UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995, or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____.
Commission file number: (33-20582)
Equity AU, Inc.
(Exact name of registrant as specified in its charter)
Delaware 75-2276137
(State of Incorporation) (Tax 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
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
Class "A" Common Stock
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 requirement for the past 90 days.
YES X NO
Aggregate market value of the voting stock held by non-affiliates
of the registrant as of December 31, 1995, received from Bulletin
Board brokers:
$ 0.00
(no authorized trading)
Shares of common stock outstanding at December 31, 1995:
99,900,000
<PAGE>
PART IV.
Item 14. Exhibits, Financial Statements and Reports on Form 8-K.
(a) The following documents are filed as a part of this report:
Included in Part II, Item 8 of this report:
1.,2., and 3.:
Accountant's Report
Consolidated Balance Sheet -- December 31, 1995 and 1994
Consolidated Statement of Operations for the Years Ended December
31, 1995 and 1994
Consolidated Statement of Shareholders Equity for the Years Ended
December 31, 1995 and 1994
Consolidated Statement of Cash Flows for Years Ended December 31,
1995 and 1994
Notes to the Consolidated Financial Statements for the Years Ended
December 31, 1995 and 1994
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.
EQUITY AU, INC.
Registrant
Charles Jones
Charles Jones, President
Date: December 18, 1996
Pursuant to the requirements to the Securities and Exchange
Act of 1934, this report has been signed below by the following
persons on behalf of Registrant and in the capacities and on the
dates indicated.
Signature Title Date
Charles Jones Director December 18, 1996
Charles Jones
James Arch Director December 18, 1996
James Arch
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
J.S. OSBORN, P.C.
Certified Public Accountants
17430 Campbell Road, Suite 114
Dallas, Texas 75252
972-735-0033 Fax 972-735-0035
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders July 3 1996
Equity AU, Inc.
Mena Arkansas
We have audited the accompanying balance sheets of Equity
AU, Inc. (a Delaware corporation) as of December 31, 1995
and 1994 and the related statements of operations,
stockholders' equity and accumulated deficit, and cash flows
for each of the three years in the period ended December 31,
1995. 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 of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provides
a reasonable basis for our opinion.
In our opinion, based on our audits, the financial
statements referred to above present fairly, in all material
respects, the financial position of Equity AU, Inc. as of
December 31, 1995 and 1994, and the results of their
operations and their cash flows for each of the three years
in the period ended December 31, 1995 in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared
assuming that the Company will continue as a going concern.
As discussed in Note H to the financial statements, the
Company has suffered recurring losses from operations and
has a net capital deficiency, which raises substantial doubt
about its ability to continue as a going concern. The
financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
J. S. Osborn, P. C.
Dallas, Texas
<PAGE>
<CAPTION>
EQUITY AU, INC.
BALANCE SHEETS
December 31, 1995 and 1994
ASSETS
restated
CURRENT ASSETS: 1995 1994
<S> <C> <C>
Cash $1,672 $12,926
Accounts receivable
- Related party $ 0 $30,127
Prepaid expense $18,966 $ 0
Total Current Assets $20,638 $43,053
PROPERTY,PLANT AND EQUIPMENT:
Investment in mining claims $7,500 $7,500
Land and buildings $77,326 $77,326
Equipment and Vehicles $26,924 $23,294
Total Property,Plant & Equip. $111,750 $111,750
OTHER ASSETS:
Silver statue $16,250 $16,250
Precious Gems $23,290 $23,290
Total Other Assets $39,540 $39,540
TOTAL ASSETS $171,928 $194,343
See accompanying notes.
<PAGE>
<CAPTION>
EQUITY AU, INC.
BALANCE SHEETS
December 31, 1995 and 1994
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
CURRENT LIABILITIES:
Restated
1995 1994
<S> <C> <C>
Accounts payable $48,791 $50,159
Payroll taxes payable 38,469 61,089
Interest payable
- Related Party 18,588 7,602
Current Portion - long term debt
- Related Party 172,555 35,640
Current Portion - long term debt 3,364 8,503
Total Current Liabilities 281,767 162,993
NON-CURRENT LIABILITIES:
Long term debt - Related Party 182,555 184,640
Long term debt 16,468 18,714
Less: current portion (175,919) (44,144)
Total Non-Current Liabilities 23,104 162,210
TOTAL LIABILITIES 304,871 325,203
CONTINGENCIES AND COMMITMENTS:
(Note D)
STOCKHOLDERS' (DEFICIT):
Preferred stock, Series A,
$1.00 Par Value 148,000 148,000
Preferred stock, Series B,
$1.00 Par Value 288,200 288,200
Preferred stock, Series C,
$1.00 Par Value 10,200 10,200
Common stock, Class A,
$0.001 Par Value 91,123 61,247
Common stock, Class B,
$0.001 Par Value 1,000 1,000
Additional paid-in capital 11,527,950 11,314,759
Accumulated deficit (12,199,416) (11,954,266)
Total Stockholders' (Deficit) (132,940) (130,860)
TOTAL LIABILITIES AND
STOCKHOLDERS'(DEFICIT) $171,928 $194,343
See accompanying notes.
<PAGE>
<CAPTION>
EQUITY AU, INC.
STATEMENTS OF OPERATIONS
For The Years Ended December 31, 1995, 1994, and 1993
Restated
REVENUE 1995 1994 1993
<S> <C> <C> <C>
Revenue $0 $0 $104,110
Direct Costs (2,519) (31,298) 40,083
GROSS MARGIN (2,519 (31,296) 64,027
EXPENSES:
Amortization 0 330 1590
Depreciation 0 70,202 84,312
General and
Administrative 145,156 366,525 609,243
Salaries 45,910 158,658 269,225
Bad Debt Expense 0 124,330 0
Writedown of assets 0 426,456 1,704,123
Total expenses 191,066 1,146,511 2,668,493
OPERATING LOSS (193,585)(1,177,809)(2,604,466)
OTHER INCOME (EXPENSE):
Interest income 9 32 9,923
Option fees 0 0 110,500
Investment income 0 0 (15,491)
Gain on sale of land 0 30,840 0
Loss on bldg. sale 0 (75,667) 0
Loss on partnership
interests 0 (2,288841) 0
Interest expense (19,057) (21,896) (72,323)
Penalties 0 (30,185)) (72,323)
Total other income
(expense) (19,048) (2,385717) 32,609
NET LOSS (212,633) (3,563526)($2,571,857)
Weighted average
shares outstanding 78,175,088 59,627160 46,468,445
LOSS PER SHARE: ($0.00) ($0.06) ($0.06)
See accompanying notes.
<PAGE>
<CAPTION>
EQUITY AU, INC.
STATEMENT OF STOCKHOLDERS' EQUITY AND ACCUMULATED DEFICIT
Period from December 31, 1993 to December 31, 1995
Preferred Stock - A
Shares Amount
<S> <C> <C>
Balance
December 31,1993 148,000 $148,000
Issuance of preferred stock
for cash 0 0
Issuance of preferred stock
for services 0 0
Balance
December 31,1994 148,000 $148,000
Balance
December 31,1995 148,000 $148,000
Preferred Stock - B
Balance
December 31, 1993 78,500 $78,500
Issuance of preferred stock
for cash 203,500 203,500
Issuance of preferred stock
for services 6,200 6,200
Balance
December 31,1994 288,200 $288,200
Balance
December 31,1995 288,200 $288,200
Preferred Stock - C
Balance
December 31,1993 0 $0
Issuance of preferred stock
for cash 6,000 6,000
Issuance of preferred stock
for services 4,200 4,200
Balance
December 31, 1995 10,200 $10,200
<PAGE>
Class A Common
Shares Amount
Balance
December 31,,1993 57,125,336$57,125
Issuance of common stock:
for cash 3,500,000 3,500
for services 459,790 460
for dividends 161,944 162
Class B Common
Shares Amount
Balance
December 31, 1993 100,000 $1,000
Paid in Capital
BALANCE
December 31,1993 $11,160,079
Issuance of common stock:
for cash 91,606
for services 45,519
for dividends 17,555
Accumulated Deficit
Balance
December 31,1993 ($8,390,740)
Net loss ( 3,563,526)
See accompanying notes.
<PAGE>
Class A Common
Balance Shares Amount
December 31, 1994 61,247,070$61,247
Issuance of common stock:
for cash 27,078,885 27,079
for services 2,500,000 2,500
1993 dividend on
Preferred Series A 161,944 162
1994 dividend on
Preferred Series A 135,284 135
Class B Common
Shares Amount
Balance
December 31,1994 100,000 $1,000
Paid in Capital
Balance
December 31,1994 11,314,759
Issuance of common stock:
for cash 157,221
for services 23,750
1993 dividend on Preferred
Series A 17,555
1994 dividend on Preferred
Series A 14,665
Accumulated Deficit
Balance
December 31, 1994 ($11,954,266)
Issuance of common stock:
1993 dividend on Preferred
Series A (17,717)
1994 dividend on Preferred
Series A (14,800)
Net Loss (212,633)
See accompanying notes.
<PAGE>
Balance
December 31, 1995
Class A Common:
Shares 91,123,183
Amount $91,123
Class B Common
Shares 100,000
Amount $1,000
Paid in Capital $11,527,950
Accumulated Deficit $12,199,416
See accompanying notes.
<PAGE>
<CAPTION>
EQUITY AU INC.
STATEMENTS OF CASH FLOWS
For The Years Ended December 31, 1995, 1994, and 1993
Restated
1995 1994 1993
CASH FLOWS FROM
OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net loss ($212,633) ($3,563,526) ($2,571,857)
Adjustments to
reconcile net
loss to net cash
(used) by operating
activities:
Stock issued for
services 26,250 56,379 132,780
Stock issued for
interest 0 0 39,100
Writedown of
assets 0 426,456 1,704,123
Amortization 0 330 1,590
Depreciation 0 70,202 84,312
Loss on
partnership
investments 0 2,288,841 0
Bad debt expense 0 124,340 0
Loss on sale of
building 0 75,667 0
Gain on sale of
land 0 (30,840) 0
Changes in working
capital:
(Increase)
decrease in
Accounts
receivable 30,127 (9,206) (48,100)
Prepaids (18,965) 0 2,088
Increase (decrease)
in Accounts payable (1,368) 27,365 21,118
Payroll taxes
payable (22,620) 37,991 0
Interest payable 11,901 27,365 0
Deposits 0 0 0
NET CASH (USED) BY
OPER. ACTIVITIES:
(187,308) (488,398) (631,917)
See accompanying notes.
<PAGE>
<CAPTION>
EQUITY AU, INC.
STATEMENTS OF CASH FLOWS
For The Years Ended December 31, 1995, 1994, and 1993
Restated
1995 1994 1993
<S> <C> <C> <C>
CASH FLOWS FROM
INVESTING ACTIVITIES:
Purchase of Equipment 0 (3,201) (133,139)
Sale of land 0 64,000 0
NET CASH PROVIDED
(USED)
BY INVESTING
ACTIVITIES: 0 60,799 (133,139)
CASH FLOWS FROM
FINANCING ACTIVITIES:
Increase in debt 24,000 187,640 290,000
Decrease in debt (32,246) (72,114) (24,727)
Sale of preferred
stock 0 209,500 78,500
Sale of common
stock 184,300 95,108 180,735
Decrease in
notes receivable 0 4,900 0
Increase in
advances-Related Party 0 0 (52,977)
Paid in capital 0 0 103,622
NET CASH PROVIDED
BY FINANCING ACTIVITIES: 176,054 425,031 575,153
NET (DECREASE) IN CASH: (11,254) (2,568) (189,903)
CASH AT BEGINNING
OF YEAR: 12,926 15,494 205,397
CASH AT END OF YEAR: $1,672 12,926 15,494
See accompanying notes.
<PAGE>
<CAPTION>
EQUITY AU, INC.
STATEMENTS OF CASH FLOWS
For The Years Ended December 31, 1995, 1994, and 1993
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW AND NON-CASH INVESTING ACTIVITIES
Restated
1995 1994 1993
<S> <C> <C> <C>
CASH FLOW INFORMATION:
Interest paid $2,302 $11,704 $33,223
Income taxes paid $0 $0 $0
1995
During 1995 the Company had the following non-cash
transactions: a) the Company exchanged Class A common stock
for $26,250 for services. b) the Company exchanged Class A
common stock for $32,517 for 1993 and 1 994 dividends.
1994
During 1994 the Company had the following non-cash
transactions: a) the Company's account receivable from a
related party in the amount of $105,362 as of December 31,
1993 was reduced when the related party paid the Company's
$40,000 note and $6,167 in accrued interest. b) the balance
of the account receivable in the amount of $54,109 was
exchanged as part of the consideration in the sale of the
Company's office building in Dallas, Texas. c) the Company
exchanged Class A common stock for $45,979 for services.
1993
During 1993 the Company had the following non-cash
transactions: a) the Company exchanged Class A common stock
for $450,000 in short term debt. b) the Company exchanged
Class A common stock for $250,000 in short term debt. c) the
Company purchased land in the amount of $74,109 by
assumption of long term debt. d) the Company issued Class A
common stock for assets in the amount of $968,604.
See accompanying notes.
<PAGE>
EQUITY AU, INC.
NOTES TO FINANCIAL STATEMENTS
Note A - Nature of Business and Summary of Significant
Accounting Policies:
History:
The Company was organized on March 5, 1988, as a Delaware
corporation under the name Sherry Lyn Corporation. The
Company was organized as a public company for the purpose of
finding a suitable combination partner.
The Company engaged in research and development of a process
to extract gold and other precious metals on various real
properties located in Arkansas. Partnerships were formed
prior to 1994 by the Company or by affiliates of the Company
to raise working capital, acquire mineral claims, rights,
facilities, and equipment and to explore for precious
metals. In 1994 the company was notified by general partners
of the partnerships that they were terminated and dissolved.
The Company has had no significant operations since August
1994 and suspended mining operations in June 1995.
Accounting Change
The Company changed its accounting presentation from
consolidation since it divested itself of all subsidiaries
in 1994. Consequently, the financial statements have been
restated for all periods presented that may have been
previously consolidated.
Use of Accounting Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make certain estimates and assumptions that affect the
amounts reported in the financial statements and
accompanying notes. Actual results could differ from those
estimates.
Property and equipment
Property and Equipment are carried at cost. Upon retirement
or disposal, the asset cost and related accumulated
depreciation are removed from the accounts and any resulting
gain or loss is included in the determination of net income.
Maintenance, repairs and renewals are charged to expense
when incurred. Additions and significant improvements are
capitalized and depreciated. Upon retirement or sale, the
cost of the assets disposed of and related accumulated
depreciation are removed from the accounts and any resulting
gain or loss are included in the determination of net
income.
<PAGE>
Note A - Nature of Business and Summary of Significant
Accounting Policies (Continued):
Depreciation and Amortization
The Company depreciates its cost in buildings and equipment
based on the estimated number of years straight-line method.
No depreciation was taken in 1995 as there were no property
additions and the values of the idle equipment was written
down to salvage value in 1994.
Revenue Recognition
The Company recognizes revenue when sales of precious metals
or other products are sold to qualified buyers.
Mining claims
Mining claims are carried at cost. These costs will be
amortized on the units of production basis when mining
operations commence. The Company assesses the value of its
claims annually for impairment. Costs will be written off
when a lease or claim is dropped or expires or a
determination is made that ore cannot be extracted in
economic quantities.
Long-Lived Assets
The preparation of financial statements in conformity with
generally accepted accounting principals requires management
to make estimates and assumptions that affect the reported
amounts of assets, liabilities, revenues and expenses.
Actual results could differ from these estimates.
In 1995, the Financial Accounting Standards Board released
the Statement of Financial Accounting Standards No. 121
(SFAS 121), "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of." SFAS
121 requires recognition of impairment of long-lived assets
in the event of net book value of such assets exceeds the
future undiscounted cash flows attributable to such assets.
SFAS 121 is effective for fiscal years beginning after
December 15, 1995 with earlier adoption encouraged. As a
result the Company recognized a loss in the amount of
$712,868 from the impairment of its advances, mining claims
and partnership investments in 1994.
(Loss) per Common Share:
(Loss) applicable to common stock is based on the weighted
average number of shares of common stock and common stock
equivalents outstanding during the year.
<PAGE>
Note A - Nature of Business and Summary of Significant
Accounting Policies (Continued):
Income Taxes
The Company is subject to the greater of federal income
taxes computed under the regular system or the alternative
minimum tax system.
The Company adopted Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes." The
Statement requires the use of an asset and liability
approach for the accounting and financial reporting of
income tax. No deferred tax asset has been recognized for
the operating loss carryforward as it is more likely than
not that all or a portion of the net operating loss will not
be realized and any valuation allowance would reduce the
benefit to zero.
Note B - Mining Claims:
The Company held 75 mining claims as of December 31, 1995
and 1994. In 1994 the Company determined that exploring for
precious metals on these claims was not economically
feasible and an impairment on these claims was recognized in
the amount of $69,500. These claims are renewable in August
of each year, but there has been no activity on these claims
in 1995.
Note C - Other Assets:
Silver Statue and Precious Gems
The Company acquired a silver statue and certain precious
gems from a related party in exchange for common stock.
During 1994, the statue and gems were pledged as collateral
on a note in the amount of $30,000 to a related party.
During 1995, the note securing the statue and gems was paid
in full. Subsequent to 1995, the silver statue was exchanged
for services rendered by a related party.
Note D - Contingencies and Commitments:
The Company owed $38,469 and $61,089 as of December 31, 1995
and 1994 in state and federal payroll taxes. Penalties and
interest continue to accrue and management as determined
that this will have no significant or material adverse
effect.
<PAGE>
Note D - Contingencies and Commitments (continued):
No provision or accrual has been made to cover any future
remedial action or cleanup activities since these costs, if
any, cannot be determined at this time. However, the company
has determined that any costs associated with future cleanup
liability will be covered by cash deposits held by the State
of Arkansas.
Although all partnerships that the Company and its
Subsidiaries served as General Partner have discontinued
operations, no provision or accrual has been made to cover
any future remedial action or formal dissolution since these
costs, if any, cannot be determined at this time.
In July 1996 the Securities and Exchange Commission filed a
default judgment against the Company for noncompliance in
filing the quarterly and annual reports on a timely basis.
The Company has agreed to action and is making every effort
to comply with the order.
<CAPTION>
Note E - Long-term Debt:
1995 1994
Non Current Current Non Current Current
<S> <C> <C> <C> <C>
Note payable to
Eastern Global
LLC. a related
party. Secured
by precious
gems and statue. 0 0 0 30,000
Note payable to
Arkansas Minerals
Partners, a
related party.
Interest accrues
at 10% payable
quarterly. Secured
by land, building,
and equipment. 0 152,000 152,000 0
Note payable for
funds advanced
and expenses paid
in the Company's
behalf. This note
is unsecured. 0 6,555 0 0
Other unsecured
debt 10,000 14,000 0 0
Total Long-term
Debt-Related
Party $ 10.000 $172,555 $152,000 $30,000
<PAGE>
1995 1994
Non Current Current Non Current Current
Land purchase
note payable,
installments
in the amount
of $1,196 at 8.5% 13,104 3,264 15,529 3,085
Land purchase
note payable,
installments
in the amount
of $761 at 8.5% 0 0 42,221 5,319
Other debt 0 100 0 100
Total Long-term
Debt $ 13,104 $3,364 $57,750 $8,504
TOTALS $ 23,104 $175,919 $209,750 $38,504
Note F - Capital Stock:
Preferred Stock - Series A: The Company is authorized to
issue 200,000 shares of non-voting preferred shares, at a
par value of $1.00 per share. These shares accrue a 10%
dividend annually. The cumulative amount of dividend is
$14,800 and $32,517 at December 31, 1995 and 1994
respectively. These Preferred shares are convertible into
Class A common stock at a conversion rate of 5.5 common
shares for each Preferred share. There were 148,000 shares
issued and outstanding at December 31, 1995, and 1994.
Dividends paid during 1995 amounted to $17,717 for 1993 and
$14,800 for 1994.
Preferred Stock - Class B: The Company is authorized to
issue 300,000 shares of non-voting preferred shares, at a
par value of $1.00 per share. These shares accrue a 10%
dividend payable annually on June 30 of each year. The
cumulative amount of dividend is $54,200 and $25,380 at
December 31, 1995 and 1994 respectively. These Preferred
shares are convertible into Class A common stock at a
conversion rate 16 common shares for each Preferred share.
There were 288,200 shares issued and outstanding at December
31, 1995, and 1994.
Preferred Stock - Class C: The Company is authorized to
issue 100,000 shares of non-voting preferred shares at a par
value of $1.00 per share. These shares accrue a 10% dividend
annually. The cumulative amount of dividend is $1,126 and
$331 at December 31, 1995 and 1994 respectively. These
Preferred shares are convertible into Class A common stock
at a conversion rate of 12 common shares for each Preferred
share. There were 10,200 shares issued and outstanding at
December 31, 1995 and 1994.
Preferred Stock: The Company is authorized to issued
1,400,000 shares of its non-voting preferred stock at a par
value of $1.00 per share. There were no shares issued and
outstanding at December 31, 1995 and 1994.
<PAGE>
Common Stock - Class A: The Company is authorized to issue
99,900,000 Class A common shares, at a par value of $.001
per share. These shares have full voting rights. There were
91,123,183 and 61,247,070 shares outstanding as of December
31, 1995, and 1994 respectively. There were 840,183 and
657,241 shares paid for but unissued as of December 31,
1995, and 1994 respectively included in outstanding shares.
The Company issued 161,944 and 135,284 shares as dividends
in 1995 for 1993 and 1994 dividends accrued.
In May 1995, the Company issued in error 9,617,000 shares to
related party that will be returned to the Company and
canceled. There was no consideration exchanged in the issue
or cancellation of these shares.
In 1994, the Company established an unqualified stock
benefit plan designed to provide awards of common stock to
selected employees based on certain performance/production
criteria or achievement of goals. The Company has 98,375 and
525,000 shares at December 31, 1995 and 1994 respectively
held in the name of the plan as of December 31, 1995 and
1994.
Common Stock - Class B: The Company is authorized to issue
100,000 shares of its Class B common shares at a par value
of $.01 per share. The Class B shares have the right to
elect a majority of the Board of Directors of the Company.
There were 100,000 shares issued and outstanding as of
December 31, 1995 and 1994.
Warrants:
On September 10, 1994, the Company issued warrants to
Eastern Global, LLC. to purchase 200,000 shares of new issue
Class A common stock at an exercise price of $0.09375 per
share. These warrants have an expiration date of September
10, 1996.
<PAGE>
NOTE G - Related Party Transactions:
Arkansas American Mining and Exploration, Inc. (AAME) was
owned and controlled by the founders of the Company. In
1988, AAME exchanged mining claims, milling facility and a
core drilling rig, for the Company's common stock. A
significant amount of the Company's property and equipment
as of December 31, 1994 is from this transaction.
In 1994, a related party loaned the Company $30,000 and held
the statue and precious gems as collateral. This note was
paid in full in 1995.
In 1994, a related party loaned the Company $152,000 secured
by the Company's land, buildings, and equipment. This note
plus interest is due in the fourth quarter of 1996.
In 1994, a related party loaned the company $2,500 to
provide working capital. This party also incurred $4,055 of
expenses on behalf of the Company.
During 1995, $10,000 and $14,000 was loaned to the company
by related parties in the form of notes to provide working
capital. The $10,000 note bears interest at 10% payable in
1997.
During 1995, the Company paid $25,000 for services rendered
by related parties and issued 2,500,000 shares of Class A
common stock.
NOTE H - Going Concern:
The Company has limited capital resources available to meet
current obligations and develop its properties and bring
into production a profitable mining operation. The adverse
effect on the Company's results of operation due to its
limited capital resources can be expected to continue until
such time as the Company is able to generate additional
capital from other sources.
These conditions raise concerns about the Company's ability
to continue as a going concern. Management has implemented,
or developed plans to implement, a number of actions to
address these conditions including: maintain the most
attractive mining properties; selling the precious gems;
obtaining additional financing; and investigating various
joint venture opportunities.
Additional funding will be necessary for the Company's
development plans. There can be no assurance that additional
funding will be available when needed or, if available, that
the terms of such financing will not adversely affect the
Company's results from operations.
The financial statements do not include any adjustment to
reflect the possible future effects on the recoverability
and classification of assets or the amounts and
classification of liabilities that may result from the
outcome of this uncertainty.
NOTE I - Subsequent Events (unaudited):
The Company agreed to pay the manager of mining operations a
monthly salary while mining operations were in progress. The
Company has exchanged its silver statue for its obligation
to that individual in full settlement of wages owed.
In the first quarter of 1996, a default judgment was entered
against the Company in Dallas County, Texas in the amount of
$7,401.70 for legal services performed in 1994.
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