` 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
For the fiscal year ended December 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from 1/1/98 to 12/31/98
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.)
400 Cleveland Street, Suite 901, Clearwater, FL 33755
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (727) 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-KB or any amendment to
it. [X]
As of December 31, 1998, the Issuer had outstanding 16,205,158 shares of its
common stock, as adjusted, par value $0.0001 per share. As of December 31,
1998, 8,763,815 shares were held by non-affiliates with an aggregate market
value of $6,353,766.
1
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PART I
Item 1 .Business.
General Development of Business
The Company was incorporated in the State of Delaware on July 6, 1987.
Since inception, the Company, which considers itself a Junior Mining Company,
has acquired various mining rights and has held up to as many as approximately
6,700 patented, unpatented lode, mill sites and placer claims on certain
properties located throughout the State of Nevada. Presently the Company
controls 850 of such claims, approximately 165 of which are subject to an
appeal with the IBLA for the "overstaking" by another mining company in which
the Company believes it will ultimately prevail. (see Table under this Section).
Certain of these rights were acquired by agreements to pay an aggregate total
royalty based upon various percentages of the net profits delivered from the
properties computed by a predefined formulas. Since acquisition of these
properties, the Company has not commenced any extractive mining operations.
During 1998 the Company, expanding on the results of its drilling
program of 1997, focused its geological efforts on inventorying the claims it
now controls, subject to the IBLA appeal discussed above, a total of 788
unpatented and 62 patented claims and mill sites (see Table under this Section)
; primarily concentrating these efforts on the 62 patented claims and mill
sites and 47 unpatented claims in the Prospect Mountain region, which in May of
1998 the Company renegotiated and closed title to these claims. The Company's
claim sites in this region are within approximately one mile of the Archimedes
(Ruby Hill) open pit, an actively producing gold mining operation, which is
owned by Homestake Mining Company. In addition to the excitement over the
quantities of resources exhibited at Archimedes Open Pit, the extraction costs
are some of thelowest reported in the industry. Although this provides no
assurance in itself that the Company's claims in this region can provide
similar results, it has generated a significant amount of interest by potential
Joint Venture partners and the Company has been evaluating its best course of
action to exploit its claims in this region; with the possibilities ranging
from undertaking the extractive process with such a co-venture partner to the
outright sale of these claims. It should be noted that these claims are subject
to a net smelter agreement with the sellers (see Commitments under this
Section and in the financial statements; see Item 13).
The patented and unpatented lode and placer mining claims are 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 validity of all unpatented mining claims, which constitutes most
of the Issuer's property holdings, is subject to inherent uncertainties.
Apart from 62 patented lode claims in the Prospect Mountain region, most of the
unpatented claims, if retained (also subject to an expected IBLA decision),
will be leased from the Bureau of Land Management. 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
2
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
on all of its claims, during 1998 the Company did obtain title opinions in
connection with the 62 patented and 47 unpatented claim sites, acquired in May.
With respect to the remaining 741 leased claims the Company has yet to obtain
title opinions and has to expect an IBLA decision If the Issuer should
experience a failure of title, then costs of action, acquisition, and initial
investigation may be lost.
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, 1998
Mining Approx. State of Nevada Number of
Project Name District County Claims
Bellehelen Bellehelen Nye 39
Ellendale Ellendale Nye 50
Diamond Silverado
(includes Dugout
Canyon & Robinson
Canyon) Eureka Eureka 285
(Plus 62
Patents &
Mill Sites)
Spring Valley Eureka Eureka 192
Mahogany Hills Eureka Eureka 28
Klondike Klondike Esmeralda 45
Ruby Hills Ruby Hills White Pine 85
Siegel Canyon Aurum White Pine 85
TOTAL 850
During the year, geological results indicate that the Company has yet to
prove its reserves, however results have indicated the Company's claims do have
indications that productive reserves for certain claims are probable. Since
these claims are not proven, estimates of their potential value are not
available at this time.
3
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.
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 1997 the Company employed directly or as consultants 10 people. During
1998 the Company engaged 8 individuals. In 1996 the Company engaged 2 people and
prior to 1996 the Company had been mostly inactive. Until active mining
operations are commenced, the present management has made a concerted effort to
keep employee compensation at a minimum.
Item 2. Properties.
The Company maintained its offices at 400 Cleveland Street Suite 901,
Clearwater, Florida 33755 and at 91 South Main Street, P.O. Box 1066, Eureka, NV
89316.
Item 3. Legal Proceedings.
The Company instituted legal proceedings in Nevada on July 9, 1998 with its
former president. On October 16, 1998, the Company's former president and the
Company agreed to mutual releases and the former president agreed to return to
the Company's treasury 350,000 shares, net of an assignment of 50,000 shares,
upon acceptance of this stipulation by the court in Nevada.
During 1997, the Company entered into net smelting agreements for up to
$7,000,000 with former shareholders in exchange for the retirement of 2,187,500
shares. In August 1998, a lawsuit was commenced against the Company by German
American Investments Limited ("GAI"). GAI was the assignor of the above
distribution rights granted by the Company to eight of its shareholders in 1997,
including its current CEO, Martin Sportschuetz. The suit alleged that EPAR's
former president, Michael Ogilvie had fraudulently induced the shareholders to
enter into the distribution agreements and sought rescission of the distribution
agreements and return of the shares, along with damages. At the time of the
suit the Company's current CEO was neither a shareholder of "GAI", nor did he
have a financial interest in GAI. This lawsuit was subsequently settled. The
initial settlement required that EPAR rescind the distribution agreements and
return 2,187,500 unrestricted shares to GAI, and issue warrants exercisable at
$0.50 to the GAI investors. The settlement was amended whereas the Company is
to issue 1,312,500 unrestricted shares and 1,750,000 restricted shares to
rescind the distribution agreement and these were recorded at the original value
ascribed to the distribution rights, an increase of $437,500 in common stock
and additional paid in capital. The Company also is to issue 1,093,500
restricted shares, valued at one-half of the market price of the Company's
common stock on December 31, 1998, or $.3625 per share, totaling $396,485,
consistent with the value of restricted stock agreed to by the parties for the
recision, which was charged to settlement expense.
4
In December, 1998, a subcontractor filed a lawsuit in Utah state court
against the Company seeking $60,000 for the breach of an alleged oral employment
agreement. The Company has filed a motion to dismiss for lack of personal
jurisdiction. The motion is. The Company intends to defend the case
vigorously.
No amounts were recorded in the financial statement.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
5
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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 with the trading symbol "EPAR".
The following table sets forth the high and low bid quotations for each
quarter for the two-year period through December 31, 1998, 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.
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
1998 First Quarter $1.72 $0.84
Second Quarter $1.66 $1.00
Third Quarter $1.40 $0.78
Fourth Quarter $1.22 $0.56
(b) Shareholders. As of December 31, 1998, the Company had 16,205,158
shares of common stock outstanding, held by individual shareholders and
brokerage firms and/or clearing houses, holding the Company's common shares in
street names for their clients. The Company believes that there are
approximately 950 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. On May 8, 1998, the
Company entered into a significant commitment in connection with its
acquisition of 62 patented and 47 unpatented claims in the Prospect Mountain
region. The Company's geological efforts focused on these claims due to the
success of its 1997 drilling program and Homestake's Archimedes (Ruby Hill)
pit (operation), which is within approximately one mile from these claims of
the Company. The Company is as excited about its proximity to the Ruby Hill Pit
as it is with the extractive costs cited by Homestake in the region.
For the year ending December 31, 1999 the Company plans on continuing to
develop its resource properties in an effort to establish proven reserves. The
Company estimates the cost in 1999 to continue the exploration program for its
resource properties will approximate up to $4,700,000 should the Company
successfully complete a secondary offering of its common stock for up to
$8,000,000, which is planned to be completed during the third quarter of 1999.
With the proceeds of the offering the Company can strengthen its position with
potential co-venturers and relieve working capital limitations on the Company's
efforts to complete the exploration stage and to ultimately realize success in
some form from the extractive process. The extent of these costs when combined
with expected operating costs of $600,000 to $1,200,000, are dependent upon the
completion of the secondary offering or other capital event. The Company still
6
will pursue to supplement its cash requirements by the sale of its tailings,
which are residual products from former mining efforts on the claim properties,
as practical in light of the Company's resources and the potential candidates
the Company has the opportunity to enter into an extraction agreement.
Geological information indicates that approximately 300,000 to 350,000 tons,
depending on density factors, could be processed without extensive mining
efforts. The Company has experienced a stronger willingness of potential
co-venturers to undertake the exploration for the ultimate purpose of a major
extraction or outright purchase of the Company's claims than the smaller
undertaking of processing these dumps sites or tailings.
On February 11, 1999, the Company executed a Letter of Intent with Ikar
Minerals Inc. for the purchase of the vast majority of their mining concessions
in the Republic of Tajikistan, a former Soviet Union State. According to
preliminary reports, the properties could contain exciting numbers of gold,
silver and tungsten, which is mainly used in the field of steel production. The
intended purchase price totals $39,850,000, payable in convertible preferred
stock of the Company and in cash. Certain conditions apply including the Company
undertaking intensive due diligence by having its representatives visit the
Republic of Tajikistan, and having an independent geologist render an opinion on
the properties, and prior to a final commitment to a contract, evaluating the
ability of the Company to export minerals out of that country. Upon completion
of the due diligence, the Board of the Company may decide to enter into a final
agreement with Ikar Mining, Inc. If such is the case, the Company may launch a
first drilling program in the most promising parts of the approximately 100,000
acres of mining concessions. Another opportunity may be to process the vast
amount of tons of dump sites and tailings, which could themselves contain
considerable amounts of minerals, such as gold and silver.
For further information visit the Company's website at "EPARGOLD.COM" or
send us an E-mail at "[email protected]".
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.
None.
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 the shareholders's meeting in Eureka, Nevada on June 24,1998,
when the company enlarged its number of directors to five individuals; except
for Evan Kechayans. Mr. Kechayans was appointed by majority vote by the board
of directors and subsequently is to be approved at the next shareholders'
meeting for a period of one year until the next annual meeting of
shareholders of the Company, or until a successor has been elected.
7
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The executive officers and directors of the Company are as follows:
Name Position Held
Martin Sportschuetz President & CEO
Dale M. Hendrick, P.Eng. Chairman & Technical Director
Carl Leaman Director
John Sgarlat Director
Evangelos Kechayans Director
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 has held several executive positions in Germany,
including the Export Director of Reisser GMBH (LTD.), a company with a large
concentration of sales in the Middle East and Central Africa. He was the
Managing Director of GVA MBH (LTD.), a Financial Consulting Concern. He is also
the Managing Director of GVA IMMOBILIEN GMBH (LTD.). He had a tour of military
service in Munich. He has also studied law and economics in Tuebingen, Germany.
Carl Leaman is the president and founder of Paradise Construction Inc. He
is a resident of Georgia. He attended Lancaster Architectural School where he
studied drafting and design. He also studied business administration at
Kennesaw College. He also worked as a hydraulic engineer for Morgan Corporation.
John Sgarlat is a graduate of Villanova University, Magnum Cum Laude, with
a Bachelor of Arts in Philosophy. He also attended a three year graduate
program at the University of Pennsylvania/Wharton School of Finance. Mr.
Sgarlat is presently the president of Media Vision Properties Inc., a producer
of childrens' television programs and educational marketing programs for public
broadcasting stations. He also worked as a registered representative with
Hornblower and Wheels. In 1974, he became Director of Marketing for Elkins and
Company, a New York Stock Exchange firm. Two years later he became a partner
of the firm and headed several departments. In 1985, Mr. Sgarlat helped
restructure a failing company with a new name, National Media Corporation.
He is the founder and chairman of the company where he served as the president
and chief executive officer. Mr. Sgarlat has extensive experience in
investment banking and the media industries.
Evangelos Kechayans, is a mechanical/marine engineer who resides in Athens
Greece, educated at Brooklyn Polytechnic Institute and is currently the
president and managing director of Metrix Systems S.A. He has also worked in
Greece as a project management consultant for major projects such as the
Kavalla Oil Refinery Project and Salarris Navy Underground Tanks. Mr.
Kechayans has also worked for Pelasgus Corp. and Martechnics Ltd where he was
the general manager for both companies.
8
<PAGE>
Item 10. Executive Compensation.
The following table sets forth the renumeration paid or accrued by the
Company during the fiscal year ending December 31, 1998, to each of its Chief
Executive Officer, its officers and directors, and to all officers and directors
as a group.
Securities of
Salaries Property
Management Fees Insurance
Name of Individual Directors' Fees Benefits or
or Number of Persons Capacities in Commission and Repayment of
in Group Which Served Bonuses Personal Benefits
Michael D. Ogilvie Director/CEO/ 46,000 -
(Through 4/22/98)
Martin Sportschuetz Director/CEO/ 64,000 105,000 shares
President/Officer
(4/22/98 to present)
Dale M. Hendrick Director/Chairman - 400,000 shares
Carl Leaman Director 27,000 $ 8,000 Health
benefits
90,000 shares
John Sgarlat Director - -
William O'Callaghan Director -
(resigned 11/25/98) - -
Officers and Directors
as a group - $137,000 595,000 shares
$ 8,000 Health
Benefits
9
<PAGE>
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, 1998.
Amount and
Nature of
Beneficial Percentage of
Name and Address Ownership Class Owned
Martin Sportschuetz 505,000 President & CEO 3.12%
Florida Resident
Dale M. Hendrick, P. Eng. 400,000 Chairman & 2.47%
Canadian Resident Technical Director
Carl Leaman 216,500 Director 1.54%
Georgia Resident
John Sgarlat 0 Director -0-
Florida Resident
Evangelos Kechayans 0 Director -0-
Athens, Greece
George Whitney 1,370,000 Shareholder 8.45%
Florida Resident
Total 2,491,500 15.38%
.
Item 12. Certain Relationships and Related Transactions
Amounts due to related party at December 31, 1997 represented 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.
10
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The Company issued 105,000 shares of common stock to the President in May of
1998 valued at $.85 per share, or $89,250, based upon their market value
subject to Rule "144" restrictions. Of this amount $44,625 was added to
resource properties and $44,625 was recorded as stock based compensation
based upon the Company's estimate of where the president directed his efforts.
The Company also agreed to issue 105,000 shares to a director, provided he
remained employed by the Company through April 30, 1999. The director resigned
from employment in an effort to curtail expenses, and remains as a director
today. The Company issued 90,000 restricted shares, valued at $.85 per share,
or $69,300, based upon their market value subject to Rule "144" restrictions.
Of this amount, $34,650 was added to resource properties and $34,650 was
recorded as stock based compensation.
During June of 1998 the Company advanced this investor $60,000 at 8% interest of
which $50,000 was repaid during the year leaving a balance of $12,234 including
accrued interest. During the year ended December 31, 1998 the Company recorded
$2,234 of interest income from this loan.
The Company issued 400,000 restricted shares to the chairman and director for
services during the year ended December 31,1998, valued at $.77 per share or
$308,000, based upon their market value subject to Rule "144" restrictions. Of
this amount $154,000 was added to resource properties and $154,000 was recorded
as stock based compensation.
11
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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, LLCF-1
Balance Sheet, December 31, 1998 F-2
Statement of Operations, for the Two Years Ended December 31, 1998
and From July 6, 1987 (Date of Inception) to December 31, 1998 F-3
Statements of Changes in Stockholders' Equity From Inception on
July 6, 1987 through December 31, 1998 F-4
Statement of Cash Flows for the Two Years Ended December 31, 1998
and from July 6, 1987 (Date of Inception) to December 31, 1998 F-8
Notes to Consolidated Financial Statements F-10
1O
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INDEPENDENT AUDITORS' REPORT
Board of Directors
European American Resources, Inc.
400 Cleveland Street, Suite 901
Clearwater, Florida 33755
We have audited the accompanying balance sheet of European American Resources,
Inc. (an Exploration Stage Company) as of December 31, 1998 and the related
statement of operations, shareholders' deficit accumulated during the
Exploration Stage, and cash flows for the two years then ended and for the
period from July 6, 1987 (Date of Inception) through December 31, 1998. 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 supportingthe 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, 1998 and the results of their operations and cash flows for
the year then ended in conformity with generally accepted accounting principles
As discussed in Note 1, the Company is in the exploration stage as of December
31, 1998. Recovery of the Company's assets is dependent upon future events, the
outcome of which is indeterminable. In addition, successful completion of the
Company's exploration program and its transition, ultimately, to attaining
profitable operations is dependent upon obtaining adequate financing to fulfill
its exploration activities and achieving a level of sales adequate to support
the Company's cost structure.
/s/ Schuhalter, Coughlin & Suozzo, LLC
Schuhalter, Coughlin & Suozzo, LLC
March 29, 1999
Raritan, New Jersey
F-1
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EUROPEAN AMERICAN RESOURCES, INC.
(AN EXPLORATION STAGE COMPANY)
BALANCE SHEET
DECEMBER 31, 1998
Assets
Current Assets
Cash and cash equivalents $ 21,419
Prepaid rent on mining claims 52,533
Note receivable from affiliate 13,439
Total Current Assets 87,391
Resource properties 2,803,110
Property and equipment, at cost, net of accumulated
depreciation of $11,451 31,069
Other Assets
Claim Receivable, net of valuation reserve of $964,459 321,333
Deferred offering costs 62,500
Other Assets 44,808
Total Other Assets 428,641
Total Assets 3,350,211
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable and accrued expenses 155,687
Note Payable to Related Party 15,000
Total Current Liabilities 170,687
Commitments -
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, 16,205,158 shares issued
and outstanding 1,621
Additional paid in capital 10,783,092
Deficit accumulated during the exploration stage (7,605,189)
Total Stockholders' Equity 3,179,524
Total Liabilities and Stockholders' Equity $ 3,350,211
The accompanying notes are an integral part of these financial statements.
F-2
<PAGE>
EUROPEAN AMERICAN RESOURCES, INC.
(AN EXPLORATION STAGE COMPANY)
STATEMENTS OF OPERATIONS
From
July 6,
1987
(Date of
For the Years Ended Inception) to
December 31, December 31,
1997 1998 1998
Revenues
Sales $ - $ -$ 29,028
Operating Expenses
Operating costs 78,300 78,800 3,669,254
General and administration 432,164 576,433 2,052,007
Depreciation and amortization 3,436 8,801 317,460
Stock based compensation 840,000 310,275 1,150,275
Royalty Expense - - 43,960
Total Operating Expenses 1,353,900 974,309 7,232,956
Loss from operations (1,353,900) (974,309)(7,203,858)
Other Income (Expense)
Interest income 4,050 20,862 316,963
Interest expense (30,480) (7,192) (113,100)
Settlement expense - (46,484) (46,484)
Loss on the sale of assets - - (12,172)
Earnings on managed foreign investment - - 190,569
Net realized losses on marketable
securities - - (256,668)
Gain on cancellation of long term
debt-related party - - 500,000
Loss on write off related party
receivable - - (15,980)
Reserve for claim on foreign
investment - (160,667) (964,459)
Total Other Income (Expense) (26,430) (193,481) (401,331)
Loss before income taxes (1,380,330) (1,167,790)(7,605,189)
Income tax expense - - -
Net Loss $(1,380,330)$(1,167,790)$(7,605,189)
Basic Loss Per Common Share $ (.14) $ (.10)
Average Common Shares Outstanding 9,733,365 11,851,389
The accompanying notes are an integral part of these financial statements.
F-3
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EUROPEAN AMERICAN RESOURCES, INC.
(AN EXPLORATION STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY
FROM INCEPTION ON JULY 6, 1987 THROUGH DECEMBER 31, 1998
Deficit
Accumulated
Additional During the
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, 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 cast 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 - - - (462,583)
Balance, December 31, 1989 2,733,365 $ 273 $ 4,573,066 $ (834,190)
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
EUROPEAN AMERICAN RESOURCES, INC.
(AN EXPLORATION STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY
FROM INCEPTION ON JULY 6, 1987 THROUGH DECEMBER 31, 1998
Deficit
Accumulated
Additional During the
Common Stock Paid In Exploration
Shares Amount Capital Stage
Balance, January 1, 1990 2,733,365 $ 273 $ 4,573,066 $ (834,190)
Net loss for the year ended
December 31, 1990 - - - (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 9,733,363 $973 $ 6,472,366 $ 5,057,069
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
EUROPEAN AMERICAN RESOURCES, INC.
(AN EXPLORATION STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY
FROM INCEPTION ON JULY 6, 1987 THROUGH DECEMBER 31, 1998
Deficit
Accumulated
Additional During the
Common Stock Paid In Exploration
Shares Amount Capital Stage
Balance, January 1, 1997 9,733,365 $ 973 $ 6,472,366 $(5,057,069)
Retirement of shares for
distribution rights (2,187,500) (219) (437,281) -
Shares sold for $1.00 per
share in private place-
ments during the year,
net of $109,925 offering
costs 2,075,000 208 1,964,867 -
Shares issued for services
in connection with the
employment agreement of
the former president
valued at $1.00 400,000 40 399,960 -
Shares issued for
cancellation of debt to
related party, valued at
$.70 per share 357,143 27 249,963 -
Shares issued for exploration,
market making services and
reactivation services
rendered through December
31, 1997, valued at, $1.16,
$1.00 and $.70 per share 1,025,000 102 814,898 -
Net loss for the year
ended December 31, 1997 - - - (1,380,330)
Balance, December 31, 1997 11,403,008$1,140 $ 9,464,773 $ (6,437,399)
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
EUROPEAN AMERICAN RESOURCES, INC.
(AN EXPLORATION STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY
FROM INCEPTION ON JULY 6, 1987 THROUGH DECEMBER 31, 1998
Deficit
Accumulated
Additional During the
Common Stock Paid In Exploration
Shares Amount Capital Stage
Balance, January 1, 1998 11,403,008$ 1,140 $ 9,464,773 $ (6,437,399)
Shares issued for services
and additions to resource
properties at $1.21, $.85
and $.77 995,900 100 834,715 -
Shares issued to retire
distribution rights and
settlement 4,156,250 416 833,569 -
Retirement of shares in
connection with termination
of employment agreement with
the former president (350,000) (35) (349,965) -
Net loss for the year ended
December 31, 1998 - - - (1,167,790)
Balance, December 31, 1998 16,205,158$ 1,621 $10,783,092 $(7,605,189)
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE>
EUROPEAN AMERICAN RESOURCES, INC.
STATEMENTS OF CASH FLOWS
(AN EXPLORATION STAGE COMPANY)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
From
July 6,
1987
(Date of
For the Years Ended Inception) to
December 31, December 31,
1997 1998 1998
Cash Flows Operating Activities
Net Loss $(1,380,330)$(1,167,790)$(7,605,189)
Adjustments to reconcile net loss
to net cash provided (used) by
operating activities:
Depreciation and amortization 3,436 8,801 317,460
Reserve for claim compensation and
settlement - 160,667 964,459
Issuance of common stock charged
to expense 840,000 356,759 1,196,759
Adjustments to resource properties
charged to operations - - 1,624,310
Loss on the sale of fixed assets - - 12,172
Earnings on managed foreign
investment - - (190,569)
Losses on marketable securities - - 156,668
Gain on cancellation of long term
debt - related party - - (500,000)
Loss on write off - related party
receivable - - 15,980
Changes in assets and liabilities:
(Increase) decrease in prepaid
rent (3,534) 2,667 (52,533)
(Decrease) increase in accounts
payable and accrued expenses 314,827 (207,714) 155,687
(Increase) in other assets (23,500) (11,955 (44,808)
(Increase) in deferred offering
costs - (62,500) (62,500)
(Increase) in interest receivable
- affiliate - (3,439) (3,439
Total Adjustments 1,131,229 243,286 3,689,646
Net Cash Used by Operating Activities (240,101) (924,504)(3,915,543)
The accompanying notes are an integral part of these financial statements.
F-8
<PAGE>
EUROPEAN AMERICAN RESOURCES, INC.
STATEMENTS OF CASH FLOWS - (CONTINUED)
(AN EXPLORATION STAGE COMPANY)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
From
July 6,
1987
(Date of
For the Years Ended Inception) to
December 31, December 31,
1997 1998 1998
Cash Flows From (Used In) Investing
Activities
Investment in foreign managed funds - - (2,250,000)
Foreign investment withdrawals - - 964,208
Investment in marketable securities - - (256,668)
Proceeds from sale of assets - - 174,151
Advance to affiliate - (60,000) (75,980)
Repayment from affiliate - 50,000 50,000
Resource properties (608,112) (258,770) (3,617,027)
Purchase of fixed assets (30,000) (12,520) (359,980)
Net Cash Provided (Used In)
Investing Activities 626,923 (281,290) (5,282,149)
Cash Flows from Financing Activities
Proceeds from issuance of common
stock, net of offering costs of
$109,925 in 1997 and $622,309
from inception 1,265,075 700,000 8,543,252
Proceeds from issuance of notes
payable to related parties 267,493 15,000 399,093
Repayment of notes payable - related
party - (134,093) (134,093)
Proceeds from long term debt -
related party - - 500,000
Net Cash Provided By Financing
Activities 1,532,568 580,907 9,308,252
Net Increase in Cash and Cash
Equivalents 645,355 (624,887) -
Cash and Cash Equivalents at Beginning
of Period 951 646,306 21,419
Cash and Cash Equivalents at End of
Period $ 646,306 $ 21,419 $ 21,419
The accompanying notes are an integral part of these financial statements.
F-9
<PAGE>
EUROPEAN AMERICAN RESOURCES, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - BASIS OF FINANCIAL STATEMENT PRESENTATION (AN EXPLORATION STAGE
COMPANY)
The Company was incorporated in the state of Delaware on July 6, 1987.
Since inception, the Company acquired mining rights to mine precious
metals for as many as approximately 6,700 claims; as of December 31, 1998
the Company is the holder of a total of 850 patented, unpatented lode,
mill sites and placer claims on certain properties located throughout the
state of Nevada. The Company is a Junior Mining Company. Since the
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, "Accounting and Reporting for
Development Stage Companies". During 1997, sufficient testing was
completed to indicate certain of the Company's reserves were probable. At
that time management considered the Company to be completed with the
exploration stage and sought co-venturers for the extraction of certain
dump rocks, which are enriched residual deposits from prior mining
efforts, or tailings, and did not present the Company in the 1997
Financial Statements as an exploration stage company. During the year
ended December 31, 1998 the Company could not locate a joint venture
partner to extract the tailings without also entering into a commitment to
extract the all of the Company's claims on Prospect Mountain, subject to
the Company, first having to prove the value of the reserves these claims
hold, which will require more exploratory activities. The 1998 financial
statements present the Company as an exploration stage company.
The Company has incurred over $4,400,000 in expenditures on resource
properties since inception which, after adjusting for claims the Company
no longer controlled and geological determinations, were adjusted downward
by $1,624,310 through December 31, 1995. The amounts capitalized as
resource properties include direct exploratory costs since the acquisition
of the right to mine these 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, 1998, the Company has $2,803,110 of resource
properties. If these costs had been expensed rather than capitalized, the
deficit accumulated during the exploration stage at December 31, 1998
would have been $10,408,299 rather than $7,605,189.
The Company has been in the exploration stage to determine the amount of
proven and/or probable reserves of its resource properties, if any.
During 1997, geological testing indicated that certain reserves of the
Company are probable and in excess of the amounts capitalized. They are
not proven as of December 31, 1998, and estimates of their potential value
are not available at this time. Sufficient capital resources and credit
facilities are available for the Company to maintain its mining claims and
the existing cost structure for personnel and administrative offices for
the near term (defined as one year). Additional capital or financing is
required to complete the Company's exploration program, and its
transition, ultimately, to obtaining profitable operations, is dependent
on future events, the outcome of which is indeterminable.
F-10
<PAGE>
EUROPEAN AMERICAN RESOURCES, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
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; a subsidiary of the Company through December
31, 1995, which was spun off without a gain or loss.
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.
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:
1998 1997
Issuance of common stock in exchange
for the cancellation of indebtedness $ - $ 250,000
Issuance of common stock for services
relating to capitalized resource properties $ 524,540 $ 375,000
Distribution rights payable for the
retirement of common stock $ - $ 437,500
Issuance of common stock for the
retirement of distribution rights $ 437,500 $ -
Operating activities include interest paid of $87,143 and $30,480 for the
years ended December 31, 1998 and 1997 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.
F-11
<PAGE>
EUROPEAN AMERICAN RESOURCES, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
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 1997 and from Inception on July 6,
1987 through December 31, 1998 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
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. At December 31, 1998 the Company had owned
and/or leased the rights to control a total of 850 claims, which are
considered probable and have a value based upon geological determinations
greater than the amount capitalized; yet no reserves are proven.
F-12
<PAGE>
EUROPEAN AMERICAN RESOURCES, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
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.
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 implemented SFAS No. 130 during the year ended December 31,
1998 and as such the effect was not 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 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. After 1993, the Company increased its effort to
obtain the return of its investment and received confirmation from the
fiduciary of SFU that the funds were still intact. Subsequently the
F-13
<PAGE>
EUROPEAN AMERICAN RESOURCES, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
fiduciary representation has been unsupported and the company believes it
was fraudulent and no underlying funds from the original investment remain
at that time under his control, and furthermore the Company believes its
prospects for collection were materially damaged by the fiduciary's
actions. 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. 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. 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 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. In 1997 the Company retained new
counsel in Germany to finalize the recovery of these amounts if any, from
the German fiduciary. The new counsel has advised the Company that the
prospects for collection have improved due to changes in German laws.
Counsel has also advised the Company to reduce the amount of its demand
(an amount in excess of the remaining carrying value) to accelerate
recovery. Accordingly, during the year ended December 31, 1998, the
Company has further reserved an additional $160,667 against this claim.
The Company will record as income any amounts recovered, net of expenses,
above the remaining carrying value of $321,333, 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, 1998
Automobiles and trucks $ 30,000
Office equipment 12,520
42,520
Less: accumulated depreciation (11,451)
$ 31,069
F-14
<PAGE>
EUROPEAN AMERICAN RESOURCES, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
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, 1998:
Total deferred tax assets $1,514,484
Less: Valuation allowance (1,514,484)
Net deferred tax assets $ 0
Deferred tax assets are attributable to available net operating loss
carryforwards. The valuation allowance was increased by $171,360 and
$221,124 during the years ended December 31, 1997 and 1998 respectively.
The Company has net operating loss carry forwards of approximately
$4,454,325 which expire in various years through the year 2011. 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 issued 7,000,000 shares of its
restricted common stock for $1,900,000 to a foreign investor, Trent, Ltd,
a Company controlled by a former director, Mr. Jochen A. Brenner. At the
time the shares were issued to Trent they represented approximately 71% of
the issued and outstanding common stock of the Company. In addition, the
Company also issued to Trent a $500,000 convertible debenture bearing
interest at 8%. As a result of the issuance of the common stock and the
convertible debenture, the Company was controlled by Trent. The
accompanying financial statements include only the accounts of the Company
and its subsidiaries and are not consolidated in any way with respect to
Trent nor do they include any of the accounts of Trent. The proceeds from
the stock issuance and debenture 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 were to be invested in foreign
exchange forward contracts. All transactions were to be made at the risk
of Mr. Brenner, relieving the Company and the investment company from any
and all liability. The invested funds were restricted as to withdrawal
until October, 1993. While the invested funds were in the sole control of
Mr. Brenner, he had entered into an agreement with the Company to
liquidate the foreign investments and deliver the funds to the United
States for use by the Company beginning in October 1993. Between January
1, 1994 and December 31, 1995 the company confirmed the amounts with Mr.
Brenner and a German fiduciary; and received partial payments totaling $
964,208. Mr. Brenner failed to return these funds. In 1996 the Company
determined the debenture should be canceled in conjunction 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
F-15
<PAGE>
EUROPEAN AMERICAN RESOURCES, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
September 30, 1987 amounting to $371,883 credited to equity in exchange
for 1,000,000 shares of common stock.
In 1989, 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.
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 director 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, or $.70
per share, in cancellation of $250,000 of the note due to the related
party. The Company also issued 750,000 shares valued at $525,000, or $.70
per share, which are assignable, for exploration and reactivation
services, performed through December 31, 1997. At December 31, 1997,
$134,093 including interest remained outstanding on this note. The Company
repaid this amount during the first quarter of 1998.
On April 22, 1998, the Company entered into a consulting agreement with
its current CEO which provides for the issuance of common stock in
addition to annualized fees, as amended, of $96,000 per year. During the
year ended December 31, 1998 the president was paid $64,000 under this
agreement. The Company issued 105,000 shares of common stock valued at
$.85 per share, or $89,250, based upon their market value subject to Rule
"144" restrictions. Of this amount $44,625 was added to resource
properties and $44,625 was recorded as stock based compensation based upon
the Company's estimate of where the president directed his efforts.
The Company also agreed to issue 105,000 shares to a director, provided he
remained employed by the Company through April 30, 1999. The director
resigned from employment in an effort to curtail expenses, and remains as
a director today. The Company issued 90,000 restricted shares, valued at
$.85 per share, or $69,300, based upon their market value subject to Rule
"144" restrictions. Of this amount, $34,650 was added to resource
properties and $34,650 was recorded as stock based compensation. The
agreement initially provided for annualized compensation of $72,000 and
during the year ended December 31, 1999 he was paid $27,000 under this
agreement.
In May of 1998, the Company entered into a management agreement for
internal accounting services for $3,000 per month and the issuance of
100,000 restricted shares, valued at $.77 per share, or $77,000 and was
recorded as stock based compensation.
F-16
<PAGE>
EUROPEAN AMERICAN RESOURCES, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
During June of 1998 the Company advanced this investor $60,000 at 8%
interest of which $50,000 was repaid during the year leaving a balance of
$12,234 including accrued interest. During the year ended December 31,
1998 the Company recorded $2,234 of interest income from this loan.
The Company issued 400,000 restricted shares to the chairman and director
for services during the year ended December 31,1998, valued at $.77 per
share or $308,000, based upon their market value subject to Rule "144"
restrictions. Of this amount $154,000 was added to resource properties
and $154,000 was recorded as stock based compensation.
Credit Facilities Provided By Affiliates
In December, 1998 one shareholder agreed to advance up to $40,000 with
interest at 10% through April 30, 1999, or the completion of the Company's
offering of common stock, whichever occurs first, and its secured by the
Company's resource properties.
In December 1998, an affiliate agreed to make a $500,000 revolving credit
available to the Company with interest at prime plus 2.5% available to
the Company, on an as needed basis, secured by the Company's resource
properties with no specific repayment terms.
NOTE 7 - COMMITMENTS AND CONTINGENCIES
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 "overstated" 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
the resource properties.
Royalty Commitment
On March 19, 1997 the Company's prior president entered into an option to
purchase previously leased claims from the original lessors of 47
unpatented claims and owner of 62 patented claims. This agreement gave
the Company all patented 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. 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 total of
$192,000 to be paid under this agreement. During 1997, $36,000 was paid
under this agreement for geological efforts and recorded as an addition to
resource properties.
F-17
<PAGE>
EUROPEAN AMERICAN RESOURCES, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
The preceding agreement was canceled and replaced by the current
management and on May 26, 1998, the Company acquired 62 patented claims
and mill sites and the rights to 47 unpatented claims on Prospect
Mountain. In connection with this purchase, the Company paid the seller
$128,000 to buy out the consulting commitment which is included in
resource properties, and $19,300 for repayment of additional filing fees
which may be subject to reimbursement to the Company; this amount is
included in other assets. The Company also issued 106,000 shares to the
seller and a company he controls, which were valued at $90,100 or $.85 per
share, and a like amount was recorded as an addition to resource
properties. Additionally, the Company agreed to pay advance minimum
royalties of up to $100,000,000 as follows:
1) $15,000 on the closing date
2) $50,000 on or before the first anniversary
3) $90,000 on or before the second anniversary
4) $120,000 on or before the third anniversary
5) $150,000 on or before the fourth anniversary
6) $200,000 on or before the fifth anniversary and $200,000 each
year thereafter.
This commitment ends when a total of $100,000,000 has been paid, including
net smelting returns, or should the Company pay the seller, at the
Company's discretion, $27,000,000 prior to May 26, 2003.
The above advance on minimum royalties will be accelerated when the
Company begins to produce extraction revenues from these properties and
the net smelting returns, which are 4% in the case when the average price
of gold (London quote) in each production quarter exceeds $400 per ounce
and 3% in the case when the average price is less than $400 per ounce;
exceeds the annual minimum.
During 1997, the Company entered into net smelting agreements for
up to $7,000,000 with former shareholders in exchange for the retirement of
2,187,500 shares. The Company charged $437,500 to common stock and
additional paid in capital as this represented the net estimated value of
the distribution rights based upon the anticipated payments, if any, that
would have been made under the agreement.
In August 1998, a lawsuit was commenced against the Company by German
American Investments Limited ("GAI"). GAI was the assignor of the above
distribution rights granted by the Company to eight of its shareholders in
1997, including its current CEO, Martin Sportschuetz. The suit alleged
that EPAR's former president, Michael Ogilvie had fraudulently induced the
shareholders to enter into the distribution agreements and sought
rescission of the distribution agreements and return of the shares, along
with damages. At the time of the suit the Company's current CEO was
neither a shareholder of "GAI", nor did he have a financial interest in
GAI. This lawsuit was subsequently settled. The initial settlement
required that EPAR rescind the distribution agreements and return
2,187,500 unrestricted shares to GAI, and issue 2,187,500 warrants
exercisable at $0.50 to the GAI investors. The settlement was amended
whereas the Company is to issue 1,312,500 unrestricted shares and
1,750,000 restricted shares to rescind the distribution agreement and
F-18
<PAGE>
EUROPEAN AMERICAN RESOURCES, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
these were recorded at the original value ascribed to the distribution
rights, an increase of $437,500 in common stock and additional paid in
capital. The Company also agreed to issue 1,093,500 restricted shares,
valued at one-half of the market price of the Company's common stock on
December 31, 1998, or $.3625 per share, totaling $396,485 consistent with
the value of restricted stock agreed to by the parties for the recision,
which was charged to settlement expense.
On May 8, 1997, the Company entered into an employment agreement with the
former president for a period of seven (7) years, which provided former
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 and employee stock
bonuses, including 400,000 shares of common stock, issued to the former
president upon signing, subject to the restrictions of Rule 144 and
thereafter 210,000 shares of common stock were to be issued on each
anniversary for the first, second, third and fourth yearly anniversary of
the contract. Additionally, the agreement called for stock options
entitling the president to purchase up to 1,000,000 shares from 1999
through 2005 at prices ranging $5.00 per shares increasing annually to
$8.50 per share.
On April 22, 1998, the Company terminated the former president. In July
1998, EPAR filed a lawsuit against its former president, Michael Ogilvie
alleging fraud and breach of his employment contract with the Company.
This lawsuit was subsequently settled. The settlement required Mr.
Ogilvie to return 400,000 shares of the Company's common stock which he
received as a result of his employment by EPAR, 50,000 of the shares were
assigned to the shareholder who made a significant investment in the
Company during 1997. The Company recorded settlement income of $350,000
based upon the original value ascribed to these shares.
In December, 1998 a subcontractor filed a lawsuit in Utah state court
against the Company seeking $60,000 for the breach of an alleged oral
employment agreement. The Company has filed a motion to dismiss for lack
of personal jurisdiction. The Company intends to defend the case
vigorously. No amounts were recorded in the financial statement.
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.
F-19
<PAGE>
EUROPEAN AMERICAN RESOURCES, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
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.
Effective for December 31, 1998 the Company agreed to issue 1,312,500
unrestricted shares and 1,750,000 restricted shares to rescind the
distribution agreement. Additionally, 1,093,500 restricted shares valued
at one-half of the market price of the Company's common stock consistent
with the value of restricted stock agreed to by the parties, which
resulted in a $396,485 charge to settlement expense.
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 1998 the Company terminated the president and both parties commenced
legal action which resulted in the return to the Company of 350,000
shares. The Company recorded settlement income of $350,000 based upon the
original value ascribed to the 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.
F-20
<PAGE>
EUROPEAN AMERICAN RESOURCES, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
As discussed in Note 6, the Company issued 100,000 restricted shares
valued at $.77 per share, or $77,000; 105,000 restricted shares valued at
$.85 per share, or $89,250; 90,000 restricted shares valued at $.85 per
share, or $69,300 and 400,000 restricted shares valued at $.77 per share,
or $308,000 to various members of the Company's management team. Of these
amounts $233,275 was added to resource properties and $310,275 was
recorded as stock based compensation.
Pursuant to a 1997 agreement, the Company issued 194,900 unrestricted
shares valued at $1.21 per share, or $201,165, which was recorded as an
addition to resource properties.
Reserved Shares
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 62 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 62 patented claims or a majority of its outstanding common stock to a
single purchaser.
Pursuant to a 1997 agreement, 242,600 shares are expected to be issued in
1999 for services in connection with the Company's resource properties.
In the case of a change in control, whereby the current management would
be eliminated, the company agrees to first issue an option to the
president to purchase from 189,000 to 201,000 shares of the Company's
common stock at an exercise price of $.25.
NOTE 10 - FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair values of the Company's financial instruments as of
December 31, 1998, are as follows:
1998
Carrying Fair
Assets: Amount Value
Cash and Equivalents $ 21,419 $ 21,419
Liabilities:
Accounts payable and accrued expenses $155,687 $155,687
Note payable to related party $ 15,000 $ 15,000
F-21
<PAGE>
EUROPEAN AMERICAN RESOURCES, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOTE 11 - SUBSEQUENT EVENTS
The board of directors approved the issuance of the Company's common
stock, the price and quantity of which is to be determined by negotiation
between the Company and the underwriter, on a firm commitment basis for up
to $8,000,000.
On February 11, 1999, the Company signed a conditional letter of intent to
acquire mineral concessions of "IKAR"(Ikar Mining Corporation) in the
Republic of Tajikistan, a former Soviet Union state. While the Company is
very excited about the potential to extract gold, silver and tungsten,
which is mainly used in the field of steel production, substantial due
diligence will be required prior to closing. Presently the purchase
price totals $39,850,000 which is to be paid by the issuance of
6,600,000 shares of the Company's convertible $6.00 preferred stock,
which at this time will be convertible on or before May 15,1999 to the
Company's common stock at a strike price of $6.50, as well as a cash
payments totaling $250,000.
F-22
<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/ Martin R. Sportschuetz
Martin R. Sportschuetz, 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/ Martin R. Sportschuetz
Martin R. Sportschuetz President & CEO
F-23
<PAGE>
CLOSING AGREEMENT
This Closing Agreement entered into on the 6th day of May 1998
between Einar C. Erickson, Lynn H. Erickson, Silver International, Inc., and
Silver Viking Corporation, all Nevada corporations, (Sellers) and European
American Resources, Inc., a Delaware corporation, (Buyer),
W I T N E S S E T H:
WHEREAS, the Sellers and the Buyer have previously entered into a
Mining Lease and Option to Purchase dated the 14th day of March 1997, and
WHEREAS, the parties have determined that it is to their mutual
advantage to replace the Mining Lease and Option to Purchase with this Closing
Agreement,
NOW THEREFORE, it is hereby agreed between the parties as follows:
1. Sellers do hereby agree to convey to Buyer and Buyer
does hereby agree to purchase from Sellers the following-described
patented and unpatented mining claims, situate in the County of Eureka,
State of Nevada:
See Exhibit A for a description of the patented mining claims.
See Exhibit B for a description of the unpatented mining claims.
1. Buyer agrees to pay as the full purchase price for the
above-described patented and unpatented mining claims the sum of
$100,000,000.00, without interest, all in the following manner:
A. $ 15,000 advance royalty upon closing date.
$ 50,000 advance royalty on or before 1 year after
closing date
$ 90,000 advance royalty on or before 2 years after
closing date
$120,000 advance royalty on or before 3 years after
closing date
$150,000 advance royalty on or before 4 years after
closing date
$200,000 advance royalty on or before 5 years after
closing date,
and a like sum on or before the same date each
and every
year thereafter until paid in full.
<PAGE>
B.
In addition, Buyer shall pay Sellers a production royalty of 3% of
the net smelter returns from all minerals produced by Buyer from
the patented and unpatented mining claims in Exhibits A and B
above when the average price of gold (London quote) in the
production quarter is less than $400/ounce. If the average price
is $400/ounce or more, the production royalty shall increase to 4%
of the net smelter returns. This production royalty shall be paid
quarterly, and shall be accompanied by a statement summarizing the
computation of net smelter returns. The quarterly royalty
payments will be provisional and subject to adjustment at the end
of Buyer's accounting year.
The term "net smelter returns" as used herein shall mean the net
proceeds received by Buyer from the sale of minerals from the
property after deductions for all of the following:
(a)
Custom smelting costs, treatment charges and penalties
including, but without being limited to, metal losses,
penalties for impurities and charges or deductions for
refining, selling, and transportation from smelter to
refinery and from refinery to market; provided, however, in
the case of leaching operations, all processing and recovery
costs incurred by Buyer beyond the point at which the metal
being treated is in solution shall be considered as
treatment charges (it being agreed and understood, however,
that such processing and recovery costs shall not include
the cost of mining, crushing, dump preparation, distribution
of leach solutions or other mining and preparation costs up
to the point at which the metal goes into solution);
(b)
Costs of transporting mineral product from the concentrator
to a smelter or other place of treatment; and
(c)
Production taxes, severance taxes and sales, privilege and
other taxes measured by production or the value of
production.
Advance royalties shall be credited against production royalties.
The total of all royalties paid to Sellers shall be credited against the
purchase price. It is specifically provided herein, however, that the
aforesaid purchase price shall be discounted from $100,000,000.00 to
$27,000,000.00, if the Sellers are paid $27,000,000.00, including royalty
credits, on or before five years from closing date.
1. Sellers warrant that their title to the patented mining
claims is as set forth in the Preliminary Title Report of First American Title
Company of Nevada dated April 14, 1998, attached hereto as Exhibit A. Upon
closing date, Sellers shall convey said title to Buyer subject only to
Exceptions 2 through 63 thereof. Exception 64 shall be removed by Buyer.
Upon closing date, Buyer shall purchase a title policy on said patented claims
in the sum of $100,000.
Likewise, upon closing date, Sellers shall convey all of their
right, title and interest to Buyer, in the unpatented claims described in
Exhibit B attached hereto.
After closing date, Buyer shall defend all adverse claims against
its title acquired in this transaction. If such claims arise because of the
acts or omissions of Sellers, the cost of defense shall be offset against
advance royalties payable under Paragraph 2. A. above. In addition, Buyer
shall finance the defense of any claims filed by G&S Construction against the
Sellers even though they do not affect Buyer's title; provided however, that
the costs of such defense shall be offset against royalties payable under
Paragraph 2.A. above.
2. The closing date of this purchase shall be on or before May
26, 1998 at the offices of First American Title Company in Ely, Nevada (the
Escrow Holder).
3. On or before closing date the Sellers, and Linda Erickson
and Georgia Erickson, shall execute and deliver to the Escrow Holder the
following-described documents:
(a) Grant, Bargain and Sale Deed to the patented
mining claims in Exhibit A with real property
transfer tax in the sum of $130.00 to be paid by
Buyer.
(b) Quitclaim Deed naming Buyer as Grantee, covering
the unpatented mining claims described in
Exhibit B above.
1. Likewise, Buyer shall execute and deliver to the Escrow
Holder on or before closing date the following-described documents:
(a) A non-recourse Promissory Note in which Buyer
undertakes to perform the royalty payment
obligations described in Paragraph 2 above.
(b) First Deed of Trust naming Buyer as Grantor,
First American Title Company as Trustee and
Sellers as Beneficiaries, from Buyer to Sellers
securing payment
of the foregoing Promissory Note, and describing
the patented mining claims in Exhibit A and
unpatented mining claims in Exhibit B as the
secured property.
The Deed of Trust shall include the following
provisions:
Beginning with the annual assessment work period
of September 1, 1998 to September 1, 1999, and
for each annual assessment work year commencing
during the term of this Deed of Trust. Grantor
shall perform for the benefit of the unpatented
mining claims work of a type customarily deemed
applicable as assessment work and of sufficient
value to satisfy the annual assessment work
requirements, if any, of all applicable Federal,
state and local laws, regulations and
ordinances, and shall prepare evidence of the
same in form proper for recordation and filing
and shall timely record and/or file such
evidence in the appropriate Federal, state and
local office as required by applicable Federal,
state and local laws, regulations and
ordinances. If under applicable Federal laws
and regulations, Federal annual mining claim
maintenance or rental fees are required to be
paid for the unpatented mining claims which
constitute all or part of the property,
beginning with the annual assessment work year
of September 1, 1998 to September 1, 1999,
Grantor shall timely and properly pay the
Federal annual mining claim maintenance or
rental fees, and shall execute and record or
file, as applicable, proof of payment of the
Federal annual mining claim maintenance of
rental fees and of Grantor's intention to hold
the mining claims
Grantor shall comply with all Federal, state and
local statutes and regulations, including
environmental statutes and regulations in its
maintenance and operation of the patented and
unpatented mining claims. If at any time,
Grantor ceases operations upon any mining claim,
it shall comply with all reclamation laws and
regulations in reclaiming such mining claim.
Upon closing date, the Escrow Holder shall record the Deeds and
Deed of Trust. The parties agree to execute all escrow instructions requested
by the Escrow Holder, but in the event of conflict the terms of Closing
Agreement shall prevail. Escrow fees shall be paid by Buyer.
1. The parties acknowledge that Buyer is already in possession
of the above-described patented and unpatented mining claims.
2. The parties agree that neither of them will incur any debts
or obligations related to the above-described property, which would allow
liens or encumbrances to attach thereto prior to closing date.
3. This Closing Agreement entirely supercedes and replaces the
Mining Lease and Option to Purchase described above. The parties do hereby
waive and release any claims they may have against each other for the breach
of said agreement.
4. The parties acknowledge that Buyer has an agreement pay
Geologist, Inc. the sum of $192,000 for geological consulting and other
services, upon which there is a
balance owing of $128,000. This balance will be paid in full, without
interest, upon closing date, but outside of escrow.
5. The parties acknowledge that Buyer has an obligation to
transfer 100,000 shares of stock in Buyer, to Sellers and 6,000 shares of
stock in Buyer to Geologist, Inc. This transfer will close upon closing date,
but outside of escrow.
6. The parties further acknowledge that Buyer will reimburse
Geologist, Inc. in the sum of $19,300.00, without interest, for its duplicate
payment of unpatented claim filing fees to the Bureau of Land Management in
1996. Therefore, Geologist, Inc. shall assign all of its right to receive the
refund of said filing fees from the BLM, upon closing date.
Simultaneously Buyer shall pay Geologist, Inc. the aforesaid $19,300.00,
without interest, upon closing date. This transaction shall close outside of
escrow.
7. Should either party default in its obligations under this
Closing Agreement which obligations are not cured within 10 days after written
notice thereof is served upon the defaulting party, the non-defaulting party
may exercise all rights in law or equity available to it, including specific
performance.
All notices provided for herein shall be deemed served if
personally delivered or mailed by certified mail to party entitled to receive
the same, at the following address:
If to Sellers: c/o Einar C. Erickson
545 South Valley View Drive #100
St. George, Utah 84770
and
P.O. Box 150415
East Ely, Nevada 89315-0415
If to Buyer: 1212 Court Street, Suite C-2
Clearwater, Florida 33756
In the event of litigation between the parties, the prevailing
party shall be entitled to the award of a reasonable attorney's fee. This
Closing Agreement shall be governed by the law of the State of Nevada.
1. Neither party shall assign this Closing Agreement prior to
closing date, without the prior written consent of the other party.
2. Subject to Paragraph 14 above, this Closing Agreement shall
be binding upon, and inure to the benefit of the parties hereto and their
respective heirs, personal representatives, successors and assigns.
Sellers: Buyer:
___________________ European American Resources,Inc.,
Einar C. Erickson a Delaware
corporation
___________________ By
___________________
Lynn H. Erickson Title
___________________
Silver International, Inc.
By ___________________________
Title _________________________
Silver Viking Corporation
By ___________________________
Title _________________________
<PAGE>
CONSENT
Geologist, Inc. does hereby consent to the terms of the above-
described
Closing Agreement.
DATED: May ______, 1998.
Geologist, Inc.
By ______________________________
Title ___________________________
April 1, 1999
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<PERIOD-END> DEC-31-1998
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<RECEIVABLES> 13439
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<CURRENT-ASSETS> 87391
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