Item 1. Business
General; Business Overview
Throughout this Annual Report on Form 10-K Golden Eagle International, Inc. is referred to as “we”, “our”, “us”, the “Company” and “Golden Eagle”.
We were formed as a Colorado corporation on July 21, 1988 as Beneficial Capital Financial Services Corp. On February 2, 1995, we changed our name to Golden Eagle International, Inc.
Our corporate headquarters are in Salt Lake City, Utah.
A. U.S. Assets and Operations
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.
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.
Plan of Operations
The Gold Bar Mill.
We are exploring and considering various alternatives with respect to the Gold Bar Mill. While we have had multiple discussions with various parties with regards to a possible merger or sale of the Gold Bar Mill, as of the date of this report we have not entered into any definitive agreement with any party and we cannot guarantee that we will do so in the future. We continue to negotiate with possible merger candidates or buyers of the Gold Bar Mill. Among the options we are considering are:
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A merger or an outright sale either for cash or stock and other consideration contingent upon identifying a suitable buyer.
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Rehabilitating the Gold Bar Mill for toll refining which is defined as processing ore through our Mill for a fixed fee or toll that is produced by a third-party mining company from its mine on its current site;
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Engaging in a joint venture or other strategic transaction with other parties that may be able to produce ore from their mines and wish to utilize the Mill.
We have attempted to complete a merger transaction or a sale of the Gold Bar Mill for the past three years but we have been unsuccessful. We have entered into serious negotiations with various parties related to the company and/or the Mill during the past year however final approval for the transaction was not received. We will attempt to market the company and the Mill more aggressively during the coming year which may require us to reduce our asking price. We can offer no guarantees that we will be successful in selling the Mill or the company.
Effect of government regulation
If we pursue further development and operation of our Gold Bar Mill we will become subject to numerous governmental regulations applied to the mining and milling industries.
See additional discussion below contained in Item 1A
Item 1A. Risk Factors
The following risks and uncertainties, along with other information contained in this Form 10-K, should be carefully considered by anyone considering an investment in our securities. The occurrence of any of the following risks could negatively affect our business, financial condition and operating results.
Financial Risks
We have no business activities, and we can provide no assurance that we will be able to engage in any business activities before our limited remaining working capital is expended. At the present time, the Company has no business operations, has a negative working capital of approximately $258,000, and is incurring a negative cash flow of approximately $25,000 per month (including salaries to its executive officer). This is lower than our monthly fee for 2012 as a result of a reduction of salary expenses and other general and administrative expenses and interest expense. While management is continuing to conserve working capital where appropriate, given the inability to complete an arrangement with respect to the Gold Bar Mill and the volatility and illiquidity of the VG Shares, we cannot offer any assurance that the Company will be able to continue to meet its corporate obligations through the current fiscal year. Since business combinations are frequently based on the availability of working capital, it is unlikely that we will be able to negotiate any business combination with any other entity.
A significant portion of our net worth and our working capital includes the value of a thinly traded and volatile security. Our balance sheet reflects the value of our 65,470 VG shares at $113,918 ($1.74 per share). While this value is based on the market price of the VG Shares as reported on the Toronto Stock Exchange (the “TSX”), there can be no assurance that we would be able to receive this amount of money were we to attempt to sell our VG Shares. The market for VG Shares on the TSX is volatile both in terms of price and volume, and there can be no assurance that we would recover the full amount set forth on our balance sheet were we to attempt to sell the VG Shares we hold. The closing price on the TSX on March 14, 2013, was $1.62 (Cdn) ($1.62 U.S.). We have, however, sold 134,530 shares of VG generating $479,689. (On October 9, 2012, Yukon Nevada Gold Corp. commenced trading on the Toronto Stock Exchange under the name Veris Gold Corp. with the symbol VG. On that same date, Veris Gold Corp. instituted a 10 for 1 reverse split of its common shares. All numbers for Veris Gold Corp./Yukon Nevada Gold Corp. in this document are based on a post reverse price and quantity).
A significant portion of our balance sheet reflects a $3,980,000 value of the Gold Bar Mill, a value that we may not be able to realize in the near future, if ever. We have held the Gold Bar Mill since 2004 when we originally acquired it. It has been inactive since then. Although over the years since then we have developed a number of plans with respect to its utilization, we have not been able to act on any of our plans. Any use of the Gold Bar Mill will require the owner (either the Company or any purchaser or business partner) to expend a significant amount of money to rehabilitee the Mill to meet current standards. Given our lack of working capital and success in dealing with the Gold Bar Mill over the past eight years, we cannot offer any assurance that we will be able to do so. If we are unable to deal with the Gold Bar Mill before our capital is exhausted, we may lose the opportunity to do so at any time in the future because of the various corporate requirements (including shareholder approval) attendant to completing any such transaction.
Because the VG Shares constitute a significant Company asset, the Company could become subject to additional regulation. The VG Shares represent the Company’s most significant asset (because of its liquidity as compared to the Gold Bar Mill) as of December 31, 2012 and subsequently. In certain situations companies whose assets are in large part comprised of marketable securities can be subject to state and/or federal regulations, such as under Investment Company Act of 1940 (the “ICA”). Although the Company does not intend to engage in, and does not to believe it is engaged in the business of investing or reinvesting in, holding, or trading securities of other companies, and does not intend to be subject to regulation under the ICA, if the Company would become an investment company we will be subject to a significant amount of additional regulation, significant restrictions in our ability to do business, and significant restrictions on any relationship with affiliates.
Historically, cash shortages have negatively affected our ability to explore and develop our properties and further our business development. Historically we have experienced significant cash shortages. We have been able to meet certain of our financial obligations through funds raised in equity and debt financings. Given our limited working capital expected to suffice only through May 2013, we likely will continue to experience cash shortages, which may cause delays in development of any business prospects and any possible revenue generating operations, and will otherwise negatively affect our financial condition. We cannot offer any assurance that there will be any additional capital available to us when required.
Should we be successful in identifying and executing upon a business opportunity with respect to our Gold Bar Mill or elsewhere within the metals mining industry, our revenues may be negatively affected by price volatility of those metals. Metals prices are subject to extreme price volatility. Our ability to refurbish and recommence operations at Gold Bar Mill would likely be directly related to gold prices. Metals prices are subject to factors that are beyond our control, including speculation, political and economic conditions, and inflation. Should gold prices experience downward price trends, our business prospects and potential revenues will be negatively affected.
The following table presents the annual high, low and average afternoon fixing prices over the past ten years, expressed in U.S. dollars, for gold per troy ounce on the London Metals Exchange and demonstrates the significant fluctuations in metal prices:
Operations in the metal mining industry are subject to various state and federal regulations. Our historical and contemplated business operations are subject to extensive regulation pertaining to the development of mining prospects and possible production, environmental regulation, labor standards, mine safety and others. Should we fail to abide by these regulations, our operations may be subject to fines or restrictions on activities pertaining to our prospects and properties, which may negatively affect our ability to conduct our operations.
Provisions in our charter documents could prevent or delay a change in control, which could delay or prevent a takeover. Our articles of incorporation authorize the issuance of “blank check” preferred stock with such designations, rights, and preferences, as may be determined by our Board of Directors. Accordingly, the Board of Directors may, without shareholder approval, issue shares of preferred stock with dividend, liquidation, conversion, voting, or other rights that could adversely affect the voting power or other rights of the holders of our common stock. Preferred stock could also be issued to discourage, delay, or prevent a change in our control.
We have agreed to indemnify our officers and directors to the full extent permitted by Colorado law, which could negatively affect our financial condition. Our Articles of Incorporation and Bylaws provide for indemnification of our officers and directors to the full extent permitted by Colorado law. This indemnification may require us to pay judgments, fines and expenses incurred by an officer or director, as a result of actions or proceedings against them. Funds or our securities paid in satisfaction of judgments, fines or expenses would likely be funds that we would need for our operations and for the exploration and development of our properties, and may negatively affect our operations, financial condition, and/or further dilute the value of our securities.
We have not implemented certain corporate governance practices. We have no independent directors. Additionally, we do not have separately designated audit, compensation, or nominating committees. This lack of independence and independent controls over our corporate affairs may result in potential or actual conflicts of interest between our officers, directors and our shareholders. We have no formal policy to resolve such conflicts and these conflicts of interests may benefit the interests of our officers and directors over that of our minority stockholders.
The public market for our common stock is extremely volatile, both as to price and volume, and may continue to be volatile in the future. Historically, the price and trading volume of our common stock has been volatile. Several factors likely contributed to this volatility including: our significant operating losses; the suspension of our operations and subsequent sale of our Bolivian projects, and the dilution of shareholders’ interests. Such factors will likely continue to impact price and trading volume volatility.
As our stock is not listed on a national securities exchange, trading in our shares will be subject to rules governing penny stocks, which will impair trading activity in our shares. Our stock is not on a national securities exchange. Therefore, our stock is subject to rules adopted by the Commission regulating broker dealer practices in connection with transactions in penny stocks. Those disclosure rules applicable to penny stocks require a broker dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized list disclosure document prepared by the Commission. That disclosure document advises an investor that investment in penny stocks can be very risky and that the investor's salesperson or broker is not an impartial advisor but rather paid to sell the shares. The disclosure contains further warnings for the investor to exercise caution in connection with an investment in penny stocks, to independently investigate the security, as well as the salesperson with which the investor is working and to understand the risky nature of an investment in this security. The broker dealer must also provide the customer with certain other information and must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction. Further, the rules require that, following the proposed transaction, the broker provide the customer with monthly account statements containing market information about the prices of the securities.
We have never paid any cash dividends on our common stock and we do not anticipate paying cash dividends on our common stock in the foreseeable future. We have never declared or paid a cash dividend on our common stock. We presently intend to retain our earnings, if any, to fund development and growth of our business and, therefore, we do not anticipate paying cash dividends in the foreseeable future.
Item 1B.
Item 1B. Unresolved staff comments
None
Item 2.
Item 2. Properties
Gold Bar Mill and plant
We currently own the Gold Bar Mill and gold recovery plant located 25 miles northwest of Eureka, Nevada, however, we do not own the land on which it is located (or any other real property).
Office lease
Our executive office is located at 9653 South 700 East, Salt Lake City, Utah 84070. We pay $855 per month on the lease on a month to month basis. We share to cost of our rent with Crown Law Ltd., a law firm owned by Terry Turner, our Chairman. After the splitting the rent we pay $405 per month.
Item 3.
Item 3. Legal proceedings
None
Item 4.
Item 4. Mine Safety Disclosure
Not Applicable.
Part II
Item 5.
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information
Our common stock is quoted on the Over-the-Counter (“OTC”) Bulletin Board under the trading symbol “MYNG.” The following table shows the high and low bid for our common stock during the last two years. These prices represent inter-dealer prices, without retail mark-up, markdown, or commission, and may not represent actual transactions.
Holders
As of December 31, 2012, there were approximately 1,200 shareholders of record of our common stock. This does not include an indeterminate number of persons who hold our common stock in brokerage accounts and otherwise in ‘street name. We estimate the total number of shareholders to exceed 8,000.
Capital Structure
We currently are authorized to issue 2,000,000,000 shares of common stock, and as of December 31, 2012, we had 23,366,328 shares of our common stock outstanding. In addition to the outstanding shares of common stock, we have authorized a total of 10,000,000 preferred shares of which the following separate classes have been designated:
(i) 3,500,000 shares of our Series A Convertible Preferred Stock have been authorized for issuance, none of which are currently issued or outstanding.
(ii) 4,500,000 shares of our Series B Preferred Stock have been authorized for issuance, of which 80,000 are issued and outstanding. These 80,000 Series B shares are in the aggregate convertible into 40,000 common shares post reverse split.
(iii) one share of Series C Preferred Stock has been authorized and issued, and is no longer outstanding.
(iv) 999,000 shares of Series D Convertible Preferred Stock have been authorized, none of which is outstanding.
Additionally, we have stock options outstanding that are convertible or exercisable into common stock. On a fully diluted basis as of December 31, 2012 we had 23,664,510 shares of common stock outstanding.
* Exclusive of immaterial fractional shares and rounding.
Dividends
We have never paid a cash dividend on our common stock or on our preferred stock and have no present intention to declare or pay cash dividends on our common or preferred stock in the foreseeable future. We intend to retain any earnings that we may realize in the foreseeable future to finance our operations. Future dividends are very unlikely for the foreseeable future and any future dividends, if any, will depend on earnings, financing requirements and other factors. Should we sell the Gold Bar Mill for cash or securities without entering a merger arrangement a dividend of cash or shares may be contemplated. We can, however, offer no assurances that any sale will take place or that we will issue a dividend if a sale or merger does take place.
Securities authorized for issuance under equity compensation plans
(1)
Stock options issued
At times we have granted certain officers and directors stock options and stock bonuses, but those are ad hoc grants and have not been made pursuant to a formal plan (except for those options granted under the 2009 Revised Plan which were subsequently deemed void ab initio).
The information in the following table is provided with respect to compensation plans (including individual compensation arrangements) under which equity securities are authorized for issuance as of the fiscal year ending December 31, 2012.
Unregistered sales of equity securities and use of proceeds
All transactions have been previously disclosed.
Item 6.
Item 6. Selected Financial Data
Not applicable.
Item 7.
Item 7. Management's discussion and analysis of financial condition and results of operations
Overview
Currently our efforts are primarily focused on exploring and pursuing our options with respect to the Gold Bar Mill that we own in Nevada. We are currently seeking a buyer for the Gold Bar Mill or a possible merger candidate. While we have had negotiations with various entities with regards to the Gold Bar Mill we have not been able to enter into a definitive agreement with respect to the Mill. Additionally we have investigated refurbishing the Mill for active operations. Any refurbishment of the Mill would require additional outside capital. The Company cannot offer any assurance that such capital will be available on reasonable terms, if at all. We anticipate that we only have sufficient cash and marketable securities to operate through May 2013. Following the exhaustion of our cash and securities we will not have sufficient cash continue as a going concern without additional financing which we cannot guarantee that we will be able to obtain.
Liquidity and capital resources
The following table sets forth our working capital position at December 31, 2012.
*
As of December 31, 2012 we held 65,470 VG Shares. While we will continue to sell these shares to cover general and administrative expenses, we cannot guarantee that by selling part or all of these securities we may be able to satisfy all or part of our capital commitments should we no longer have cash available. Because of our diminishing working capital and absent other financing (of which there can be no assurance), it is likely that we will be required to dispose of our remaining VG Shares during the first two quarters of 2013.
We believe we have sufficient cash and securities on hand to satisfy our current limited business operations through May 2013 if we are able to sell shares of VG which we own at a consistent price of $1.60 or higher. As of March 25, 2013 we still own 22,970 shares of VG. However, these assets are not sufficient to allow us to engage in significant operations such as refurbishing or operating the Gold Bar Mill (which operations are not currently contemplated).
Because we have no continuing active business operations, our cash flow commitments of approximately $25,000 per month are related primarily to our office lease, salaries, accounting and legal expenses associated with maintaining our status as a company reporting under the Securities Exchange Act of 1934. Inasmuch as we have no revenues, we can expect our working capital and available cash to continue to decrease as we pay our corporate obligations during 2013 and will deplete our remaining cash unless we are able to obtain additional financing (of which there can be no assurance) or we are able to dramatically reduce our expenses.
Results of operations
The following sets forth certain information regarding our results of operations as of December 31, 2012 and 2011.
Revenues. We did not generate any revenues during 2012 and 2011 respectively.
General & Administrative Expenses. General and administrative expenses decreased by $335,048 to $494,778 for year ended December 31, 2012 (approximately $41,000 per month), from $829,826 during our 2011 fiscal year. The reduction of our general and administrative expenses results from the limited nature of our operations and a decrease in salary costs.
Severance expenses. During the year ended December 31, 2012, we accrued a $350,000 severance expense. This expense is payable to Terry C. Turner related to his departure as the company's Chief Executive Officer without cause in accordance with his employment agreement. This was a onetime charge that is payable to Mr. Turner.
Interest Expense. Interest expense for the year ended December 31, 2012, decreased by $61,244 to $4,630, from $65,874 during the same 2011 period. The decrease was primarily due to the elimination of almost all the debt that we owed. We will incur interest expense during 2013 related to $350,000 in severance payable to Terry Turner that carries an interest rate of 5% per annum. We anticipate that we will incur $17,500 in interest payable on this note during 2013 if it is not paid off during the year.
Going Concern. The audited financial statements included with this annual report have been 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 do 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.
Off-balance sheet arrangements
Not applicable
Item 7A.
Item 7A. Quantitative and Qualitative disclosures about market risk
No disclosure required.
Item 8.
Item 8. Financial statements and supplementary data
The disclosure required by this item are contained on pages through.
Item 9.
Item 9. Changes in and disagreements with accountants on accounting and financial disclosure
During the year ended December 31, 2012 we did not have any disagreements with our auditors, Ingenium Accounting Associates, Reno, Nevada on any matters of accounting principles, practices or financial statement disclosures.
On January 26, 2012, we engaged Ingenium Accounting Associates, Reno, Nevada, to audit our financial statements for the year ended December 31, 2012 and 2011 and the periods then ended. Accordingly, we dismissed our previous auditors, Mark Bailey & Company, Ltd., on January 26, 2012. Both actions were approved by our Board of Directors. We do not have an audit committee.
Item 9A.
Item 9A. Controls and procedures
Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our filings under the Exchange Act is recorded, processed, summarized and reported within the periods specified in the rules and forms of the SEC. This information is accumulated and communicated to our executive officer to allow timely decisions regarding required disclosure. Our Chief Executive Officer evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act) as of the end of the period covered by this report. Based on that evaluation and the requirements of the Exchange Act, our Chief Executive Officer concluded that, as of December 31, 2012, our disclosure controls and procedures needed to be declared as ineffective. The small size of our company does not provide for the desired separation of control functions, and we do not have the required level of documentation of our monitoring and control procedures. The potential remedies for this situation are described below.
Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Management conducted an evaluation of the effectiveness of our internal control over financial reporting and determined that our internal control over financial reporting was ineffective as of December 31, 2012 due to material weaknesses. A material weakness in internal control over financial reporting is defined by the Public Company Accounting Oversight Board’s Audit Standard No. 5 as a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company's annual or interim financial statements will not be prevented or detected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control over financial reporting that is less severe than a material weakness, yet important enough to merit attention by those responsible for oversight of our financial reporting.
Management’s assessment identified the following material weaknesses in internal control over financial reporting:
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The small size of our Company limits our ability to achieve the desired level of separation our internal controls and financial reporting. We do not have a separate CEO and CFO and we do not have an Audit Committee to review and oversee the financial policies and procedures of the Company. In the interim, we will continue to strengthen the role of our CEO and his review of our internal control procedures.
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We have not achieved the desired level of documentation of our internal controls and procedures. This documentation will be strengthened to limit the possibility of any lapse in controls occurring.
In light of the material weaknesses described above, we performed additional analysis and other post-closing procedures to ensure our financial statements were prepared in accordance with generally accepted accounting principles. Accordingly, we believe that the financial statements included in this report fairly present, in all material respects, our financial condition, results of operations and cash flows for the periods presented.
Subject to the Company’s financial resources, Management hopes to further mitigate the risk of the material weaknesses going forward by utilizing external financial consulting services, in a more effective manner, prior to the review by our principal independent accounting firm to ensure that all information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported accurately and within the time periods specified in the Commission’s rule and forms.
Our management determined that there were no other changes made in our internal controls over financial reporting during 2012 that have materially affected, or are reasonably likely to materially affect our internal control over financial reporting.
This Annual Report on Form 10-K does not include an attestation report of the Company's independent registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's independent registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit the Company to provide only management's report in this Annual Report on Form 10-K.
Item 9B
Item 9B Other information
No disclosure required.
Part III
Item 10.
Item 10. Directors, Executive Officers and Corporate Governance
Identification of Directors and Executive Officers:
The following table sets forth certain information concerning the persons serving as our directors and executive officers (including of our subsidiaries) as of March 31, 2013. Executive officers are appointed by the Board of Directors. Each officer holds office for one year or until a successor has been duly appointed, and qualified or until death, resignation or removal. Messrs. Turner and Madsen have entered into employment agreements as discussed under the employment agreement section. No family relationships exist among the officers and directors. Directors hold office until the next meeting of shareholders and until a successor is elected and qualified, or until their resignation.
Name
Age
Position
Term of Office
Terry C. Turner
Chairman of the Board of Directors
2/14/97-present
Mark Bogani Director 7/31/12-present
Tracy A. Madsen
Chief Executive Officer,
Secretary/Treasurer
Director
2/13/03-present
7/31/12-present
Terry C. Turner, was appointed to the Board of Directors and as our President and Chief Executive Officer on February 14, 1997. Mr. Turner was terminated without cause on July 31, 2012 as the Chief Executive Officer and remains as Chairman of the Board of Directors. In 1977, Mr. Turner received a B.A. in Political Science and a B.A. in Spanish from the University of Utah. He received his Juris Doctorate in 1980 from Brigham Young University. He is admitted to practice law in the State and Federal Courts of Utah and Colorado, as well as the 10th Circuit Court of Appeals, the Court of Appeals of the Federal Circuit, the United States Court of International Trade and the United States Supreme Court. Mr. Turner is also a member of the District of Columbia Bar, the American Bar Association, the Inter-American Bar Association and the International Bar Association. In addition, he is the first and only American attorney admitted as a member of the Bolivian College of Lawyers (Bolivian National Bar) and the Bar of the State (Department) of La Paz, Bolivia.
Mark Bogani was appointed as a director on July 31, 2012. Mr. Bogani has been involved in the securities industry for more than 20 years, starting out in financial public relations and retail brokerage. Along the way, he has also assisted and consulted on numerous mergers, acquisitions and business valuations in both publicly-held and private companies. Mr. Bogani is an active investor and has participated in dozens of private placements, bridge loans, convertible debentures and various other debt and equity investments. In 2004 Mr. Bogani founded Transhare Corporation, a securities transfer agency that serves more than 40,000 shareholders in publicly-traded companies, where he continues to serve as CEO.
Tracy A. Madsen was appointed as Corporate Secretary/Treasurer and Chief Financial Officer on February 13, 2003. On November 12, 2003 he was also appointed Vice President US Administration. On July 31, 2012 he was appointed as Chief Executive Officer and Director and retained his other responsibilities with the company. Mr. Madsen is currently working substantially full time for the Company. Mr. Madsen received a B.A. in Finance from Boise State University, and an MBA from the University of Nevada Las Vegas. Mr. Madsen has broad financial and executive experience serving as a Chief Financial Officer for various companies for the past 23 years.
Board of Directors - Composition
Our Board of Directors seeks to ensure that it is composed of members whose particular experience, qualifications, attributes, and skills, when taken together, will allow the Board of Directors to satisfy its oversight obligations effectively. Currently, the Company does not have a separate nominating or compensation committee as it does not believe that given the small size of the Company and its limited resources and personnel that such a committee is warranted. Currently the Board of Directors as a whole is in charge of identifying and appointing appropriate persons to add to the Board of Directors when necessary. In identifying Board candidates it is the Board’s goal to identify persons whom it believes have appropriate expertise and experience to contribute to the oversight of a company of Golden Eagle’s nature while also reviewing other appropriate factors.
The Company believes that each of the persons that currently comprise its Board of Directors have the experience, qualifications and attributes and skills taken as a whole to enable the Board of Directors to satisfy its oversight responsibilities effectively.
Involvement in certain legal proceedings
During the past ten years, no present director or executive officer of the Company has been the subject matter of any of the following legal proceedings that are required to be disclosed pursuant to Item 401(f) of Regulation S-K including: (a) any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; (b) any criminal convictions; (c) any order, judgment, or decree permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; (d) any finding by a court, the SEC or the CFTC to have violated a federal or state securities or commodities law, any law or regulation respecting financial institutions or insurance companies, or any law or regulation prohibiting mail or wire fraud; or (e) any sanction or order of any self-regulatory organization or registered entity or equivalent exchange, association or entity. Further, no such legal proceedings are believed to be contemplated by governmental authorities against any director or executive officer.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), requires our officers and directors, and persons who own more than 10% of a registered class of our equity securities, to file reports of ownership and changes in ownership of our equity securities with the Securities and Exchange Commission. Officers, directors and greater-than-ten-percent shareholders are required by Securities and Exchange Commission regulations to furnish us with copies of all Section 16(a) filings.
Based solely on our review of Forms 3, 4 and 5 available to us and, where applicable, written representations from directors, officers and 10% shareholders that no form is required to be filed, we believe that no director, officer or beneficial owner of more than 10% of its common stock failed to file on a timely basis reports required pursuant to Section 16(a) of the Exchange Act with respect to fiscal year ended December 31, 2012, with the exception of:
The Dewey Williams trust did not timely file a Form 4 reporting its conversion(s) of two convertible debentures in June 2011, however a Form 5 was filed by Mr. Williams on March 5, 2012 reporting this conversion and we believe he is now current in his filings.
Code of Ethics
We adopted a Code of Ethics on March 23, 2004, that applies to our principal executive officer, principal financial officer, principal accounting officer or controlling persons, or persons performing similar functions. A copy of the Code was included as an exhibit to our annual report for the period ending December 31, 2003. In addition, our Code of Ethics is available on our web site at www.geii.com under the caption “Investor Relations: Code of Ethics.” A copy of our Code of Ethics is available to any person, without charge, by faxing a request to our Chief Executive Officer at our corporate offices at (801) 619-1747.
Nominating Procedures
We have not changed our nominating procedures during the past fiscal year or subsequently. We do not have a nominating committee and, as a result, the Board of Directors as a whole performs the functions of the nominating committee and directs and oversees the process by which individuals may be nominated to our Board of Directors.
No Audit Committee
Because of the Company’s small size and that it is not subject to the rules of any specific national stock exchange, the Company has not appointed an audit committee and has not identified an audit committee financial expert. Consequently, the Board of Directors as a whole performs the functions of an audit committee.
Item 11.
Item 11. Executive Compensation.
The following table sets out the compensation received during the previous two fiscal years, in respect to the only person that served as our chief executive officer at any time during the last fiscal year and our most highly compensated executive officers whose total salary and bonus exceeded $100,000 (the “Named Executive Officers”).
SUMMARY COMPENSATION TABLE
(**) This column represents the dollar amount recognized for financial statement reporting purposes with respect to the fair value of stock awards and stock options granted to the named executive officers. See note B to the consolidated financial statements for discussion regarding the assumptions used to calculate fair value under the Black-Scholes-Merton valuation model.
(A) During 2011, Mr. Turner was paid $200,000 for his 2011 salary plus $60,844 for prior year’s accrued salary. On July 31, 2012 Mr. Turner was terminated as Chief Executive Officer without cause. Up to that point he had been paid $100,000 through June 30, 2012. Following his termination he began receiving $1,000 per month as Chairman of the Board through the remainder of the year.
(B) Of the amounts indicated during 2012 and 2011, $36,783 and $60,000 respectively was in the form of a cashless bonus. This bonus payments reflect non-cash debt forgiveness. At December 31, 2011, Mr. Turner owed us $36,783 in non-interest bearing loans he received from us prior to July 31, 2002; we also owed Mr. Turner $36,783 on a non-interest bearing basis as a result of salaries that accrued without payment during 1997 through 2001 (in excess of the $443,772 in accrued salary that Mr. Turner waived on December 31, 2001). During each of 2012 and 2011, Mr. Turner waived $36,783 and $60,000 respectively of unpaid accrued salary. There has been no material modification of the terms of either indebtedness since the enactment of Section 402 of the Sarbanes-Oxley Act of 2002. As of December 31, 2012 the amount owed to us by Mr. Turner and the amount we owed Mr. Turner was (in both cases) $0. The remaining $25,000 bonus during 2011 was paid in cash.
(C) Effective July 1, 2012 Mr. Madsen’s salary was increased to $200,000 annually resulting from his promotion to Chief Executive Officer.
(D) Mr. Madsen was paid a cash bonus of $25,000 in February 2011.
(E) In June of 2012 Mr. Madsen was paid a stock bonus of $25,000 in accordance with his previous employment agreement. Of this amount, Mr. Madsen was granted 3,710 shares of Stock in Veris Gold (formally Yukon Nevada Gold valued at $10,313 and 407,950 shares of Golden Eagle restricted stock valued at $14,686.
Compensation Discussion and Analysis; Employment Agreements
Our Board of Directors as a whole reviews and approves the total direct compensation packages for each of our executive officers. As described in the notes to the Summary Compensation Table above, the primary elements of compensation to our named executive officers are cash compensation and equity compensation in the form of stock option grants and restricted stock grants.
Our named executive officers are to receive a base salary payable in accordance with our normal payroll practices and in accordance with the terms of their employment contracts which contemplate their full time employment by the Company.
When the Board considers total cash compensation for our named executive officers, we do so by evaluating their responsibilities, experience and the competitive marketplace. Specifically, the Board considers the following factors:
·
the Company’s financial resources and ability to meet its current and prospective financial obligations;
·
the executive’s leadership and operational performance and potential to enhance long-term value to the Company’s shareholders;
·
performance compared to the financial, operational and strategic goals established for the Company;
·
the nature, scope and level of the executive’s responsibilities;
·
competitive market compensation paid by other companies for similar positions, experience and performance levels; and
·
the executive’s current salary, the appropriate balance between incentives for long-term and short-term performance.
We have entered into employment agreements with certain of our executive officers, each of which is described below.
Tracy Madsen
On October 7, 2009, we entered into employment agreements with Tracy Madsen , our Chief Executive Officer, President, Principal Financial Officer, Secretary, Treasurer and Director (the “Madsen Agreement") This agreement was contingent on receiving shareholder approval. On March 23, 2010 our shareholders approved the terms of the Madsen Agreement, and it became effective and binding on that date.
In this summary the Madsen Agreement is referred to the “Agreement” and Mr. Madsen is referred to herein as the “Executive.” The Agreement contemplate the Executives’ full time employment by the Company, and was wash for an initial 3-year term expiring October 2012. The Agreement was amended on July 27, 2012 and extended to a 4-year term expiring October 2013. The Agreement will renew for successive one year terms unless either the Company or the Executive gives at least 60 days’ notice to the other that it or he will not accept the renewal term.
The Agreement provided for a base salary of $150,000 which was increased to $200,000 effective July 1, 2012 upon Mr. Madsen's appointment as Chief Executive Officer. The Agreement provides that the Executive is eligible to receive a discretionary cash bonus based on the Company’s business and results and is eligible to participate in the Company’s equity based compensation plans and to receive other standard employee benefits. The Agreements impose restrictive covenants on the Executive, such as confidentiality obligations and non-solicitation restrictions.
If the Agreement is terminated by the Company without cause, or not as a result of the Executive’s death or disability, the Executive is entitled to a severance payment equal to the Executive’s base salary at the rate in effect on the termination date for a period of 6 months, plus one month for each year that Executive has been with the Company, or through expiration of the Agreement’s original term, whichever is a shorter period of time. However, in no event will the Executive be entitled to less than 6 months of severance pay. This severance pay requirement is not applicable if the Agreements terminate because of non-renewal.
The Agreement also provides for a severance payment upon a “change of control event” (as defined in the Agreements) or if the Agreements are terminated by the Executive for “good reason” (as defined in the Agreements). The severance to be paid to Mr. Madsen upon a change of control event or upon the Agreement being terminated for good reason is calculated using the greater of:
1)
An amount equal to Mr. Madsen’s base salary at the rate in effect on the termination date for a period of 6 months, plus one month for each year that Mr. Madsen has been with the Company, or through expiration of the Agreement’s amended term, whichever is a shorter period of time; or
2)
An amount equal to (a) one year of Mr. Madsen’s current annual base salary and (b) the amount of the most recent discretionary bonus paid to Mr. Madsen (if any) less applicable withholding.
Terry Turner
On October 7, 2009, we entered into employment agreements with Terry Turner , our then Chief Executive Officer, President and Chairman of the Board of Directors (the “Turner Agreement ) this agreement was contingent on receiving shareholder approval. On March 23, 2010 our shareholders approved the terms of the Turner Agreement, and it became effective and binding on that date.
In this summary the Turner Agreement is referred to as the “Agreement” and Mr. Turner is referred to herein as the “Executive.” The Agreement contemplated the Executives’ full time employment by the Company for an initial 3-year term expiring October 2012.
The Agreement provided for a base salary of $180,000 which was increased to $200,000 on October 1, 2010. If the Agreement was terminated by the Company without cause, or not as a result of the Executive’s death or disability, the Executive was entitled to a severance payment equal to the Executive’s base salary at the rate in effect on the termination date for a period of 6 months, plus one month for each year that Executive has been with the Company, or through expiration of the Agreement’s original term, whichever is a shorter period of time. However, in no event would the Executive be entitled to less than 6 months of severance pay.
On July 31, 2012 Mr. turner was terminated without cause as an officer of the company. As a result of this termination, Mr. Turner was entitled to severance pay of $350,000 in accordance with the terms of his employment Agreement. At the time of his dismissal, we did not have sufficient funds to pay Mr. Turner the severance payment owed to him in cash. Mr. Turner agreed to enter into a promissory note for the $350,000 owed to him. This note carries an interest rate of 5% per annum and matures on July 27, 2013. This note is secured by the Gold Bar Mill located outside of Eureka Nevada.
Mr. Turner remains as the Chairman of the Board of Directors and is paid $1,000 per month for his services. No current employment agreement is in place with Mr. Turner.
Option Grants To Our Named Executive Officers.
No options or restricted stock were granted to any named executive officer of Golden Eagle during the fiscal year ended December 31, 2012.
Compensation of Directors
We reimburse directors for travel and related expenses associated with Board of Directors’ meetings. We also compensate out non-employee directors $1,000 per month for attending any Board of Directors’ meetings held within that month telephonically or in person. The following table sets forth information regarding the cash compensation paid to our directors during our year ended December 31, 2012:
DIRECTOR COMPENSATION
Although Mr. Madsen and Mr. Bogani also served on our Board of Directors during our 2012 fiscal year they did not receive any separate compensation for their service in their capacity as Directors. Mr. Riveros and Mr. DeLozier resigned as Directors on July 31, 2012.
Item 12.
Item 12. Security ownership of certain beneficial owners and management and related stockholder matters
Security Ownership of Golden Eagle Officers and Directors
As of December 31, 2012 and March 18, 2013, there were 23,366,328 shares of the Company’s common stock outstanding. The following table sets forth the beneficial ownership of the Company’s common stock as of March 31, 2013 by each director and each executive officer of the Company and by all directors and executive officers as a group. To the extent any of the named shareholders own derivative securities that are vested or otherwise exercisable into shares of our common stock these securities are included in that shareholders’ beneficial ownership (as required by Rule 13d-3(a)) at their conversion ratios and explained in the notes to the table. For purposes of this report we have used the fully diluted number of shares of 23,664,510.
(1)
Calculated in accordance with Rule 13d-3(a) promulgated under the Securities Exchange Act of 1934 and Item 403 of Regulation S-K.
(2)
Mr. Turner does not own any shares of our common stock.
Security Ownership of Certain Beneficial Owners
The following table sets forth the beneficial ownership of the Company’s common stock as of March 31, 2013 by each person (other than the directors and executive officers of the Company) was known to own beneficially, more than 5% of the outstanding voting shares of common stock. To the extent any of the named shareholders own shares of outstanding Preferred Stock (being Series B Stock) or other derivative securities that are exercisable into shares of our common stock or grant the holder voting power, these securities are included in that shareholders’ beneficial ownership (as required by Rule 13d-3(a)) at their conversion ratios and explained in the notes to the table). As of March 31, 2013 there were 23,366,328 shares of the Company’s common stock outstanding. For purposes of this report we have used the fully diluted number of shares of 23,664,510.
(1)
Calculated in accordance with Rule 13d-3(a) promulgated under the Securities Exchange Act of 1934 and Item 403 of Regulation S-K. Because certain Golden Eagle securities held by the beneficial holders are convertible into common shares or grant the holder voting rights these securities are included in the beneficial ownership of the given beneficial holder. All outstanding shares of Golden Eagle’s preferred stock are entitled to vote as a single class with the common stock.
Change of Control Arrangements
There are not any plans or arrangement known to us that will result in a change of control.
Securities Authorized for Issuance under Equity Compensation Plans
See the description in Item 5 of this Annual Report for a description of the Company’s equity compensation plans.
Item 13.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
The following sets out information regarding transactions between officers, directors and significant shareholders of Golden Eagle during the most recent two fiscal years and during the subsequent fiscal year.
Indebtedness
At December 31, 2012 and 2011, Mr. Turner owed us $36,783 and $96,783 respectively in non-interest bearing loans he received from us prior to July 31, 2002; we also owed Mr. Turner $36,783 and $96,793 respectively on a non-interest bearing basis as a result of salaries that accrued without payment during 1997 through 2001 (in excess of the $443,772 in accrued salary that Mr. Turner waived on December 31, 2001). During 2012 and 2011, Mr. Turner waived $36,783 and $60,000 respectively of unpaid accrued salary. There has been no material modification of the terms of either indebtedness since the enactment of Section 402 of the Sarbanes-Oxley Act of 2002. As of December 31, 2012 the amount owed to us by Mr. Turner and the amount we owed Mr. Turner was (in both cases) $0.
Related party transactions
An entity, controlled by Mark Bogani, a Director, has provided consulting services, as it relates to stock transfer services, in the amount of $3,215 and $3,515 during the years ended December 31, 2012 and 2011, respectively. The balance owing, as at December 31, 2012 and 2011, was $345 and 250 respectively.
We share certain office expenses with Crown Law Ltd, a law firm owned by Terry Turner our Chairman of the Board of Directors. Crown Law Ltd. deposits funds with us against which we apply their portion of rent, utilities and other expenses as we incur these expenses. As of December 31, 2012 we owed Crown Law Ltd. $9,566 and as of December 31, 2011 Crown Law Ltd. owed us $4,219 which is included with our accounts payable and other accrued expenses on our audited financial statements.
Employment Agreements
See Item 11, Executive Compensation - Compensation Discussion and Analysis; Employment Agreements, for a discussion of the employment contracts between the Company and Messrs. Madsen and Turner.
Transactions with significant shareholders
None
Director Independence
Our board of directors consists of Messrs. Turner, Bogani and Madsen. None of the board members do we consider to be “independent” as defined by Section 803A of the NYSE Amex Company Guide. The board considers all relevant facts and circumstances in its determination of independence of all members of the board.
Item 14.
Item 14. Principal accountants’ fees and services
Our Board of Directors selected the independent accounting firm of Ingenium Accounting Associates, with respect to the audit of our consolidated financial statements for the years ended December 31, 2012 and 2011.
Audit Fees
We anticipate paying Ingenium Accounting Associates $15,000 to complete the 2012 audit of our financial statements. We paid Ingenium Accounting Associates $16,678 to complete the 2011 audit of our financial statements.
During the fiscal year ended December 31, 2012, we paid Ingenium Accounting Associates $7,500 for the review of our quarterly financial statements. During 2011 we paid Mark Bailey & Company $14,000 for the review of our quarterly financial statements, $30,921 for the audit of our December 31, 2010 financial statements, and $34,200 for the re-audit of our December 31, 2009 financial statements. These aggregate fees include professional services for the audit of our annual financial statements and the review of the financial statements included in our reports on Form 10-Q and Form 10-K.
Audit-Related Fees
There were no fees billed by Mark Bailey & Company, Ltd. and Ingenium Accounting Associates for audit-related services rendered during fiscal years ended December 31, 2012 and 2011.
Tax Fees
There were no fees billed by Mark Bailey & Company, LLC and Ingenium Accounting Associates during the fiscal year ended December 31, 2012 and 2011, for tax compliance, tax advice, and tax planning.
All Other Fees
There were no other services provided by Mark Bailey & Company Ltd. or Ingenium Accounting Associates during fiscal years ended December 31, 2012 and 2011.
Audit Committee’s Pre-Approval Practice.
Inasmuch as Golden Eagle does not have an audit committee, Golden Eagle’s board of directors performs the functions of its audit committee. Section 10A(i) of the Securities Exchange Act of 1934 prohibits our auditors from performing audit services for us as well as any services not considered to be “audit services” unless such services are pre-approved by the board of directors (in lieu of the audit committee) or unless the services meet certain de minimis standards.
The Board of Directors has adopted resolutions that provide that the board must:
Preapprove all audit services that the auditor may provide to us or any subsidiary (including, without limitation, providing comfort letters in connection with securities underwritings or statutory audits) as required by §10A(i)(1)(A) of the Securities Exchange Act of 1934 (as amended by the Sarbanes-Oxley Act of 2002).
Preapprove all non-audit services (other than certain de minimis services described in §10A(i)(1)(B) of the Securities Exchange Act of 1934 (as amended by the Sarbanes-Oxley Act of 2002) that the auditors propose to provide to us or any of its subsidiaries.
The Board of Directors considers at each of its meetings whether to approve any audit services or non-audit services. In some cases, management may present the request; in other cases, the auditors may present the request.
Part IV
Item 15.
Item 15. Exhibits and financial statement schedules
(a) Financial statements
The following documents are filed as part of this report: Page
Independent Auditors Report
Consolidated Balance Sheets as of December 31, 2012 and 2011
Consolidated Statements of Operations for the years ended
December 31, 2012 and 2011
Consolidated Statements of Cash Flows for the years ended
December 31, 2012 and 2011
Consolidated Statement of Stockholders' Equity (Deficit) for
the years ended December 31, 2012 and 2011
Notes to Consolidated Financial Statements through
(b) Exhibits
The following exhibits are filed with this Form 10-K or incorporated herein by the following references:
Exhibit Number
Description
3.1
Articles of Incorporation. (1)
3.1.1
Certificate of Designation for the Series A Convertible Preferred Stock.(2)
3.1.2
Certificate of Designation for the Series B Convertible Preferred Stock. (3)
3.1.3
Articles of Amendment (4)
3.1.4
Certificate of Designation for the Series C Convertible Preferred Stock. (5)
3.1.5
Certificate of Designation for the Series D Convertible Preferred Stock. (6)
10.2
Employment Agreement with Terry Turner. (8)
10.3
Employment Agreement with Tracy Madsen. (8)
31.1
Certification by the Principal Executive Officer pursuant to Rule 13a-14(a)/15d-14(a)
31.2
Certification by the Principal Financial Officer pursuant to Rule 13a-14(a)/15d-14(a)
32.1
Certification by the Principal Executive Officer pursuant to Section 1350.
32.2
Certification by the Principal Financial Officer pursuant to Section 1350.
Interactive Data Files required by Rule 405 of Regulation ST, and Item 601(101) of Regulation SK
(1)
Incorporated by reference from our registration statement on Form 10-SB that became effective June 17, 1994.
(2)
Incorporated by reference from Current Report on Form 8-K dated March 10, 2005.
(3)
Incorporated by reference from Current Report on Form 8-K dated December 29, 2006.
(4)
Incorporated by reference from Current Report on Form 8-K dated September 14, 2007.
(5)
Incorporated by reference from Current Report on Form 8-K dated December 24, 2008.
(6)
Incorporated by reference from Current Report on Form 8-K dated July 6, 2009.
(7)
Incorporated by reference from Current Report on Form 8-K dated April 28, 2010.
(8)
Incorporated by reference from Current Report on Form 8-K dated October 7, 2009.
(9)
Incorporated by reference from Current Report on Form 8-K dated February 1, 2012.
(10)
Incorporated be reference from Current Report on Form 8-K dated June 7, 2012.
(11)
Incorporated be reference from Current Report on Form 8-K dated July 31, 2012.
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Golden Eagle International, Inc. has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
GOLDEN EAGLE INTERNATIONAL, INC.
April 1, 2013 /s/ Tracy A. Madsen
Tracy A Madsen, President and Chief Executive Officer and Principal Financial Officer
Pursuant to the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of Golden Eagle International, Inc. and in the capacities and on the dates indicated.
GOLDEN EAGLE INTERNATIONAL, INC.
April 1, 2013 /s/ Tracy A. Madsen
Tracy A. Madsen, President, Chief Executive Officer, Principal Financial Officer and Director
April 1, 2013 /s/ Terry C. Turner
Terry C. Turner, Chairman of the Board of Directors
April 1, 2013 /s/ Mark Bogani
Mark Bogani, Director
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
April 1, 2013
To the Board of Directors and
Stockholders of Golden Eagle International, Inc.
We have audited the accompanying balance sheets of Golden Eagle International, Inc.”Company” as of December 31, 2012 and 2011, and the related statements of income, stockholders’ equity and comprehensive income, and cash flows for the years ended December 31, 2012 and 2011. Golden Eagle International’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Golden Eagle International, Inc. as of December 31, 2012 and 2011, and the results of its operations and its cash flows for the years ended December 31, 2012 and 2011in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 of the accompanying financial statements, the Company has incurred losses, has not generated any revenue, has limited marketable securities it can liquidate, and has negative operating cash flows. These factors, and the need for additional financing in order for the Company to meet its business plans, raise substantial doubt about its ability to continue as a going concern. Management’s plan to continue as a going concern is also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Ingenium Accounting Associates
Reno, NV
4755 Caughlin Parkway, Suite A • Reno, NV 89519 Office (775) 827-2312 Fax (775) 827-1774 info@IngeniumCPA.com
Golden Eagle International, Inc.
Notes to Consolidated Financial Statements
Note A - Organization and Business
Organization and Nature of Business
Golden Eagle International, Inc. (“we,” “us” or “Golden Eagle”) was incorporated in Colorado on July 21, 1988. From late 2008 through June 2009, we were engaged in contract gold milling operations in the state of Nevada in the United States.
We have not had any business operations since we disposed of our wholly-owned subsidiary, Golden Eagle International, Inc. (Bolivia) in the first quarter of fiscal 2010. Prior to that time we had been involved in the business of minerals exploration and (prior to 2005) mining and milling operations in Bolivia through that subsidiary.
We currently own the Gold Bar Mill (the “Mill”) in Eureka, Nevada which is not currently in operation and which will require a significant expenditure to rehabilitate should we choose to do so. Although we have been attempting to seek value for our investment in the Gold Bar Mill since its acquisition in 2004, we have not been able to obtain the financing necessary to rehabilitate the Mill or enter into a joint venture or other business arrangement with respect to the Mill.
Going Concern
The audited financial statements included with this annual report have been 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 do 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 - Summary of Significant Accounting Policies
Use of Estimates
Preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates, and such differences may be material to the financial statements.
Concentration of Credit Risk
From time to time our cash balances, held at a major financial institution, exceed the federally insured limits of $250,000. Our management believes that the financial institution is financially sound and the risk of loss is low.
Fair Value of Financial Instruments
We use the established three-level valuation hierarchy for valuing and disclosing our financial instruments at fair value. The three levels are defined as follows:
Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
Level 3 inputs to valuation methodology are unobservable and significant to the fair measurement.
Golden Eagle International, Inc.
Notes to Consolidated Financial Statements
The carrying amounts reported in the balance sheets for cash, receivables, and current liabilities are at cost which approximates their fair value due to their short-term nature.
As part of our August 2010 settlement with Queenstake Resources we obtained 2,000,000 shares of common stock of Queenstake’s parent company, Yukon Nevada Gold Corp. (“YNG”). On October 9, 2012, Yukon Nevada Gold Corp. commenced trading on the Toronto Stock Exchange under the name Veris Gold Corp. with the symbol VG. On that same date, Veris Gold Corp. instituted a 10 for 1 reverse split of its common shares. All numbers for Veris Gold Corp./Yukon Nevada Gold Corp. in this document are based on a post reverse price and quantity. In the remainder of this document Yukon Nevada Gold Corp./Veris Gold Corp. will be referred to as Veris Gold and or VG.
These securities, classified as available for sale, are our only financial instrument that is measured at fair value on a recurring basis. At December 31, 2012 we held 65,470 shares of VG and the fair value of these shares, using level 1 inputs, was $113,918. At December 31, 2011 we held 151,710 shares of VG and the fair value of these shares, using level 1 inputs, was $458,825.
Since the securities are classified as available for sale, we recognize realized gains / losses and declines in value of the securities deemed to be other than temporary in earnings. Unrealized gains / losses are recognized as a component of other comprehensive income. For the year ended December 31, 2012 we recognized an unrealized gain of $180,866 on our VG common stock holdings. For the year ended December 31, 2011 we recognized an unrealized loss of $1,030,055 on our VG common stock holdings.
Cash and Cash Equivalents
For the statement of cash flows, any liquid investments with a maturity of three months or less at the time of acquisition are considered to be cash equivalents.
Property, Equipment and Mineral Development
Property and equipment are recorded at cost. Maintenance and repair costs are charged to expense as incurred, and renewals and improvements that extend the useful life of assets are capitalized. Depreciation on property and equipment is computed using the straight-line method over the assets’ estimated useful lives as follows:
Mining equipment 7-8 years
Vehicles 5 years
Office equipment 4-10 years
Depreciation expense totaled $51 and $205 for the years ended December 31, 2012and 2011, respectively.
At December 31, 2012 and 2011 we held a Mill with a carrying value of $3,980,000. The Mill is located near Eureka, Nevada and has been idle since acquisition; therefore, no depreciation expense has been recognized.
At December 31, 2012 and 2011 we had an immaterial amount of office equipment that is depreciated on a straight line basis.
Long-Lived Assets
We periodically review our long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Impairment losses are recognized when the estimated future cash flows are less than the carrying amount of the asset calculated on discounted cash flow basis.
For the years ended December 31, 2012 and 2011 we recognized impairment charges of $0.
Stock Based Compensation
We measure stock-based compensation cost relative to the estimated fair value of the awards on the grant date using a Black Scholes options pricing model. We recognize the cost as the awards vest. See Note E for a more detailed description of our stock based compensation.
Golden Eagle International, Inc.
Notes to Consolidated Financial Statements
Income (Loss) Per Share
The computation of basic earnings (loss) per common share is based on the weighted average number of shares outstanding during each year.
The computation of diluted earnings per common share is based on the weighted average number of shares outstanding during the year plus the common stock equivalents as detailed in the following chart. In 2011 the inclusion of these shares would have resulted in a weighted average shares fully diluted number that was anti-dilutive and as such they are excluded.
Stock equivalents consist of the following:
* Exclusive of immaterial fractional shares and rounding.
Income Taxes
Income taxes are accounted for under the liability method of accounting for income taxes. Under the liability method, future tax liabilities and assets are recognized for the estimated future tax consequences attributable to differences between the amounts reported in the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Future tax assets and liabilities are measured using enacted or substantially enacted income tax rates expected to apply when the asset is realized or the liability settled.
Deferred taxes are provided on a liability method whereby deferred tax assets tax assets are recognized for deductible temporary differences and operating loss and tax credit carry-forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax basis. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more-likely-than-not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax law and rates on the date of enactment.
Effect of New Accounting Pronouncements
There are no recent accounting pronouncements that are expected to have a material impact on our financial position, results of operations or cash flows.
Note C - Loans and Notes Payable
We have debt obligations outstanding at December 31, 2012 and 2011 as follows:
Golden Eagle International, Inc.
Notes to Consolidated Financial Statements
Note D- Stock Based Compensation
As part of certain employment agreements we issue stock options. These are generally approved by the Board of Directors. The exercise price is set by the average closing price of our stock the ten days prior to approval and the grant date fair value is estimated using a Black Scholes pricing model with the following assumptions:
Volatility = 225%
Expected term = 3 years
Dividend yield = 0
Risk free rate = .30%
The following table represents the option activity for the periods presented;
As of December 31, 2012 all of the options are vested and exercisable with a weighted average exercise price of $.68 and remaining terms between 2 weeks and 7 months. The total intrinsic value of the options outstanding as of December 31, 2012 is $0.
Note E - Stockholders’ Equity
Common Stock
During the year ended December 31, 2012 we issued a total of 4,657,626 shares of our common stock with a fair value at date of issuance of $149,044. The Stock was issused to satisfy principal and accrued interest in the amount of $83,837. Accordingly, we recognized a $65,207 loss on settlement of this debt.
Additionally, we issued 3,675,708 shares of our common stock for cash consideration at a price of $.018 per share valued at $66,163.
Golden Eagle International, Inc.
Notes to Consolidated Financial Statements
Additionally, we issued 407,950 shares of common stock for services at a price of $0.36 per share for total consideration of $14,686.
During the year ended December 31, 2011 we issued a total of 1,444,660 shares of our common stock valued at $111,888 for the settlement of certain notes payable and interest.
Additionally, we issued 24,706 shares of common stock for services at a price of $0.17 per share for total consideration of $4,200.
Also during 2011, we issued 3,820,233 shares of common stock upon the conversion of one share of Series C preferred stock (convertible at a ratio 975,493 shares of common stock for each share of Series C preferred) and 568,948 shares of our Series D Preferred Stock (convertible at a ratio of 5 shares of common stock for each share of Series D preferred).
Preferred stock
Our Articles of Incorporation provide that we may issue up to 10,000,000 shares of preferred stock. Subject to the requirements of the Colorado Business Corporation Act, the Board of Directors may issue the preferred stock in series with rights and preferences as the Board of Directors may determine appropriate, without shareholder approval. To date, the Board of Directors has authorized the creation of four series of preferred stock as described below.
(i) 3,500,000 shares of our Series A Convertible Preferred Stock have been authorized for issuance, none of which are currently issued or outstanding.
(ii) 4,500,000 shares of our Series B Preferred Stock have been authorized for issuance, of which 80,000 are issued and outstanding. These 80,000 Series B shares are in the aggregate convertible into 40,000 common shares.
(iii) one share of Series C Preferred Stock has been authorized and issued, and redeemed. There are no shares of Series C shares outstanding
(iv) 999,000 shares of Series D Convertible Preferred Stock have been authorized, of which 793,849 shares of Series D Preferred Stock were issued and redeemed. There are no Series D shares outstanding.
Note F - Related Party Transactions
Indebtedness
At December 31, 2012 and 2011, Mr. Turner owed us $36,783 and $96,783 respectively in non-interest bearing loans he received from us prior to July 31, 2002; we also owed Mr. Turner $36,783 and $96,793 respectively on a non-interest bearing basis as a result of salaries that accrued without payment during 1997 through 2001 (in excess of the $443,772 in accrued salary that Mr. Turner waived on December 31, 2001). During 2012 and 2011, Mr. Turner waived $36,783 and $60,000 respectively of unpaid accrued salary. There has been no material modification of the terms of either indebtedness since the enactment of Section 402 of the Sarbanes-Oxley Act of 2002. As of December 31, 2012 the amount owed to us by Mr. Turner and the amount we owed Mr. Turner was (in both cases) was $0.
Related party transactions
An entity, controlled by Mark Bogani, a Director, has provided consulting services, as it relates to stock transfer services, in the amount of $3,215 and $3,515 during the years ended December 31, 2012 and 2011, respectively. The balance owing, as at December 31, 2012 and 2011, was $345 and $250 respectively.
Golden Eagle International, Inc.
Notes to Consolidated Financial Statements
We share certain office expenses with Crown Law Ltd, a law firm owned by Terry Turner our Chairman of the Board of Directors. Crown Law Ltd. deposits funds with us against which we apply their portion of rent, utilities and other expenses as we incur these expenses. As of December 31, 2012 we owed Crown Law Ltd. $9,566 and as of December 31, 2011 Crown Law Ltd. owed us $4,219 which is included with our accounts payable and other accrued expenses on our audited financial statements.
Note G - Income Taxes
Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax basis. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more-likely-than-not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
Deferred tax assets and valuation allowance at December 31, 2012 and 2011, respectively are as follows:
The components of income tax expense for years-ended December 31, 2012 and 2011 respectively are as follows:
A provision for income taxes has not been made due to net operating loss carry-forwards of $13,006,328 and $17,904,000 at December 31, 2012 and 2011, respectively, which may be offset against future taxable income through 2031. No tax benefit has been reported in the financial statements.
The actual provision for income tax differs from the statutory U.S. federal income tax rate for the years-ended December 31, 2012 and 2011, respectively as follows:
Golden Eagle International, Inc.
Notes to Consolidated Financial Statements
Current accounting guidance requires the Company to provide a reconciliation of the beginning and ending amount of unrecognized tax impacts related to the sustainability of tax positions taken in current and prior periods.
As of December 31, 2012 the Company did not have any tax positions for which it is reasonably possible that the total amount of unrecognized tax benefits will significantly increase or decrease within the next 12 months.
The Company includes interest and penalties arising from the underpayment of income taxes in the consolidated statements of operations in the provision for income taxes. As of December 31, 2012 and 2011, the Company had no accrued interest or penalties related to uncertain tax positions.
The tax years that remain subject to examination by major taxing jurisdictions are those for the years ended December 31, 2010 through 2012.