FORM 10-KSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from 1/1/97 to 12/31/97
Commission file number 33-3492-D
EUROPEAN AMERICAN RESOURCES, INC. (Formerly Merlin Mining Company)
(Exact name of registrant as specified in its charter)
Delaware 87-0443214
(State or other jurisdiction of (I.R.S. Employer
incorporation of organization) Identification No.)
1212 Court St., Suite C-2, Clearwater, FL 33756
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (813) 298-0636
Securities registered pursuant to Section 12(g) of the Act:
NONE
(Title of Class)
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 that the
registrant was required to file such reports), and (2) has been subject to such
filing requirement for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definite proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to it.
[ ]
As of December 31, 1997, the Issuer had outstanding 11,403,008 shares of
its common stock, as adjusted, par value $0.0001 per share.
<PAGE>
PART I
Item 1. Business.
General Development of Business
During the past twelve months the Issuer has continued to review its Nevada
mining claims and has released 656 of those claims, now retained a total of 775
unpatented claims and 52 patents and mill sites (see Table under this Section).
Substantially all of the patented and unpatented claims to which the Issuer has
rights to acquire were located principally by an outside geologist in open,
unappropriated federal domain. The patented and unpatented lode and placer
mining claims were in numerous separate claim groups throughout Nevada.
Although several of the claims are contiguous, many are not, therefore the
Issuer has been required to conduct exploration and other field work to
satisfy the annual assessment work on the claims in numerous separate
locations. The Company has entered into 10% net profit agreements for
potential claims. In computing net profits, the Issuer is allowed to charge
all appropriate expenses and reserves including reclamation, interest on
payments, and any and all specific carrying cost, and assets including
accelerated depreciation on assets.
The validity of all unpatented mining claims, which constitutes most of the
Issuer's property holdings, is subject to inherent uncertainties. Apart from 52
patented lode claims in the Diamond-Silverado claim group, most of the
unpatented claims, if retained, will be leased or subleased from third
parties. Such claims are located on federal land pursuant to procedures
established by the General Mining Law of 1872, as amended. Unpatented claims,
when properly located, staked, and posted according to regulation, give the
claimant possessory rights only.
Possessory title to an unpatented claim, when validly initiated, endures
unless lost through abandonment due to failure to perform and file proof of
required annual assessment work, through failure to timely record conveyances,
or through a forfeiture which results from an adverse location made while the
prior location is in default with respect to the performance of annual
assessment work. Because many of these factors involve findings of fact,
title validity cannot be determined solely from an examination of the record.
The continuing validity of these claims is subject to many contingencies,
including the availability of land for location at the time the location was
made, the making of valid mineral discoveries within the boundary of each
claim compliance with all regulations, both state and federal, for locating
claims, the performance of annual assessment work of $100 per year per claim,
and the making of required annual and other filings with the Bureau of Land
Management ("BLM") and the county in which the claims are located. Failure
to perform annual assessment work and failure to make required filings
subjects the claimant to forfeiture of rights through valued subsequent
locations by others or through cancellation by the government agency involved.
Title to unpatented claims and other mining properties in the western
United States typically involves certain other inherent risks due to the
frequently ambiguous conveyancing history characteristics of such properties as
well as the frequently ambiguous or imprecise language of mineral leases,
agreements, and royalty obligations. The Issuer has not obtained title opinions
with respect to the subleased property and may acquire other claims without a
title opinion. If the Issuer should experience a failure of title, then costs
of action, acquisition, and initial investigation may be lost. The Issuer does
have an indemnification from the lessors for those subleased claims. However,
the Issuer does not know the sufficiency of such indemnity in the case of
failure of title.
The following chart sets forth the mining claims now retained by the
Issuer:
TABLE
EUROPEAN AMERICAN RESOURCES, INC. - MINING CLAIMS RETAINED AS OF
DECEMBER 31, 1997
Project Name Mining Approx. State of Nevada Number of
District County Claims
Bellehelen Bellehelen Nye 39
Ellendale Ellendale Nye 50
Diamond Silverado
(includes Dugout
Canyon & Robinson
Canyon) Eureka Eureka 293
(Plus 52
Patents &
Mill Sites)
Spring Valley Eureka Eureka 192
Mahogany Hills Eureka Eureka 28
Klondike Klondike Esmeralda 24
Ruby Hills Ruby Hills White Pine 64
Siegel Canyon Aurum White Pine 85
TOTAL 827
Furthermore, the Issuer has continued to seek a joint venture or a farm-out
arrangement on the claims, but has been unable to complete a transaction as of
this date. In connection with that determination, the Issuer has wrote off a
large percentage of claims which have been previously deferred as capitalized
exploration cost. During the year, geological results indicate that the Company
has no proven claims and no unproven claims, therefore the Company's claims are
probable. Since these claims are not proven, estimates of their potential value
are not available at this time.
Description of Securities
The Issuer has 250,000,000 shares of common stock authorized at a par
value of $.0001; and 25,000,000 shares of convertible preferred stock authorized
at a par value of $.0001, of which none are issued or outstanding.
<PAGE>
Competition
The Issuer faces competition in the mining field by companies in the same
sector of the business and in the same regions where the Issuer maintains its
claims. However, such competition, as fierce as it may be, does not directly
effect the operations or profitability of the Company as long as the claims are
maintained with the BLM and the Issuer proceeds with the acquisition or joint
venture agreements in order to actively mine such claims.
Employees
In 1996, the Issuer employed two persons in the capacity of on-site
managers in Eureka County, Nevada. In 1997 the Company employed 10 people
during the course of the year. Prior to 1996 the Company has been mostly
inactive employee compensation was kept at a minimum, including no
compensation for the Board of Directors and officers.
Item 2. Properties.
The Company maintained its offices at 1212 Court St., Suite C-2,
Clearwater, Florida 33756.
Item 3. Legal Proceedings.
The Company is not presently a party to any material litigation, other than
the claim receivable noted in Note 3 in the financial statements, nor to the
knowledge of management, is any material litigation threatened.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
<PAGE>
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters.
(a) Market Information. The Company's Common Stock is traded in the
over-the-counter market.
The following table sets forth the high and low bid quotations for each
quarter for the two-year period through December 31, 1997, based upon
information received from the National Quotation Bureau. Such quotations
reflect inter-dealer prices, and do not include retail mark-up, mark-down or
commission. They may not represent actual transactions.
High Bid Low Bid
1997 First Quarter $1.45 $1.29
Second Quarter $1.84 $1.62
Third Quarter $1.41 $1.28
Fourth Quarter $1.56 $1.47
1996 First Quarter $1.50 $1.25
Second Quarter $1.75 $1.25
Third Quarter $1.875 $ .375
Fourth Quarter $1.50 $ .625
(b) Shareholders. As of December 31, 1997, the Company had 11,403,008
shares of common stock outstanding, held by individual shareholders and
brokerage firms and/or clearing houses, holding the Company's common shares
in "street name" for their clients. The Company believes that there are
approximately 900 beneficial owners of its common stock.
(c) Dividends. The Company has not paid or declared any dividends upon its
Common Stock since its inception and does not contemplate or anticipate paying
any dividends upon its Common Stock in the foreseeable future.
Item 6. Management's Plan of Operations
The Company has for the most part in this fiscal year been concentrating
on geological efforts with its resource properties. The Company maintained its
patented and unpatented claims with the BLM and has negotiated to attract a
joint venture partner for all of its mining operations. As of this writing,
no such partner has materialized and the Company will continue to seek some
type of operational format for the mining of its claims.
<PAGE>
For the year ending December 31, 1998 the Company plans on continuing to
develop its resource properties in an effort to establish proven reserves. The
Company estimates the cost for 1998 to continue development of resource
properties will approximate from $600,000 to $2,600,000. These costs combined
with expected operating costs of $300,000 to $900,000, which may require the
Company to raise additional funds in order to satisfy its cash requirements.
The Company plans on supplementing its cash requirements by the sale of its
"Tailings", which are residual products from former mining efforts on the claim
properties, as permitted, which indicate value.
Inflation
The rate of inflation has had little impact on the Company's results of
operations and is expected to not have a significant impact on continuing
operations.
Item 7. Financial Statement and Supplementary Data.
See Item 13.
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
Effective with the filing of this Form 10-KSB, the Company determined to
change its accountants from Joseph J. Repko, CPA to Schuhalter, Coughlin &
Suozzo, LLC. No disagreement with the accountant caused such change.
<PAGE>
PART III
Item 9. Directors and Executive Officers of Registrant.
(a) Directors and Officers. The following schedule sets forth the name of
each director and officer of the Company and the nature of all positions, and
offices with the Company presently held by them. Each director and officer, has
been elected as of November 26, 1996, until the next annual meeting of
shareholders of the Company, or until his successor shall have been elected and
qualified.
The executive officers and directors of the Company are as follows:
Name Position Held
Michael D. Ogilvie President, Chairman & CEO
Dale M. Hendrick, P. Eng. Director (Resigned June 97)
Martin Sportschuetz Director
William O'Callaghan Director
Michael D. Ogilvie is an Investment Banker/Management Consultant, born in
Toronto, Ontario, educated at Wake Forest University and York University in
Toronto, majoring in business Administration. He has over 15 years of
experience as a management specialist and over 7 years directly involved in
corporate finance. Having worked with a number of major multi-national
corporations such as the Hudson Bay Company of Canada and Samsung of South
Korea, he has also worked with a number of Junior Gold Mining Companies in
Canada. Since 1981, as project team leader working with Canadian External
Affairs, as a trade developer, and as a private consultant, he has
demonstrated an excellent track record in corporate restructuring and as
financial advisor in a number of industry sectors.
Dale M. Hendrick, P. Eng., is a geologist, born in Ottawa, Ontario,
educated in Ottawa University and Queen's University, and is now the President
of Dale M. Hendrick and Associates. He has 41 years of experience in
exploration and mining having worked as a Mine Geologist at Rio Algom Mines
(Milliken) at Elliot Lake and Quemont Mines Ltd. At Noranda, P.Q. He joined
Herr Addison in 1964 and was Chief Geologist, Exploration from 1973 to 1988.
Since 1989 through Dale M. Hendrick and Associates, he has demonstrated an
excellent and strong track record as a corporate technical and financial
advisor to growth oriented junior resource companies on a global basis.
Martin Sportschuetz was born in Stuttgart, Germany where he spent most of
his life. Hi education and experience is centered around the study of German
Law, and general sales and marketing techniques, as well as the study of
economics. He has worked as a real estate developer and manager, and most of
his experience is in matters of currency trading and securities transactions,
in a foreign as well as a local environment. Mr. Sportschuetz' position on the
Board is concurrent with his long term investment in the Company and his
position as a 4.49% shareholder of the Company's securities.
Mr. William O'Callaghan has over 25 years of experience in the field of
public financing of public companies, structuring of equity positions, corporate
debt restructuring, and corporate financing. He has worked in major financial
institutions throughout his career, most of which are Wall Street based firms.
His position with the Board is instrumental in the areas of expansion and
acquisition in order to further the Company's scope of business and regenerate
its long due involvement in the mining business.
Item 10. Executive Compensation.
The following table sets forth the renumeration paid or accrued by the
Company during the fiscal year ending December 31, 1997, to each of its Chief
Executive Officer, its officers and directors, and to all officers and directors
as a group.
Cash and Cash-equivalent forms of
renumeration
Salaries, fees, Securities of
Name of Individual Capacities in director's fees, property
or Number of which served commission and insurance
Persons in Group bonuses benefits or
repayment of
personal
benefits
Michael G. Ogilvie Director/
President/Officer *1 497,000 0
Dale M. Hendrick Director
(resigned 6/6/97) 0 0
Martin Sportschuetz Director 0 0
William O'Callaghan Director *2 0 0
Officers and
Directors as
a group 497,000 0
*1 includes stock award of 400,000 shares valued at $400,000.
*2 Does not include 250,000 shares for services to an investment bank company
which is owned by a holding company to which he is a managing director of
750,000 shares valued at $525,000 and 357,143 shares valued at $250,000 to
another company he is a managing director, both of which are considered
affiliates of the Company.
Item 11. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth the number of Common Shares of the Company
owned by record, or to the knowledge of the Company, beneficially, by each
Director of the Company and by each person owning five percent or more of the
Company's outstanding shares, as of December 31, 1997.
Name and Address Amount and Nature of Percentage of
Beneficial Ownership Class Owned
Michael D. Ogilvie
Florida resident 400,000 President 3.51%
George Whitney 1,400,000 Shareholder 12.27%
All officers and directors and beneficial owners as a group own 1,800,000
or 15.78%% of the outstanding shares of the Company.
Item 12. Certain Relationships and Related Transactions
Amounts due to related party at December 31, 1997 represent cash and
expense advances by a company affiliated with a stockholder and director of the
Company totaling $134,093 after the reduction of $250,000 for 357,143 shares to
be issued. During 1997 the company paid $30,480 for interest on this
obligation.
During 1997, the Company retired 2,187,500 shares of common stock in exchange
for distribution rights valued at $437,500.
Additionally, in 1997 the Company sold 2,075,000 shares during the year in
private transactions for $1.00 a share, which, net of offering costs of
$109,925, generated net proceeds to the Company of $1,265,075 and a $700,000
stock subscription receivable, which was collected on March 4, 1998.
Also in 1997, the company issued 400,000 shares to the president in connection
with his employment agreement.
In 1997, the Company issued 250,000 shares to an affiliate for investment
banking services which were valued at $1.16 or $290,000.
In 1997, the Company issued 25,000 shares to a finder, valued at $1.00 per
share, with a like amount charged to additional paid in capital.
In March 1998, the Company issued 750,000 shares to an affiliate for exploration
and reactivation services performed through December 31, 1997 valued at $.70 per
share.<PAGE>
PART IV
Item 13. Exhibits, Financial Statement Schedules.
(1) The following financial statements are included herein at pages F-1
through F-17 as follows:
Independent Auditors' Report - Schuhalter, Coughlin & Suozzo, LLC1
Independent Auditor's Report - Joseph J. Repko, C.P.A. 2
Consolidated Balance Sheet, December 31, 1997 3
Consolidated Statements of Changes in Stockholders' Equity
on December 31, 1997 4
Consolidated Statement of Operations, for the Year Ended 1997 6
Consolidated Statement of Changes in Stockholders' Equity 7
Consolidated Statement of Cash Flows 8
Notes to Consolidated Financial Statements 9
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
European American Resources, Inc.
(Registrant)
By:
Michael D. Ogilvie, Chairman, President & CEO
Dated:
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
NAME CAPACITY
Michael Ogilvie Chairman, President & CEO
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
European American Resources, Inc.
(Registrant)
By: /s/ Michael D. Ogilvie
Michael D. Ogilvie, Chairman, President & CEO
Dated:
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
NAME CAPACITY
/s/ Michael Ogilvie
Michael Ogilvie Chairman, President & CEO
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
European American Resources, Inc.
1212 Court St., Suite C-2
Clearwater, Florida 33756
We have audited the accompanying balance sheet of European American Resources,
Inc. as of December 31, 1997 and the related statements of operations,
shareholders' equity (deficit), and cash flows for the year then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards.Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
from material misstatement. An audit includes examining, on a test basis,
evidence supporting the accounting principals used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide 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 European American Resources,
Inc. at December 31, 1997 and the results of their operations and cash flows
for the year then ended in conformity with generally accepted accounting
principles.
March 13, 1998
Raritan, New Jersey
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
European American Resources, Inc.
1212 Court St., C-2
Clearwater, Florida 33756
We have audited the accompanying balance sheet of European American Resources,
Inc. as of December 31, 1997 and the related statements of operations,
shareholders' equity (deficit), and cash flows for the year then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
from material misstatement. An audit includes examining, on a test basis,
evidence supporting the accounting principals used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide 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 European American Resources,
Inc. at December 31, 1997 and the results of their operations and cash flows
for the year then ended in conformity with generally accepted accounting
principles.
/s/ Schuhalter, Coughlin & Suozzo, LLC
Schuhalter, Coughlin & Suozzo, LLC
March 13, 1998
Raritan, New Jersey
<PAGE>
INDEPENDENT AUDITOR'S REPORT
Board of Directors
EUROPEAN AMERICAN RESOURCES, INC.
1212 Court St., Suite C-2
Clearwater, FL 33756
I have audited the Statement of operations, shareholders equity, and cash flows
for the year ended December 31, 1996 of European American Resources, Inc..
These financial statements are the responsibility of the Company's management.
My responsibility is to express an opinion on these financial statements
based on my audits.
I conducted my audits in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free from material
misstatement. An audit includes examining, on a test basis, evidence supporting
the accounting principals used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. I believe that
my audits provide a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the results of operations, changes in shareholders equity and
cash flows of European American Resources, Inc. for the ended December 31, 1996
in conformity with generally accepted accounting principles.
March 28, 1997
Joseph J. Repko, C.P.A.
<PAGE>
INDEPENDENT AUDITOR'S REPORT
Board of Directors
EUROPEAN AMERICAN RESOURCES, INC.
1212 Court St., Suite C-2
Clearwater, FL 33756
I have audited the Statement of operations, shareholders equity, and cash flows
for the year ended December 31, 1996 of European American Resources, Inc..
These financial statements are the responsibility of the Company's management.
My responsibility is to express an opinion on these financial statements
based on my audits.
I conducted my audits in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free from material
misstatement. An audit includes examining, on a test basis, evidence supporting
the accounting principals used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. I believe that
my audits provide a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the results of operations, changes in shareholders equity and
cash flows of European American Resources, Inc. for the ended December 31, 1996
in conformity with generally accepted accounting principles.
March 28, 1997
/s/ Joseph J. Repko, C.P.A.
Joseph J. Repko, C.P.A.
<PAGE>
European American Resources, Inc.
Consolidated Balance Sheet
December 31, 1997
Assets
Current Assets
Cash and cash equivalents $ 646,306
Subscription receivable 700,000
Prepaid rent on mining claims 55,200
Other Current Assets 23,500
Total Current Assets 1,425,006
Resource properties, at cost, net of accumulated
depreciation of $30,211 2,019,801
Property and equipment, net 27,350
Other Assets
Claim Receivable, net of valuation reserve of $803,792 482,000
Other Assets 9,353
Total Other Assets 491,353
Total Assets $3,963,510
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable and accrued expenses $ 363,403
Note Payable to Related Party 134,093
Total Current Liabilities 497,496
Distribution Rights Payable 437,500
Stockholders' Equity
Preferred stock; $.0001 par value, 25,000,000 shares
authorized, no shares issued or outstanding -
Common stock; $.0001 par value, 250,000,000 shares
authorized, 11,403,008 and 9,733,365 shares issued
and outstanding 1,140
Additional paid in capital 9,464,773
Deficit accumulated during the exploration stage (6,437,399)
Total Stockholders' Equity 3,028,514
Total Liabilities and Stockholders' Equity $3,963,510
<PAGE>
European American Resources, Inc.
Consolidated Statements of Operations
For the Years Ended
December 31,
1997 1996
Revenue
Sales $ - $ -
Operating Expenses
Operating costs 78,300 77,500
General and administration 1,272,164 38,363
Depreciation and amortization 3,436 923
Total Operating Expenses 1,353,900 116,786
Loss from operations (1,353,900) (116,786)
Other Income (Expense)
Interest income 4,050 -
Interest expense (30,480) -
Total other Income (Expense) (26,430) -
Loss before income taxes (1,380,330) (116,786)
Income tax expense - -
Net Loss $(1,380,330) $(116,786)
Basic Loss Per Common Share $ (.14) $ (.012)
Average Common Shares Outstanding 9,581,803 9,733,365
<PAGE>
European American Resources, Inc.
Consolidated Statement of Stockholders' Equity
From Inception on July 6, 1987 Through December 31, 1997
Deficit
Common Stock Accumulated
Additional During The
Shares Amount Paid In Exploration
Capital Stage
Shares
Amount
Balance, July 6, 1987 - $ - $ - $ -
Shares issued to officers
and directors of the
Company and other
individuals, for cash July
through September, 1997 1,000,000 100 371,783 -
Net Loss for the period
ended December 31, 1987 - - - (95,060)
Balance, December 31, 1987 1,000,000 100 371,783 (95,060)
Effect of recapitalization
of Paradise Valley Mining,
Inc. on March 11, 1988 1,000,000 100 200,418 -
Shares sold by private
placement for cash at $1.00
per share in July, 1988,
net of $4,808 in offering
costs 151,000 15 146,177 -
Shares sold by private
placement for cash at $0.33
per share in October, 1988 150,000 15 49,985 -
Net loss for the year ended
December 31, 1988 - - - (275,547)
Balance, December 31, 1988 2,301,000 230 768,363 (370,607)
Shares sold by private
placement for cash at
$10.00 per share during
April through June 1989,
net of $518,576 in offering
costs 429,374 43 3,774,785 -
Shares issued in payment of
interest at $10.00 per
share during April and May
1989 2,991 - 29,918 -
Net loss for the year ended
December 31, 1989 - - - (463,583)
Balance, December 31, 1989 2,733,365 $ 273 $4,573,066 $ (834,190)
<PAGE>
European American Resources, Inc.
Consolidated Statement of Stockholders' Equity
From Inception on July 6, 1987 Through December 31, 1997
Deficit
Common Stock Accumulated
Additional During The
Paid In Exploration
Shares Amount Capital Stage
Net loss for the year ended
December 31, 1991 - $ - $ - $(1,620,689)
Balance, December 31, 1990 2,733,365 273 4,573,066 (2,454,879)
Net loss for the year ended
December 31, 1991 - - - (477,967)
Balance, December 31, 1991 2,733,365 273 4,573,066 (2,932,846)
Shares sold by private
placement for cash at
$.2714 per share during
September, 1992 7,000,000 700 1,899,300 -
Net loss for the year ended
December 31, 1992 - - - (694,935)
Balance, December 31, 1992 9,733,365 973 6,472,366 (3,627,781)
Net loss for the year ended
December 31, 1993 - - - (730,281)
Balance, December 31, 1993 9,733,365 973 6,472,366 (4,358,062)
Net loss for the year ended
December 31, 1994 - - - (332,383)
Balance, December 31, 1994 9,733,365 973 6,472,366 (4,690,445)
Net loss for the year ended
December 31, 1995 - - - (249,838)
Balance, December 31, 1995 9,733,363 973 6,472,366 (4,940,283)
Net loss for the year ended
December 31, 1996 - - - (116,786)
Balance, December 31, 1996 9,733,365 $ 973 $6,472,366 $ 5,057,069
<PAGE>
European American Resources, Inc.
Consolidated Statement of Stockholders' Equity
From Inception on July 6, 1987 Through December 31, 1997
Deficit
Common Stock Accumulated
Additional During the
Paid In Exploration
Shares Amount Capital Stage
Retirement of shares for
distribution rights (2,187,500) $(219) $ (437,281) $ -
Shares sold for $1.00 per
share in private
placements during the
year, net of $109,925
offering costs and
including a $700,000
stock subscription
received on March 4, 1998 2,075,000 208 1,964,867 -
Shares for capital and
market making services,
including 250,000 shares
valued at $1.16 per share
to a related party and
25,000 shares valued at
$1.00 per share with the
25,000 shares charged to
offering costs 275,000 27 289,973 -
Shares issued for services
in connection with the
employment agreement of
the president valued at
$1.00 400,000 40 399,960 -
Shares to be issued for
cancellation of debt to
related party, valued at
$.70 per share 357,143 27 249,963 -
Shares to be issued for
exploration and
reactivation services
rendered through December
31, 1997 by a related
party, valued at $.70 per
share 750,000 75 524,925 -
Net loss for the year
ended December 31, 1997 - - - (1,380,330)
Balance, December 31, 199711,403,008 $1,140 $9,464,773 $(6,437,399)
<PAGE>
European American Resources, Inc.
Consolidated Statements of Cash Flows
Increase (Decrease) in Cash and Cash Equivalents
For the Year Ended
December 31,
1997 1996
Cash Flows Operating Activities
Net loss $(1,380,330) $ (116,785)
Adjustments to reconcile net loss to net cash
provided (used) by operating activities:
Depreciation and amortization 3,436 923
Issuance of common stock charged to expense 840,000 -
Changes in assets and liabilities:
(Increase) decrease in prepaid rent (3,534) -
Increase in accounts payable and accrued
expenses 314,827 -
Increase in other assets (23,500) -
Total Adjustments 1,131,229 923
Net Cash Used by Operating Activities (240,101) (115,863)
Cash Flows to Investing Activities
Proceeds from issuance of common stock, net
of offering costs of $109,925 1,265,075 -
Resource properties (608,112) -
Purchase of fixed assets (30,000) -
Net Cash Provided By Investing Activities 626,923 -
Cash Flows from Financing Activities
Proceeds from issuance of notes payable to
related party 267,493 116,600
Net Cash Provided By Financing Activities 267,493 116,600
Net Increase in Cash and Cash Equivalents 645,355 738
Cash and Cash Equivalents at Beginning of Period 951 213
Cash and Cash Equivalents at End of Period $ 646,306 $ 951
NOTE 1 - BASIS OF FINANCIAL STATEMENT PRESENTATION
The Company was incorporated in the state of Delaware on July 6, 1987.
Since inception, the Company acquired mining rights to approximately 6,700
patented, unpatented lode, mill sites and placer claims on certain
properties located throughout the state of Nevada. Certain of these
rights were acquired by agreement to pay an aggregate total royalty based
upon various percentages of the net profits delivered from the properties
computed by a predefined formula. Since acquisition of these properties,
the Company has not commenced planned principal operations and accordingly
has been considered an exploratory stage company as defined in SFAS No. 7
and Security and Exchange Commission regulations.
Property Rights, Exploration and Development Costs
The Company had incurred over $2,661,000 which after adjusting for claims
the Company no longer controlled and geological determinations, was
adjusted to $1,036,690 by December 31, 1995. These represented direct
exploratory activity costs since acquisition of the right to these mining
properties. In accounting for these costs the Company selected an
accounting policy which capitalizes exploratory costs rather than
expensing them as incurred. Amortization of these costs is to be
calculated by the units of production method based upon proven or probable
reserves. Costs incurred on properties later determined to be
unproductive are expensed by the Company as that determination is made.
As of December 31, 1997, the Company has $2,019,801 in deferred
exploration and development costs. If these remaining costs had been
expensed rather than capitalized, the accumulated deficit at December 31,
1997 would have been $8,457,200 rather than $6,437,399.
The Company has been in the exploration stage to determine the amount of
proven or probable reserves of its resource properties, if any. During
1997, sufficient testing was completed to indicate the Company's reserves
are probable and in excess of the amounts capitalized, yet since they are
not proven, estimates of their potential value are not available at this
time.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principals of Consolidation
The accompanying consolidated financial statements include the accounts of
European American Resources, Inc. (Formerly Merlin Mining Company) and
Paradise Valley Mining, Inc. All significant intercompany accounts and
transactions have been eliminated in consolidation.
Property and Equipment
Property and equipment is recorded at cost. Depreciation is computed for
financial statement purposes using the straight line method over the
estimated useful lives of the related assets. The useful related lives of
property and equipment range from 3 to 5 years. For federal income tax
purposes, depreciation is computed under the modified acceleration cost
recovery system.
<PAGE>
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES- (Continued)
Income Taxes
Statement of Financial Accounting Standards No. 109 "Accounting for Income
Taxes" was issued in early 1992, and requires an assets and liability
approach for accounting for income taxes. This method was adopted by the
Company for the year ended December 31, 1993 and thereafter. No deferred
tax benefit has been reported for the Company's net operating loss carry
forward for purposes of FASB 109, due to a reasonable chance the Company
may not fully utilize the benefit thereof. Accordingly, the deferred tax
benefit has been offset by a valuation allowance in the same amount.
Statement of Cash Flows
For the purposes of the statement of cash flows, the Company considers all
highly liquid debt investments purchased with a maturity of three months
or less to be cash equivalents.
The following items represent a schedule of non-cash investing and
financing activities:
1996 1995
Issuance of common stock in exchange
for the cancellation of indebtedness $250,000 $0
Issuance of common stock for services
relating to capitalized resource properties $375,000 $0
Operating activities include interest paid of $30,480 and $0 for the
years ended December 31, 1997 and 1996 respectively.
Loss per Common Share
For the year ending December 31, 1997, and all periods presented
thereafter, the Company adopted FASB 128 to compute earnings per share.
Basic EPS excludes dilution and is computed by dividing income available
to common stockholders by the weighted-average number of common shares
outstanding for the period. Diluted EPS reflects the potential dilution
that could occur if securities or other contracts to issue common stock
were exercised or converted into common stock or resulted in the issuance
of common stock that then shared in the earnings of the entity.
Dividends
The Company has not paid any dividends and any dividends which might be
paid in the future will depend upon the financial requirements of the
Company and other relevant factors.
Reclassification
The financial statement presented for 1996 have been reclassified to
conform to the current year's presentation.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES- (Continued)
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenue and expense
during the reporting period. Actual results could differ from those
estimates. These estimates include property and equipment, depreciation,
the carrying value of resource properties and distribution rights payable
Stock-Based Compensation
The Company accounts for stock based compensation in accordance with SFAS
No. 123, "Accounting for "Stock-Based Compensation," which permits
entities to recognize as expense over the vesting period the fair value of
all stock-based awards on the date of grant. Alternatively, SFAS No. 123
also allows entities to continue to apply the provisions of the Accounting
Principles Board (APB) Opinion No. 25 and provide pro forma net income and
pro forma earnings per share disclosures for employee stock option grants
made in 1995 and future years as if the fair value-based method, as
defined in SFAS No. 123, had been applied. The Company has elected to
continue to apply the provisions of APB Opinion No. 25 and provide the pro
forma disclosure required by SFAS No. 123. As such, compensation expense
is generally recorded on the date of grant only if the current market
price of the underlying stock exceeded the exercise price.
Resource properties
The Company records its interest in resource properties at cost.
Producing properties will be amortized on the unit-of-production basis.
The ultimate recovery of costs associated with non-producing properties is
dependent upon the discovery and development of economic reserves or the
profitable sale of the properties. If a property is abandoned or sold,
the proceeds on the sale, less the cost of the property and any related
deferred expenditures, will be included in operations at that time. The
Company periodically reviews its mineral properties to ascertain whether
an impairment in value has occurred. Where a property is considered
uneconomic it is written off. During 1997, the Company had no proven
claims and the rights to 827 claims, which are considered probable.
Income Taxes
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective
tax bases and operating loss carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are
expected to be realized or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period
that includes the enactment date. Valuation allowances are established
when necessary to reduce deferred tax assets to the amounts expected to be
realized.
Fair Value of Financial Instruments
SFAS No. 107, "Disclosure About Fair Value of Financial Instruments",
requires the determination of fair value for certain of the Company's
assets and liabilities. The Company estimates that the carrying values of
its financial instruments approximate fair value.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES- (Continued)
Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of
In accordance with SFAS No. 121 "Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to Be Disposed Of," the Company
reviews for the impairment of long-lived assets and certain identifiable
intangibles to be held and used by the Company whenever events and changes
in circumstances indicate that the carrying value of an asset may not be
recoverable.
Other Accounting Pronouncements
The FASB has issued SFAS No. 130, Reporting Comprehensive Income effective
for fiscal years beginning after December 15, 1997, which establishes
standards for the reporting of comprehensive income and its components.
The Company believes that the effect of the adoption of SFAS No. 130 will
not be material to its financial position or results of operations.
NOTE 3 - MANAGED FOREIGN INVESTMENTS AND CLAIM RECEIVABLE
The Company had previously entered into a managed investment agreement
with Schwabische Finanz-und Unternehmensberatung Gmbh (SFU). The
investment consisted of USD $2,250,000 which was being managed by SFU and
was being held in accounts at Dominick & Dominick AG. The agreement
commenced on September 25, 1992 and the funds were restricted from
withdrawal until October 1993. SFU had been notified of the Company's
intent to withdraw the funds and had indicated the funds would be wire
transferred in October 1993. SFU defaulted on its promises and did not
liquidate the account as instructed. SFU sent various payments in partial
liquidation totaling US $964,208 which payments were received sporadically
through December 22, 1995. Since 1995, the company increased its effort to
obtain the return of its investment, received confirmation from the
fiduciary of SFU. Subsequently the fiduciary representation has been
unsupported and the company believes it was fraudulent and no underlying
funds from the original investment remain under his control. The company
has filed a claim under German law, against the fiduciary, for "fraudulent
statements" which holds German attorneys accountable for certain
representations as well as requires minimum and annually adjusted amounts
of liability insurance for such claims as a requirement for licensure. The
company believes it will collect up to approximately $1,286,000, which
represents the net amount of the original investment which has not been
returned to the company. Management has also classified this claim as a
long term asset and reserved an amount for both the recoverability and
the costs associated with the claim. The possibility does exist that the
company may not realize any amount should they not prevail in their action
against the attorney. The company's counsel has advised management that it
is probable they will receive an amount greater than the net carrying
value remaining in the financial statements. The last records obtained
which showed the funds intact were in 1993 and were invested with Dominick
and Dominick AG. Management has determined to charge the expense and
record the corresponding reserve in the amount of approximately $804,000
to 1993, the earliest period when the Company actually received detailed
records and statements of its investments. This is consistent with the
maturity date of October, 1993 of the original investment agreement.
The Company will record as income any amounts recovered, net of expenses,
above the remaining carrying value of $ 482,000, only in such period they
were actually realized, yet record as additional expense any further
reserve should the likelihood of recovery diminish.
NOTE 4 - PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
December 31, 1997
Automobiles and trucks $ 49,740
Mining equipment 6,889
Office equipment 932
57,561
Less accumulated depreciation (30,211)
$ 27,350
NOTE 5 - INCOME TAXES
No provision for income taxes have been made for the periods presented as
the Company incurred losses during those periods.
Deferred taxes consist of the following at December 31, 1997:
Total deferred tax assets $1,293,360
Less: Valuation allowance (1,293,360)
Net deferred tax assets $ 0
Deferred tax assets are attributable to available net operating loss
carryforwards. The valuation allowance was increased by $171,360 during
the year.
Current and deferred tax expense has been specifically calculated
individually to each member of the consolidated group as if it were a
separate taxpayer.
The Company has net operating loss carry forwards of approximately
$3,804,000 which expires in various years through the year 2010. The
amount of the operating loss carry forwards may be subject to annual
limitations limited by IRS regulations as a result of the sale of a
majority interest.
NOTE 6 - RELATED PARTY TRANSACTIONS
On September 25, 1992, the Company sold 7,00,000 shares of its restricted
common stock for $1,900,000 to a foreign investor, Trent, Ltd.
Represented by Jochen A Brenner. The shares issued to Trent represent
approximately 71% of the issued and outstanding common stock of the
Company. In addition, the Company also sold to Trent a $500,000
convertible debenture bearing interest at 8%. By reason of the sale of
the common stock and convertible, the Company was controlled by Trent at
that time. The accompanying financial statements include only the
accounts of the Company and its subsidiaries and are not consolidated with
respect to Trent nor do they include any of the accounts of Trent except
as noted below. The proceeds from the stock sale and debenture sale has
remained in the control of Mr. Brenner and were invested in his name or
the names of other entities under his control in certain pooled
investments which invest in foreign exchange forward contracts. All
transactions were to be made at the risk of Mr. Brenner, relieving the
investment company from any and all liability. The invested funds were
restricted as to withdrawal until October, 1993. While the invested funds
are in the sole control of Mr. Brenner, he had entered into an agreement
with the Company that he would proceed to liquidate the foreign
NOTE 6 - RELATED PARTY TRANSACTIONS - (Continued)
investments and deliver the funds to the United States for use by the
Company beginning October 1993. In 1996 the Company determined this
debenture should be written off in connection with the managed foreign
investments and claim receivable, discussed in Note 3, retroactively to
December 31, 1993.
The Company received all working capital through September 30, 1987 from
stockholder/officers. These parties agreed to have all payments through
September 30, 1987 amounting to $371,883 credited to equity in exchange
for 10,000,000 shares of common stock.
Pursuant to the private placement of stock, the Company paid stock
offering fees to related parties, including $30,000 paid to Merlin
Equities, Inc., a broker-dealer and an affiliate of the president, at that
time, of the Company. Canopus, Ltd., a London-based entity and principal
shareholder of the Company was paid $300,000. A total of $418,000 was
paid to two officers of Harrier, Inc., a public corporation, for whom an
officer of the Company served as financial consultant in raising equity
funding.
The Company had previously intended to complete a drilling venture with
Entrex in which certain officer, stockholders, and directors of the
Company also served as officer of Entrex but held no ownership interest in
Entrex. The agreement was eventually canceled. During 1993 and 1992, the
Company expended $5,372 and $20,003 on the matter. None of the Company's
officers, stockholders or directors received any portion of these funds.
In 1997, the Company leased office space from an affiliate on a month to
month basis via the assumption of the affiliates lease to a third party
from September, 1997 through December 31, 1997. Rent expense paid to the
third party was $4,687.
In 1997 the Company issued 250,000 shares to an affiliate for investment
banking services valued at $290,000.
During 1997, the Company signed a note to a related party bearing interest
of 11%. Interest charged to expense for this note in 1997 was $30,480.In
March 1998, the Company issued 357,143 shares, valued at $250,000, in
cancellation of $250,000 of the note due to the related party. At December
31, 1997 $134,093 remained outstanding on this note. The Company expects
to repay this amount in the first quarter 1998. The Company also issued
750,000 shares valued at $525,000, which are assignable, for exploration
and reactivation services performed through December 31, 1997.
NOTE 7 - COMMITMENTS
In order to maintain the Company's current unpatented mineral lease claims
[See Note 1], the Company must pay an annual rental fee of $100 per claim
to the Bureau of Land Management. The fees have been paid through August
31, 1998. During 1997, some of these properties were "overstaked" by a
third party and the Company has won a stay of decision from the finding of
the Bureau of Land Management(BLM), which has caused this overstaking,
pending the review of the Interior Board of Land Appeals(IBLA) relating to
this claim. The Company does not expect the result of this review,
regardless of outcome, to have an adverse effect on the carrying value of
NOTE 7 - COMMITMENTS - (Continued)
the resource properties.
On March 19, 1997 the Company entered into an option to purchase the
previously leased portfolio from the original lessors of unpatented claims
and owner of the patented claims. The new agreement gives the Company all
patent and unpatented claims for the purchase price of 100,000 shares of
the Company's common stock subject to their restricted legend, and certain
accelerated payments under a consulting agreement and further 10% Net
Smelter Return (NSR) less applicable expenses up to $100,000,000 million
dollars from the properties. The Company has notified the option seller
the Company will exercise the patented claim portion of this option in
1998. Additionally, on March 19, 1997 the Company entered into a forty-
eight (48) month consulting agreement with the geological company owned by
the original owner of the patented claims with a monthly retainer of
$4,000 and a minimum $192,000. During 1997 $36,000 was paid under this
agreement for geological efforts. When the Company exercises its option in
1998 certain payments remaining under this agreement may be accelerated.
The Company, in connection with the retirement of 2,187,500 shares entered
into net smelting agreements for up to $4,375,000 with former shareholders
in exchange for their shares. The Company charged $437,500 to common
stock and additional paid in capital as this represents the net estimated
value of the distribution rights based upon the anticipated deferred
nature of when such payments, if any, will be made in relation to the time
of the exchange.
On May 8, 1997, the Company entered into an employment agreement with the
president for a period of seven (7) years, which provides for the
following:
a) annual cash compensation of $144,000, subject to a ten percent (10%)
increase per year and such other increases as the Board of Directors may
determine from time to time at its sole discretion.
b) Employee stock bonuses, including 400,000 shares of common stock,
issued upon signing, subject to the restrictions of Rule 144 and 210,000
shares of common stock to be issued on each anniversary for the first,
second, third and fourth yearly anniversary of the contract.
c) Stock options entitling the president to purchase:
1) 200,000 shares at $5.00 per share prior to 1999
2) 200,000 shares at $7.00 per share prior to 2001
3) 300,000 shares at $8.00 per share prior to 2004
4) 300,000 shares at $8.50 per share prior to 2005
<PAGE>
NOTE 7 - COMMITMENTS - (Continued)
The Company's mining and exploration activities are subject to various
federal, state and local laws and regulations governing the protection of
the environment. These laws and regulations are continually changing and
generally becoming more restrictive. The Company conducts its operation so
as to protect the public health and environment and believes its
operations are materially in compliance with all applicable laws and
regulations. The Company has made, and expects to make in the future,
expenditures to comply with such laws and regulations.
The Company is from time to time involved in various claims, legal
proceedings and complaints arising in the ordinary course of business. It
does not believe that any pending or threatened proceeding related or
other matters, or any amount which it may be required to pay by reason
thereof, will have a material adverse effect on the financial condition or
future results of operations of the Company.
NOTE 8 - COMMON STOCK
During 1997, the Company retired 2,187,500 shares of common stock in
exchange for distribution rights, valued at $437,500.
Additionally, in 1997 the Company sold 2,075,000 shares during the year in
exempt transactions for $1.00 a share, which, net of offering costs of
$109,925, generated net proceeds to the Company of $1,265,075 and a
$700,000 stock subscription receivable, which was collected on March 4,
1998.
Also in 1997, the Company issued 400,000 shares to the president in
connection with his employment agreement as discussed in Note 7. At
December 31, 1997 resource properties were increased $200,000 and $200,000
was charged to the statement of operations for the year ended December 31,
1997. These shares were valued at $1.00, which represented the most
recent selling price of restricted shares.
In 1997, the Company issued 250,000 shares to an affiliate for investment
banking services which were valued at $1.16 or $290,000, which represented
the same proportionate discount for recent sales of restricted shares to
the market price at the time of the transaction.
In 1997, the Company issued 25,000 shares to a finder, valued at $1,00 per
share, with a like amount charged to additional paid in capital. These
shares were valued at the most recent selling price of restricted shares.
In March, 1998, the Company issued 357,143 shares valued at $.70 in
cancellation of $250,000 debt with an affiliate. The shares outstanding
and the amounts "Due to Related Party" at December 31, 1997 have been
adjusted to reflect his transaction. The value ascribed to these shares
was adjusted for the same proportionate discount for restricted shares in
relation to the market price at the time of the transaction.
In March 1998, the Company issued 750,000 shares to an affiliate for
exploration and reactivation services performed through December 31, 1997
valued at $.70 per share or $525,000. At December 31, 1997 resource
properties were increased $175,000 and $350,000 was charged to general and
administrative expenses in the statement of operations for the year ended
December 31, 1997. The value ascribed to these shares was adjusted for
the same proportionate discount for restricted shares in relation to the
market price at the time of the transaction.
NOTE 8 - COMMON STOCK - (Continued)
Reserved Shares
Pursuant to the employee agreement with the president discussed in Note 7,
840,000 shares of common stock may be granted as stock bonuses in
increments of 210,000 shares per yearly anniversary, commencing in May of
1998. Additionally the agreement granted options to purchase up to 1
million shares of common stock at various prices ranging from $5.00 to
$8.50 through the year 2005.
The Company granted options to an accredited investor to purchase, at $.50
per share, up to 1,225,000 shares of restricted common stock. The option
period begins on September 3, 1999 and runs through September 3, 2000 or
sooner, should the Company sell the control of either its 52 patented
claims or a majority of its outstanding common stock to a single
purchaser.
The Company also granted an accredited investment firm options to
purchase, also at $.50 per share up to 675,000 shares of restricted common
stock. The option period begins on September 3, 1999 and runs through
September 3, 2000 or sooner, should the Company sell the control of either
its 52 patented claims or a majority of its outstanding common stock to a
single purchaser.
NOTE 9 - SUBSEQUENT EVENTS
In March 1998, the Company notified the seller of the option in Note 7,
for 52 patented claims they will exercise this portion of the option in
1998.
On March 4, 1998 the Company received $700,000 for payment in full on the
stock subscription.
On March 13, 1998 and March 17, 1998 the Company authorized the issuance
of 357,143 and 750,000 shares as discussed in Note 6 and Note 9.
NOTE 10 - FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair values of the Company's financial instruments as of
December 31, 1997, are as follows:
1997
Carrying Fair
Amount Value
Assets:
Cash and Equivalents $646,306 $646,306
Subscriptions receivable $700,000 $700,000
Liabilities:
Note payable to related party $134,093 $134,093
Distribution rights payable $437,500 $437,500
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 646,306
<SECURITIES> 0
<RECEIVABLES> 700,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,425,006
<PP&E> 27,350
<DEPRECIATION> 0
<TOTAL-ASSETS> 3,963,510
<CURRENT-LIABILITIES> 497,496
<BONDS> 0
0
0
<COMMON> 1,140
<OTHER-SE> 3,027,374
<TOTAL-LIABILITY-AND-EQUITY> 3,963,510
<SALES> 0
<TOTAL-REVENUES> 4,050
<CGS> 0
<TOTAL-COSTS> 78,300
<OTHER-EXPENSES> 1,275,600
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 30,480
<INCOME-PRETAX> (1,380,330)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,380,330)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,380,330)
<EPS-PRIMARY> (.14)
<EPS-DILUTED> 0
</TABLE>
