UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
[X]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarter ended: September 30, 1996
OR
[ } TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number: 01-17520
Equity AU, Inc.
(exact name of registrant as specified in its charter)
Delaware 33-20582 75-2276137
(State of Incorporation) ('33 Act SEC file no.) (IRS E Id No.)
119 Gold Lane, Mena, Arkansas 71953
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: 501-389-6466
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 Act of 1934 during the past 12 months and (2) has been
subject to such filing requirements for the past 90 days.
X YES NO
Shares of common stock outstanding at September 30, 1996:
90,283,000
<PAGE>
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION Page Num.
Item 1. Financial Statements 3
Item 2. Managements's Discussion and Analysis
of Financial Condition and Results of
Operations 8
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 10
Item 2. Changes in Securities 10
Item 3. Defaults upon Senior Securities 10
Item 4. Submission of Matters to a Vote
of Security-Holders 10
Item 5. Other Information 10
Item 6. Exhibits and Reports on Form 8-K 10
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<TABLE>
Item 1. EQUITY AU, INC.
<CAPTION>
CONDENSED BALANCE SHEET
ASSETS
Sept. 30 Decem. 31
1996 1995
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash $ (1,431) $ 1,672
Prepaid Expense 0 18,966
Accounts Rec. - Related Party 0 0
Total Current Assets: (1,431) 20,638
PROPERTY, PLANT AND EQUIPMENT:
Investment in Mining Claims 7,500 7,500
Land, Buildings, Equipment (net) 104,250 104,250
Total Property, Plant & Equip: 111,750 111,750
OTHER ASSETS:
Other Assets 39,540 39,540
Total Other Assets: 39,540 39,540
TOTAL ASSETS: 149,859 171,928
LIABILITIES AND STOCKHOLDER'S (DEFICIT)
CURRENT LIABILITIES:
Accounts Payable $ 106,901 105,848
Current-Long Term-Related Party 172,555 172,555
Current-Long Term 1,790 3,364
Total Current Liabilities: 281,246 281,767
NON-CURRENT LIABILITIES:
Long Term Debt-Related Party 196,896 182,555
Long Term Debt 60,706 16,468
Less Current Portion (174,345) (175,919)
Total Non-Current Liabilities: 83,257 23,104
TOTAL LIABILITIES: 364,503 304,871
STOCKHOLDER'S (DEFICIT):
Preferred Stock, Series A, $1 PV 148,000 148,000
Preferred Stock, Series B, $1 PV 288,200 288,200
Preferred Stock, Series C, $1 PV 10,200 10,200
Common Stock, Class A, $.001 PV 91,123 91,123
Common Stock, Class B, $.001 PV 1,000 1,000
Additional Paid-In Capital 11,527,950 11,527,950
Accumulated Deficit (12,281,117) (12,199,416)
Total Stockholder's Deficit (214,644) (132,943)
TOTAL LIAB. & STOCKHOLDER'S (DEFICIT) $149,859 $171,928
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EQUITY AU, INC.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
For 3 Months Ended For 9 Months Ended
Sept 30 Sept 30 Sept 30 Sept 30
1996 1995 1996 1995
<S> <C> <C> <C> <C>
REVENUE:
Revenue $ 0 $ 0 $ 0 $ 0
Direct Costs 0 (1,476) 1,135 (2,519)
GROSS MARGIN: 0 (1,476) 1,135 (2,519)
EXPENSES:
Amortization 0 0 0 0
Depreciation 0 0 0 0
General & Admin. 23,107 26,121 60,165 135,068
Salaries 16,128 0 16,128 45,910
Asset Writedown 0 0 0 0
Total Expenses: 39,235 26,121 76,293 180,978
OPERATING LOSS: (39,235) (27,597) (75,158) (183,497)
OTHER INCOME (EXPENSE):
Interest Income 0 0 0 9
Interest Expense (1,196) (4,552) (1,196) (13,932)
Penalties 0 (14) (879) (596)
Total Other Inc (Exp): (1,196) (4,566) (2,075) (14,519)
NET LOSS: $(40,431) (32,163) (77,233) (198,016)
</TABLE>
See accompanying notes.
<PAGE>
<TABLE>
<CAPTION>
EQUITY AU, INC.
STATEMENT OF STOCKHOLDER'S EQUITY AND ACCUMULATED DEFICIT
Period from December 31, 1994 to September 30, 1996
(Unaudited)
Pref Stock (A) Pref Stock (B) Pref Stock (C)
Shares Amount Shares Amount Shares Amount
<S> <C> <C> <C> <C> <C> <C>
Balance:
Dec. 31, 1994 148,000 $148,000 288,200 $288,200 10,200 $10,200
Balance:
Dec. 31, 1995 148,000 $148,000 288,200 $288,200 10,200 $10,200
Balance:
Sept. 30, 1996 148,000 $148,000 288,200 $288,200 10,200 $10,200
</TABLE>
See accompanying notes.
<PAGE>
<TABLE>
<CAPTION>
EQUITY AU, INC.
STATEMENT OF STOCKHOLDER'S EQUITY AND ACCUMULATED DEFICIT
Period from December 31, 1994 to September 30, 1996
(Unaudited)
Class A Common Class B Common Paid In Accumulated
Shares Amount Shares Amount Capital Deficit
<S>
Balance: December 31, 1994
<C> <C> <C> <C> <C> <C>
61,247,000 $61,247 100,000 $1,000 $11,314,759 ($11,954,266)
Issue Common Stock for:
cash 27,078,885 27,079 157,221
serv. 2,500,000 2,500 23,750
1993
Divs
on A
Pref.
Shares 161,944 162 17,555 (17,717)
1994
Divs
on A
Pref.
Shares 135,284 135 14,665 (14,800)
Net Loss: (212,633)
Balance: December 31, 1995
91,123,183 $91,123 100,000 $1,000 $11,527,950 ($12,199,416)
Balance: September 30, 1996
91,123,183 $91,123 100,000 $1,000 $11,527,950 ($12,281,117)
</TABLE>
See accompanying notes.
<PAGE>
EQUITY AU, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
Nine Months ended September 30, 1996
Note A - Basis of Presentation:
The accompanying unaudited financial statements include all
adjustments which are, in the opinion of management, necessary for
the fair presentation of the Company's financial position at
September 30, 1996 and December 31, 1995, and results of operations
for the three month and nine month periods ended September 30, 1996
and 1995. These financial statements have been prepared on a basis
consistent with the accounting principles and policies reflected in
the December 31, 1995 financial statements. The December 31, 1995
Form 10-K should be read in conjunction with these financial
statements. The Balance Sheet as of December 31, 1995 has been
derived from audited financial statements at that date. Operating
results for the three month and nine month periods ended September
30, 1996 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1996 as they may be
affected by a number of factors.
Note B - Contingencies:
The Company continues to have limited funds for working
capital. As a result, there are concerns about the Company's
ability to continue as a going concern.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
(1) Liquidity. December 31, 1995 represented the seventh
year end of Registrant. The Registrant has funded its operations
over time from fees received from limited partnerships and their
limited partners, loans from officers, directors, and Affiliates,
through paid-in equity capital, and debt. The Registrant's
liquidity has become virtually non-existent.
As of September 30, 1996 the Registrant's cash and cash
equivalents totalled $(1,431), representing a change since June 30,
1996, of $(2,952).
(2) Capital Resources.
(i) Registrant has no firm commitments for capital
resources at this time, and considering the nearly maximum
issue of its class "A" common shares, none is likely to occur.
(ii) It is not likely that the officers and directors of
Registrant can fund the Registrant to any increased extent
than they have already provided.
(iii) Registrant has no lines of credit.
(3) Results of Operations. In 1991 and 1992, the Registrant
significantly expanded its activity at its milling site near Mena,
Arkansas. The Registrant believed, due to statements from its
operations managers and other third parties, that they had
developed a reliable process to extract precious metals from the
ore taken from properties owned or administered by the Registrant.
The Registrant entered into agreements with AT&T Nassau Metals to
be its refiner, and agreed to deliver certain quantities of gold
bearing mineral concentrates in several forms to AT&T Nassau.
After selling an initial shipment to its refiner, the Registrant's
technical staff was not able to continue deliveries, citing
interference with other platinum group metals locked in complex
molecular clusters.
In early 1993, upon the investigation and advise of its
technical staff, the Registrant believed that electron beam
technology, using gasification at high temperature in a vacuum, was
required to fracture the molecular clusters, thereby permitting the
gold and other precious metal recovery. In April 1993, the
Registrant purchased and commenced installation of electron beam
equipment, completing work and obtaining an operating permit from
the Arkansas Department of Pollution Control and Ecology in
September 1993. Initial testing of the equipment provided variable
results, with no guaranteed results for the continued infusion of
capital for production modifications.
<PAGE>
Shortly thereafter, the Registrant accepted a letter of
resignation from its technical manager, and then hired Mr. Natvar
Patel, an experienced metallurgist directed to implement mining
production, under any method, as quickly as possible.
After considerable testing and evaluation by the new
metallurgist, it was determined that it was likely that the subject
ores could be processed commercially without required use of the
electron beam equipment. The Registrant has yet to fully
investigate the potential of this equipment to enhance mineral
values extracted through more conventional means, and while feeling
that it may yet hold promise, decided not to invest an additional
$40,000 to $50,000 in the electron beam equipment for modifications
which would be required for proper evaluations.
Instead, management made the decision to pursue two directions
more focused on earning production revenue, and adding value to the
assets. Since the second half of 1994, the Registrant sought to
develop repeatable and consistent (low standard deviation) pilot
production of gold values through extraction methods which have
proved reasonably reliable through extensive testing, supported by
numerous third party independent assays. At the same time, the
Registrant employed a consultant from a University mining school of
the highest reputation, to investigate and deliver to the
Registrant a "flowchart", which would be a system designed to be
the most effective extraction method for gold values, at the most
reasonable cost, providing the most consistent results. That goal
was not accomplished, due in large part, to the inability of the
Registrant to fund the expenses involved. The Registrant had
tested numerous pilot batches beginning in July of 1994, based on
internal research, and had continued working toward reducing the
standard deviation in variance of test results down to acceptable
levels for eventual certification of the reliable flowchart.
Although the test results varied greatly, management considered
that it would be satisfied if even the lower results could be
relied upon in a large scale operation.
Sizable variability in the test results continued in 1995, and
all research activity and development work in Arkansas was
suspended in mid June of 1995.
However, as reported in the Registrant's June 30 Form 10Q, a
number of management changes were made in mid 1996, a new
President, Charles Jones, was appointed, and the Arkansas
facilities were re-opened. The Registrant has commenced very
limited production, and, subsequent to the end of the third quarter
covered by this report, has sold a small amount of gold which it
obtained from two tons of its ore. Although management is not yet
certain regarding future funding, or any timeframe, plans have been
made to start larger scale operations as soon as possible.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
The Registrant is not a party to, or aware of any suits or
legal proceedings which might be considered to be outside of the
course of everyday business operations, or materially affect
operations.
Item 2. Changes in Securities.
Registrant has made no changes in its securities during the
third quarter of 1996, but has subsequently solicited a vote of
shareholders for an annual meeting on several different matters
(See Item 4. below).
Item 3. Defaults Upon Senior Securities.
Registrant has no senior securities and accordingly no
defaults on same. However, the Registrant has several classes of
"preferred" stock, which, although they hold no seniority, priority
or privilege regarding assets, do hold the right to receive
dividend or interest payments. As of September 30, 1996, such
securities have accrued said payments in the amount of $124,850.
Item 4. Submission of Matters to a Vote of Security Holders.
The Registrant has submitted several matters to a vote of
security holders. On the mailing date of approximately November 1,
1996, the Registrant has solicited a vote of its Class A Common
shareholders to approve a "one hundred down to one" reverse split
of those outstanding shares, to grant authority to the Board of
Directors to change the Registrant's state of incorporation from
Delaware to Nevada, and to re-elect three Directors to its Board.
Such vote will be tabulated at the Registrant's annual meeting of
shareholders to be held December 12, 1996, at 10AM local time, at
the Registrant's facilities in Mena, Arkansas.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
The Registrant has not filed any reports on Form 8-K during
the third quarter of 1996.
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
EQUITY AU, INC
(Registrant)
BY: Charles Jones
Charles Jones, President
DATE: October 30, 1996
