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EXHIBIT 7.1
VISTA PHOTOGRAPHIC AND VIDEO GROUP, LTD.
FINANCIAL STATEMENTS
December 31, 1999 and 1998
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C O N T E N T S
<TABLE>
<S> <C>
Independent Auditors' Report................................................ 3
Balance Sheet............................................................... 4
Statements of Revenues, Expenses and Changes in Members' Capital (Deficit).. 6
Statements of Cash Flows.................................................... 7
Notes to the Financial Statements........................................... 8
</TABLE>
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INDEPENDENT AUDITORS' REPORT
----------------------------
To the Members of
Vista Photographic and Video Group, Ltd.
Carrollton, Texas
We have audited the accompanying balance sheet of Vista Photographic and Video
Group, Ltd. as of December 31, 1999 and the related statements of revenues,
expenses and changes in members' capital (deficit) and cash flows for the years
ended December 31, 1999 and 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audits in accordance with generally accepted auditing
standards. 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 audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Vista Photographic and Video
Group, Ltd. as of December 31, 1999 and the results of its operations and its
cash flows for the years ended December 31, 1999 and 1998 in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 7 to the
financial statements, the Company has incurred losses since inception, which
raises substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note 7. The
financial statements do not include any adjustments that might result for the
outcome of the uncertainty.
HJ & Associates, LLC
Salt Lake City, Utah
June 28, 2000
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VISTA PHOTOGRAPHIC AND VIDEO GROUP, LTD.
Balance Sheet
ASSETS
------
<TABLE>
<CAPTION>
December 31,
1999
-------------
<S> <C>
CURRENT ASSETS
Cash $ 8,684
Accounts receivable, net (Note 2) 29,418
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Total Current Assets 38,102
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PROPERTY AND EQUIPMENT (Note 3)
Video equipment 188,600
Furniture and fixtures 38,080
Leasehold improvements 17,649
Less: accumulated depreciation (112,878)
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Total Property and Equipment 131,451
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OTHER ASSETS
Deposits 3,500
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Total Other Assets 3,500
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TOTAL ASSETS $ 173,053
=============
</TABLE>
The accompanying notes are an integral part of these financial statements.
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VISTA PHOTOGRAPHIC AND VIDEO GROUP, LTD.
Balance Sheet (Continued)
LIABILITIES AND MEMBERS' CAPITAL (DEFICIT)
------------------------------------------
<TABLE>
<CAPTION>
December 31,
1999
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<S> <C>
CURRENT LIABILITIES
Accounts payable $ 25,468
Accrued expenses 76,725
Unearned revenue 5,250
Notes payable - related (Note 4) 225,000
Line of credit (Note 5) 145,601
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Total Current Liabilities 478,044
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Total Liabilities 478,044
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COMMITMENTS AND CONTINGENCIES (Note 6)
MEMBERS' CAPITAL (DEFICIT) (304,991)
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TOTAL LIABILITIES AND MEMBERS' CAPITAL (DEFICIT) $ 173,053
=============
</TABLE>
The accompanying notes are an integral part of these financial statements.
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VISTA PHOTOGRAPHIC AND VIDEO GROUP, LTD.
Statements of Revenues, Expenses and Changes in Members' Capital (Deficit)
<TABLE>
<CAPTION>
For the Years Ended
December 31,
----------------------
1999 1998
---------- ----------
<S> <C> <C>
SALES, NET $ 377,438 $ 339,377
COST OF GOODS SOLD 173,340 129,858
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Gross Margin 204,098 209,519
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OPERATING EXPENSES
Depreciation expense 45,026 41,561
General and administrative expenses 287,856 294,215
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Total Operating Expenses 332,882 335,776
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(Loss) from Operations (128,784) (126,257)
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OTHER (EXPENSE)
Interest expense (27,752) (20,326)
Bad debt expense (16,307) (2,031)
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Total Other Income (Expense) (44,059) (22,357)
--------- ---------
EXCESS OF EXPENSES OVER REVENUES (172,843) (148,614)
MEMBERS' CAPITAL (DEFICIT) - BEGINNING (132,178) (83,574)
MEMBERS' CAPITAL CONTRIBUTIONS 30 100,010
--------- ---------
MEMBERS' CAPITAL (DEFICIT) - ENDING $(304,991) $(132,178)
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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VISTA PHOTOGRAPHIC AND VIDEO GROUP, LTD.
Statements of Cash Flows
<TABLE>
<CAPTION>
For the Years Ended
December 31,
----------------------
1999 1998
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) $(172,843) $(148,614)
Adjustments to reconcile net (loss) to net
cash used in operating activities:
Depreciation and amortization 45,026 41,561
Bad debt expense 16,307 2,031
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable (35,017) 53,818
Increase (decrease) in accounts payable 11,098 (7,804)
Increase (decrease) in accrued expenses 56,168 11,506
Increase (decrease) in unearned revenue (1,468) (16,041)
--------- ---------
Net Cash provided (Used) in Operating Activities (80,729) (63,543)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (29,912) (10,163)
--------- ---------
Net Cash Used in Investing Activities (29,912) (10,163)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on notes payable (24,410) (21,691)
Capital contributions 30 100,010
Payments on notes payable - related parties - (7,369)
New borrowings from related parties 137,533 -
--------- ---------
Net Cash Provided by Financing Activities 113,153 70,950
--------- ---------
NET INCREASE (DECREASE) IN CASH 2,512 (2,756)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR 6,172 8,928
--------- ---------
CASH AND CASH EQUIVALENTS AT
END OF YEAR $ 8,684 $ 6,172
========= =========
CASH PAID FOR:
Interest $ 27,752 $ 20,326
</TABLE>
The accompanying notes are an integral part of these financial statements.
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Income taxes $ - $ -
VISTA PHOTOGRAPHIC AND VIDEO GROUP, LTD.
Notes to the Financial Statements
December 31, 1999 and 1998
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
The financial statements presented are those of Vista Photographic and
Video Group, Ltd. (the Company). The Company is a partnership formed
under the laws of the State of Texas on May 31, 1997. The Company was
formed as a full service video production house and a producer,
aggregator and broadcaster of streaming media programming for the
Internet.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Accounting Method
The Company's financial statements are prepared using the accrual
method of accounting. The Company has elected a December 31 year end.
b. Income Taxes
The Company had elected to be taxed as a partnership, accordingly,
there is no provision for income taxes at the company level.
c. Cash Equivalents
The Company considers all highly liquid investments with a maturity of
three months or less to be cash equivalents.
d. Revenue Recognition
The Company's revenue is derived primarily from video production
services. The revenue is recognized upon completion and delivery to the
customer.
e. Estimates
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 and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
f. Allowance for Doubtful accounts
The Company's accounts receivable are shown net of an allowance for
doubtful accounts of $2,655 at December 31, 1999.
The accompanying notes are an integral part of these financial statements.
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g. Advertising Expense
The Company expenses advertising costs as incurred.
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VISTA PHOTOGRAPHIC AND VIDEO GROUP, LTD.
Notes to the Financial Statements
December 31, 1999 and 1998
NOTE 3 - PROPERTY AND EQUIPMENT
All property and equipment is accounted for at cost. Property and
equipment is depreciated over its estimated useful lives of five to
seven years using the straight-line method. For the years ended
December 31, 1999 and 1998, the Company expensed $45,026 and $41,561 in
depreciation.
NOTE 4 - NOTES PAYABLE - RELATED PARTY
The Company has received advances from related parties which bear
interest at prime plus 1%, are unsecured and due on demand. The balance
due at December 31, 1999 was $225,000.
NOTE 5 - LINE OF CREDIT
An analysis of the line of credit with Wells Fargo Bank as of December
31, 1999 is shown below:
Available Line Debt
of Credit Outstanding
--------------- --------------
$ 200,000 $ 145,601
=============== ==============
Borrowings under the line of credit are guaranteed by the Company's
equipment and accounts receivable. Interest accrues at the bank's prime
rate plus 2.75% (11.25% at December 31, 1999).
NOTE 6 - COMMITMENTS AND CONTINGENCIES
On January 26, 2000, the Company entered into an operating lease for
its office and warehouse space located in Carrollton, Texas. The lease
is for a period of three years and expires on January 31, 2003. Base
monthly payments are $1,614. Rent expense for the years ended December
31, 1999 and 1998 were $19,200 and $14,377, respectively.
NOTE 7 - GOING CONCERN
The Company's financial statements are prepared using generally
accepted accounting principles applicable to a going concern which
contemplates the relation of assets and liquidation of liabilities in
the normal course of business. However, the Company has current
liabilities in excess of current assets of $439,942 and has generated
losses for the years ended December 31, 1999 and 1998. Members of the
Company have committed to meeting the current operational cash flow
needs of the Company.
NOTE 8 - SUBSEQUENT EVENTS
On February 3, 2000, the Company was acquired by e resources, inc.
(formerly Dryden Industries, Inc.) and became a wholly-owned
subsidiary.
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