U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K/A
[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. [ ]
<PAGE>
Note 1: Amended 10K/A
This amended 10K/A reflects the audited financial statements of Equity
AU, Inc. for the year ended December 31, 1998 performed by Jones,
Jensen, and Company of Salt Lake City, Utah.
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
December 31, 1998 was 9,972,350 shares.
Transitional Small Business Disclosure Format (check one): Yes [ ] No
[x]
PART I
Item 1. Business.
GENERAL
Reference is hereby made to item 1 of the previously filed 10K.
HISTORY AND CURRENT ACTIVITY
Reference is hereby made to item 1 of the previously filed 10K.
Item 2. Properties.
Reference is hereby made to item 2 of the previously filed 10K.
Item 3. Legal Proceedings.
Reference is hereby made to item 3 of the previously filed 10K.
Item 4. Submission of Matters to a Vote of Security Holders.
Reference is hereby made to item 4 of the previously filed 10K.
PART II
Item 5. Market for Common Equity & Related Stockholder Matters.
Reference is hereby made to item 5 of the previously filed 10K
2
<PAGE>
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.
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 $146,688 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 $146,688 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.
3
<PAGE>
The Company experienced a net loss of $203,024 in fiscal 1996 compared
with a net loss of $212,633 in fiscal 1995.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1998, the Company had $4820 in assets and total
stockholders deficit of $(142,408) 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, 1997
and December 31, 1998 balances were audited while the December 31, 1996 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 10
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
Management deems the Company an "inactive entity" as that term is
understand under Rule 3-11 of Regulation S-X. The Registrant has therefore filed
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 did not retain or engage the services and has dismissed the
firm of J.S. Osborn, P.C., Certified Public Accountants, as independent
accountants for the Company. Management has secured the services of Jones,
Jensen and Company of Salt Lake City, Utah to perform the audits for year end
December 31, 1997 and December 31, 1998. (Refer to the Company's Form 8-K filed
with the Commission on March 22, 1997.)
4
<PAGE>
C O N T E N T S
Independent Auditors' Report............................................. F-2
Balance Sheet............................................................ F-3
Statements of Operations................................................. F-4
Statements of Stockholders' Equity (Deficit)............................. F-5
Statements of Cash Flows................................................. F-9
Notes to the Financial Statements....................................... F-11
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Equity AU, Inc.
(A Development Stage Company)
Maitland, Florida
We have audited the accompanying balance sheet of Equity AU, Inc. (a development
stage company) as of December 31, 1998 and the related statements of operations,
stockholders' equity (deficit), and cash flows for the years ended December 31,
1998 and 1997 and from inception of the development stage on January 1, 1994
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 audits 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 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 Equity AU, Inc. (a development
stage company) as of December 31, 1998 and the results of its operations and its
cash flows for the years ended December 31, 1998 and 1997, and from inception of
the development stage on January 1, 1994 through December 31, 1998 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 6 to the
financial statements, the Company is a development stage company with recurring
losses which raises substantial doubt about its ability to continue as a going
concern. Management's plans in regard to these matters are also described in
Note 6. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
Jones, Jensen & Company
Salt Lake City, Utah
January 19, 1999
F-2
<PAGE>
<TABLE>
<CAPTION>
EQUITY AU, INC.
(A Development Stage Company)
Balance Sheet
ASSETS
December 31,
1998
-----------------
CURRENT ASSETS
<S> <C>
Cash $ 4,820
Total Current Assets 4,820
-----------------
TOTAL ASSETS $ 4,820
=================
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable $ 1,398
Accrued expenses (Note 2) 58,830
Dividends payable (Note 4) 20,000
Notes payable (Note 3) 6,000
Notes payable - related party (Note 3) 61,000
-----------------
Total Current Liabilities 147,228
-----------------
Total Liabilities 147,228
-----------------
CONTINGENCIES AND COMMITMENTS (Note 2)
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred stock, Class A, $1.00 par value, 2,000,000 shares
authorized, 50,000 shares issued and outstanding 50,000
Preferred stock, Class B, $1.00 par value, 300,000 shares
authorized, -0- shares issued and outstanding -
Preferred stock, Class C, $1.00 par value, 100,000 shares
authorized, -0- shares issued and outstanding -
Common stock, Class A, $0.001 par value, 99,900,000 shares
authorized, 9,972,350 shares issued and outstanding 9,972
Common stock, Class B, $0.01 par value, 100,000 shares
authorized, 100,000 shares issued and outstanding 1,000
Additional paid-in capital 12,324,191
Accumulated deficit (12,527,571)
-----------------
Total Stockholders' Equity (Deficit) (142,408)
-----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $ 4,820
=================
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
EQUITY AU, INC.
(A Development Stage Company)
Statements of Operations
From
Inception of the
Development
Stage
on January 1,
1994
For the Years Ended Through
December 31, December 31,
1998 1997 1998
--------------- --------------- ----------------
<S> <C> <C> <C>
REVENUES $ - $ - $ -
--------------- --------------- ----------------
EXPENSES
General and administrative 146,688 110,398 257,086
--------------- --------------- ----------------
Total Expenses 146,688 110,398 257,086
--------------- --------------- ----------------
LOSS FROM OPERATIONS (146,688) (110,398) (257,086)
--------------- --------------- ----------------
OTHER INCOME (EXPENSE)
Interest expense (4,135) (5,106) (9,241)
--------------- --------------- ----------------
Total Other Income (Expense) (4,135) (5,106) (9,241)
--------------- --------------- ----------------
LOSS BEFORE DISCONTINUED OPERATIONS (150,823) (115,504) (266,327)
LOSS ON DISCONTINUED OPERATIONS - - (3,870,504)
--------------- --------------- ----------------
NET LOSS $ (150,823) $ (115,504) $ (4,136,831)
=============== =============== ================
BASIC LOSS PER SHARE $ (0.02) $ (0.09)
=============== ===============
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 7,407,442 1,296,194
=============== ===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
EQUITY AU, INC.
(A Development Stage Company)
Statements of Stockholders' Equity (Deficit)
From Inception of the Development Stage on January 1, 1994 to December 31, 1998
Preferred Stock - A Preferred Stock - B Preferred Stock - C
---------------------------- ---------------------------- ---------------------------
Shares Amount Shares Amount Shares Amount
------------ ------------ ------------ ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1994 148,000 $ 148,000 78,500 $ 78,500 - $ -
Preferred stock issued for
cash at $1.00 per share - - 203,500 203,500 6,000 6,000
Preferred stock issued for
services at $1.00 per share - - 6,200 6,200 4,200 4,200
------------ ------------ ------------ ------------ ----------- -------------
Balance
December 31, 1994 148,000 148,000 288,200 288,200 10,200 10,200
------------ ------------ ------------ ------------ ----------- -------------
Balance
December 31, 1995 148,000 148,000 288,200 288,200 10,200 10,200
------------ ------------ ------------ ------------ ----------- -------------
Balance
December 31, 1996 148,000 148,000 288,200 288,200 10,200 10,200
Shares converted to
Class A common stock - - (5,000) (5,000) - -
Shares converted to
Class A common stock - - (11,000) (11,000) - -
Canceled shares (98,000) (98,000) (272,200) (272,200) (10,200) (10,200)
------------ ------------ ------------ ------------ ----------- -------------
Balance
December 31, 1997 50,000 50,000 - - - -
------------ ------------ ------------ ------------ ----------- -------------
Balance,
December 31, 1998 50,000 $ 50,000 - $ - - $ -
============ ============ ============ ============ =========== =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
<TABLE>
<CAPTION>
EQUITY AU, INC.
(A Development Stage Company)
Statements of Stockholders' Equity (Deficit) (Continued)
From Inception of the Development Stage on January 1, 1994 to December 31, 1998
Class A Common Class B Common Additional
---------------------------- ---------------------------- Paid-in Accumulated
Shares Amount Shares Amount Capital Deficit
------------ ------------ ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance
January 1, 1994 571,254 $ 570 100,000 $ 1,000 $ 11,216,634 $ (8,390,740)
Common stock issued for
services at $0.10 per share 35,000 35 - - 95,071 -
Common stock issued for
services at $0.10 per share 4,598 5 - - 45,974 -
Common stock issued for
dividends at $0.11 per share 1,619 2 - - 17,715 -
Net loss for the year ended
December 31, 1994 - - - - - (3,563,526)
------------ ------------ ------------ ------------ ------------- -------------
Balance,
December 31, 1994 612,471 612 100,000 1,000 11,375,394 (11,954,266)
Common stock issued for
cash at $0.01 per share 270,789 271 - - 184,029 -
Common stock issued for
services at $1.05 per
share 25,000 25 - - 26,225 -
Common stock issued for
dividends at $10.94 per
share 1,619 2 - - 17,715 (17,717)
Common stock issued for
dividends at $10.93 per
share 1,353 1 - - 14,799 (14,800)
Net loss for the year ended
December 31, 1995 - - - - - (212,633)
------------ ------------ ------------ ------------ ------------- -------------
Balance,
December 31, 1995 911,232 911 100,000 1,000 11,618,162 (12,199,416)
Net loss for the year ended
December 31, 1996 - - - - - (61,828)
------------ ------------ ------------ ------------ ------------- -------------
Balance
December 31, 1996 911,232 $ 911 100,000 $ 1,000 $ 11,618,162 $ (12,261,244)
------------ ------------ ------------ ------------ ------------- -------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
<TABLE>
<CAPTION>
EQUITY AU, INC.
(A Development Stage Company)
Statements of Stockholders' Equity (Deficit) (Continued)
From Inception of the Development Stage on January 1, 1994 to December 31, 1998
Class A Common Class B Common Additional
---------------------------- ---------------------------- Paid-in Accumulated
Shares Amount Shares Amount Capital Deficit
------------ ------------ ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance
December 31, 1996 911,232 $ 911 100,000 $ 1,000 $ 11,618,162 $ (12,261,244)
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 services
at $0.06 per share 200,000 200 - - 11,800 -
Stock issued for debt
at $0.20 per share 257,500 258 - - 51,242 -
Stock issued for services
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 for the year ended
December 31, 1997 - - - - - (115,504)
------------ ------------ ------------ ------------ ------------- -------------
Balance
December 31, 1997 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-7
<PAGE>
<TABLE>
<CAPTION>
EQUITY AU, INC.
(A Development Stage Company)
Statements of Stockholders' Equity (Deficit) (Continued)
From Inception of the Development Stage on January 1, 1994 to December 31, 1998
Class A Common Class B Common Additional
---------------------------- ---------------------------- Paid-in Accumulated
Shares Amount Shares Amount Capital Deficit
------------ ------------ ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance
December 31, 1997 2,412,544 $ 2,413 100,000 $ 1,000 $ 12,188,154 $ (12,376,748)
Reversal of cancellation of
common A shares 214,000 214 - - (214) -
Shares issued at $0.063 per
share to repay note payable 86,841 86 - - 5,384 -
Shares issued to officer at
$0.063 per shares for consulting
services rendered 6,836 7 - - 424 -
Shares issued at $0.063 per
share to officer for consulting
services rendered 1,123,984 1,124 - - 70,030 -
Shares issued at $0.063 per
share to officer for consulting
services rendered 128,145 128 - - 7,955 -
Shares issued to officer to
pay off note payable for
consulting services rendered 6,000,000 6,000 - - 52,458 -
Net loss for the year ended
December 31, 1998 - - - - - (150,823)
------------ ------------ ------------ ------------ ------------- -------------
Balance, December 31, 1998 9,972,350 $ 9,972 100,000 $ 1,000 $ 12,324,191 $ 12,527,571
============ ============ =========== ============ ============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-8
<PAGE>
<TABLE>
<CAPTION>
EQUITY AU, INC.
(A Development Stage Company)
Statements of Cash Flows
From
Inception of the
Development
Stage
on January 1,
1994
For the Years Ended Through
December 31, December 31,
1998 1997 1998
----------------- --------------- ------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net loss $ (150,823 ) $ (115,504) $ (4,136,831)
Adjustments to reconcile net loss to net
cash used by operating activities:
Common stock issued for services 79,668 115,201 284,815
Preferred stock issued for services - - 10,400
Depreciation and amortization - - 70,532
Bad debt expense - - 129,240
Discontinued operations - - 2,820,586
Dividend expense - - 29,801
Changes in operating assets and liabilities:
Decrease in accounts receivable - - 20,921
Increase (decrease) in accounts payable 379 (30,102) (21,397)
Increase (decrease) in accrued expenses 9,126 5,107 40,723
----------------- --------------- ------------------
Net Cash Used by Operating Activities (61,650 ) (25,298) (751,210)
----------------- --------------- ------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of equipment - - (3,201)
Sale of land - - 64,000
----------------- --------------- ------------------
Net Cash Provided by Investing Activities - - 60,799
----------------- --------------- ------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Sale of common stock - 8,394 287,800
Sale of preferred stock - - 209,500
Proceeds from long-term debt 66,470 16,590 187,937
Principle payments on long-term debt - - (5,500)
----------------- --------------- ------------------
Net Cash Provided by Financing Activities 66,470 24,984 679,737
----------------- --------------- ------------------
NET INCREASE (DECREASE) IN CASH 4,820 (314) (10,674)
CASH AT BEGINNING OF PERIOD - 314 15,494
----------------- --------------- ------------------
CASH AT END OF PERIOD $ 4,820 $ - $ 4,820
================= =============== ==================
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-9
<PAGE>
<TABLE>
<CAPTION>
EQUITY AU, INC.
(A Development Stage Company)
Statements of Cash Flows (Continued)
From
Inception of the
Development
Stage
on January 1,
1994
For the Years Ended Through
December 31, December 31,
1998 1997 1998
----------------- --------------- ------------------
Cash paid during the year for:
<S> <C> <C> <C>
Interest $ - $ 2,302 $ 8,509
Income taxes $ - $ - $ -
NON-CASH FINANCING:
Common stock issued for services $ 79,668 $ 115,201 $ 284,815
Preferred stock issued for services $ - $ - $ 10,400
Common stock issued for dividends $ - $ - $ 50,234
Paid-in capital through cancellation of
preferred stock $ - $ 380,400 $ 380,400
Paid-in capital through cancellation of
common stock $ - $ 8,394 $ 8,394
Common stock issued for debt $ 63,928 $ 51,500 $ 115,428
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-10
<PAGE>
EQUITY AU, INC.
(A Development Stage Company)
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 4, 1988 as a Delaware corporation
under the name Sherry Lynn Corporation. The Company was organized as a
public company for the purpose of finding a suitable combination
partner.
On December 6, 1988, the Company changed its name to Equity Gold, Inc.
The number of shares of common stock authorized to be issued changed
from 50,000,000 to 150,000,000 with a par value of $0.001 per share of
common stock.
On December 14, 1989, the Company merged with Gold Equity, Inc., a
Delaware corporation. The surviving corporation was Equity Gold, Inc.
On February 7, 1989, the Company changed its name to Equity AU, Inc.
On April 14, 1989, the Company changed the number of authorized shares
of common stock to 99,900,000.
On November 7, 1991, the Company authorized 2,000,000 shares of
preferred stock with a par value of $1.00 each.
On February 19, 1992, the Company authorized 99,900,000 shares of Class
A common shares with a par value of $0.001 per share. The Company
authorized 100,000 shares of Class B common shares with a par value of
$0.01 per share.
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 1993 and
entered the development stage on January 1, 1994. 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. Accounting Method
The Company's financial statements are prepared using the accrual
method of accounting. The Company has elected a December 31 year end.
c. 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.
F-11
<PAGE>
EQUITY AU, INC.
(A Development Stage Company)
Notes to the Financial Statements
December 31, 1998
NOTE 1 - NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
d. Basic Loss Per Share
The basic loss per share of common stock is based on the weighted
average number of shares issued and outstanding during the period of
the financial statements. Preferred stock and stock warrants prior to
conversion are not included in the basic calculation because their
inclusion would be antidilutive, thereby reducing the net loss per
common share.
e. 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.
f. Cash and Cash Equivalents
For purposes of financial statement presentation, the Company considers
all highly liquid investments with a maturity of three months or less,
from the date of purchase to be cash equivalents.
NOTE 2 - CONTINGENCIES AND COMMITMENTS
The Company owed $58,830 and $54,695 as of December 31, 1998 and 1997,
respectively, in federal taxes. Penalties and interest continue to
accrue. Management has determined that this will have no significant or
material adverse effect on the results of operations.
On December 31, 1997, the Company canceled 8,402 Class A shares of
common stock. These shares had been authorized for issue during prior
years. No details were available as to whom the shares should be issued
to. Management canceled these shares which resulted in contributed
capital of $8,394.
On December 31, 1997, the Company canceled 98,000 shares of Class A
preferred stock, 272,200 shares of Class B preferred stock, and 10,200
shares of Class C preferred stock. No record of owners of these shares
could be determined. The results of the cancellation of these shares
was contributed capital of $380,400. All dividends associated with the
canceled shares were also canceled. The Company may be liable to the
owners of these shares, should the owners of these shares be
identified.
At December 31, 1998, a creditor has made a claim for approximately
$20,000. Management contends the amount is not owed due to
non-performance by the Lessor. the amount has been due since February
1994.
F-12
<PAGE>
EQUITY AU, INC.
(A Development Stage Company)
Notes to the Financial Statements
December 31, 1998
NOTE 2 - CONTINGENCIES AND COMMITMENTS (Continued)
At December 31, 1998, a creditor has made a claim for approximately
$19,000. Management contends the amount is not owed due to
non-performance by the creditor. The amount has been due since June
1996.
NOTE 3 - NOTES PAYABLE
<TABLE>
<CAPTION>
Notes payable of the Company are as follows:
December 31,
1998
-----------------
<S> <C>
Unsecured note payable to a related party,
due December 14, 1999, bearing 10% interest. $ 61,000
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 (61,000)
-----------------
Total notes payable 6,000
Less current portion (6,000)
-----------------
Total Long-Term Debt $ -
=================
Scheduled maturities of notes payable are as follows:
1999 $ 67,000
2000 -
2001 -
2002 -
2003 -
Thereafter -
-----------------
$ 67,000
=================
</TABLE>
NOTE 4 - 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 $1.00 per share. These shares
accrue a 10% dividend annually. The cumulative amount of dividend was
$20,000 and $15,000 at December 31, 1998 and 1997, 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 50,000 shares issued and outstanding at December 31, 1998 and
1997.
F-13
<PAGE>
EQUITY AU, INC.
(A Development Stage Company)
Notes to the Financial Statements
December 31, 1998
NOTE 4 - CAPITAL STOCK (Continued)
Dividends paid during 1995 amounted to $17,717 for 1993 and $14,800 for
1994. No dividends were paid during 1998, 1997 and 1996.
b. 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 was $-0- and $83,020 at December 31, 1998
and 1997, respectively. These preferred shares are convertible into
Class A common stock at a conversion rate of 16 common shares for each
preferred share. There were no shares issued and outstanding at
December 31, 1998. Management canceled all outstanding shares and
related dividends payable in 1997.
c. 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 was $-0- at
December 31, 1998 and 1997. These preferred shares are convertible into
Class A common stock at a conversion rate of 12 common shares for each
preferred share. There were $-0- shares issued and outstanding at
December 31, 1998. Management canceled all outstanding shares and
related dividends payable in 1997.
d. Preferred Stock
The Company is authorized to issue 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, 1998.
e. Common Stock - Class A
The Company is authorized to issue 99,900,000 Class A common shares, at
a par value of $0.001 per share. These shares have full voting rights.
There were 9,972,350 shares outstanding as of December 31, 1998.
In October 1997, the Company issued 9,150,000 post-split shares of
Class A common stock for cash and mining rights. These shares were
canceled due to non-performance of the terms of the agreements. 25,000
shares were returned in October 1997. 1,487,000 of these shares were
used to settle debt of the Company. At December 31, 1998, 145,000
remained outstanding.
In September 1997, the Company authorized a reverse stock split of
100-for-1. Shares outstanding have retroactively been restated.
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 a related
party that were returned to the Company and canceled during 1996. There
was no consideration exchanged in the issuance or cancellation of these
shares.
F-14
<PAGE>
EQUITY AU, INC.
(A Development Stage Company)
Notes to the Financial Statements
December 31, 1998
NOTE 4 - CAPITAL STOCK (Continued)
f. Common Stock - Class B
The Company is authorized to issue 100,000 shares of its Class B common
shares at a par value of $0.01 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,
1998. All Class B shares of common stock are held by a director at
December 31, 1998.
NOTE 5 - 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.
In 1994, a related party loaned the Company $152,000 secured by the
Company's land, buildings, and equipment. This note, plus interest, was
due in the fourth quarter of 1996. The Company defaulted on the note.
The property and equipment were claimed by the note holder and written
off by the Company.
During 1995, the Company paid $25,000 for services rendered by related
parties and issued 2,500,000 shares of Class A common stock for
additional services valued at $26,225.
During 1997, the Company issued 1,029,500 shares of common A stock to a
former President of the Company for services valued at $102,000. An
agreement has been made with this former officer for continued
consulting services.
On December 23, 1998, the Company borrowed $61,000 from Kentrust, Inc.,
an entity whose CEO is a director of the Company. The note carries a
10% interest rate, and is due in full on December 23, 1999.
NOTE 6 - GOING CONCERN
The Company has no 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 lack of 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 substantial doubt 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: maintaining the most attractive mining properties; selling
the precious gems; obtaining additional financing; and, investigating
various joint venture opportunities.
F-15
<PAGE>
EQUITY AU, INC.
(A Development Stage Company)
Notes to the Financial Statements
December 31, 1998
NOTE 6 - GOING CONCERN (Continued)
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.
F-16
<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: January 27, 2000
5
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 4,820
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,820
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 4,820
<CURRENT-LIABILITIES> 147,228
<BONDS> 0
0
50,000
<COMMON> 12,324,191
<OTHER-SE> (12,527,571)
<TOTAL-LIABILITY-AND-EQUITY> 4,820
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 146,688
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,135
<INCOME-PRETAX> 0
<INCOME-TAX> 0
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<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (150,823)
<EPS-BASIC> (0.02)
<EPS-DILUTED> 0
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