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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 JUNE 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 June 30,
2000.
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e resources inc
Form 10-QSB for the Quarter ended June 30, 2000
Table of Contents
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<TABLE>
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Page
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Part I - Financial Information...................................................... 3
Item 1 - Consolidated Financial Statements...................................... 3
Item 2 - Management's Discussion and Analysis and Results of Operation.......... 8
Part II - Other Information.......................................................... 11
Item 1 - Legal Proceedings...................................................... N/A
Item 2 - Changes in Securities.................................................. 11
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...................................................... 12
Item 6 - Exhibits and Reports on Form 8-K....................................... 12
</TABLE>
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e resources inc
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
the most recent fiscal year. The results of operations for the three months
ended June 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
June 30, 2000
(Unaudited)
ASSETS
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<TABLE>
<S> <C>
CURRENT ASSETS:
Cash $ 625,489
Note receivable 4,250
Accounts receivable 81,949
----------
Total current assets 711,688
PROPERTY AND EQUIPMENT, net 151,861
OTHER ASSETS 94,001
----------
Total assets $ 957,550
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 137,316
Unearned revenue 52,550
Notes payable to stockholders 200,000
----------
Total current liabilities 389,866
STOCKHOLDERS' EQUITY:
Common stock, $.001 par value, 250,000,000 shares authorized;
14,399,159 shares issued and outstanding 14,529
Additional paid-in capital 1,477,022
Accumulated deficit (923,867)
----------
Total stockholders' equity 567,684
----------
Total liabilities and stockholders' equity $ 957,550
==========
</TABLE>
See notes to the consolidated financial statements.
4
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E RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Three Months Ended For the Six Months Ended
June 30, June 30
------------------------- ------------------------
2000 1999 2000 1999
----------- ---------- ----------- ----------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
REVENUES:
Production and video sales $ 61,976 $ 167,281 $ 270,139 $ 196,232
Sales of medical supplies 6,352 - 6,352 -
----------- ---------- ----------- ----------
Total 68,328 167,281 276,491 196,232
COST OF GOODS SOLD:
Production and video 56,149 69,408 137,120 104,228
Medical supplies 5,115 - 5,115 -
----------- ---------- ----------- ----------
Total 61,264 69,408 142,235 104,228
----------- ---------- ----------- ----------
Gross profit 7,064 97,873 134,256 92,004
OPERATING EXPENSES:
General and administrative expense 410,638 55,806 559,436 103,835
Depreciation and amortization 26,544 7,000 33,564 16,380
----------- ---------- ----------- ----------
Total 437,182 62,806 593,000 120,215
----------- ---------- ----------- ----------
Income (loss) from operations (430,118) 35,067 (458,744) (28,211)
INTEREST EXPENSE (5,536) (10,088) (11,161) (18,985)
----------- ---------- ----------- ----------
NET INCOME (LOSS) $ (435,654) $ 24,979 $ (469,905) $ (47,196)
=========== ========== =========== ==========
NET INCOME (LOSS) PER SHARE
(basic and diluted) $ (.03) $ - $ (.05) $ (.01)
=========== ========== =========== ==========
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 14,528,968 8,809,672 10,085,642 8,809,672
=========== ========== =========== ==========
</TABLE>
See notes to the consolidated financial statements.
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E RESOURCES INC AND SUBSIDIARIES
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
For the Six Months Ended
June 30,
-------------------------
(unaudited) (unaudited)
2000 1999
----------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (469,905) $ (47,196)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization 33,564 16,380
Common stock issued for services 22,000 -
Changes in operating assets and liabilities:
Accounts and note receivable (56,781) (35,145)
Unearned revenues 47,300 28,407
Accounts payable and accrued expenses (51,545) (10,600)
Other 21,583 -
----------- ----------
Net cash used by operating activities (453,784) (48,154)
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in other assets (59,873) -
Purchase of property and equipment (38,807) (14,355)
----------- ----------
Net cash used by investing activities (98,680) (14,355)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in notes payable (258,731) 70,589
Issuance of common stock for cash, net 1,428,000 -
----------- ----------
Net cash provided (used) by financing activities 1,169,269 70,589
NET INCREASE IN CASH 616,805 8,080
CASH, beginning of period 8,684 6,172
----------- ----------
CASH, end of period $ 625,489 $ 14,252
=========== ==========
</TABLE>
See notes to the consolidated financial statements.
6
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E RESOURCES INC AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
1. Organization and Basis of Presentation
--------------------------------------
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 June 30, 2000 and the consolidated
statements of operations for the three and six month periods ended June 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 June 30, 2000 and the results of operations for the three and
six month periods ended June 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.
During the first quarter of 2000, the Company sold 714,000 shares of common
stock for cash proceeds of $1,428,000.
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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 $1.00
per share. The shares are to be accompanied by warrants to acquire up to an
additional 2,500,000 shares at $3.00 per share. 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 was incorporated under the laws of the state of Utah on March 6,
1987, under the name Wonder Capital, Inc. Subsequently, the Company's name was
changed to Dryden Industries, Inc. ("Dryden"). The Company was originally formed
to be a vehicle for ongoing business entities to become public through a merger
or acquisition with the Company. In 1998, Dryden discontinued operations in all
three of its subsidiaries due to continuing losses in operations. In 1999,
Dryden changed its status to a development stage company and wrote off the
assets that were attributable to its three operating subsidiaries.
Dryden remained a development stage company with essentially no operations
until January 2000, when the Company's shareholders ratified a contribution
agreement providing for the acquisition of Vista Photographic and Video, Ltd., a
Texas limited partnership ("vistastream"). vistastream is a full-service video
production house and a producer, aggregator and broadcaster of streaming media
programming for the Internet. vistastream is operated as a wholly-owned
subsidiary of the Company. In connection with the acquisition, Christopher D.
Curtis, the founder of vistastream, was appointed to the Board of Directors of
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the Company. The details of the vistastream acquisition, as well as the summary
of vistastream's business, are disclosed in the Company's 10-KSB, filed with the
SEC on April 26, 2000, and the Company's 10-QSB, filed with the SEC on May 22,
2000.
On April 28, 2000, the Company acquired all the outstanding capital stock
of CareMart, Inc., a Delaware company ("CareMart"). The acquisition was
accomplished pursuant to a reverse triangular merger, whereby CareMart was
merged with a wholly-owned subsidiary of the Company in accordance with a merger
agreement entered into between the parties on March 17, 2000. Immediately prior
to the merger, CareMart acquired all the outstanding capital stock of Cunningham
& Cunningham Health Concerns, a Texas corporation ("CC&H"). CC&H operated the
business of CareMart prior to the merger. CareMart is operated as a wholly-owned
subsidiary of the Company.
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. In
connection with the merger, Charles C. Cunningham, the founder of CareMart,
became a member of the Board of Directors and was appointed to the offices of
President and Treasurer of the Company. Mr. Curtis, a shareholder of CareMart
prior to the merger, was appointed to the offices of Chief Executive Officer and
Secretary of the Company following the acquisition of CareMart.
In connection with the CareMart acquisition, Mr. Curtis was issued
1,787,479 shares of the Company's common stock and Mr. Cunningham was issued
2,813,358 shares of the Company's common stock. Because the consideration for
the CareMart acquisition consisted entirely of shares of the common stock of the
Company, the Company did not have any material funding requirements in order to
effectuate the acquisition. The details of the CareMart merger, as well as the
summary of CareMart's business, are disclosed in the Company's 8-K filed with
the SEC on June 30, 2000.
In June 2000, management determined that the vistastream and CareMart
transactions should be characterized as a reorganization 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. The transactions were initially characterized as purchases of
vistastream and CareMart by the Company. The recharacterization of the
transactions resulted in the need to prepare amended financial statements for
the three (3) months ended March 2000. On June 30, 2000, the Company filed a
Form 8-K with the SEC disclosing the recharacterization of the vistastream and
CareMart transactions, and filing the requisite financial statements. The
amended first quarter financial statements reporting the recharacterization of
the vistastream and CareMart transactions are being reviewed and, upon
completion, will be filed with the SEC.
On May 30, 2000, the Company formed eGROW Inc., a Delaware corporation
("eGROW"), as a wholly-owed subsidiary of the Company. eGROW was formed 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 an 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.
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Effective July 19, 2000, the Company's independent public accountant for
fiscal year 1999, H J & Associates, LLC, was dismissed by the Company's Board
of Directors. The dismissal was due primarily to the late preparation of
financial statements, and was not motivated by a disagreement on any matter of
accounting principle or practice. Effective July 25, 2000, the Company engaged
Hein & Associates, LLP, as its independent public accountant for fiscal year
2000. The Company's 8-K reporting the change in independent accountants was
filed with the SEC on July 25, 2000.
(b) Financial Condition and Results of Operations.
As previously noted, 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 June 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 June 30, 2000, since the Company had no other material operations
for the applicable time periods.
Results of Operations
---------------------
Revenues for the three and six month periods ended June 30, 2000 were
$68,328 and $276,491, respectively, versus $167,281 and $196,232 for the
comparable 1999 periods. vistastream revenues decreased during the second
quarter ended June 30, 2000 compared to the same period for 1999. This decrease
was primarily due to projects that were completed earlier in the first quarter,
as reflected in revenues for the six months ended June 30, 2000 compared to the
same period for 1999. vistastream's revenues in prior periods were focused
specifically on video production. During the second quarter ended June 30,
2000, sales efforts were refocused to video streaming and other e-commerce
related video production, which the Company believes will help to stabilize
revenues and produce a recurring revenue stream in the future. CareMart
revenues consisted of $6,352 for the three months ended June 30, 2000. CareMart
will begin marketing its web site in the third and fourth quarter, and
management believes this marketing effort will increase revenues.
Gross profit for the three and six month periods ended June 30, 2000 were
$7,064 and $134,256, respectively, versus $97,873 and $92,004 for the comparable
1999 periods. The decline of gross profit in the second quarter ended June 30,
2000 compared to the same period for 1999 is primarily due to the timely
completion of video projects in the first quarter. This is evidenced by the
increase in gross profit for the six months ended June 30, 2000 over the same
period in 1999, which were the result of the early completion of such projects.
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,
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 six month periods ended June 30, 2000
were $437,182 and $593,000, respectively, versus $62,806 and $120,215 for the
comparable 1999 periods. The significant increase in operating expenses over
the prior year is primarily due to the fact that vistastream was the only
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operating entity in 1999 with material expenditures and expenses related to
acquisitions. e resources has incurred $150,775 in operating expenses for the
second quarter ended June 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 six month periods ended June 30, 2000
were ($435,654) and ($469,905), respectively, versus $24,979 and ($47,196) for
the comparable 1999 periods. Basic and diluted earnings per share were ($.03)
and ($.05) for the three and six month periods ended June 30, 2000. In 1999,
the only entity in operation was vistastream with diluted earnings per share of
($.01) for the six month period ending June 30, 1999.
Liquidity and Capital Requirements
----------------------------------
The Company had net working capital of approximately $321,822 at June 30,
2000. Cash consisted of $625,489 as of June 30, 2000. The Company did not have
any significant capital expenditures in the second quarter, nor were there any
significant internal or external sources of liquidity. During the second
quarter, the Company did approve a private placement of the Company's common
stock for $2,500,000. Management anticipates that it will commence the sale of
private placement shares during the third quarter. Monies obtained via the
private placement are anticipated to be used to fund the operations of all e
resources companies and also fund future capital requirements.
PART II - OTHER INFORMATION
---------------------------
Item 2. Changes in Securities.
---------------------
(a) Stock Issued; Proceeds.
During March and April 2000, in consideration for the vistastream and
CareMart acquisitions, the Company issued 2,331,543 and 4,892,987 shares of the
Company's common stock to the former owners of vistastream and CareMart in order
to complete the acquisitions. The stock issued resulted in the former owners of
vistastream and CareMart acquiring a controlling interest in the Company of
approximately 53%, before giving effect to a cash sale of 714,000 shares of
common stock representing proceeds of $1,428,000.
(b) Stock Option Plan.
On July 12, 2000, the Company's Board of Directors approved the e resources
inc Stock Option Plan (the "Plan"). The Plan is intended to create shareholder
value by providing incentives to selected key employees and consultants who
contribute, and are expected to contribute, materially to the success of the
Company; to provide a means of rewarding outstanding performance by such key
employees and consultants; and to enhance the interests of such key employees
and consultants in the continued success and progress of the Company by
providing them with a proprietary interest in the Company. Further, the Plan is
designed to enhance the Company's ability to maintain a competitive position in
attracting and retaining qualified key personnel necessary for the continued
success and progress of the Company.
The Plan reserves 1,000,000 shares of the Company's common stock for
issuance to key employees and consultants. Options granted under the Plan may
be intended to qualify as incentive stock options pursuant to Section 422 of the
Internal Revenue Code of 1986, as amended, or may be nonqualified options,
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as determined by the committee administering the Plan. Since with the
implementation of the Plan, the Company has granted options to acquire an
aggregate of 657,500 shares to 14 employees of the Company. The Options expire
over certain various four (4) year vesting periods. The Company intends to
submit the Plan to its shareholders for approval at the next meeting of
shareholders.
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, at a price of One Dollar
($1.00) per Share, accompanied by (ii) warrants for Two Million Five Hundred
Thousand (2,500,000) shares of unregistered common stock, at an exercise price
of Three Dollars ($3.00) per share. The warrants are anticipated to be
immediately 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. Management currently anticipates that the Offering will
commence in the third quarter of 2000; however, 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.
Item 6. Exhibits and Reports on Form 8-K.
--------------------------------
Reports on Form 8-K filed during the quarter ended June 30, 2000:
The Company's current report on Form 8-K was filed June 30, 2000,
disclosing (i) the acquisition of CareMart; (ii) the recharacterization of the
vistastream and CareMart transactions as a reorganization; and (iii) the
Offering, and filing the audited financial statements of vistastream and
CareMart as of December 31, 1999, accompanied by the report of the independent
auditors, and the unaudited consolidated pro forma financial statements of the
Company (including vistastream and CareMart) as of December 31, 1999.
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: August 14, 2000
By: /s/ Charles C. Cunningham
--------------------------------------
Charles C. Cunningham
President and Treasurer
(Principal Financial Officer)
By: /s/ Christopher D. Curtis
--------------------------------------
Christopher D. Curtis
Chief Executive Officer and Secretary
12
