U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-KSB
[x] Annual report under Section 13 or 15 (d) of the Securities
Exchange Act of 1934 (No fee required, effective October 7, 1996.)
For the fiscal year ended December 31, 1998
[ ] Transition report under Section 13 or 15(d) of the Securities
Exchange Act of 1934 (No fee required)
For the transition period from _____________ to _____________ .
Commission file number 33-20582
Equity AU, Inc.
(Name of Small Business Issuer in Its Charter)
Delaware 75-2276137
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
P.O. Box 940037, Maitland, Florida 32794-0037
(Address of Principal Executive Offices) (Zip Code)
(407) 647-3952
(Issuer's Telephone Number, Including Area Code)
Securities registered under Section 12(b) of the Exchange Act:
None
Securities registered under Section 12(g) of the Exchange Act:
Class A Common Stock, par value $.001 per share
(Title of Class)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes [ ] No [ x ]
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B is not contained in this form, and no disclosure will
be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]
The issuer's revenues for the year ended December 31, 1998 were $0.
The aggregate market value of the voting stock held by non-affiliates
computed by reference to the price at which the stock was sold, or the average
bid and asked prices of such stock, as of October 28, 1999 was $292,667.
The number of shares outstanding of the issuer's common equity, as of
November 02, 1998 was 3,344,760 shares.
Transitional Small Business Disclosure Format (check one): Yes [ ]
No [ x ]
<PAGE>
PART I
Item 1. Business.
GENERAL
Equity AU, Inc. ("Equity", or "the Company") is a Delaware corporation.
Equity has been engaged in the exploration and mining of certain minerals in
Polk County, near Mena, Arkansas. Equity's principal corporate offices are now
located at the home of the president of the Company. The address is P.O. Box
940037, Maitland, FL 32794-0037, and its telephone number is (407) 647-3952.
Equity ceased all mining activity in December 1996 and is presently looking for
a company to merge with or acquire.
HISTORY AND CURRENT ACTIVITY
In February of 1995, the Chairman of the Company, James Arch ("Mr.
Arch") reached an agreement with a shareholder and investor, Stephen Guarino,
to invest significant equity capital into the Company. Mr. Arch thereafter
granted full management and financial control to Mr. Guarino. The then current
President, Kingman L. Hitz resigned, and all operations were moved to Mena,
Arkansas. Director Gail W. Holderman resigned shortly thereafter. Mr. Guarino
was appointed with the official title of President in May of 1995, and was also
appointed as a Director, along with William Hanlon and Roger Tichenor. Kingman
Hitz had not received notice of any meetings, and subsequently resigned as a
director in July of 1995. In early 1996, a partnership controlled by Mr. Arch
foreclosed on the Company's property and equipment which had been pledged for
loans received from the partnership.
In June of 1996, Mr. Guarino, Mr. Hanlon, and Mr. Tichenor resigned all
of their positions with the Company, and Mr. Arch entered into agreements with
Mr. Guarino and Mr. Tichenor to purchase all of the Class Common shares which
had been previously issued to them. Also in June 1996, Charles Jones was
appointed as the Company's new President.
Mr. Arch elected to resume operations at Mena, Arkansas on June1, 1996.
Mr. Arch provided the property and equipment for the start-up and the Company
borrowed $57,500 from private investors on convertible notes, at a 10% interest
rate to fund the operations. At December 31, 1996 the notes carried accrued
interest of $3,403. B&D Construction was contracted to get the mill into
operation, mill the ore and process the ore to a finished gold product, ready
for sale.
Ore production was commenced in early September, 1996. The first 5 tons
of ore production were lost due to power failures and heavy rains. Then, 2
additional tons of ore were processed yielding 1.25 oz. of gold which was sold
to the Dallas Gold Exchange for $413. Management determined that the operation
could not be profitable based on the limitations of the Company's current
equipment. It was determined by management to use any of the Company's remaining
funds to look for additional sources of funding to purchase the necessary
equipment to produce additional ore. Management has been unable to identify
adequate, additional funding and can make no assurances as to its ability to
find adequate funding in the future.
On December 12, 1996 the Company convened the annual shareholders
meeting. James Arch, Charles Jones and Bruce Beckman were elected by a majority
of shareholders to the Board of Directors. Additionally, a one hundred (100)
down to one (1) "reverse split" of the Company's outstanding Class A Common
shares was approved. Management is waiting for the certainty of ongoing
operations before effecting the reverse split. There can be no assurance as to
when management will determine the time to be appropriate to effect the reverse.
2
<PAGE>
On August 4, 1997 Charles Jones resigned as President and Director of
the Company. He will assist with the Company until a new President can be
appointed.
There are many companies engaging in the exploration and development of
precious metal claims. Most of these entities are more experienced, more
established and financially stronger than the Company. There can be no assurance
that the Company will be able to continue mining successfully, locate and mill
any ores, or compete successfully against other companies.
The existence of commercial quantities of mineral bearing ore, and a
method for their extraction, is crucial to the Company's realization of any
return on investment. Even further, the Company faces other considerable risk
factors in achieving its goals, which include, but are not necessarily limited
to, financing production facilities, availability of skilled personnel, unstable
market prices for its products, and all other risks that can be customarily
associated with the start-up of a new business enterprise.
Item 2. Properties.
The Company's executive offices are located at P.O. Box 940037,
Maitland, FL 32794-0037, the home of the Company's president.
During 1995, the Company owned a drilling rig and mining, milling, and
refining equipment that forms a pilot milling operation near the city of Mena,
Polk County, Arkansas. The facility consisted of grinding equipment, flotation
or leaching tanks, furnaces and other related equipment. The Company also owned
a building on the site which housed a laboratory with certain testing and
refining equipment. These assets had been pledged for loans made to the Company
by a partnership, owned and funded in large part by the Chairman of the Company.
Early in 1996 the partnership foreclosed on the property and equipment and
forgave the loans and accrued interest.
Item 3. Legal Proceedings.
In July of 1996, the Company consented to a judgment obtained by the
United States Securities and Exchange Commission which required the Company to
bring its delinquent reporting current by August 13, 1996, which was complied
with, and further permanently enjoined the Company from any failure to file
required reports in a timely manner in the future. This report has been filed
subsequent to the filing deadline and the subsequent quarterly reports have yet
to be filed.
Item 4. Submission of Matters to a Vote of Security Holders.
On December 12, 1996 the Company held its annual meeting of
shareholders. Mr. James Arch, Mr. Charles Jones and Mr. Bruce Beckman were
elected directors of the Company by a vote of 76,187,483 shares for, 1,444,511
shares against, and 12,651,006 no vote shares. Additionally, the Company
approved a one hundred to one (100:1) reverse split of its outstanding Class A
Common Stock by a vote of 76,187,483 shares for, 1,444,511 shares against, and
12,651,006 no vote shares. The reverse split was effected on September 24, 1997.
Mr. Jones resigned as president and director of the Company on August 4, 1997.
3
<PAGE>
PART II
Item 5. Market for Common Equity & Related Stockholder Matters.
The Company's common stock is currently traded in the over-the-counter
market on the Electronic Bulletin Board under the symbol EQAU.
The following table represents the range of high and low bid quotations
for the calendar quarters indicated since the first quarter of 1995.
Calendar Quarters High Bid Low Bid
1996
1st Quarter .000 .000
2nd Quarter .000 .000
3rd Quarter .500 .005
4th Quarter .500 .005
1997
1st Quarter 3.000 .100
2nd Quarter .100 .800
3rd Quarter 1.380 .300
4th Quarter .200 .090
1998
1st Quarter .010 .090
2nd Quarter .010 .090
3rd Quarter .080 .070
4th Quarter .080 .040
The above quotes have been restated to give effect to a 1 for 100
reverse split.
As of October 28, 1998, the Company had 3,324,615 shares of its common
stock issued and outstanding, and there were 738 shareholders of record, which
figures do not take into consideration those shareholders whose certificates are
held in the name of broker-dealers.
As of the date hereof, the Company has not paid or declared any cash
dividends. The Company can give no assurance that it will generate future
earnings from which cash dividends can be paid. Future payment of dividends by
the Company, if any, is at the discretion of the Board of Directors and will
depend, among other criteria, upon the Company's earnings, capital requirements,
and its financial condition as well as other relative factors. Management has
followed the policy of retaining any and all earnings to finance the development
of its business. Such a policy is likely to be maintained as long as necessary
to provide working capital for the Company's operations.
RECENT SALES OF UNREGISTERED SECURITIES
On June 6, 1997 the Company issued 8,900,000 restricted shares to
General Enterprises and Trading Company (Isle of Man) Ltd. for the promise to
loan the Company $100,000 and to pledge to the Company a Capital Asset
Certificate for $5,000,000. These shares were exempt from registration pursuant
to Section 4(2) of the Securities Act of 1933.
On October 3, 1997 the Company repaid indebtedness to various note
holders by issuing 257,500 shares of its common stock. The shares were exempt
from registration pursuant to Sections 4(2) or 3(b) under the Securities Act.
4
<PAGE>
On October 3, 1997 the Company issued 1,029,500 shares to the past
president of the Company for wages owed. The shares were exempt from
registration pursuant to Sections 4(2) or 3(b) under the Securities Act.
On June 8, 1998 the Company issued 1,123,984 shares to the Chairman of
the Company for debt and related interest owed. The shares were exempt from
registration pursuant to Sections 4(2) of 3(b) under the Securities Act.
Item 6. Management's Discussion & Analysis of Financial Condition & Results of
Operations.
Statements made or incorporated in this report include a number of
forward-looking statements within the meaning of Section 27(a) of the Securities
Act of 1933 and Section 21(e) of the Securities Exchange Act of 1934.
Forward-looking statements include, without limitation, statements containing
the words "anticipates", "believes", "expects", "intends", "future", and words
of similar import which express management's belief, expectations or intentions
regarding the Company's future performance or future events or trends. Reliance
should not be place on forward-looking statements because they involve known and
unknown risks, uncertainties and other factors, which may cause actual results,
performance or achievements of the Company to differ materially from anticipated
future results, performance or achievements expressly or implied by such
forward-looking statements. In addition, the Company undertakes no obligation to
publicly update or revise any forward-looking statement, whether as a result of
new information, future events or otherwise.
RESULTS OF OPERATIONS
For the Year Ended December 31, 1998 compared to the Year Ended December 31,
1997.
During the year ended December 31, 1998 the Company had no operations.
General and administrative expenses were $31,045 for the year of 1998. Expenses
include the rental of office space and consulting fees to keep the corporation
current and dividends on preferred stock. Any changes in the profit and loss
accounts are due to the terminated operations. The Company recorded a net loss
of $31,045 in 1998, compared to $115,504 in 1997.
For the Year Ended December 31, 1997 compared to the Year Ended December 31,
1996.
During the year ended December 31, 1996 the Company briefly resumed
mining operations which had been terminated in 1994. Operations yielded $413 of
gold sales to the Dallas Gold Exchange. The cost of contract labor to produce
the gold was $15,569, resulting in a gross profit of ($15,156). During 1995
there were no mining operations.
General and administrative expenses increased $96,770, 51%, to $287,836
during fiscal 1996 from $191,066 during fiscal 1995. These expenses primarily
include professional fees, salary to the Company's president and accrued
dividend expense.
The Company had other income of $99,968 during fiscal 1996 compared
with other expense of ($19,048) during fiscal 1995. The difference is due
primarily to the gain recognized when notes payable were called due and the
pledged assets were foreclosed on. The assets had previously been written down
to salvage value during prior years.
The Company experienced a net loss of $203,024 in fiscal 1996 compared
with a net loss of $212,633 in fiscal 1995.
5
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1998, the Company had $29,955 in assets and total
stockholders deficit of $(166,226) compared with total assets of $0 and total
stockholders deficit of $(135,181) at December 31, 1997. The Company borrowed
$31,000 from Kentrust Corporation for general operating expenses. In 1997, the
Company was able to reduce some debt by issuing common stock. The Chairman has
been paying the expenses of the Company until an acquisition or merger can be
made. There is no assurance that the Chairman can or will, continue to fund the
company and no assurance as to when or if the company will be able to find a
merger or acquisition.
At December 31, 1997, the Company had total assets of $0 and total
stockholders deficit of $(135,181) compared with total assets of $154 and total
stockholders deficit of $(335,967) at December 31, 1996. The decrease in total
assets of $171,774, between 1995 and 1996 is due to the write off of the
Company's property and equipment upon foreclosure by a note holder for which the
property and equipment had been pledged. Total liabilities at December 31, 1996
increased $31,250, 10%, from $304,871 to $336,121. The increase is due primarily
to the accrual for dividends payable of $114,766.
Item 7. Financial Statements and Supplementary Data.
The Following financial statements and documents are filed herewith on
the pages listed below, as part of Item 7 of this report. The December 31, 1995
and December 31, 1997 balances were audited while the December 31, 1996 and 1998
balances have not been audited as management has deemed the Company inactive, as
that term is defined in Rule 3-11 of Regulation S-X.
Document ............................................ Page
Balance Sheet........................................ F-1
Statement of Operations.............................. F-2
Statement of Stockholder's Equity.................... F-3,4
Statement of Cash Flows.............................. F-5
Notes to Financial Statements........................ F-6 to 8
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
Management deems the Company and "inactive entity" as that term is
understand under Rule 3-11 of Regulation S-X. The Registrant will therefore file
unaudited financial statements for reports required for fiscal years 1996 and
1997, for purposes of reports required under the Securities Exchange Act of
1934. The Company will not be retaining or engaging services and has dismissed
the firm of J.S. Osborn, P.C., Certified Public Accountants, as independent
accountants for the Company. Management has not determined when the Company will
engage a new independent accountant. (Refer to the Company's Form 8-K filed with
the Commission on March 22, 1997.)
6
<PAGE>
<TABLE>
<CAPTION>
EQUITY AU, INC.
BALANCE SHEET
December 31, 1998
ASSETS
December 31, December 31,
1998 1997
CURRENT ASSETS (Unaudited) (Audited)
<S> <C> <C>
Cash $ 4,955 $ 0
-------------- --------------
TOTAL ASSETS $ 29,955 $ 0
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 1,019 $ 1,019
Accrued expenses 54,695 54,695
Dividends payable 15,000 15,000
Notes payable (Note 5) 125,467 64,467
-------------- --------------
Total current liabilities 195,162 134,162
-------------- --------------
TOTAL LIABILITIES 196,181 135,181
-------------- --------------
CONTINGENCIES AND COMMITMENTS: (Note 4)
STOCKHOLDERS' (DEFICIT) (Note 6):
Preferred stock, Series A, $1.00 Par Value 50,000 50,000
Preferred stock, Series B, $1.00 Par Value 0 0
Preferred stock, Series C, $1.00 Par Value 0 0
Common stock, Class A, $0.001 Par Value 2,413 2,413
Common stock, Class B, $0.001 Par Value 1,000 1,000
Additional paid-in capital 12,188,154 12,188,154
Accumulated deficit (12,376,748) (12,376,748)
-------------- --------------
Total Stockholders' (Deficit) (166,226) (135,181)
-------------- --------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 29,955 $ 0
============== ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-1
<PAGE>
<TABLE>
<CAPTION>
EQUITY AU, INC.
Statement of Operations
For the Year Ended
December 31,
1998 1997
(Unaudited) (Audited)
INCOME:
<S> <C> <C>
Revenue $ - $ -
Direct Costs - -
---------------- ------------------
Total Income - -
GROSS PROFIT - -
================ ==================
EXPENSES:
General and Administrative 31,045 110,398
---------------- ------------------
Total Expenses 31,045 110,398
LOSS FROM OPERATIONS (31,045) (110,398)
================ ==================
OTHER INCOME (EXPENSE):
Interest expense - (5,106)
---------------- ------------------
Total Other Income (Expense) - (5,106)
NET LOSS BEFORE INCOME TAXES $ (31,045) $ (115,504)
================ ==================
Income taxes - -
NET LOSS (31,045) (115,504)
================ ==================
Net Loss Per Common Share $ (0.02) $ (0.07)
================ ==================
Weighted average common shares outstanding 1,296,194 1,296,194
================ ==================
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-2
<PAGE>
<TABLE>
<CAPTION>
EQUITY AU, INC.
STATEMENT OF STOCKHOLDERS' EQUITY AND ACCUMULATED DEFICIT
Period from December 31, 1996 to March 31, 1999
Preferred Stock - A Preferred Stock - B Preferred Stock - C
Shares Amount Shares Amount Shares Amount
<S> <C> <C> <C> <C> <C> <C>
December 31, 1996 148,000 $148,000 288,200 $288,200 10,200 $10,200
------- -------- ------- -------- ------ -------
Balance
December 31, 1997 50,000 $ 50,000 272,200 $272,200 - $ -
------- -------- ------- -------- ------ -------
Conversion to Class
A common stock (5,000) $ (5,000)
------- --------
(16,000) $(16,000)
Canceled shares (98,000) (98,000) (272,200) (272,200) (10,200) (10,200)
------- -------- ------- -------- ------ -------
Balance
December 31, 1998 50,000 $ 50,000 - $ - - $ -
March 31, 1999 50,000 $ 50,000 - $ - - $ -
======= ======== ======= ======== ====== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
EQUITY AU, INC.
STATEMENT OF STOCKHOLDERS' EQUITY AND ACCUMULATED DEFICIT
Period from December 31, 1996 to March 31, 1999
Class A Common Class B Common Paid in Accumulated
Shares Amount Shares Amount Capital Deficit
<S> <C> <C> <C> <C> <C> <C>
December 31, 1996 911,232 $ 911 100,000 $ 1,000 $11,618,169 $ (12,402,440)
---------- ------------ ------- ------------- ----------- --------------
Stock issued in Exchange
for preferred B stock at
$6.25 per Share 800 1 - - 4,999 -
Fractional shares issued 315 - - - 1 -
Stock issued for
notes payable 257,500 258 - - 51,242 -
Stock issued for
wages payable at
$0.10 per share 1,029,500 1,030 - - 100,970 -
Stock issued for
Services at $0.06
Per share 20,000 20 - - 1,180 -
Stock issued in exchange
For preferred B stock
At $6.88 per share 1,599 2 - - 10,998 -
Contributed Capital on
Cancellation of shares (8,402) (9) - - 388,802 -
Net loss - - - - - (115,504)
---------- ------------ ------- ------------- ----------- --------------
Balance
December 31, 1997 2,412,544 2,413 100,000 1,000 12,188,154 (12,376,748)
Net loss - - - - - -
---------- ------------ ------- ------------- ----------- --------------
Balance
December 31, 1998 2,412,544 $ 2,413 100,000 $ 1,000 $12,188,154 $ (12,376,748)
March 31, 1999 2,412,544 $ 2,413 100,000 $ 1,000 $12,188,154 $ (12,376,748)
========== ============ ======= ============= =========== ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
EQUITY AU, INC.
STATEMENT OF CASH FLOWS
For the Year Ended
December 31,
1998 1997
(Unaudited) (Audited)
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net loss $ (31,045) $ $(115,504)
Adjustments to reconcile net loss to net cash used
by operating activities:
Stock issued for accrued wages - 115,201
Disposal of assets - -
Assets exchanged for wages & fees - -
Dividends payable 15,000 -
Changes in operating assets and liabilities:
(Increase) decrease in Prepaids - -
Increase (decrease) in Accounts Payable - (30,102)
Increase (decrease) in accrued expenses 25,893 5,107
----------------- ------------------
NET CASH (USED) BY OPERATING ACTIVITIES: 26,045 25,298
----------------- ------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long term debt - 16,590
Principle payments on long term debt - -
Sale of common stock - 8,394
----------------- ------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES: - 24,984
----------------- ------------------
NET DECREASE IN CASH: (26,045) (314)
CASH AT BEGINNING OF PERIOD: 31,000 314
----------------- ------------------
CASH AT END OF PERIOD: $ 4,955 $ 0
================= ==================
CASH PAID DURING THE YEAR FOR:
Interest $ - $ 2,302
Income taxes - -
NON-CASH FINANCING:
Common stock issued for accrued wages $ - $ 115,201
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
EQUITY AU, INC.
Notes to the Financial Statements
December 31, 1998
NOTE 1 - NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. 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. During September
1996, the Company resumed operations and again suspended
operations in December 1996. The Company can make no assumptions
as to if, and when operations will resume again.
b. 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.
c. 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.
d. Depreciation and Amortization
The Company depreciates its cost in buildings and equipment based
on its estimated useful life in years using the straight-line
method. No depreciation was taken in 1995 as there were no
property additions and the idle equipment was written down to
salvage value in 1994. During 1996, the remaining property and
equipment was used to settle a note and written off.
e. Revenue Recognition
The Company recognizes revenue when sales of precious metals or
other products are sold to qualified buyers. The Company currently
has no operations.
f. 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 of when a lease or claim is
dropped or expires or a determination is made that ore cannot be
extracted in economic quantities. During 1996, mining claims
previously valued at $7,500 were not renewed. The balance was
written off.
F-6
<PAGE>
EQUITY AU, INC.
Notes to the Financial Statements
December 31, 1998
NOTE 1 - NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
g. Long-Lived Assets
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, 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.
h. (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.
i. Income Taxes
The Company is subject to the greater of federal income taxes
computed under the regular system of 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 - 2 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. During 1996
the Company did not renew its claims. The balance of $7,500 for
claims was written off.
NOTE - 3 OTHER ASSETS
a. 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 1996 the
silver statue was exchanged for services rendered by a related
party, and the gems were exchanged for fees owed.
NOTE - 4 CONTINGENCIES AND COMMITMENTS
The Company owed $29,461 and $38,469 as of December 31, 1996 and
1995 in state and federal payroll taxes. Penalties and interest
continue to accrue and management has determined that this will
have no significant or material adverse effect.
No provision or accrual has been made to cover any future remedial
action or cleanup activities for mining claims 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.
F-7
<PAGE>
EQUITY AU, INC.
Notes to the Financial Statements
December 31, 1998
NOTE - 4 CONTINGENCIES AND COMMITMENTS (Continued)
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 judgement against the Company for noncompliance in filing
the quarterly and annual reports on a timely basis. The Company
has agreed to the action and is making every effort to comply with
the order. During 1996 the Company filed its 1995 annual report
and the first and second quarter reports for 1996 late. The 1996
and 1997 annual reports and the quarterly reports for 1997 through
June of 1998, will also be filed late. The Company cannot estimate
the action that will be taken by the Securities and Exchange
Commission related to these late filings.
NOTE - 5 NOTES PAYABLE
Notes payable of the Company are as follows:
<TABLE>
<CAPTION>
December 31,
1998 1997
<S> <C> <C>
Unsecured debt for advances from a related
party due upon demand $ 31,000 $ 58,467
Unsecured promissory notes bearing interest
at 10%. Interest payable annually in either
stock or cash, or both. The lenders may earn
bonus distributions based on the productivity
of mining operations. Due on demand. - 6,000
Less related party notes - (58,467)
------------
Total notes payable 31,000 6,000
Less current portion - (6,000)
-----------
Total Current Notes Payable $ 31,000 $ -
============ ============
</TABLE>
NOTE - 6 CAPITAL STOCK
a. Preferred Stock - Series A
The Company is authorized to issue 200,000 shares of non-voting
preferred shares, at a par value of $1.
F-8
<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.
EQUITY AU, INC.
(Registrant)
BY: /s/ James Arch
-----------------------
JAMES ARCH, President
Dated: November 2, 1999
7
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 4,955
<SECURITIES> 0
<RECEIVABLES> 25,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 29,955
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 29,955
<CURRENT-LIABILITIES> 195,162
<BONDS> 0
0
50,000
<COMMON> 12,188,154
<OTHER-SE> (12,376,748)
<TOTAL-LIABILITY-AND-EQUITY> 29,955
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (31,045)
<EPS-BASIC> (0.02)
<EPS-DILUTED> 0
</TABLE>
