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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
FORM 8-K/A
(AMENDMENT NO. 1)
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): September 7, 2000
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eResource Capital Group, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 1-8662 23-2265039
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(State or other jurisdiction (Commission File (IRS Employer
of incorporation) Number) Identification Number)
3353 Peachtree Road, N.E., Suite 130 Atlanta, Georgia 30326
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(Address of principal executive offices) (Zip Code)
flightserv.com, 3343 Peachtree Rd., N.E., Suite 530, Atlanta, GA 30326
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(Former Name or Former Address, if changed since last report)
Registrant's telephone number, including area code: (404) 760-2570
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This Amendment No. 1 amends and supplements Items 7(a) and 7(b) of the Current
Report on form 8-K filed on September 22, 2000 by the registrant (the "Company")
with respect to, among other things, the Company's acquisition of DM Marketing,
Inc. In accordance with Item 7 of form 8-K, the financial statements required
thereby are being filed with this Amendment No. 1.
Statements in this report about anticipated or expected future revenue or growth
or expressions of future goals or objectives are forward-looking statements
within the meaning of Section 21E of the Securities Act of 1934, as amended. All
forward-looking statements in this release are based upon information available
to the Company on the date of this release. Any forward-looking statements
involve risks and uncertainties, including those risks described in the
Company's filings with the Securities and Exchange Commission, that could cause
actual events or results to differ materially from the events or results
described in the forward-looking statements, whether as a result of new
information, future events or otherwise. Readers are cautioned not to place
undue reliance on these forward-looking statements.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements of Business Acquired
In accordance with Item 7(a) of Form 8-K, the following financial
statements of DM Marketing, Inc. prepared in accordance with regulation
S-X are included in this report:
Independent Auditors' Report
Balance Sheets as of June 30, 2000 and 1999
Statements of Operations and Accumulated Deficit for the year
ended June 30, 2000 and for the ten month period ended June
30, 1999
Statements of Cash Flows for the year ended June 30, 2000 and
for the ten month period ended June 30, 1999
Notes to Financial Statements
(b) Pro Forma Financial Information
In accordance with Item 7(b) of Form 8-K, the following pro forma
financial statements of eResource Capital Group, Inc. prepared in
accordance with regulation S-X are included in this report:
Unaudited Pro Forma Condensed Consolidated Balance Sheet as
of June 30, 2000
Unaudited Pro Forma Condensed Consolidated Statement of
Operations for the year ended June 30, 2000
(c) Exhibits
2.1 Stock Purchase Agreement dated as of August 16, 2000 among
eResource Capital Group, DM Marketing, Inc., Michael Pruitt
and Darek Childress.* Pursuant to Item 601(b)(2), the exhibits
to the Stock Purchase Agreement have been omitted and the
Company agrees to furnish copies of such exhibits supplemental
to the Commission upon request.
2.2 Stock Purchase Agreement dated as of August 11, 2000 between
the Company, Internet Aviation Services, Ltd. and Caliente
Consulting.* Pursuant to Item 601(b)(2), the exhibits to the
Stock Purchase Agreement have been omitted and the Company
agrees to furnish copies of such exhibits supplementary to the
Commission upon request.
99.1 Press Release dated September 14, 2000*
99.2 Press Release dated September 8, 2000*
99.3 Press Release dated August 31, 2000*
99.4 Press Release dated August 25, 2000*
*Previously filed.
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Independent Auditors' Report
Stockholders and Directors
DM Marketing, Inc.
Pensacola, FL 32534
We have audited the accompanying balance sheets as of June 30, 2000 and 1999,
and the related statements of operations and accumulated deficit and the
statements of cash flows for the year ended June 30, 2000 and for the ten month
period ended June 30, 1999. These financial statements are the responsibility of
the company's management. Our responsibility is to express an opinion on the
financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides 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 DM Marketing, Inc., as of June
30, 2000 and 1999, and the results of its operations and cash flows for the year
ended June 30, 2000 and for the ten month period ended June 30, 1999 in
conformity with accounting principles generally accepted in the United States.
October 31, 2000
By: /s/ WALKER, CROOK & JONES, P.C.
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Walker, Crook & Jones, P.C.
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DM Marketing, Inc.
Balance Sheets
<TABLE>
<CAPTION>
ASSETS June 30
---------------------------
2000 1999
--------- ---------
<S> <C> <C>
Cash and cash equivalents $ 157,466 $ 1,794
Prepaid expenses -- 3,006
--------- ---------
Current assets 157,466 4,800
Property and equipment, net 58,069 21,739
--------- ---------
Total assets $ 215,535 $ 26,539
========= =========
Liabilities and Stockholders' Equity
Accounts payable and accrued expenses $ 4,232 $ --
--------- ---------
Current liabilities 4,232 --
Commitments and contingent liabilities
Shareholders' equity:
Common stock, no par value, 1500 shares authorized,
issued and outstanding -- --
Paid-in capital 218,941 84,117
Accumulated deficit (7,638) (57,578)
--------- ---------
Total shareholders' equity 211,303 26,539
--------- ---------
Total liabilities and shareholders' equity $ 215,535 $ 26,539
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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DM Marketing, Inc.
Statements of Operations and Accumulated Deficit
<TABLE>
<CAPTION>
Ten Month
Year Ended Period Ended
June 30, 2000 June 30, 1999
------------- -------------
<S> <C> <C>
Revenues $ 354,854 $ 35,376
Selling, general and administrative expenses 298,354 90,379
Depreciation and amortization 6,560 2,575
--------- ---------
Net income (loss) 49,940 (57,578)
Accumulated deficit-beginning of period (57,578) --
--------- ---------
Accumulated deficit-end of period $ (7,638) $ (57,578)
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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DM Marketing, Inc.
Statements of Cash Flows
<TABLE>
<CAPTION>
Ten Month
Year Ended Period Ended
June 30, 2000 June 30, 1999
--------------- --------------
<S> <C> <C>
Cash flows provided by operating activities:
Net income (loss) $ 49,940 $ (57,578)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization 6,560 2,575
Changes in operating assets and liabilities:
Prepaid expenses 3,006 (3,006)
Accounts payable and accrued expenses 4,232 --
--------- ---------
Net cash provided (used) by operating activities 63,738 (58,009)
--------- ---------
Cash flows from investing activities:
Purchase of property and equipment (42,890) (24,314)
--------- ---------
Net cash used by investing activities (42,890) (24,314)
--------- ---------
Cash flows from financing activities:
Proceeds from issuance of common stock -- 84,117
Capital contributions by shareholder 134,824 --
--------- ---------
Net cash provided by financing activities 134,824 84,117
--------- ---------
Net increase in cash and cash equivalents 155,672 1,794
Cash and cash equivalents at beginning of year 1,794 --
--------- ---------
Cash and cash equivalents at end of year $ 157,466 $ 1,794
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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DM Marketing, Inc.
Notes to Financial Statements
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
DM Marketing, Inc. (the "Company"), began operations on October 2, 1998
and provides telemarketing, help desk and other services primarily for
Internet related companies located throughout the United States.
Cash Equivalents
The Company considers all highly liquid investments readily convertible
into cash or having a maturity of three months or less when purchased
to be cash equivalents.
Property and Equipment
Property and equipment are stated at cost less allowance for
depreciation. Depreciation is computed using the straight-line method
over the estimated useful lives of the assets. The Company periodically
assesses the realizability of its long-lived assets and evaluates such
assets for impairment whenever events or change in circumstances
indicated the carrying amount of an asset may not be recoverable.
Advertising Cost
The Company conducts nondirect response advertising. The costs are
expensed as incurred. Advertising cost totaled $30,108 and $5,479 for
the year ended June 30, 2000 and for the ten month period ended June
30, 1999, respectively.
Revenue Recognition
The Company provides services to customers under contracts negotiated
on a project basis. Revenue is recognized over the term of each
contract ranging from 1 day to 3 months.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could materially
differ from those estimates.
2. PROPERTY AND EQUIPMENT
Major classifications of property and equipment and their respective
depreciable lives are summarized below:
<TABLE>
<CAPTION>
2000 1999 Depreciable Lives
-------- -------- -----------------
<S> <C> <C> <C>
Office Equipment $ 67,204 $ 24,314 5-10 years
Less Accumulated Depreciation (9,135) (2,575)
-------- --------
$ 58,069 $ 21,739
======== ========
</TABLE>
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DM Marketing, Inc.
Notes to Financial Statements (continued)
3. COMMON STOCK
During the ten month period ended June 30, 1999, the Company issued
1,500 shares of common stock for $84,117 in a private placement
transaction. During the year ended June 30, 2000, one of the Company's
shareholders made capital contributions aggregating $134,824.
4. INCOME TAXES
The Company accounts for income taxes in accordance with the liability
method as provided under Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes." Accordingly, deferred income
taxes are recognized for the tax consequences of differences between
the financial statement carrying amounts and the tax basis of existing
assets and liabilities. The measurement of deferred tax assets is
reduced, if necessary, by the amount of any benefits that based on
available evidence, are not expected to be realized.
No provision for income taxes was recorded for the ten month period
ended June 30, 1999. The Company utilized $49,940 of the available net
operating loss carryforward for the year ended June 30, 2000. The
remaining loss carryforward balance of $7,638 may be applied against
future taxable income through 2019. No other significant deferred
income tax assets or liabilities exist.
5. OPERATING LEASE COMMITMENT
The Company entered into a 24 month operating lease agreement for its
office space in July 2000. The lease requires a monthly lease payment
of $2,687. Future minimum lease payments are as follows as of June 30,
2000:
2001 $32,244
2002 $32,244
Prior to entering into the above agreement the Company leased office
space on a month to month basis. Rent expense totaled $22,030 and
$12,000 for the year ended June 30, 2000 and the ten month period ended
June 30, 1999, respectively.
6. CONCENTRATIONS OF CREDIT RISK
Financial instruments that potentially subject the Company to credit
risk consisted of cash. The Company maintains its cash balances in a
financial institution located in Atmore, Alabama. The balances are
insured by the Federal Deposit Insurance Corporation up to $100,000. At
June 30, 2000, the Company's uninsured cash balances totaled $40,566.
7. SUBSEQUENT EVENTS
In August 2000, one of the Company's stockholders made a capital
contribution of $300,000.
On September 7, 2000 the Company exchanged shares in connection with a
definitive purchase agreement executed on August 16, 2000 related to
the sale of DM Marketing, Inc. to flightserv.com (now known as
eResource Capital Group, Inc.). The stockholders of the Company sold
their 1,500 shares of common stock in exchange for 8,450,000 restricted
shares of flightserv.com common stock with a market value of $5,281,250
on August 16, 2000.
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Item 7. Continued
(b) Pro Forma Financial Information
On September 7, 2000, eResource Capital Group, Inc. (the "Company")
(formerly flightserv.com) exchanged shares in connection with a
definitive purchase agreement executed on August 16, 2000 ( the "DM
Agreement") related to the acquisition of DM Marketing, Inc., a
Delaware corporation ("DM"). The DM Agreement was among the Company,
DM, Michael Pruitt and Darek Childress (together with Mr. Pruitt, the
"DM Stockholders"). Pursuant to the DM Agreement, the Company acquired
all of the issued and outstanding capital stock of DM from the DM
Stockholders in exchange for 8,450,000 shares of the Company's common
stock with a market value of $5,281,250 on August 16, 2000. The DM
acquisition will be accounted for under the purchase method of
accounting.
As a result of the DM Acquisition, DM became a wholly-owned subsidiary
of the Company. DM, based in Pensacola, Florida, operates a call center
providing telemarketing, help desk and other services for Internet
related companies.
The following unaudited pro forma condensed consolidated balance sheet
and statement of operations of eResource Capital Group, Inc ("RCG" or
the "Company") and DM Marketing, Inc. ("DM") are derived from, and
should be read in conjunction with, the audited financial statements of
DM included in item 7(a) herein and the audited consolidated financial
statements of RCG as previously filed on Form 10-KSB for the year ended
June 30, 2000. The unaudited pro forma consolidated financial
statements do not purport to be indicative of the results of operations
or financial position which would have actually been reported had the
acquisition been consummated on the dates indicated, or which may be
reported in the future.
The following unaudited pro forma consolidated balance sheet and the
unaudited pro forma consolidated statement of operations reflect
adjustments as if the acquisition had been consummated on July 1, 1999.
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eResource Capital Group, Inc. and Subsidiaries
Pro Forma Condensed Consolidated Balance Sheet (Unaudited)
<TABLE>
<CAPTION>
ASSETS
eResource eResource
Capital Capital
Group, Inc. DM Marketing, Inc. Group, Inc.
June 30, 2000 June 30, 2000 Pro Forma June 30, 2000
Actual Actual Adjustments (1) Pro Forma
------------- ------------------ --------------- -------------
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 526,657 $ 157,466 $ -- $ 684,123
Accounts and notes receivable 55,995 -- -- 55,995
Prepaid expenses - compensation 4,615,862 -- -- 4,615,862
Prepaid expenses - other 119,912 -- -- 119,912
------------ ------------- --------------- -------------
Total current assets 5,318,426 157,466 -- 5,475,892
Deferred costs and other assets 924,743 -- -- 924,743
Predevelopment costs 1,164,043 -- -- 1,164,043
Property and equipment, net 9,561,842 58,069 -- 9,619,911
Goodwill -- -- 5,999,594 4,799,676
(1,199,918)
------------ ------------- --------------- -------------
Total assets $ 16,969,054 $ 215,535 $ 4,799,676 $ 21,984,265
============ ============= =============== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Notes payable - current portion $ 128,683 $ -- $ -- $ 128,683
Accounts payable and accrued expenses 839,146 4,232 34,250 877,628
------------ ------------ ------------ ------------
Total current liabilities 967,829 4,232 34,250 1,006,311
Net liabilities of discontinued operations 5,852 -- -- 5,852
Notes payable 7,582,707 -- -- 7,582,707
Accrued interest payable 848,424 -- -- 848,424
Commitments and contingent liabilities
Shareholders' equity:
Common stock, $.04 par value, 60,000,000 shares authorized,
33,554,584 and 42,004,584 issued and outstanding, 1,342,183 -- 338,000 1,680,183
respectively
Additional paid-in capital 78,147,672 218,941 5,627,344 83,993,457
Accumulated deficit (71,788,106) (7,638) (1,199,918) (72,995,662)
Treasury stock - at cost (435,930 shares) (137,507) -- -- (137,507)
------------ ------------ ------------ ------------
Total shareholders' equity 7,564,242 211,303 4,765,426 12,540,971
------------ ------------ ------------ ------------
Total liabilities and shareholders' equity $ 16,969,054 $ 215,535 $ 4,799,676 $ 21,984,265
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
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eResource Capital Group, Inc. and Subsidiaries
Pro Forma Condensed Consolidated Statements of Operations (Unaudited)
<TABLE>
<CAPTION>
eResource Capital DM eResource Capital
Group, Inc. Marketing, Inc. Group, Inc.
Year Ended Year Ended Year Ended
June 30, 2000 June 30, 2000 Pro Forma June 30, 2000
Actual Actual Adjustments(1) Pro Forma
---------------- ---------------- --------------- -------------------
<S> <C> <C> <C> <C>
Revenues:
Sales - private aviation $ 10,040 $ -- $ -- $ 10,040
Sales-call center -- 354,854 -- 354,854
Lease income - commercial real estate 1,108,438 -- -- 1,108,438
------------ ------------ ------------ ------------
1,118,478 354,854 -- 1,473,332
Cost of sales - private aviation 93,561 -- -- 93,561
------------ ------------ ------------ ------------
Gross profit 1,024,917 354,854 -- 1,379,771
Selling general and administrative expenses 7,023,055 298,354 -- 7,321,409
Compensation expense related to issuance
of stock options and warrants 48,996,238 -- 48,996,238
Depreciation and amortization 466,482 6,560 1,199,918 1,672,960
Interest expense, net 862,975 -- -- 862,975
Loss on investments 1,011,716 -- -- 1,011,716
------------ ------------ ------------ ------------
Loss before discontinued operations $(57,335,549) $ 49,940 $ (1,199,918) $(58,485,527)
============ ============ ============ ============
Basic and diluted loss per share before
discontinued operations $ (1.81) $ (1.46)
============ ============
Weighted average shares outstanding used
in computing basic and diluted loss per share 31,596,541 40,046,541
============ ============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
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(1) The 8,450,000 shares of common stock issued by RCG for the DM
acquisition had a fair market value of $5,281,250 on August 16, 2000.
Including direct acquisition costs the aggregate purchase price for DM
was $6,210,897. The excess value of the purchase price over the
historical value of DM's net assets on the acquisition date has been
allocated to goodwill which will be amortized over five years. Pro
forma goodwill amortization aggregated $1,199,918 for the year ended
June 30, 2000.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Company has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
eResource Capital Group, Inc.
Date: November 10, 2000 By: /s/WILLIAM L. WORTMAN
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William L. Wortman
Vice President and
Chief Financial Officer
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