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United States
Securities and Exchange Commission
Washington, D.C. 20549
_______________________
Form 10-QSB
X QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
----- ACT OF 1934 (THE "EXCHANGE ACT") FOR THE QUARTERLY PERIOD ENDED
SEPTEMBER 30, 2000
----- TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
FOR THE TRANSACTION PERIOD FROM TO .
---- ----
_______________________
Commission file number: 33-14065-D
e resources inc
(Exact Name of Issuer as Specified in its Charter)
______________________________________________________________________________
Utah 87-0476117
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification Number)
304 North Highway 377, Roanoke, Texas 76262
(Address of Principal Executive Offices)
Issuer's Telephone Number: (817) 491 -8698
Former Name, Former Address and Former Fiscal Year,
If Changed Since Last Report: N/A
State the number of shares outstanding of each of the Issuer's classes of
common equity, as of the latest practicable date:
14,528,968 shares of Common Stock, $.001 par value, outstanding as of October
31, 2000.
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e resources inc
Form 10-QSB for the Quarter ended September 30, 2000
Table of Contents
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<TABLE>
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Page
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Part I - Financial Information
Item 1 - Consolidated Financial Statements 3
Item 2 - Management's Discussion and Analysis and Results of Operation 8
Part II - Other Information
Item 1 - Legal Proceedings N/A
Item 2 - Changes in Securities N/A
Item 3 - Defaults Upon Senior Securities N/A
Item 4 - Submission of Matters to a Vote of Security Holders N/A
Item 5 - Other Information 10
Item 6 - Exhibits and Reports on Form 8-K 11
</TABLE>
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E RESOURCES INC AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION
------------------------------
Item 1. Consolidated Financial Statements.
---------------------------------
The financial statements of e resources inc (the "Company") included herein
have been prepared pursuant to the rules and regulations of the Securities and
Exchange Commission (the "SEC") and have not been audited by the Company's
independent public accountants. In the opinion of management, all adjustments
(which consisted only of normal recurring accruals) necessary to present fairly
the financial position and results of operations have been made. Pursuant to
SEC rules and regulations, certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted from these statements,
unless significant changes have taken place in relevant operations since the end
of the most recent fiscal year. The results of operations for the three and
nine months ended September 30, 2000 are not necessarily indicative of the
results to be expected for the full year.
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E RESOURCES INC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
September 30, 2000
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash $ 133,452
Note receivable 3,750
Accounts receivable 51,631
Prepaid expenses 82,843
-----------
Total current assets 271,676
PROPERTY AND EQUIPMENT, net 162,113
OTHER ASSETS 96,097
-----------
Total assets $ 529,886
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 114,716
Unearned revenue 25,419
Notes payable to stockholders 200,000
-----------
Total current liabilities 340,135
STOCKHOLDERS' EQUITY:
Common stock, $.001 par value, 250,000,000 shares authorized;
14,528,968 shares issued and outstanding 14,529
Additional paid-in capital 1,478,022
Accumulated deficit (1,302,800)
-----------
Total stockholders' equity 189,751
-----------
Total liabilities and stockholders' equity $ 529,886
===========
See notes to the consolidated financial statements.
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CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
------------------------------------ ----------------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
REVENUES:
Production and video sales $ 128,353 $ 89,848 $ 398,492 $ 286,080
Sales of medical supplies 7,235 - 13,587 -
----------- ----------- ----------- -----------
Total 135,588 89,848 412,079 286,080
----------- ----------- ----------- -----------
COST OF GOODS SOLD:
Production and video 32,413 28,620 169,533 132,848
Medical supplies 5,688 - 10,803 -
----------- ----------- ----------- -----------
Total 38,101 28,620 180,336 132,848
----------- ----------- ----------- -----------
Gross profit 97,487 61,228 231,743 153,232
OPERATING EXPENSES:
General and administrative expense 472,471 67,139 1,031,907 170,974
Depreciation and amortization 13,061 7,020 46,625 23,400
----------- ----------- ----------- -----------
Total 485,532 74,159 1,078,532 194,374
----------- ----------- ----------- -----------
Loss from operations (388,045) (12,931) (846,789) (41,142)
INTEREST, net 10,142 (4,578) (1,019) (23,563)
----------- ----------- ----------- -----------
NET LOSS $ (377,903) $ (17,509) $ (847,808) $ (64,705)
=========== =========== =========== ===========
NET LOSS PER SHARE (basic and
diluted) $ (.03) $ (.01) $ (.07) $ (.03)
=========== =========== =========== ===========
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING 14,528,968 2,331,543 11,577,561 2,331,543
=========== =========== =========== ===========
</TABLE>
See notes to the consolidated financial statements.
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STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
For the Nine Months Ended
September 30,
----------------------------------
2000 1999
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(Unaudited) (Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (847,808) $ (64,705)
Adjustments to reconcile net loss to net cash provided by operating
activities:
Depreciation and amortization 46,625 23,400
Common stock issued for services 22,000 -
Changes in operating assets and liabilities:
Accounts and note receivable (25,963) (50,889)
Prepaid advertising (82,843) -
Unearned revenues 20,169 12,182
Accounts payable and accrued expenses (52,523) (14,935)
------------- -------------
Net cash used by operating activities (920,343) (94,947)
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in other assets (50,000) -
Purchase of property and equipment (74,158) (14,743)
------------- -------------
Net cash used by investing activities (124,158) (14,743)
CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease in notes payable (258,731) (28,514)
Issuance of common stock for cash, net 1,428,000 -
Capital contributions - 149,972
------------- -------------
Net cash provided by financing activities 1,169,269 121,458
NET INCREASE IN CASH 124,768 11,768
CASH, beginning of period 8,684 6,172
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CASH, end of period $ 133,452 $ 17,940
============= =============
</TABLE>
See notes to the consolidated financial statements.
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E RESOURCES INC AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
1. Organization and Basis of Presentation
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Reorganization and Reverse Acquisition
--------------------------------------
In late 1999, the owners of Vista Photographic and Video Group, Ltd.
("Vistastream") and Cunningham and Cunningham Health Concerns, Inc.
("CareMart") informally agreed to acquire in a reverse acquisition a
controlling interest in the common stock of Dryden Industries, Inc.
("Dryden"). The transactions were completed in March and April 2000, and
resulted in the owners of Vistastream and CareMart obtaining approximately
53% of the stock of Dryden before a cash sale of stock, which was done in
conjunction with the transactions. The transactions have been treated as a
reorganization of Vistastream and CareMart, due to common ownership, and an
acquisition of the net assets of Dryden accompanied by a recapitalization of
Vistastream and CareMart under the legal capital structure of Dryden.
Therefore, the accompanying financial statements are the historical
financial statements of Vistastream, and the operations of Dryden and
CareMart are included in the consolidated financial statements beginning
March 31, 2000. The assets and liabilities of CareMart have been recorded at
book value. The assets and liabilities of Dryden were recorded at estimated
market value. Intercompany accounts and transactions are eliminated in
consolidation.
Unaudited Information
---------------------
The consolidated balance sheet as of September 30, 2000 and the consolidated
statements of operations for the three and nine month periods ended
September 30, 2000 and 1999 were taken from the Company's books and records
without audit. However, in the opinion of management, such information
includes all adjustments (consisting only of normal recurring accruals)
which are necessary to properly reflect the consolidated financial position
of the Company as of September 30, 2000 and the results of operations for
the three and nine month periods ended September 30, 2000 and 1999.
Certain information and notes normally included in financial statements
prepared in accordance with generally accepted accounting principles have
been condensed or omitted, although management believes that the disclosures
are adequate to make the information presented not misleading. Interim
period results are not necessarily indicative of the results to be achieved
for an entire year. These financial statements should be read in conjunction
with the financial statements and notes to financial statements of Vista
Photographic and Video Group, Ltd. and Cunningham and Cunningham Health
Concerns, Inc. included in the Company's Form 8-K dated April 28, 2000.
2. Stockholders' Equity
--------------------
In March 2000 the Company completed a one for twenty reverse stock split.
All reference to share information in the accompanying financial statements
is as if the reverse stock split had occurred at the earliest period
presented.
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During the first quarter of 2000, the Company sold 714,000 shares of common
stock for cash proceeds of $1,428,000.
During March 2000, the Company issued 162,300 shares for services related to
a consulting agreement entered into by Dryden in October 1999. The shares
were recorded at their estimated market value at the time the agreement was
entered into of $0.27 per share. Approximately one-half of the shares
applied to services after the transaction with Dryden described above and
have been recorded as an expense of $22,000 in the accompanying financial
statements.
During March and April 2000, the Company issued 2,331,543 and 4,842,987
shares, respectively to the former owners of Vistastream and CareMart to
complete the transactions described in Note 1.
3. Stock Option Plan
-----------------
In July 2000, the Company's board of directors approved a stock option
agreement ("the Agreement"), which is to be presented to the Company's
stockholders for approval. The Agreement provides for Non Statutory Options
and Incentive Stock Options to be granted employees as approved by the
Company's compensation committee of the board of directors. In July 2000,
subject to shareholder approval, options were granted to acquire 657,500
shares at $.75 per share. The options expire over various periods and
contain four year vesting periods.
4. Private Placement of Common Stock
----------------------------------
In July 2000, the Company began a private placement in which up to 2,500,000
shares of the Company's common stock are to be offered at a price per share
which is competitive with the Company's publicly traded stock. The shares
are to be accompanied by warrants to acquire up to an additional 2,500,000
shares of common stock. The warrants are to be immediately exercisable and
expire on December 31, 2010.
************
Item 2. Management's Discussion and Analysis of Financial Condition and
---------------------------------------------------------------
Results of Operations.
-----------------------
(a) General
e resources inc is an acquisition and development company engaged primarily
in developing, investing in and directing the business strategy of a network of
companies with Internet, Intranet and electronic commerce based applications.
The Company currently has three (3) wholly-owned operating subsidiaries,
CareMart, Inc., ("CareMart"), vistastream inc
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("vistastream"), and eGROW Inc. (eGROW"). CareMart is an online niche marketer
and distributor of home healthcare products and supplies for general and
institutional consumption. CareMart markets to healthcare providers who treat
persons with reduced or impaired mobility or other self-care limitations due to
age, injuries or disease. vistastream is a full-service video production house
and a producer, aggregator and broadcaster of streaming media programming for
the Internet. eGROW was formed in the second quarter of 2000 to position the
Company to enter the business incubation industry, by creating a vehicle to aide
newly emerging businesses to develop and mature into solid companies through
acquisition and investment. Through eGROW, the Company plans to construct an
interactive combination of network companies, formed through certain strategic
partnerships and alliances. The Company already has such an alliance with
vLicense.com, ("vLicense"), a vendor of business-to-business software engaged in
developing products that enable electronic software distribution for portals,
ASPs, and application vendors. vLicense has applied for patent protection for
its proprietary technology with the United States Patent and Trademark Office.
(b) Financial Condition and Results of Operations.
As previously reported, the Company ceased operations in all three of its
subsidiaries in 1998 and became a development stage company in 1999, with
essentially no operations until the acquisition of vistastream and CareMart.
Accordingly, any comparison of the financial condition and results of operations
of the Company for fiscal years 1998 and 1999 with the quarter ended September
30, 2000 must be qualified by these factors. In the opinion of management, it
is more appropriate to compare the historical financial statements of
vistastream and CareMart with the Company's consolidated financial statements
for the quarter ended September 30, 2000, since the Company had no other
material operations for the applicable time periods.
Results of Operations
---------------------
Revenues for the three and nine month periods ended September 30, 2000 were
$135,588 and $412,079, respectively, versus $89,848 and $286,080 for the
comparable 1999 periods. The increase for 2000 compared to 1999 is due to
increased scope of services and utilizing marketing opportunities from trade
shows and events. During the second quarter ended June 30, 2000, sales efforts
were refocused to live event production, video streaming and other e-commerce
related video production, which the Company believes will help stabilized
revenues and produce a recurring revenue stream in the future. CareMart
revenues consisted of $7,235 for the three months ended September 30, 2000.
Since CareMart does not have a strong holiday appeal, the Company has chosen to
delay marketing its Web site until the first quarter of 2001, when the Company
anticipates launching a direct mail campaign to push additional customers to its
Web site.
Gross profit for the three and nine month periods ended September 30, 2000
were $97,487 and $231,743, respectively, versus $61,228 and $153,232 for the
comparable 1999 periods. The increase in gross profit dollars for 2000 compared
to 1999 is due to increased price point and utilization of sales and marketing
staff, as well as the further development of strategic partnerships to decrease
cost of goods sold. In the second quarter, management implemented a new business
strategy, which focuses vistastream as a producer and aggregator of streaming
media services for the Internet. Prior to the implementation of the new business
strategy,
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vistastream's focus had been on corporate video production. Management believes
that the adjustment in vistastream's business strategy will better position the
Company to increase its revenues in the long term, by mitigating the seasonal
nature of corporate video production.
Operating expenses for the three and nine month periods ended September 30,
2000 were $485,532 and $1,078,532, respectively, versus $74,159 and $194,374 for
the comparable 1999 periods. The increase in operating expenses over prior year
is primarily due to the fact that vistastream was the only operating entity in
1999 with material expenditures. e resources has incurred $150,775 in operating
expenses for the quarter ended September 30, 2000. The majority of these
expenses relate to legal fees in association with the merger and acquisition of
CareMart and Vistastream. Vistastream also incurred additional expenses for the
second quarter due to the hiring of three additional sales representatives in
order to focus marketing efforts on obtaining additional video streaming
revenue.
Net income (loss) for the three and nine month periods ended September 30,
2000 were ($377,903) and ($847,808), respectively, versus ($17,509) and
($64,705) for the comparable 1999 periods. Basic and diluted earnings per share
were ($.03) and ($.07) for the three and nine month periods ended September 30,
2000. In 1999, the only subsidiary of the Company in operation was vistastream,
with basic and diluted earnings per share of ($.01) and ($.03) for the same
period.
Liquidity and Capital Requirements
----------------------------------
The Company had net working capital of approximately ($68,459) at September
30, 2000. Cash consisted of $133,452 as of September 30, 2000. The Company did
not have any significant capital expenditures in the third quarter, nor were
there any significant internal or external sources of liquidity. During the
second quarter, the Company did approved a private placement of the Company's
common stock for an aggregate of up to $2,500,000, plus warrants to acquire
additional shares (see item 5, below). Management anticipates that monies
obtained via the private placement will be used to fund the operations of all e
resources subsidiaries, as well as to fund the Company's present and future
capital requirements. The Offering commenced in the third quarter of 2000;
however, as of September 30, 2000, the Company had not raised any capital
through the Offering, primarily due to management's evaluation of current market
conditions.
PART II - OTHER INFORMATION
---------------------------
Item 5. Other Information.
-----------------
On June 30, 2000, the Company announced its intent to commence a private
placement offering of its common stock (the "Offering"). The Company intends to
offer a maximum of Five Million (5,000,000) shares of unregistered common stock,
consisting of (i) Two Million Five Hundred Thousand (2,500,000) shares of
unregistered common stock offered through subscription, accompanied by (ii)
warrants for Two Million Five Hundred Thousand (2,500,000) shares of
unregistered common stock. The warrants are anticipated to be immediately
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exercisable, expiring on December 31, 2010. The proceeds of the Offering are
anticipated to be used for acquiring and investing in businesses engaged in
providing e-business solutions, working capital, and general corporate purposes.
The Offering commenced in the third quarter of 2000; however, as of September
30, 2000, the Company had not raised any capital through the Offering, primarily
due to management's evaluation of current market conditions. The Company plans
to adjust the offering price of the Shares to reflect market conditions at the
time the Offering is completed. There can be no assurance that the Company will
complete the Offering, or any similar fund raising transaction, or that if it
does, it will be able to complete the Offering on the terms set forth above.
On July 12, 2000, the Board of Directors of the Company approved the
Executive Employment Agreements of Christopher D. Curtis, the Chief Executive
Officer of the Company, and Charles C. Cunningham, the President of the Company
(the "Employment Agreements"). The provisions of the Employment Agreements for
Mr. Curtis and Mr. Cunningham are identical. A form of Employment Agreement is
attached as Exhibit 10.
Item 6. Exhibits and Reports on Form 8-K.
--------------------------------
Reports on Form 8-K filed during the quarter ended September 30, 2000:
The Company's current report on Form 8-K was filed on July 25, 2000,
disclosing (i) the dismissal of H J & Associates, LLC, the Company's
independent public accountants for fiscal year 1999, effective July 19, 2000;
and (ii) the engagement of Hein & Associates, LLP, 12770 Coit Road, Suite 1150,
Dallas, Texas 75251, as the Company's independent public accountants for fiscal
year 2000.
The Company's current report on Form 8-K/A was filed July 27, 2000,
attaching the letter from H J & Associates to the office of the Chief Accountant
of the SEC as required by Regulation S-B.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: November 14, 2000
By: /s/ Charles C. Cunningham
--------------------------------------------
Charles C. Cunningham
President and Treasurer
(Principal Financial Officer)
By: /s/ Christopher D. Curtis
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Christopher D. Curtis
Chief Executive Officer and Secretary
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