FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the Quarterly Period Ended June 30, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the transition period from ----- to -----.
GOLDEN PHOENIX MINERALS, INC.
(Exact Name of Registrant as specified in its charter)
Minnesota 41-1878178
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
3595 Airway Dr. Suite 405 Reno, Nevada 89511
(Address of Principal Executive Offices) (Zip Code)
(702) 853-4919
Registrant's telephone number, including area code:
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 12months (or for
such shorter period that 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 ___
The number of shares outstanding of the Registrant's
Common Stock as of June 30, 1998 was 15,374,450
Transitional Small Business Disclosure Format (check one):
Yes ___ No ___
GOLDEN PHOENIX MINERALS, INC.
INDEX
Page
Number
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PART I Financial Information
Item 1 Financial Statements
Condensed Balance Sheet as of June 30, 1998 3
Condensed Statements of Loss and Operating Deficit
for the three months and six months ended June 30, 1998 4
Condensed Statements of Cash Flows for the three months and
six months ended June 30, 1998 5-6
Notes to Condensed Financial Statements. 7
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations 8-9
PART II Other Information
SIGNATURE 9
2
GOLDEN PHOENIX MINERALS, INC.
(A Development Stage Company)
CONDENSED BALANCE SHEET
(Unaudited)
June 30, 1998
ASSETS
June 30
-----------
Current Assets
Cash and cash equivalents $ 3,439.
Employee receivables 3,486.
Investments 1,082,700.
Prepaid Expenses 14,250.
Stock subscription receivable 101,000.
-----------
Total Current Assets 1,204,875.
-----------
Vehicles and Equipment
Vehicles and equipment 127,264.
Less accumulated depreciation 14,294.
-----------
112,970.
-----------
Mining Properties and Claims
Options/leases 314,315.
Deferred exploration cost 98,609.
Mining property and claim 10,000.
-----------
422,924.
-----------
Other Assets
Refundable Deposits 3,800.
Incorporation costs, net of amortization of $193 924.
-----------
4,724.
-----------
$1,745,493.
-----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Notes Payable current $ 30,000.
Accounts payable 278,815.
Accrued liabilities 47,790.
Bank overdraft --
Amount due to shareholders 286,400.
-----------
Total Current Liabilities 643,005.
-----------
Stockholders' Equity
Preferred stock, no par value, 50,000,000 shares authorized and
500,000 shares issued and outstanding at June 30, 1998. 2,000.
Common stock, no par value, 150,000,000 shares authorized,
14,475,353 issued and outstanding at June 30, 1998 (including
2,000,000 of 144 Restricted shares for organizational services) 3,447,585.
Additional paid-in capital (10,000.)
Deficit accumulated during exploration stage (2,337,097.)
-----------
Total Stockholders' Equity 1,102,488.
-----------
Total Liabilities and Stockholders' Equity $1,745,493.
-----------
The Accompanying Notes to Condensed Financial
Statements are an integral part of these statements
3
GOLDEN PHOENIX MINERALS, INC.
(A Development Stage Company)
CONDENSED STATEMENT OF LOSS AND OPERATING DEFICIT
(Unaudited)
Three months and six months ended June 30, 1998
Three Months Six Months
ended June 30 ended June 30
------------- -------------
Revenues
Joint Ventures $ 32,700. $ 32,700.
---------------------------------
Expenses
Exploration 130,058. 342,446.
General and Administrative 327,470. 562,068.
Depreciation and amortization 5,860. 11,931.
---------------------------------
463,388. 916,445.
---------------------------------
(Loss) From Operations (430,688.) (883,745.)
Other Income
Interest and other income 1. 1.
Other Expense
Loss on Sale of Fixed Assets -- (960.)
---------------------------------
Loss Before Provision
For Income Taxes 430,687. (884,704.)
Provision For Income Taxes -- --
---------------------------------
(430,687.) (884,704.)
Deficit Accumulated During Exploration Stage
Beginning of Period (1,906,410.) (1,452,393.)
---------------------------------
Ending of Period $ 2,337,097. $(2,333,097.)
---------------------------------
Net Less per share (primary and fully diluted) $ (0.03) $ (0.06)
---------------------------------
Weighted Average
Common Shares Outstanding
(primary and fully diluted): 14,622,557. 14,622,557.
---------------------------------
The Accompanying Notes to Condensed Financial
Statements are an integral part of these statements
4
GOLDEN PHOENIX MINERALS, INC.
(A Development Stage Company)
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
Three months and six months ended June 30, 1998
Three Months Six Months
Cash Flows From Operating Activities ended June 30 ended June 30
------------- -------------
Net Loss $(430,687.) $(884,704.)
Adjustments to reconcile net loss
to cash provided by operating activities
Depreciation and amortization 5,860. 11,931.
(Increase) in receivables (3,229.) (3,486.)
Decrease (Increase) in investments 292,300. 167,300.
Decrease in prepaid expenses 10,553. 21,104.
Decrease in stock subscriptions receivable 699,000. 789,000.
Decrease in deposits -- 11,981.
Increase in accounts payable 133,825. 182,925.
Increase (Decrease) in bank overdraft (380.) --
Increase (Decrease) in accrued liabilities 30,816. 30,173.
-------------------------------
Net Cash Provided (Used) by
Operating Activities 738,058. 326,224.
-------------------------------
Cash Flows From Investing Activities
Purchase of options (2,700.) (274,315.)
Purchase of Vehicles and equipment -- (15,128.)
Sales of Vehicles and equipment -- 24,999.
Increase in deferred exploration costs (733.) (27,642.)
-------------------------------
Net Cash (Used) by
Investing Activities (3,433.) (292,086.)
-------------------------------
Cash Flows from Financing Activities
Cancellation of stock subscriptions receivable (800,000.) (890,000.)
Cancellation of Debt (300,000.) (300,000.)
Payment of Debt (120,000.) (515,000.)
Proceeds from issuance of debt 136,400. 136,400.
Proceeds from issuance of stock 352,315. 1,256,928.
-------------------------------
Net Cash Provided by
Financing Activities (731,285.) (311,672.)
-------------------------------
Net Decrease in Cash
And Equivalents 3,340. (277,534.)
Cash and Equivalents, Beginning of Period 99. 280,973.
-------------------------------
Cash and Equivalents, End of Period $ 3,439. $ 3,439.
--------------------------------
The Accompanying Notes to Condensed Financial
Statements are an integral part of these statements
5
GOLDEN PHOENIX MINERALS, INC.
(A Development Stage Company)
CONDENSED STATEMENT OF CASH FLOWS
(Unaudited)
Three months and six months ended June 30, 1998
Supplemental Disclosure of Cash Flow Information
Three Months Six Months
ended June 30 ended June 30
------------- -------------
Cash Paid during the Period
for interest, net of amount
Capitalized $ 396. $ 4,621.
Cash Paid During the Period
For Income Taxes $ -- $ --
The Accompanying Notes to Condensed Financial
Statements are an integral part of these statements
6
GOLDEN PHOENIX MINERALS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Interim Financial Statement Policies and Disclosures
The interim, unaudited, condensed financial statements of GOLDEN PHOENIX
MINERALS, INC. (the "Company") included herein have been prepared pursuant to
the rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally required in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations, although the
Company believes that the disclosures are adequate to make the information
presented not misleading.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the six month ending June 30, 1998, are not necessarily
indicative of the results that may be expected for the year ending December 31,
1998. These financial statements should be read in conjunction with the
financial statements and notes thereto for the period ended December 31, 1997.
The accounting policies set forth in the audited financial statements are the
same as the accounting policies utilized in the preparation of these financial
statements except as modified from appropriate interim presentation.
Income Taxes
No provision for income taxes was required in 1998 because of the net operating
losses.
Net Income per Share
Net income per share is computed based on the weighted-average number of shares
of common stock and common stock equivalents, if dilutive, actually outstanding
during the period.
On a primary basis, net income per share is based on common stock equivalents
adjusted to reflect additional shares that would be outstanding (1) using the
treasury stock method assuming exercise of dilutive stock warrants and stock
options having exercise prices less than the average market price, and (2) using
the as-converted method for convertible debentures.
On a fully diluted basis, net income per share is based on common stock
equivalents adjusted to reflect additional shares that would be outstanding (1)
using the treasury stock method assuming exercise of dilutive stock warrants and
stock options having exercise prices less than the period end market price (when
greater than the average market price), and (2) using the as-converted method
for convertible debentures.
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS No. 128")
which establishes a new accounting standard for the computation and reporting on
net income per share. SFAS No. 128 is effective for financial statements issued
for periods ending after December 15, 1997, and early adoption is prohibited.
The Company expects that there will be no material effect upon implementing SFAS
No. 128 on its net income per share computations.
Note 3 - Long-Term Debt
There was no long-term debt at June 30, 1998.
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Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Section 21E of the Securities Exchange Act of 1934 provides a "safe harbor" for
forward-looking statements. Certain information included herein contains
statements that are forward-looking, such as statements regarding management's
expectations about future production and development activities as well as other
capital spending, financing sources and the effects of regulation. Such
forward-looking information involves important risks and uncertainties that
could significantly affect anticipated results in the future and, accordingly,
such results may differ from those expressed in any forward-looking statements
made herein. These risks and uncertainties include, but are not limited to,
those relating to the market price of metals, production rates, production
costs, the availability of financing, the ability to obtain and maintain all of
the permits necessary to put and keep properties in production, development and
construction activities and dependence on existing management. The Company
cautions readers not to place undue reliance on any such forward-looking
statements, and such statements speak only as of the date made.
RESULTS OF OPERATIONS
The Company generated revenues from the granting of joint venture positions in
part of its Alaska holdings. Company activities have been directed toward
exploration activities and acquisition of properties. The Company has
exploration properties in Alaska, Nevada and California.
The Company has entered into a joint venture agreement with Kennecott
Exploration, ("Kennecott") Inc. on its High Grade property located in Modoc
County, California. The agreement was signed on September 19, 1997, and gives
the Company the option to acquire a 100% interest in the property over a three
year period. The agreement calls for Golden Phoenix to spend $200,000 the first
year, $300,000 the second year, and $500,000 the last year for a total of
$1,000,000 in exploration work commitments on the property. The Company will
also pay Kennecott $200,000 in cash or the equivalent hereof in the Company's
stock to complete the exercise of the option. Kennecott has reserved the right
to buy back a 51% interest in the property at the time of a positive feasibility
study for 150% of 51% of all exploration expenses at the time of such
feasibility study. If Kennecott chooses not to exercise the right to buy back
into the property, Kennecott will retain a 2% net smelter return royalty on the
property.
The Company entered into an agreement on August 21, 1997 with J. D. Welsh &
Associates to purchase an interest in a mineral property, situated in Mineral
County, Nevada, known as the Borealis property ("Borealis Property"). The Welsh
interest in the Borealis property is presently a joint venture with Cambior
Exploration USA, Inc. ("Cambior"). The Company had the option to purchase all of
Welsh's interest in Borealis over three years for a total of $1,250,000 in
payments. The Company will be carried through positive mining feasibility by
Cambior, the operator of the project. Cambior Exploration USA must spend
$7,000,000 over seven years to earn a 70% interest in the property.
The Company acquired on January 6, 1998, an option to purchase 100% of the
issued and outstanding stock of F. W. Lewis, Inc. and Mina Gold Mine, Inc.
(collectively "Lewis Companies") for an option payment of $250,000. The option
replaces a previous option to purchase the above stock, which expired December
31, 1997. The Lewis Companies control in excess of 25,000 acres of mining
properties consisting of patented and unpatented mining claims, patented and
unpatented mill sites, and fee lands in Nevada, Colorado, and certain oil and
gas interests in California. The Lewis Companies also own various pieces of
mining equipment in Nevada. The purchase price for the Lewis Companies and all
their real and personal property assets is $20,000,000. The option to purchase
expires on December 31, 1998. The company is actively seeking funding for this
acquisition and is also involved in negotiations with other companies to share
the cost of, and thereby acquire an interest in, the Lewis Companies and their
mining properties and other assets. The Company believes it will be successful
in raising the $20,000,000 purchase price. However, should the Company and any
joint venture partner be unable to raise the $20,000,000 in funding to acquire
the Lewis Companies, the option will expire without any value retained by the
Company.
Exploration costs have been incurred in connection with the properties in
California, Alaska and Nevada. These costs have been incurred for the location
of prospect sites and mining claims, and field examinations to determine the
potential occurrence of economic mineralization on the different properties.
Other exploration costs include the
8
compilation of historic data on the properties to assist in the evaluation of
the properties and the planning of further exploration.
No provision for income taxes was recognized for the six months ended June 30,
1998 due to net operating losses.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 1998, the company had $561,870 in working capital. A significant
portion of the working capital is allocated to the joint venture with Cambior
Exploration USA, Inc., involving the Borealis Property. The total Borealis
Property interest acquisition cost is $1,050,000 and an additional $100,000
lease payment made in January 1998, for the benefit of the seller. Payments to
date total $1,050,000. The payments are payable in cash or stock of the Company
or a combination of cash and stock, with the stock being valued at its current
closing market price on the day before payment.
The ability of the Company to satisfy the cash requirements of its development
and operations will be dependent upon future financing. The Company anticipates
that additional financing will be obtained, although no assurance can be made
that funds will be available on terms acceptable to the Company. See "OUTLOOK"
below.
INVESTING AND FINANCING ACTIVITIES
The Company is investigating potential financing sources and is in discussions
with potential joint venture partners to acquire the Lewis Companies, but the
Company has not yet finalized commitments for such financing or joint venturing.
No assurance can be given that the Company will obtain all of the financing to
purchase the Lewis Companies.
OUTLOOK
The Company will issue a significant number of common shares of Golden Phoenix
Minerals, Inc. to J. D. Welsh & Associates to satisfy all future payments to
acquire the remaining interest in the joint venture with Cambior Exploration
USA. The issuance of stock will eliminate $400,000 of current debt. The Company
will also need to raise additional financing to fund its exploration,
development and operations.
PART II OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
(b) No reports were filed on Form 8-K during the three-month period ended March
31, 1998.
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GOLDEN PHOENIX MINERALS, INC.
(Registrant)
August 18, 1998 BY: /s/ Michael R. Fitzsimonds
(Date) Michael R. Fitzsimonds
President
9