6
Results of Operations
---------------------
Golden Eagle's operations in the first quarter of 1999 resulted in significant losses and negative cash flow. Notwithstanding the limited amount of revenues generated from mining operations ($5,000 in post-royalty revenues in the first quarter of 1999), Golden Eagle's general, administrative and other
costs have vastly outstripped the resources generated by Golden Eagle's operations. As described above in "Liquidity and Capital Resources," Golden Eagle has been dependent on loans from affiliated and unaffiliated parties (including certain family members of affiliates), as well as stock issuances
through private placements, to meet its working capital obligations and to finance Golden Eagle's continuing operating losses. There can be no assurance that Golden Eagle will be able to continue to finance its operating losses in such a manner.
The following sets forth certain information regarding Golden Eagle's results of operations during the three months of the first quarter of 1999 compared with the same period in 1998.
Golden Eagle incurred operating expenses totaling $352,811 in the first quarter of 1999, as compared to $456,935 in 1998, a decrease of 23%. As a result of having limited revenues from operations, Golden Eagle incurred operating losses of ($347,734) in 1999 and ($445,135) in 1998, a decrease of 22%.
As of March 31, 1999, Golden Eagle had accrued cumulative compensation and related payroll taxes of approximately $990,700. (Golden Eagle's president, as well as Golden Eagle's secretary/treasurer, were not paid any salary during the
first quarter of 1999; neither Golden Eagle's president nor the secretary/treasurer has been paid any compensation subsequently during 1999, although salaries are continuing to accrue at the rate of $200,000 per year for the president and $150,000 per year for the secretary/treasurer.)
Golden Eagle's costs and operating expenses for first quarter 1999 decreased slightly as to general and administrative expenses, totaling $301,959 compared to $369,927 during the same period in 1998, an 18% decrease. However, first quarter 1999 exploration expenses decreased more substantially from
$55,970 in 1998 to $29,751 in 1999 (see following paragraph).
As of March 31, 1999, capitalized costs related to the Bolivian prospect are principally $100,000 paid for prospect acquisition rights and $797,529 for mining equipment.
Golden Eagle incurred interest expense in the first quarter of 1999 of $76,934, as opposed to first quarter 1998 interest of $122,884. The decrease was a result of less stock issued in 1999 for interest, leading to this 37% decline.
Interest costs will continue, and probably rise significantly, during the balance of 1999 and through the forseeable future because of increased borrowings necessary to maintain liquidity for operating purposes.
Golden Eagle had a net loss for the first quarter of 1999 of ($426,268), or ($.004) per share, compared to its net loss during the same period in 1998 of ($567,959), or ($.006) per share, a decrease of 25% and 33% per share, respectively. Golden Eagle anticipates that the trend of net losses will
continue through the balance of 1999, as it invests further in exploration on its Cangalli prospect and in general and administrative expenses in the United
States and Bolivia, without generating significant revenues from those efforts.
Golden Eagle's continued ability to survive notwithstanding the continuing losses is, as described above, its ability to raise necessary financing. This cannot continue indefinitely and, eventually, Golden Eagle will have to generate
positive cash flows from its operating activities to be able to continue as a
going concern.
Impact of Inflation and Changing Prices
---------------------------------------
Golden Eagle has not experienced any impact from the effects of inflation during the last three operating periods, 1996, 1997, or 1998, and was not impacted during the first quarter of 1999. Bolivian inflation, while astronomical at points during the early 1980's, has been relatively stable, at less than 10% since 1985, and during the last three years has been less than 8%
per annum.
7
Year 2000 Compliance
--------------------
Although there can be no assurance, Golden Eagle does not anticipate that it will suffer any adverse impact as a result of Year 2000 (Y2K) computer software issues either as a result of third party non-compliance or as a result of internal matters. None of the information technology or other software and
hardware systems utilized by Golden Eagle or its subsidiaries incorporates technology that is incapable of recognizing dates beyond December 31, 1999.
In making the foregoing determination, Golden Eagle assessed embedded systems contained in its office buildings, equipment, and other infrastructures.
As a result, Golden Eagle has not established a contingency plan to come into effect in the event of a Y2K catastrophe, and management does not believe that such a plan is necessary. Of course, Golden Eagle is dependent on facilities outside of its control, such as electrical power supplies, banking facilities, transportation facilities (such as airlines), and communications facilities.
Furthermore, Bolivia, the location of Golden Eagle's mineral property and its significant operations, is an emerging-growth country. Based on Golden Eagle's observation, although Bolivian facilities are attempting to address issues associated with Y2K, it does not appear that the infrastructure (banking
facilities, communications facilities, transportation facilities, and electrical power supplies, among other things) is as sensitive to the issues as in the United States. Also, generally software available in Bolivia is less likely to be Y2K compliant, but Golden Eagle does not believe that a requirement to
replace its existing hardware or software used in its Bolivian operations, if necessary, will materially affect it.
While Golden Eagle believes, based on public reports and some notifications they have received, that the outside facilities in the United States and Bolivia are or will be Y2K compliant, Golden Eagle has no other basis for determining their compliance. The operations of Golden Eagle would be significantly and
adversely affected if any of these outside facilities in the United States or Bolivia are adversely affected by the millennium change or by other issues
related to Y2K.
|
