UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSBA
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934.
For the Quarter ended 9/30/97 Commission File No.33-2392-D
European American Resources, Inc. (formerly Merlin Mining Co.)
(Exact name of registrant as specified in its charter)
Delaware 87-0443214
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification Number)
1212 Court St., Suite C-2, Clearwater, FL 33756
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, (813) 298 - 0636
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934,
during the preceding 12 months (or for shorter period that the registrant was
required to file such report), and (2) has been subject to such filing
requirements for the past 90 days.
Yes: X No:
Transitional Small Business Disclosure Format:
Yes: X No:
The number of shares outstanding of each of the registrant's classes of common
stock as of September 30, 1997 is 8,795,865 shares all of one class of $.0001
par value common stock.
EUROPEAN AMERICAN RESOURCES, INC. AND SUBSIDIARIES
(FORMERLY MERLIN MINING CO.)
INDEX
PAGE
PART I FINANCIAL INFORMATION
Consolidated Balance Sheet - September 30, 1997 1
Consolidated Statements of Operations - Three
And Nine Months Ended September 30, 1997 2
Consolidated Statement of Cash Flows - Nine
Months Ended September 30, 1997 5
Notes to Financial Statements 6-9
Management's Discussion and Analysis of financial
conditions and results of operations 10-11
PART II OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 2. Changes in Securities 12
Item 3. Defaults Upon Senior Securities 12
Item 4. Submission of Matters to a Vote of
Security Holders 12
Item 5. Other Information 12
Item 6. Exhibits on Reports on Form 8-K 12
Signature Page 13
EUROPEAN AMERICAN RESOURCES, INC. AND SUBSIDIARIES
(FORMERLY MERLIN MINING CO.)
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1997
Assets
Current Assets
Cash and cash equivalents $ 373,719
Notes receivable 33,500
Prepaid rent on mining claims 129,062
Total Current Assets 536,281
Resource properties 1,386,219
Property and equipment, net 29,903
Other Assets
Investments, net of valuation reserve of 803,792 482,000
Other assets 9,353
Total Other Assets 491,353
Total Assets $2,443,756
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable and accrued expenses $ 153,325
Due to Related Party 396,960
Total Current Liabilities 550,285
Distribution rights payable 437,500
Stockholder's Equity
Preferred stock; $.0001 par value, 25,000,000
shares authorized, no shares issued or
outstanding
Common stock; $.0001 par value, 250,000,000
shares authorized, 8,795,865 shares issued
and outstanding 880
Additional paid in capital 7,181,687
Deficit accumulated during the exploration stage (5,726,596)
Total Stockholder's Equity 1,455,971
Total Liabilities and Stockholder's Equity $2,443,756
EUROPEAN AMERICAN RESOURCES, INC. AND SUBSIDIARIES
(FORMERLY MERLIN MINING CO.)
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Nine Months
September 30, September 30,
1997 1997
Revenue
Sales $ - $ -
Operating Expenses
Operating costs 22,735 68,205
General and administrative 527,720 601,770
Total Operating Expenses 550,455 669,975
Other
Total Other Income (Expense) 21 448
Loss before income taxes (550,434) (669,527)
Income tax expense - -
Net Loss $(550,434) $(669,527)
Weighted Average Shares Outstanding 9,264,615 9,571,244
Net Loss Per Share $(.059) $(.700)
EUROPEAN AMERICAN RESOURCES, INC. AND SUBSIDIARIES
(FORMERLY MERLIN MINING CO.)
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
Cash Flows Operating Activities
Net Loss $ (669,527)
Adjustments to reconcile net loss to net cash
(used) by operating activities:
Issuance of common stock charged to expense 345,000
Changes in assets and liabilities:
(Increase) in prepaid rent (77,396)
Increase in accounts payable and accrued expenses 34,923
Net Cash Used By Operating Activities (367,000)
Cash Flows From Investing Activities
Additions to resource properties (83,820)
Advances of note receivable (33,500)
Net Cash (Used In) Investing Activities (117,320)
Cash Flows From Financing Activities
Advances from related party 280,360
Proceeds from the issuance of stock, net of
offering costs of $123,273 576,728
Net Cash Provided By Financing Activities 857,088
Net Increase in Cash and Cash Equivalents 372,768
Cash and Cash Equivalents at Beginning of Period 951
Cash and Cash Equivalents at End of Period $ 373,719
A. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to
Form 10-QSB and Article 10 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the
opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the nine month period ended September 30, 1997 are
not necessarily indicative of the results that may be expected for the
year ending December 31, 1997. Earnings per share are based on weighted
average shares outstanding. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Registrant Company's annual report on form 10-KSB for the year ended
December 31, 1996.
Additionally, prior years amounts for the same period are unavailable as
the registrant was inactive during that period. The amounts in this
filing have been amended to include the capitalizing of costs to the
deferred exploration costs account. Previously the Company reported a
loss for the nine months ended September 30, 1997 of $669,527 or $21,476
greater than the loss as restated.
B. RESOURCE PROPERTIES
The Company has incurred over $2,661,000 in direct exploratory activity
costs since acquisition of the right to these mining properties. In
accounting for these costs the Company selected an accounting policy which
capitalizes exploratory costs rather than expensing them as incurred.
Amortization of these costs is to be calculated by the units of production
method based upon proven or probable reserves. Costs incurred on
properties later determined to be unproductive are expensed by the Company
as that determination is made. As of September 30, 1997, the Company has
$1,386,219 in resource properties. If these remaining costs had been
expensed rather than capitalized, the accumulated deficit at September 30,
1997 would have been $7,112,815 rather than $5,726,596.
The Company is continuing its exploration stage activities on the
remaining properties to determine the amount of proven or probable
reserves, if any. Realization of the $1,386,219 in resource properties is
dependent on establishing proven or probable reserves in excess of amounts
capitalized.
C. RESTATEMENT AND RECLASSIFICATION OF FINANCIAL STATEMENT PRESENTATION
Historically the Company has capitalized exploration costs as discussed in
Note B. Originally the Company filed Form 10-QSB for the period ending
September 30, 1997 with these costs treated as an expense. The statement
of operations presented herein differ from those previously reported due
to the correction of this error. A reconciliation of revenue and net loss
are as follows:
Nine Months
Ended
September 30,
1997
Revenues - as previously restated 0
Revenues as restated 0
Net Income (Loss) - as previously reported (805,358)
Net (Loss) as restated (669,527)
D. RELATED PARTY TRANSACTIONS
Amounts due to related party at September 30, 1997 represent cash and
expense advances by a company affiliated with a stockholder and director
of the company totaling $396,960. Presently these amounts bear no
interest.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
The following is management's discussion and analysis of certain significant
factors which have affected the Company's financial position and operating
results during the periods included in the accompanying condensed financial
statements, as well as information relating to the plans of the Company's
current management.
RESULTS OF OPERATIONS
Nine Months Ended September 30, 1997
The Company's historical results of operations for the nine months ended
September 30, 1997 consisted of a loss of $669,527. No comparison to prior year
amounts can be made as the registrant was inactive during that period.
Liquidity and Working Capital
The Company's working capital increased during the quarter ended September 30,
1997 primarily due to the issuance of common stock. At September 30, 1997 the
Company had a working capital deficit of $14,004 as compared to a working
capital deficit of $112,559 at December 31, 1996.
During the period the Company increased resource properties by $349,529.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
NONE
Item 2. Changes in Securities
The number of common shares issued and outstanding as of July 1,
1997 was 9,733,365.
In July of 1997 the following transactions took place:
Issuance of 25,000 shares of common stock as per Rule 144 for
consulting services rendered;
Issuance of 400,000 shares of common stock as per Rule 144 as part
of an employment agreement of officer of the Company;
Retirement of 2,187,500 shares of free-trading common stock in
exchange for distribution rights to those shareholders, amounting to
10% of total returns to the Company, not to exceed 4,375,000 in
payments. This potential liability is being recorded at a 10%
valuation based on management's assessment of the current returns
from net smelter production.
In August and September of 1997, the following transactions took
place:
Two private placement for three hundred thousand ($350,000 USD)
dollars each, for a total of seven hundred thousand ($700,000 USD)
dollars received by the Company in cash, in exchange of 700,000
shares of common stock as per Rule 144, in addition to 175,000
warrants at a strike price of $2.50, and 350,000 warrants at a
strike price of $5.00, exercisable in three years from the date of
issuance.
Item 3. Defaults Upon Senior Securities
NONE
Item 4. Submission of Matters to a Vote of Security Holders
NONE
Item 5. Other Information
NONE
Item 6. Exhibits and Reports on Form 8-K
NONE
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant, caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
EUROPEAN AMERICAN RESOURCES, INC.
FORMERLY MERLIN MINING CO.
Dated: By:
Michael D. Ogilvie, President
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant, caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
EUROPEAN AMERICAN RESOURCES, INC.
FORMERLY MERLIN MINING CO.
Dated: By: /s/ Michael D. Ogilvie
Michael D. Ogilvie, President