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Golden Eagle incurred operating expenses totaling $456,935 in the first
quarter of 1998, as compared to $86,042 in 1997, an increase of 431%. As a
result of having limited revenues from operations, Golden Eagle incurred
operating losses of ($445,135) in 1998 and ($86,042) in 1997, an increase of
359%.
As of March 31, 1998 Golden Eagle had accrued cumulative compensation and
related payroll taxes of approximately $633,570. (Golden Eagle's president, as
well as Golden Eagle's secretary/treasurer, were not paid any salary during the
first quarter of 1998; neither Golden Eagle's president nor the
secretary/treasurer has been paid any compensation subsequently during 1998,
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 1998
increased substantially as to general and administrative expenses, totaling
$369,927 compared to $83,957 during the same period in 1996, a 341% increase.
However, first quarter 1997 exploration expenses were not reflected in the
period's report, but for the same period in 1998, those costs were $55,970 (see
following paragraph). In addition, depreciation increased in the first quarter
of 1998 to $31,038, up from $2,085 in 1997, representing a rise of 1,389%. This
increase in depreciation is due principally to the acquisition of mining
equipment and putting more of that mining equipment into use.
During 1997, due to uncertainties regarding the recoverability of Golden
Eagle's investment in the Bolivian prospect (the uncertainty regarding
reserves), Golden Eagle elected to write-down $873,462 of costs previously
capitalized, including $470,853 which were incurred in 1996. As of December 31,
1997, through March 31, 1998, capitalized costs related to the Bolivian prospect
are principally $100,000 paid for prospect acquisition rights and $813,529 for
mining equipment.
Golden Eagle incurred interest expense in the first quarter of 1998 of
$122,884, as opposed to first quarter 1997 interest of $25,875. The increased
amount of operating loans during the course of 1998, and the issuance of 558,353
shares of common stock issued in lieu of $72,500 cash for interest, led to this
375% escalation. This increased interest cost will continue, and probably rise
significantly, during the balance of 1998 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 1998 of ($567,959), or
$(.006) per share, compared to its net loss during the same period in 1997 of
($115,987), or $(.002) per share, an increase of 390% and 200% per share,
respectively. Golden Eagle anticipates that the trend of net losses will
continue through the balance of 1998, 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.
Impact of Inflation and Changing Prices
---------------------------------------
Golden Eagle has not experienced any impact from the effects of inflation
during the last three operating periods, 1995, 1996, or 1997, and was not
impacted during the first quarter of 1998. Bolivian inflation, while
astronomical at points during the early 1980's, has been relatively stable, at
less than 10% since 1985, and during the last three years has been less than 8%
per annum. Year 2000 Compliance --------------------
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
5
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 millenium change or by other issues
related to Y2K. |
