as of the balance sheet date, and fluctuations in the fair value affect other comprehensive income. As of September 30, 2013, the market price for VG shares was $.567 per share.
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