FORM 10-KSB\A
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, 1996
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 12/31/95 to 12/31/96
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 No X
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.
[ ]
State the Issuer's revenues from its most recent fiscal year. $0.00. The
aggregate market value of the Issuer's voting stock held by non affiliates,
computed at the average bid price of $1.40 per share on December 30, 1996, was
approximately $13,626,711.
As of December 31, 1996, the Issuer had outstanding 9,733,365 shares of its
common stock, 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 801
unpatented claims and 65 patents and mill sites (see Table under this Section).
Substantially all of the unpatented claims to which the Issuer has rights to
acquire were located principally by Gol-Sil 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 arrangement with Gol-Sil is that the
Issuer will pay Gol-Sil and its predecessors in interest an aggregate total
royalty equal to 50% of the net profits delivered form the properties payable in
cash or in kind. 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, including accelerated appreciation and
assets. The Issuer has not had any production to date with respect to these
claims and therefore, no amounts have been paid to Gol-Sil other than amounts
for annual contracted assessment work on a number of the claims.
The validity of all unpatented mining claims, which will constitute most
of the Issuer's property holdings, is subject to inherent uncertainties. Apart
from 65 patented lode claims in the Diamond-Silverado claim group, most of the
unpatented claims, if retained, will be leased or subleased form 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 wad 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
Project Name Mining Approx. State of Nevada Number of
District County Claims
Bellehelen Bellehelen Nye 40
Ellendale Ellendale Nye 51
Diamond Silverado Eureka Eureka 293
(includes Dugout (Plus 65
Canyon & Robinson Patents &
Canyon) Eureka Mill Sites)
Spring Valley Eureka 192
Mahogany Hills Eureka Eureka 28
Klondike Klondike Esmeralda 47
Ruby Hills Ruby Hills White Pine 65
Siegel Canyon Aurum White Pine 85
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.
Public Offering of Securities
There has been no issuance of stock of the Issuer during the fiscal year
represented in this Form 10-KSB and since the Issuer's last filed Form 10-K as
of December 31, 1992. The number of outstanding securities remain constant at
9,733,365. There are no options, warrants, any other class of securities issued
or outstanding. 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.
Competition
The Issuer faces competition in the mining field by companies in the same
sector of 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
The Issuer employed two persons in the capacity of on-site managers in
Eureka County, Nevada, during the period referenced herein. Since 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 120 Broadway, Suite #3660, New York,
N.Y. 10271.
Item 3. Legal Proceedings.
The Company is not presently a party to any material litigation 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, 1996, 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
1996 First Quarter $1.50 $1.25
Second Quarter $1.75 $1.25
Third Quarter $1.875 $ .375
Fourth Quarter $1.50 $ .625
1995 First Quarter $ .50 $ .25
Second Quarter $ .50 $ .375
Third Quarter $ .375 $ .25
Fourth Quarter $ .25 $ .125
(b) Shareholders. As of December 31, 1996, the Company had 9,733,365
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 800 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 inactive. The
only exceptions were that the Company maintained its patented and unpatented
claims with the BLM and has proceeded 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. It is anticipated in the near future there will be a
management re-organization with plans to re-fund the Company through some type
of private placement.
For the year ending December 31, 1997 the Company plans on continuing to
develop its resource properties in an effort to establish either proven or
probable reserves. The Company estimates the cost for 1997 to continue
development of resource properties will approximate $600,000. These costs
combined with expected operating costs of $300,000 will require the Company to
raise additional funds in order to satisfy its cash requirements. The Company
plans on satisfying its cash requirements by the sale of its common stock and
interim advances from "related party".
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 the filing of this Form 10-KSB, the Company determined to change
its accountants from Peterson, Siler & Stevenson, P.C., to Joseph J. Repko, CPA.
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
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 tem 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 not 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 Sportscheutz 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. Sportscheutz' 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
securities trading, management of public companies, structuring of equity
positions, corporate debt restructuring, and corporate financing. A graduate of
Penn State University, 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, 1996, 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
Securities of
property
insurance
Salaries, fees, benefits or
Name of Individual director's fees, repayment of
or Number of Capacities in commission and personal
Persons in Group which served bonuses benefits
Michael G. Ogilvie Director/Officer 14,000 0
Dale M. Hendrick Director 0 0
Martin Sportschuetz Director 0 0
William O'Callaghan Director 0 0
Officers and
Directors as a
group 14,000 0
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, 1996.
Name and Address Amount and Nature of Percentage of
Beneficial Ownership Class Owned
Martin Sportschuetz 437,500 Director 4.49%
All officers and directors as a group own 437,500 or 4.49% of the
outstanding shares of the Company.
Item 12 Certain Relationships and Related Transactions
Amounts due to related party at December 31, 1996 represent cash and
expense advances by a company affiliated with a stockholder and director of the
Company totaling $116,600. These advances bear no interest and have no specific
repayment terms.
<PAGE>
PART IV
Item 13. Exhibits, Financial Statement Schedules.
(1) The following financial statements are included herein at pages F-1
through F-5 as follows:
Pages
Auditor's Report F-1
Balance Sheets F-2
Statements of Operations F-3
Statements of Cash Flows F-6
Notes to Financial Statements F-7
<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 Ogilvie, Chairman, President & CEO
Dated: March 28, 1997
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 Ogilvie
Michael Ogilvie, Chairman, President & CEO
Dated: March 28, 1997
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>
EUROPEAN AMERICAN RESOURCES, INC.
(Formerly Merlin Mining Company)
(An Exploration Stage Company)
CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996
<PAGE>
EUROPEAN AMERICAN RESOURCES, INC.
(Formerly Merlin Mining Company)
(An Exploration Stage Company)
CONSOLIDATED FINANCIAL STATEMENTS
Table of Contents
Independent Auditor's Report 1
Consolidated Balance Sheets, December 31, 1996 and 1995 2
Consolidated Statements of Operations, for the Years
Ended 1996, 1995 and from inception on July 6, 1987
through December 31, 1996 3
Consolidated Statements of Stockholders' Equity, from
inception on July 6, 1987 through December 31, 1996 4 - 5
Consolidated Statements of Cash Flows, for the years ended
December 31, 1996, 1995 6
Notes to Consolidated Financial Statements 7 - 12
<PAGE>
INDEPENDENT AUDITOR'S REPORT
Board of Directors
EUROPEAN AMERICAN RESOURCES, INC.
(Formerly Merlin Mining Company)
2124 Broadway, Suite #336
New York, New York 10023
I have audited the accompanying balance sheets of European American Resources,
Inc. (Formerly Merlin Mining Company) as of December 31, 1996 and 1995 and the
related statements of operations, shareholders equity (deficit), and cash flows
for the years then ended. 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 financial position of European American Resources, Inc.
(Formerly Merlin Mining Company) at December 31, 1996 and 1995, and the results
of their operations and cash flows for the years then ended in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that European
American Resources,Inc.(Formerly Merlin Mining Company) will continue as a going
concern. As discussed in Note 2 to the financial statements, the Company's
recurring loses from operations and requirements for significant working capital
in the future raise substantial doubt about the entity's ability to continue as
a going concern. Management's plans in regard to this matter are also described
in Note 2. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
March 28, 1997
Joseph J. Repko, C.P.A.
<PAGE>
INDEPENDENT AUDITOR'S REPORT
Board of Directors
EUROPEAN AMERICAN RESOURCES, INC.
(Formerly Merlin Mining Company)
2124 Broadway, Suite #336
New York, New York 10023
I have audited the accompanying balance sheets of European American Resources,
Inc. (Formerly Merlin Mining Company) as of December 31, 1996 and 1995 and the
related statements of operations, shareholders equity (deficit), and cash flows
for the years then ended. 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 financial position of European American Resources, Inc.
(Formerly Merlin Mining Company) at December 31, 1996 and 1995, and the results
of their operations and cash flows for the years then ended in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that European
American Resources, Inc.(Formerly Merlin Mining Company) will continue as a
going concern. As discussed in Note 2 to the financial statements, the Company's
recurring loses from operations and requirements for significant working capital
in the future raise substantial doubt about the entity's ability to continue as
a going concern. Management's plans in regard to this matter are also described
in Note 2. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
March 28, 1997
/s/ Joseph J. Repko, C.P.A.
Joseph J. Repko, C.P.A.
<PAGE>
EUROPEAN AMERICAN RESOURCES, INC.
(Formerly Merlin Mining Company)
(An Exploration Stage Company)
CONSOLIDATED BALANCE SHEETS
December 31
1996 1995
ASSETS
CURRENT ASSETS:
Cash and Cash Equivalents $ 951 $ 213
Prepaid Rent on Mining Claims 51,666 51,666
Total current assets 52,617 51,879
PROPERTY AND EQUIPMENT, net 786 1,709
OTHER ASSETS:
Deferred exploration and development costs 1,036,690 1,036,690
Claiming receivable, net of reserve of
$803,792 and $803,792 482,000 482,000
Assets held for resale 9,353 9,353
Total Other Assets 1,528,043 1,528,043
TOTAL ASSETS $1,581,446 $1,581,631
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 48,576 $ 48,576
Loan payable related party 116,600 -
Total Current Liabilities 165,176 48,576
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, 9,733,365 and 9,733,365
shares issued and outstanding 973 973
Additional paid in capital 6,472,366 6,472,366
Deficit accumulated during the exploration
stage (5,057,069) (4,940,284)
Total Stockholders' Equity 1,416,270 1,533,055
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $1,581,446 $1,581,631
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
EUROPEAN AMERICAN RESOURCES, INC.
(Formerly Merlin Mining Company)
(An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
From Inception
On
July 6, 1997
For the Years Ended through
December 31, December 31,
1996 1995 1996
REVENUE
Sales $ - $ - $ 29,098
OPERATING EXPENSES
Operating costs 77,500 118,620 3,512,154
General and administration 38,363 153,652 1,043,410
Royalty expense 43,960
Depreciation and amortization 923 923 305,223
Total Operating Expense 116,786 273,195 4,904,747
LOSS FROM OPERATIONS (116,786) (273,195) (4,875,649)
OTHER INCOME (EXPENSE)
Loss on write down of managed
foreign investments (803,792)
Earnings on managed foreign
investments 190,569
Loss on writeoff of related
party receivable (15,980)
Interest income 8 292,051
Interest expense ( 75,428)
Gain (loss) on write down and
sales of assets 23,349 (12,172)
Gain on write down of long
term debt (related party) 500,000
Net realized losses on current
marketable securities (216,107)
Net unrealized losses on current
marketable securities (40,561)
Total Other Income (Expense) 23,357 (181,420)
LOSS BEFORE INCOME TAXES (116,786) (249,838) (5,057,069)
Income tax expense - - -
NET LOSS $ (116,786) $ (249,838) $(5,057,069)
LOSS PER COMMON SHARE ($ .01) ($ .03) ($ .52)
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
EUROPEAN AMERICAN RESOURCES, INC.
(Formerly Merlin Mining Company)
(An Exploration Stage Company)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FROM INCEPTION ON JULY 6, 1987
THROUGH DECEMBER 31, 1993 (Restated)
Deficit
Accumulated
Additional During
Common Stock Paid In Exploration
Shares Amount Capital Stage
BALANCE, July 6, 1987 $ - $ - $ - $ -
Shares issued to officers
and directors of the company
and other individuals, for cash,
July through September, 1987 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)
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
EUROPEAN AMERICAN RESOURCES, INC.
(Formerly Merlin Mining Company)
(An Exploration Stage Company)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FROM INCEPTION ON JULY 6, 1987
THROUGH DECEMBER 31, 1993 (Restated)
Deficit
Accumulated
Additional During
Common Stock Paid In Exploration
Shares Amount Capital Stage
Net loss for the year ended
December 31, 1991 $ - $ 973 $ - $(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 9,733,363 973 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 9,733,363 $ 973 $6,472,366 $(5,057,069)
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
EUROPEAN AMERICAN RESOURCES, INC.
(Formerly Merlin Mining Company)
(An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
December 31
1996 1995
Cash Flows Operating Activities
Net loss $ (116,785) $(249,838)
Adjustments to reconcile net loss to net
cash provided (used) by operating activities:
Depreciation and amortization 923 923
Changes in assets and liabilities:
(Increase) decrease in prepaid rent - 1,734
Increase (decrease) in accounts payable
and accrued expenses - (1,449)
(Increase) decrease in accounts
receivable related party - 77,500
Total Adjustments 923 78,708
Net Cash Used by Operating Activities (115,863) (171,130)
Cash Flows to Investing Activities
Proceeds from sale of assets - 174,151
Deferred exploration and development costs - (27,437)
Foreign investments withdrawals - 24,500
Net Cash Provided (Used) by Investing Activities - (171,214)
Cash Flows from Financing Activities
Proceeds from issuance of notes payable 116,600 -
Net Cash Provided by Financing Activities 116,600 -
Net Increase (Decrease) In Cash and
Cash Equivalents 738 84
Cash and Cash Equivalents at Beginning of Period 213 129
Cash and Cash Equivalents at End of Period $ 951 $ 213
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
EUROPEAN AMERICAN RESOURCES, INC.
(Formerly Merlin Mining Company)
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 through out the state of Nevada. Certain of these rights were
acquired by agreement to pay an aggregate total royalty equal to 50% of the
net profits delivered from the properties computed by a predefined formula.
Since acquisition of these properties, the Company has been engaged in
exploratory activities to determine proven and profitable reserves. To date,
the Company has not commenced planned principal operations and accordingly is
considered an exploratory stage company as defined in SFAS No. 7 and Security
and Exchange Commission regulations.
Deferred Exploration and Development Costs - The Company has incurred over
$2,661,000 (including $0 and $27,437 in 1996 and 1995) in 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. In 1995 and 1994 geological determination resulted in
the expensing of previously capitalized amounts related to those properties
of approximately $0 and $0 respectively. As of December 31, 1996, the
Company has $1,036,690 in deferred exploration and development costs. If
these remaining costs had been expensed rather than capitalized, the
accumulated deficit at December 31, 1995 would have been $6,093,759 rather
than $5,057,069.
The Company is continuing it's exploration stage activities on the remaining
properties to determine the amount of proven or probable reserves, if any.
Realization of the $1,036,690 in deferred exploration and development costs
on those properties is dependent on establishing proven or probable reserves
in excess of amounts capitalized. Failure to do so would result in the
immediate write-down of those deferred charges.
Assets Held for Resale - The Company was a defendant in a lawsuit filed
against it in 1989 by a plaintiff from which the Company had acquired certain
mining claims and equipment. In April of 1990, as a result of a counter
action filed by the Company, a judgment was received in the Company's favor
totaling $677,332 plus attorney's fees of approximately $20,200. Upon
payment of the award, the Company was to return the equipment purchased from
the plaintiff and pay a contingent legal fee of $15,000 to it's attorneys.
Due to the unlikelihood of collection of the judgement, the Company has not
recorded the judgement or the related attorney's fees in it's accounting
records. During the year ended December 31, 1990, the Company listed the
related equipment for resale. The net book value of $296,862 was believed to
approximate the market value of the equipment. During 1991, part of this
equipment valued at $37,894 was sold at a net loss of $4,034 or approximately
10% below it's book value. Accordingly, a change was made to income in 1991
to devalue the remaining equipment by 10% or $27,600. During 1992, equipment
<PAGE>
EUROPEAN AMERICAN RESOURCES, INC.
(Formerly Merlin Mining Company)
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF FINANCIAL STATEMENT PRESENTATION (continued)
with a net book value of $13,669 was sold at a net gain of $2,571. During
1993 and 1992, equipment with a net book value of $1,591 and $24,586 was
determined to have no remaining value and was written off.
During 1995 and 1994 with the remaining book value of $191,522 was sold at
gains of $23,349 and $19,340 respectively..
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principal 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.
Income Taxes - Statement of Financial Accounting Standards No. 109
"Accounting for Income Taxes" was issued in early 1992, and requires an asset
and liability approach for accounting for income taxes. This method was
adopted by the Company for the year ended December 31, 1993 and there after.
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 change 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.
Loss per Common Share - Cumulative net loss per common share from inception
is calculated based upon the weighted average number of shares outstanding
from inception. Stock splits are treated as having incurred at inception.
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 statements presented for years prior to
December 31, 1993 have been reclassified to conform to the titles and
headings used in the presentation of the December 31, 1993 financial
statements.
Restatement - The financial statements for all periods presented have been
restated to reflect a reverse stock split during November 1992 on the basis
of one share issued for each ten shares previously issued.<PAGE>
EUROPEAN AMERICAN RESOURCES, INC.
(Formerly Merlin Mining Company)
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 it's promises and did not liquidate the account as instructed. SFU sent
various payments in partial liquidation totaling USD$964,208 which payments
were received sporadically through December 22, 1995. Since 1995, the company
increase its efforts to obtain the return of the investment, received
confirmation from the fiduciary of SFU. Subsequently the fiduciary
representation has been unsupported and the company believes it was an 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 a to approximately $1, 286, 000, which
represents the net amount of the original investment which has not been
return to the company. Management has also classified this claim as a long
term acid and reserve an amount for the recoverability and the costs
associated with the buying. 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 council has advice management that it is highly
probable they will receive an amount greater than the net carrying value
remaining in the financial statements. The last records obtain which show
the arms impact were in 1993 and were investment 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 coming actually received detailed records and
statements of its investments. This is consistent with the majority date of
October, 1993 of the original investment agreement.
The Company will record as income any amount recovered, net of expenses,
above the remaining carrying value of $482, 000, only in such period they
were actually realize, and record as additional expenses any further reserve
should the likelihood of recovery diminish.
<PAGE>
EUROPEAN AMERICAN RESOURCES, INC.
(Formerly Merlin Mining Company)
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 - PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
December 31,
1995 1995
Automobiles and trucks $ 19,740 $ 19,740
Mining equipment 6,889 6,889
Office equipment 932 932
27,561 27,561
Less Accumulated Depreciation (26,775) (25,852)
$ 786 $ 1,709
NOTE 5 - INCOME TAXES
The Company has net operating loss carry forwards of approximately $3,500,000
which expires in various years through the year 2010. The amount of the
operating loss carry forwards are limited by IRS regulations as a result of
the sale of a majority interest .
NOTE 6 -- RELATED PARTY TRANSACTIONS
Sale of Stock and Subordinated Debt - On September 25, 1992, the Company sold
7,000,000 shares of it's 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 then controlled by Trent. 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 have 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. The foreign investment company administering the
pooled investments is entitled to enter into any transaction such as currency
trading, gold and/or oil transactions including futures, negotiate, buy and
sell any kind of properties without prior approval from the company. All
transactions shall be made at the risk of the company, relieving the
investment company from any and all liability. The invested fund were
restricted as to withdrawal until October, 1993. While the invested funds
are in the sole control of Mr. Brenner, he has entered into an agreement with
the Company that he will proceed to liquidate the foreign 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 managed foreign investments and claim receivable discussed in
Note 3 retroactively to December 31, 1993.
<PAGE>
EUROPEAN AMERICAN RESOURCES, INC.
(Formerly Merlin Mining Company)
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7 - COMMON STOCK AND STOCK PURCHASE WARRANTS
As described in Note 8 above, on September 25, 1992, the Company sold
7,000,000 shares of restricted common stock for $1,900,000 to a group of
foreign investors. These shares represent approximately 71% of it's issued
and outstanding shares. The company also issued a $500,000 convertible
debenture with interest at 8% per annum. This debenture is convertible into
the number of shares of common stock based upon the average bid price, if the
stock is trading or the last price sold to a third party. The Company also
issued stock options for the purchase of 266,667 shares at $.30 per share for
a two year period.
During 1989, the Company sold 429,374 restricted common shares by private
placement at $10.00 per share. Stock offering costs of $518,576 were charged
against capital in excess of par value. The sale of common shares also
included the sale of warrants to purchase 429,374 shares of restricted common
stock at a purchase price of $12.50 per share if exercised before June 1,
1990 and at a purchase price of $15.00 per share if exercised after May 31,
1990 and prior to June 1, 1991. All of the above warrants expired June 1,
1991 with no warrants being exercised.
In April and May 1989, the Company issued 2,991 shares of restricted common
stock at $1.00 per share to liquidate accrued interest to private investors.
There were no offering costs associated with this issuance. During July 1988,
the Company approved a plan of recapitalization whereby shareholders received
one share of common stock for each five shares held. The shareholders rights
were not altered and no shareholders were eliminated under this plan. The
accompanying financial statements have been restated to reflect this reverse
stock split.
In July 1988, the Company issued 151,000 shares of its common stock in a
private placement to 20 investors. Net proceeds to the Company were $146,192
after deducting offering costs of $4,808.
In October 1988, an additional investor purchased 150,00 shares of the
Company's common stock for $50,000. In conjunction with this transaction,
the investor was given common stock purchase warrants to purchase 200,000
shares of common stock. The warrants expired without being exercised.
As of December 31, 1996, 1995, none of the warrants had been exercised.
NOTE 8 - MINERAL LEASES AND ROYALTY PAYMENTS
In 1987 and 1988 the Company entered into 2 separate mining and mineral
leases. These leases required minimum lease and loyalty payments and
contained various other provisions. The leases were terminated in 1990 and
1991. Lease payments included in the statement of operations in 1991 was
$800. As part of the termination of one of these leases, the Company was
required to perform reclamation activities at a cost of approximately
$26,000. The reclamation was substantially completed during the year ended
December 31, 1993.
<PAGE>
EUROPEAN AMERICAN RESOURCES, INC.
(Formerly Merlin Mining Company)
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9 - 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,
1997.
NOTE 10 - SCOPE LIMITATION
As discussed in more detail in Note 14 (above), the Company has not been able
to obtain any detailed records with regards to it's investment which has been
managed by foreign companies. The detail statements and records were either
never provided by the management company or were lost by the former officers
and directors of the Company. Current management is unable to obtain any
information with regards to this investment. The effect of this scope
limitation it that the investment losses are not being recorded in the actual
period or periods when they occurred. Rather management has determined to
push the losses back to the earliest period (1993) when the losses might have
occurred. The Company did have contact with the investment management
company (through it's former officers and directors) up through 1995 and did
received various payment totaling $964,208. The last payment was received on
1995 and the last confirmation of balance was received as of December 31,
1995.
Management believes that the effects of the above described scope limitations
are not significant to the on-going operations of the Company because the
investment has indeed been lost and the funds are not currently available (in
1996) for the on-going operations.
