AMERICAN EAGLE RESOURCES, INC. 10-Q FOR QUARTER ENDED 03-31-97 Commission File No. 0-12570 QUARTERLY REPORT UNDER SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTER ENDED COMMISSION FILE March 31, 1997 Number: 0-12570 AMERICAN EAGLE RESOURCES, INC. (Exact name of registrant as specified in its charter) Delaware 95-3494141 -------- ---------- (State of other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) Six Mile Canyon Road, Virginia City, Nevada 89502 -------------------------------------------------- (Address of principal executive office) (Zip code) Registrant's telephone number including area code: (702) 246-0761 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period than the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days: Yes___x___No______ ------- Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date: 5,400,000 shares of common stock outstanding at March 31, 1997 AMERICAN EAGLE RESOURCES, INC. 10-Q FOR QUARTER ENDED 03-31-97 Commission File No. 0-12570 AMERICAN EAGLE RESOURCES INC. FORM 10-Q INDEX Page Number ------------ Part I - Financial Information - ---------------------------------- Item 1. Financial Statements: Consolidated Balance Sheets as at March 31, 1997 (unaudited) and June 30, 1996 3 Consolidated Statements of Operations for the three months ended March 31, 1997, 1996, and 1995 (unaudited) 4 Consolidated Statements of Cash Flows for the three months ended March 31, 1997, 1996, and 1995 (unaudited) 5 Notes to Consolidated Financial Statements (unaudited) 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10 Part II - Other Information - ------------------------------- Item 6. Exhibits and Reports of Form 8-K 11 Signatures 12 AMERICAN EAGLE RESOURCES, INC. CONSOLIDATED BALANCE SHEET March 31, 1997 June 30, 1996 ---------------- ---------------- Assets Current Assets Cash $ 39,524 $ 48,545 Accounts Receivable 9,340 56,846 Prepaid Expenses 10,970 14,978 ---------------- ---------------- Total Current Assets $ 59,834 $ 120,369 Property and Equipment - Net - - Other Assets Marketable Securities at cost 1,058,125 1,058,125 Restricted Cash 366,232 366,232 Due from Related Party 55,121 55,121 ------ ------ Total Other Assets $ 1,479,478 $ 1,479,478 ---------------- ---------------- Total Assets $ 1,539,312 $ 1,599,847 Liabilities and Shareholders' Equity (Deficiency) Current Liabilities Accounts Payable $ 20,165 $ 21,845 Accrued and Other Liabilities 3,018 9,316 ---------------- ---------------- Total Current Liabilities $ 23,183 $ 31,161 Long Term Liabilities Reclamation 440,365 $ 113,601 Due to Related Parties 2,618,087 2,521,426 ---------------- ---------------- Total Long Term Liabilities $ 3,058,452 $ 2,635,027 Shareholders' Equity (Deficiency) - ------------------------------------------------- Common Shares, par value $0.01 per share 30,000,000 shares authorized 5,400,000 shares issued and outstanding 54,000 54,000 Additional Paid-in Capital 15,088,360 15,088,360 Deficit (16,684,683) (16,208,701) ---------------- ---------------- Total Shareholders' Equity (Deficiency) (1,542,323) ( 1,066,341) ---------------- ---------------- Total Liabilities & Shareholders' Equity $1,539,312 $ 1,599,847 <FN> (see accompanying notes to the consolidated financial statements) AMERICAN EAGLE RESOURCES, INC. 10-Q FOR QUARTER ENDED 03-31-97 Commission File No. 0-12570 AMERICAN EAGLE RESOURCES, INC. CONSOLIDATED STATEMENT OF OPERATIONS Nine months ended March 31 1997 1996 1995 --------------------------- ------------------------- ---------- Revenue - --------------------------- Mineral Sales and Royalties 28,252 659,517 557,126 Interest Income and Other 29,227 32,152 6,035 --------------------------- ------------------------- ---------- 157,479 691,669 563,161 Expenses Mine Operating Costs 151,753 524,348 606,402 Mineral Exploration - Reclamation 421,303 Depreciation and Depletion 202,592 144,604 General and Administration 60,405 32,901 106,259 --------------------------- ------------------------- ---------- 633,461 759,841 857,265 Net Loss for the Period (475,982) 68,172 294,104 --------------------------- ------------------------- Net Loss per share (0.09) (0.01) (0.05) Weighted average shares Outstanding 5,400,000 5,400,000 5,400,000 AMERICAN EAGLE RESOURCES, INC. 10-Q FOR QUARTER ENDED 03-31-97 Commission File No. 0-12570 AMERICAN EAGLE RESOURCES, INC. CONSOLIDATED STATEMENT OF CASH FLOWS Nine months ended March 31 1997 1996 1995 ------------------------ --------------------------- --------- Net Profit (Loss) (475,982) (68,172) (294,104) Adjustments to reconcile net loss to net cash provided by (used in) Operating Activities Depreciation and Depletion 202,592 144,604 Reclamation expense 326,764 18,558 18,504 (Increase) decrease in accounts receivable 47,506 10,779 (295,585) (Increase) decrease in prepaid expenses 4,008 11,907) 4,791 (Increase) in due to related party 96,661 164,594 538,631 (Increase) decrease in other assets 15,148 Increase (decrease) in accounts payable (1,680) (36,056) (68,081) Increase (decrease) in accrued and other liabilities (6,298) (11,047) 1,885 ------------------------ --------------------------- Total adjustments 466,961 337,513 359,897 ------------------------ --------------------------- Net Cash used in Operations ( 9,021) 269,341 65,793 Purchase of Equipment (103,926) (30,268) Financing Activities (55,521) ------------------------ Increase (Decrease) in Cash (9,021) 165,415 (19,996) Cash - Beginning of Period 48,545 48,000 20,888 ------------------------ --------------------------- --------- Cash - End of Period 39,524 213,415 892 AMERICAN EAGLE RESOURCES, INC. 10-Q FOR QUARTER ENDED 03-31-97 Commission File No. 0-12570 AMERICAN EAGLE RESOURCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES Nature of Business- All mining, exploration, development and production of - -------------------- precious metals has ceased. The only remaining activity in it's 40% interest - --- of the Golden Eagle Mine Joint Venture ( formerly the Flowery Mine) is reclamation work. Basis of Presentation - The financial statements include the accounts of - ----------------------- American Eagle Resources, Inc. (the "Company") and a proportionate share of - ----- the accounts of the Golden Eagle Mine Joint Venture in which the Company has - -- an interest. All material inter-company balances and transactions have been eliminated. Restricted Cash - Restricted cash consists of certificates of deposit held as - ---------------- collateral for the performance of the Companies reclamation activities. The Company ceased mining operations during fiscal 1996 and leaching stopped in the second quarter of fiscal 1997; only reclamation work is being carried out. Management does not intend to further explore, expand or develop the properties owned and leased by the Golden Eagle Mine Joint Venture. Accordingly, an impairment allowance of $442,181 was established as of June 30, 1996 which fully reserved the remaining net book value of property and equipment. Revenue Recognition - Any revenue is recognized when gold shipments are made - -------------------- Net Loss Per share - The computation of net loss per share is based on the - --------------------- Company's reported net loss and the weighted average number of shares of - --- common stock outstanding. - --- Reclamation - Estimated reclamation costs are accrued over the estimated life - ----------- of the mine on a unit-of-production basis. Total anticipated reclamation costs are estimated to be $524,312, of which $83,947. has been expended through March 31, 1997, reducing the accrual to $440,365. Impairment of Long-Lived Assets - Statement of Financial Accounting Standards - -------------------------------- ("SFAS") No. 121, ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF, was issued by the Financial Accounting Standards Board ("FASB") in March 1995, and established accounting for the impairment of long-lived assets, certain identifiable intangibles, and goodwill related to those assets to be held and used for long-lived assets and certain identifiable intangibles to be disposed of. The Company adopted the provisions of SFAS No. 121 during the year ended June 30, 1996. The Company reviews the carrying values of its long-lived and identifiable intangible assets for possible impairment whenever events or changes in circumstances indicate that the carrying amount of assets may not be recoverable. Reclassifications - Certain amounts have been reclassified to conform with the - ----------------- current year's presentation. 2. PROPERTY AND EQUIPMENT Property and Equipment has been fully reserved (see note 1). 3. INVESTMENT IN MIRAMAR MINING CORPORATION The Company's Investment in Miramar Mining Corporation ("Miramar") represents and approximate 2% interest in that Company. Miramar is a mining Company listed on the NASDAQ Stock Exchange and is a related party. At March 31, 1997 and 1996, this investment was recorded at cost, which was less than market value. Due to the related party nature of the investment, the investment is not recorded above original cost basis. 4. INCOME TAXES No provision for income taxes has been recorded in the financial statements due to the net losses of the Company. At June 30, 1996, the Company had net operating loss ("NOL") carryforwards of $15,207,207, which expire up to the year ending June 30, 2011. The Company has not recognized a deferred tax asset relating to these carryforwards. The NOL carryforwards generated through the date of the Company's reorganization in 1990 are subject to an annual limitation of $272,858. The NOL carryforwards generated subsequent to such reorganization are allowed without limitation. Therefore, total NOL carryforwards actually available to offset future taxable income will be limited to approximately $6,500,000 before fully expiring during the year ending June 30, 2011. Subsequent ownership changes could further reduce available NOL carryforwards. The annual limitation, and therefore the NOL carryforwards available, are increased by any recognized built-in gains during a taxable year as provide by Internal Revenue Code Section 382. The Company has adopted Financial Accounting Standards Board Statement No. 109, Accounting for Income Taxes (FAS109). The Company had no recorded deferred taxes before or after implementation of FAS 109 and, accordingly, there was no cumulative or current period effect from the adoption of FAS 109. Deferred income taxes reflect the impact of temporary differences between the amount of assets and liabilities recognized for financial reporting purposed and such amount recognized for tax purposes and the impact of net operating loss carryforwards. The components of the Company's deferred tax assets as of June 30, 1996 were as follows: Benefit from net operating loss carryovers $ 5,170,450 Benefit from investment tax credit carryovers $ 129,120 Other $ 164,777 ----------- Total 5,464,347 Valuation Allowance (5,464,347) ----------- Net $ - 5. RELATED PARTY TRANSACTIONS In September 1989, the Company entered into a joint venture agreement with Miramar Gold Corporation ("Miramar Gold"), a Nevada corporation for the operation of mining properties and equipment (the Golden Eagle Mine Joint Venture). Miramar Gold is a wholly owned subsidiary of Miramar (see Note 3), which has a 16% interest in the Company. Mr. W.H. Berukoff is President and a member of the Board of Directors of the Company. He is also President and a member of the Board of Directors of Miramar Gold and Miramar. Under the terms of the agreement, the Company received 20% of the revenues and paid 40% of the expenses from mining operations until Miramar had received the sum of $1,000,000. Beginning in September, 1994, the Company received 40% of the revenues and paid 40% of the expenses. At March 31, 1997, the Company had a payable to Miramar Gold of $2,618,087 for costs paid by Miramar Gold on behalf of the Company. The Company classifies this payable as non-current as Miramar Gold has represented it will not demand payment in fiscal 1997. At March 31, 1997, the Company has a receivable of $53,261 from a Company controlled by the President of the Company as well as a receivable of $1,860 from other companies that are controlled by the President of the Company. The Company classifies this amount as non-current as significant repayments are not expected within a year. AMERICAN EAGLE RESOURCES, INC. 10-Q FOR QUARTER ENDED 03-31-97 Commission File No. 0-12570 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND - ------------------------------------------------------------------------------ RESULTS OF OPERATIONS - ----------------------- Results of Operations - ----------------------- The profitability of the Company's operations in any one accounting period is directly related to, among other things: 1) the average realized price of gold and silver; 2) the average ore grade; 3)the rate of production of ore. Effectively all operations have ceased as at the end of the second quarter, and only reclamation work is being carried out. During the first six months, net production was 606 ounces of gold and 10,119 ounces of silver of which the Company's share is 242 ounces of gold and 4,048 ounces of silver. Liquidity and Capital Resources - ---------------------------------- Mar 31 June 30, Increase 1997 1996 (Decrease) Current Assets $59,834 $120,369 $(60,535) Current Liabilities 23,183 31,161 (7,978) Working Capital $ 36,651 $ 89,208 $(52,557) Working capital decreased due to cessation of all activities, other than reclamation. Leaching ceased by the end of the second quarter, and only reclamation work remains. The Company is in the process of evaluating various future business directions. PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS OF FORM 8-K A) NONE B) NONE AMERICAN EAGLE RESOURCES, INC. 10-Q FOR QUARTER ENDED 03-31-97 Commission File No. 0-12570 SIGNATURES ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf the undersigned thereunto duly authorized. AMERICAN EAGLE RESOURCES, INC. Date: By: Margaret E. Stewart Authorized Representative Date: By: James McKay Director