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, 1997

         [ ] 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 ]

<PAGE>


         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, 1997 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 July 14, 1998 was $96,902.


         The number of shares  outstanding of the issuer's common equity,  as of
July 14, 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.

<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.

<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

         The above  quotes  have  been  restated  to give  effect to a 1 for 100
reverse split.

         As of July 14,  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.

<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, 1997  compared to the Year Ended  December 31,
1996.

         During the year ended  December 31, 1997 the Company had no operations.
General and administrative  expenses included professional fees paid 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 $63,553 in 1997, compared to $203,024 in 1996.

For the Year Ended  December  31, 1996  compared to the Year Ended  December 31,
1995.

         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.

<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

         At December 31,  1997,  the Company the Company had no assets and total
stockholders  deficit of $(306,020) compared with total assets of $154 and total
stockholders  deficit of $(335,967)  at December 31, 1996.  The Company has been
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  31,1996,  the  Company had total  assets of $154 and total
stockholders  deficit of  $(335,967)  compared with total assets of $171,928 and
total  stockholders  deficit of $(132,943) at December 31, 1995. The decrease in
total assets of $171,774,  99% 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
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  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.)

<PAGE>

<TABLE>
<CAPTION>



                                                  EQUITY AU, INC.

                                                   BALANCE SHEET
                                                 December 31, 1997

                                          ASSETS
                                                                         December 31,          December 31,
                                                                             1997                  1996
CURRENT ASSETS                                                            (Unaudited)          (Unaudited)

<S>                                                                    <C>                    <C>
  Cash                                                                  $            0        $          154
                                                                        --------------        --------------
        TOTAL ASSETS                                                    $            0        $          154
                                                                        ==============        ==============
                          LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES

  Accounts payable                                                      $       45,003        $       54,003
  Accrued expenses                                                              40,725                34,975
  Dividends payable                                                            159,281               114,766
  Notes payable (Note 5)                                                        61,011                99,377
                                                                        --------------        --------------
     Total current liabilities                                                 306,020               336,121
                                                                        --------------        --------------
         TOTAL LIABILITIES                                                     306,020               336,121
                                                                        --------------        --------------
CONTINGENCIES AND COMMITMENTS: (Note 4)

STOCKHOLDERS' (DEFICIT) (Note 6):

  Preferred stock, Series A, $1.00 Par Value                                   148,000               148,000
  Preferred stock, Series B, $1.00 Par Value                                   272,200               288,200
  Preferred stock, Series C, $1.00 Par Value                                    10,200                10,200

  Common stock, Class A, $0.001 Par Value                                        2,201                91,123
  Common stock, Class B, $0.001 Par Value                                        1,000                 1,000

  Additional paid-in capital                                                11,726,372            11,527,950

  Accumulated deficit                                                      (12,465,993)          (12,402,440)
                                                                        --------------        --------------
     Total Stockholders' (Deficit)                                             306,020              (335,967)
                                                                        --------------        --------------
        TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                      $          154        $          154
                                                                        ==============        ==============

</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,
                                                     1997                            1996
                                                 (Unaudited)                     (Unaudited)
INCOME:
<S>                                           <C>                          <C>
  Revenue                                     $         -                  $              413
  Direct Costs                                          -                             (15,569)
                                              ----------------             ------------------
     Total Income                                       -                             (15,156)

GROSS PROFIT                                            -                             (15,156)
                                              ================             ==================
EXPENSES:
  General and Administrative                            55,790                        287,836
                                              ----------------             ------------------
     Total Expenses                                     55,790                        287,836

LOSS FROM OPERATIONS                                    55,790                       (302,992)
                                              ================             ==================
OTHER INCOME (EXPENSE):
  Gain on disposition of assets                                                       105,482
  Interest expense                                      (7,763)                        (5,514)
                                              ----------------             ------------------
     Total Other Income (Expense)                       (7,763)                       (99,968)

NET LOSS BEFORE INCOME TAXES                  $        (63,553)            $         (203,024)
                                              ================             ==================
Income taxes                                            -                              -

NET LOSS                                               (63,553)                      (203,024)
                                              ================             ==================
Net Loss Per Common Share                     $          (0.05)            $            (0.22)
                                              ================             ==================
Weighted average common shares outstanding           1,233,582                        911,232
                                              ================             ==================
</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, 1994 to December 31, 1997

                                 Preferred Stock - A                Preferred Stock - B               Preferred Stock - C
                               Shares           Amount            Shares           Amount           Shares           Amount
<S>                            <C>        <C>                     <C>        <C>                     <C>       <C>
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
                               -------    -------------           -------    -------------           ------    ------------

Class B Conversion
  to Common                                                       (16,000)   $     (16,000)   
                                                                  -------    -------------        

Balance
  December 31, 1997            148,000    $     148,000           272,200    $     272,200           10,200    $     10,200
                               =======    =============           =======    =============           ======    ============


</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, 1994 to December 31, 1997

                                 Class A Common                   Class B Common              Paid in       Accumulated
                             Shares          Amount           Shares          Amount           Capital        Deficit
<S>                        <C>           <C>                   <C>        <C>                <C>           <C>
Balance,
  December 31, 1994           612,471    $        612          100,000    $      1,000       11,559,423    $   (11,954,266)

Issuance of common stock:
  for cash                    270,789             271                                           184,029
  for services                 25,000              25                                            26,225
  1993 dividend on
    Preferred Series A          1,619               2                                            17,715            (17,717)
  1994 dividend on
    Preferred Series A          1,353               1                                            14,799            (14,800)

Net loss                                                                                                          (212,633)

Balance
  December 31, 1995           911,232    $        911          100,000    $      1,000       11,618,162    $   (12,199,416)

Net loss                                                                                                          (203,024)

Balance
  December 31, 1996           911,232    $        911          100,000    $      1,000       11,618,162    $   (12,402,440)

Class B Conversion 
  to Common                     2,399               3                                            15,997

Stock issued for 
  Notes payable               257,500             258                                            51,242

Stock issued for 
  wages payable             1,029,500           1,029                                            40,971

Net loss                                                                                                           (63,553)
                            ---------    ------------         --------   -------------       ----------    ---------------
Balance 
  December 31, 1997         2,200,631    $      2,201         100,000    $       1,000       11,726,372    $   (12,465,993)
                            =========    ============         =======    =============       ==========    =============== 

</TABLE>

   The accompanying notes are an integral part of these financial statements.

                                       F-4

<PAGE>
<TABLE>
<CAPTION>
                                 EQUITY AU, INC.

                             STATEMENT OF CASH FLOWS
                                   (Unaudited)


                                                                            For the Years Ended
                                                                               December 31,
                                                                    1997                            1996         
                                                                              
CASH FLOWS FROM OPERATING ACTIVITIES:                                         
                                                                              
                                                                              
<S>                                                        <C>                             <C>                   
  Net loss                                                 $         (63,553)              $         (203,024)   
Adjustments to reconcile net loss to net cash used                            
 by operating activities:                                                     
  Stock issued for accrued wages                                      42,000                           -         
  Disposal of assets                                                  -                               (87,273)   
  Assets exchanged for wages & fees                                   -                                39,540    
  Dividends payable                                                   44,515                          114,766    
                                                                              
Changes in operating assets and liabilities:                                  
  (Increase) decrease in Prepaids                                     -                                18,966    
  Increase (decrease) in Accounts Payable                            (42,000)                          38,212    
  Increase (decrease) in accrued expenses                              5,750                          (22,082)   
                                                           -----------------               ------------------    
                                                                              
NET CASH (USED) BY OPERATING ACTIVITIES:                             (13,288                         (100,895)   
                                                           -----------------               ------------------    
CASH FLOWS FROM FINANCING ACTIVITIES:                                         
                                                                              
  Proceeds from long term debt                                        13,134                           99,377    
  Principle payments on long term debt                                -                              (199,023)   
  Sale of common stock                                                -                                -         
                                                           -----------------               ------------------    
NET CASH PROVIDED BY FINANCING ACTIVITIES:                            13,134                           99,377    
                                                           -----------------               ------------------    
NET DECREASE IN CASH:                                                   (154)                          (1,518)   
                                                                              
CASH AT BEGINNING OF PERIOD:                                             154                            1,672    
                                                           -----------------               ------------------    
CASH AT END OF PERIOD:                                     $               0               $              154    
                                                           =================               ==================    
CASH PAID DURING THE YEAR FOR:                                                
                                                                              
                                                                              
   Interest                                                $          -                    $            2,391    
   Income taxes                                                       -                                -         
                                                                              
NON-CASH FINANCING:                                                           
                                                                              
   Common stock issued for accrued wages                   $          42,000               $           -         

</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, 1997

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, 1997

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  los 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, 1997

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
<TABLE>
<CAPTION>

              Notes payable of the Company are as follows:
                                                                          December 31, 
                                                                      1997           1996
                                                                               
             <S>                                                <C>             <C> 
                Unsecured debt for advances from a related                     
                 party due upon demand                            $     55,011   $     41,877
                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         57,500
                                                                  ------------   ------------
                   Total Current Notes Payable                    $     61,011   $     99,377
                                                                  ============   ============
</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 $1.00 per share.  These shares
              accrue a 10% dividend annually.  The cumulative amount of dividend
              is  $44,400   and   $29,600  at   December   31,  1997  and  1996,
              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, 1997 and 1996.

              Dividends  paid  during  1995  amounted  to  $17,717  for 1993 and
              $14,800 for 1994. No dividends were paid during 1996 or 1997.

              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  is $111,715  and  $83,020 at
              December 31, 1997 and 1996,  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 272,200 and
              288,200  shares  issued and  outstanding  at December 31, 1997 and
              1996.

                                       F-8

<PAGE>
                                 EQUITY AU, INC.
                        Notes to the Financial Statements
                                December 31, 1997

NOTE - 6      CAPITAL STOCK (Continued)

              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
              is $3,166 and $2,146 at December 31, 1997 and 1996,  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,
              1997 and 1996.

              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, 1996
              and 1995.

              e.  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  shares  outstanding as of
              December 31, 1996 and 1995.  There were  840,183  shares paid for,
              but  unissued  as of  December  31,  1996  and  1995  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 were  returned  to the  Company  and  canceled
              during 1996. 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 0 and 98,375  shares at December  31, 1996
              and 1995, respectively held in the name of the plan as of December
              31, 1996 and 1995.

              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 $.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, 1996 and 1995.

              g.  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.  The  warrants
              expired unexercised on September 10, 1996.

NOTE - 7      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  o the
              Company's  property and  equipment as of December 31, 1995 is from
              this transaction.

                                       F-9

<PAGE>
                                 EQUITY AU, INC.
                        Notes to the Financial Statements
                                December 31, 1997

NOTE - 7      RELATED PARTY TRANSACTIONS (Continued)

              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.

NOTE - 8      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 - 8 SUBSEQUENT EVENTS (UNAUDITED)

              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.

                                      F-10
<PAGE>


                                    PART III

Item 10.  Directors, Executive Officers, Promoters and Control Persons

     All  directors  of the Company  serve a term of one (1) year until the next
Annual  Shareholders  Meeting or until  their  death,  resignation,  retirement,
removal,  disqualification,  or until  their  successors  have been  elected and
qualified.  Vacancies in the existing  board are to be filled by a majority vote
of the  remaining  directors.  Officers of the Company  serve at the will of the
Board of Directors.

     The  following  table sets forth the name and office held by each  director
and officer of the Company, followed by a brief resume of each individual.

         NAME                  AGE       POSITION HELD
         James Arch            76        President, Chief Executive Officer, 
                                         Secretary, Treasurer and Director
         Bruce R. Beckman      47        Director

         JAMES ARCH, President,  Chief Executive Officer,  Secretary,  Treasurer
and  director  of the  Company.  Mr.  Arch  has a  respected  40  year  business
background as an educator and public speaker. He currently conducts seminars for
banks,  corporations,  associations,  and  conventions to motivate,  develop and
train people to achieve greater business  success.  His long list of clients has
included 20 years with the Professional Golfers Association and 12 years for the
Professional  Bowlers  Association.  Mr.  Arch  serves on the  boards of several
cellular and wireless cable  companies,  and is President of his own corporation
marketing   attitude   development   programs  designed  to  help  business  and
individuals achieve greater growth and financial success.  Mr. Arch was born and
educated in England, is a graduate of NorthWestern College, and has served as an
officer  in the  British  Merchant  Navy and the Royal Air  Force.  He became an
American citizen in 1954.

         BRUCE R. BECKMAN, director of the Company since 1990, is Superintendent
of Operations for the LaCygne  Station of Kansas City Power & Light. He has held
various  engineering  and  management  positions  with Kansas City Power & Light
since 1974. He has served as Plant  Maintenance  engineer,  Air Quality  Control
Engineer,  Superintendent  of  Reliability  Problems  and as  Superintendent  of
Central Maintenance.  Mr. Beckman is a member of the Association of Professional
Engineers  and is certified as a chief  engineer by the National  Institute  for
Uniform  Licensing  of  Power  Engineers.  He is also a  commissioned  examining
engineer,  and a technical instructor.  Mr. Beckman graduated with a Bachelor of
Science degree in mechanical  engineering from Southern  Illinois  University in
1974,  where he  specialized  in power  plant  theory and  design.  Mr.  Beckman
graduated with a Masters of Business Administration degree from Avila College in
Kansas City, Missouri.

Item 10.  Executive Compensation.

Executive and Director Compensation

         The  Company  does  not  have a  bonus,  profit  sharing,  or  deferred
compensation plan for the benefit of its employees, officers or directors.

         The  following  table  sets  forth  a  summary  of  cash  and  non-cash
compensation  for each of the last three fiscal periods ended December 31, 1997,
1996,  and 1995,  with respect to the  Company's  Chief  Executive  Officer.  No
executive  officer of the  Company  has earned a salary  greater  than  $100,000
annually for any of the periods depicted.

<PAGE>

                                             Summary Compensation Table

Name & Principal Position                     Year              Salary
-------------------------                     ----              ------
James Arch                                    1997              $-0-
President, CEO, Secretary,                    1996              $-0-
Treasurer                                     1995              $-0-
(from August 1997 to present)

Charles Jones                                 1997              $42,000
President & CEO                               1996              $42,000
(from June 1996 to August 1997)               1995              $-0-

Item 11.  Security Ownership of Certain Beneficial Owners and Management.

        The following table sets forth information, to the best knowledge of the
Company,  as of July 14, 1998,  with respect to the beneficial  ownership of the
Company's  Common  Stock  by (i) each  person  known  by the  Company  to be the
beneficial owner of more than 5% of the Company's outstanding Common Stock; (ii)
each  director  and  officer;  and (iii) all  current  directors  and  executive
officers as a group.
<TABLE>
<CAPTION>

NAME AND ADDRESS OF                                            NUMBER OF                          PERCENT
BENEFICIAL OWNER                                             SHARES OWNED                         OF CLASS

<S>                                                          <C>                               <C>  
CLASS B COMMON
Calistro  and Peters                                              100,000                        100.0%
James Arch, Manger
P.O. Box 940037
Maitland, FL 32794

All Officers and Directors as a Group                             100,000                        100.0%

CLASS A COMMON
Bruce R. Beckman                                                  201,000                           6.0%
16574 Glenwood
Stillwell, KS 66085

James Arch and affiliates                                       1,481,926                          44.3%
P.O. Box 940037
Maitland, FL 32794

All Officers and Directors as a Group (2 persons)               1,682,926                          50.6%

Cede & Co.
55 Water Street
New York, NY 10041                                                658,226                          19.7%

Charles F. Jones
9 Oak Circle
Lake Dallas, TX 75065-2924                                        252,190                          7.5%

Myles S. Rudolph
22426 Estallans
Mission Viejo, CA 92692                                           300,000                          9.0%

Roger Shaw
3415 Indian Hills Drive
Marietta, GA 30068                                                230,000                          6.9%
</TABLE>
<PAGE>

Item 12.  Certain Relationships and Related Transactions.

         In early 1996, a partnership  controlled by Mr. Arch  foreclosed on the
Company's  property and equipment  that had been pledged for loans received from
the partnership.

         During the years ended  December 31, 1997 and 1996, Mr. Arch loaned the
Company $13,134 and $41,877 respectively for operating capital at 10% interest.

Item 13.  Exhibits and Reports on Form 8-K.

(a) No exhibits have been filed with this report.

(b) The Company  filed a Form 8-K with the  Commission on March 22, 1997 setting
forth the reasons for dismissing the Company's independent accountant.




                                   SIGNATURES


         In accordance with Section 13 or 15(d) of the Exchange Act of 1934, the
Registrant  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: July 16, 1998