-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CC1jkgNybLHvNdhr01243hFoW3fUOQhg88kQtc3cubPg3Zmt4Uxk0DvWKzkGrzq3 DbFuepeT8Qz3M9iG0eajhQ== 0000950144-01-504473.txt : 20010716 0000950144-01-504473.hdr.sgml : 20010716 ACCESSION NUMBER: 0000950144-01-504473 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010403 ITEM INFORMATION: FILED AS OF DATE: 20010713 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ERESOURCE CAPITAL GROUP INC CENTRAL INDEX KEY: 0000722839 STANDARD INDUSTRIAL CLASSIFICATION: LAND SUBDIVIDERS & DEVELOPERS (NO CEMETERIES) [6552] IRS NUMBER: 232265039 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 001-08662 FILM NUMBER: 1680744 BUSINESS ADDRESS: STREET 1: 3353 PEACHTREE ROAD N E STREET 2: SUITE 130 CITY: ATLANTA STATE: GA ZIP: 30326 BUSINESS PHONE: 4048692599 MAIL ADDRESS: STREET 1: 2930 WELLINGTON CIRCLE SUITE 101 CITY: TALLAHASSEE STATE: FL ZIP: 32308 FORMER COMPANY: FORMER CONFORMED NAME: FLIGHTSERV COM DATE OF NAME CHANGE: 19990716 FORMER COMPANY: FORMER CONFORMED NAME: PROACTIVE TECHNOLOGIES INC DATE OF NAME CHANGE: 19950921 FORMER COMPANY: FORMER CONFORMED NAME: KEYSTONE MEDICAL CORPORATION DATE OF NAME CHANGE: 19920703 8-K/A 1 g70031e8-ka.txt ERESOURCE CAPITAL GROUP, INC. 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. FORM 8-K/A (Amendment No. 2) CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): April 3, 2001 ------------------------------ eResource Capital Group, Inc. - ------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 1-8662 23-2265039 - ---------------- ----------------- ---------------------------- (State or other (Commission File (IRS Employer jurisdiction of Number) Identification Number) incorporation) 3353 Peachtree Road, N.E., Suite 130 Atlanta, Georgia 30326 - ------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (404) 760-2570 ---------------------------- 2 This Amendment No. 2 amends and supplements Items 7(a) and 7(b) of the Current Report on forms 8-K and 8-K/A filed on April 18, 2001 and May 15, 2001, respectively, by the registrant (the "Company") with respect to, among other things, the Company's acquisition of LST, Inc. d/b/a Lifestyle Technologies, Inc. ("Lifestyle") In accordance with Item 7 of Form 8-K, the financial statements required thereby are being filed with this Amendment No. 2. 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 LST, Inc. prepared in accordance with regulation S-X are included in this report: 1. Audited financial statements Independent Auditors' Report Balance Sheet as of December 31, 2000 Statement of Operations and Accumulated Deficit for the period from March 24, 2000 (date of incorporation) through December 31, 2000. Statement of Cash Flows for the period from March 24, 2000 through December 31, 2000. Notes to Financial Statements 2. Unaudited condensed financial statements Balance Sheets at March 31, 2001 and December 31, 2000 Statements of Operations for the three months ended March 31, 2001 and 2000. Statement of Changes in Stockholders' Equity for the three months ended March 31, 2001. Statements of Cash Flows for the three months ended March 31, 2001 and 2000. Notes to Unaudited Condensed 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 March 31, 2001 Unaudited Pro Forma Condensed Consolidated Statement of Operations for the nine months ended March 31, 2001 Unaudited Pro Forma Condensed Consolidated Statement of Operations for the year ended June 30, 2000 2 3 (c) Exhibits 2.1 The Stock Purchase Agreement between the Company and the majority of the stockholders of LST, Inc. (Certain of the exhibits and schedules to the agreement have been omitted from this Report pursuant to Item 601(b)(2) of Regulation S-B, and the Company agrees to furnish copies of such omitted exhibits and schedules supplementally to the Securities and Exchange Commission upon request.)(*) 2.2 Stock Purchase Agreement between the Company and Glenn I. Barrett, Jr. dated March 16, 2001. (Certain of the exhibits and schedules to the agreement have been omitted from this Report pursuant to Item 601(b)(2) of Regulation S-B, and the Company agrees to furnish copies of such omitted exhibits and schedules supplementally to the Securities and Exchange Commission upon request.)(*) 2.3 Stock Purchase Agreement between the Company and Brandon Holdings, Inc. dated March 21, 2001. (Certain of the exhibits and schedules to the agreement have been omitted from this Report pursuant to Item 601(b)(2) of Regulation S-B, and the Company agrees to furnish copies of such omitted exhibits and schedules supplementally to the Securities and Exchange Commission upon request.)(*)
(*) Incorporated by reference to the Current Form 8-K filed by the Company on April 18, 2001. 3 4 INDEPENDENT AUDITOR'S REPORT To the Board of Directors of LST, Inc. d/b/a LifeStyle Technologies We have audited the accompanying balance sheet of LST, Inc. d/b/a LifeStyle Technologies as of December 31, 2000 and the related statements of income (loss), changes in stockholders' equity and cash flows for the period from inception (March 24, 2000) to December 31, 2000. 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 audit in accordance with generally accepted auditing standards. These 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 LST, Inc. as of December 31, 2000 and the results of their operations and cash flows for the initial period then ended 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 6: COMMITMENTS AND CONTINGENCIES to the financial statements, the Company's significant operating losses, as well as its reliance on the home building industry, raises substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. /s/ E. D. Duncan, CPA, PA - -------------------------- E. D. Duncan, CPA, PA February 23, 2001 Huntersville, North Carolina 4 5 LST, INC. D/B/A LIFESTYLE TECHNOLOGIES Balance Sheet December 31, 2000 ASSETS Current assets: Cash $ 108,454 Accounts receivable - trade 182,096 Accounts receivable - other 6,534 Inventories (Note 2) 85,416 Prepaid expenses 21,578 ----------- Total current assets 404,078 ----------- Furniture, fixtures and equipment, net of accumulated depreciation (Note 3 ) 192,189 ----------- Deferred income taxes (Note 4) -- Other assets: Deposits 32,184 Prepaid expenses - non current 36,007 ----------- Total other assets 68,191 ----------- Total assets $ 664,458 =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 335,014 Payroll taxes payable 101,260 Accrued expenses 20,597 Unearned revenue 5,342 Note payable (Note 5) 100,000 ----------- Total current liabilities 562,213 ----------- Commitments and contingencies (Note 6) Stockholders' equity (Notes 8 and 9): Common stock ($.001 par value, 20,000,000 shares authorized, 8,259,750 shares issued and outstanding) 8,260 Additional paid-in-capital 2,251,490 Retained earnings (deficit) (2,157,505) ----------- Total stockholders' equity 102,245 ----------- Total liabilities and stockholders' equity $ 664,458 ===========
See Notes to the Financial Statements -5- 6 LST, INC. D/B/A LIFESTYLE TECHNOLOGIES Statement of Income (Loss) For the Period from Inception to December 31, 2000 Net sales $ 843,666 Cost of goods sold 1,216,132 ----------- Gross profit (loss) (372,466) Selling and general and administrative expenses 1,746,349 ----------- Income (loss) from operations (2,118,815) ----------- Other income (expenses): Interest income 600 Interest expense (19,581) Depreciation expense (19,709) ----------- (38,690) ----------- Net (loss) before income tax benefit (2,157,505) Income taxes (Note 4) -- ----------- Net (loss) $(2,157,505) ===========
See Notes to the Financial Statements -6- 7 LST, INC. D/B/A LIFESTYLE TECHNOLOGIES Statement of Changes in Stockholders' Equity For the Period from Inception to December 31, 2000
Additional Retained Common Paid-in- Earnings Stock Capital (Deficit) Total ----------- ----------- ----------- ---------- Beginning balance, March 24, 2000 $ -- $ -- $ -- $ -- Issuance of common stock 8,260 2,251,490 -- 2,259,750 Net (loss) (2,157,505) (2,157,505) ----------- ----------- ----------- ---------- Ending balance, December 31, 2000 $ 8,260 $ 2,251,490 $(2,157,505) $ 102,245 =========== =========== =========== ==========
See Notes to Financial Statements -7- 8 LST, INC. D/B/A LIFESTYLE TECHNOLOGIES Statement of Cash Flows For the Period from Inception to December 31, 2000 Cash flows from operating activities: Net (loss) $(2,157,505) Adjustments to reconcile net (loss) to net cash (used in) operating activities: Depreciation expense 19,709 Changes in operating assets and liabilities: (Increase) in accounts receivable (188,630) (Increase) in inventories (85,416) (Increase) in prepaid expenses (21,578) Increase in accounts payable 335,014 Increase in payroll taxes payable 101,260 Increase in accrued expenses 20,597 Increase in unearned revenue 5,342 Increase in note payable 100,000 ----------- Net cash (used in) operating activities (1,871,207) ----------- Cash flows from investing activities: Purchase of furniture, fixtures and equipment (211,898) Increase in other assets (68,191) ----------- Net cash (used in) investing activities (280,089) ----------- Cash flows from financing activities: Issuance of common stock 2,259,750 ----------- Net cash provided by financing activities 2,259,750 ----------- Net increase in cash 108,454 Beginning cash at March 24 -- ----------- Ending cash at December 31 $ 108,454 =========== Supplemental Cash Flow Information: Cash paid during the year for interest $ 10,734 ===========
See Notes to the Financial Statements -8- 9 LST, INC. D/B/A LIFESTYLE TECHNOLOGIES Notes to Financial Statements December 31, 2000 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES NATURE OF OPERATIONS The Company is a privately-held Delaware "C" corporation. It was formed on March 24, 2000 and provides a new emerging home networking technology, which integrates existing internet, security, satellite television, entertainment and communications technology for the home. The Company has positioned itself to be the "one stop shop" of technology needs for homebuilders and homebuyers in both North and South Carolina. REVENUE RECOGNITION AND BASIS OF ACCOUNTING The Company invoices its customers and records revenue as work is completed on each project. Generally, the work is completed in two phases -- wiring, then hardware installation. For customers that purchase contracts for alarm monitoring services, revenue is recognized only when the contracts are sold to third parties. The Company sells substantially all of its alarm monitoring contracts immediately subsequent to the date the contracts are signed by the customer. The Company uses the accrual basis of accounting. CASH AND CASH EQUIVALENTS The Company considers all highly liquid investment instruments purchased with an original maturity of three months or less to be cash equivalents. FAIR VALUE OF FINANCIAL INSTRUMENTS The Company believes the carrying amount of cash, accounts receivable, other current assets, note and accounts payable, and other accrued liabilities approximates fair value due to their short maturity. CONCENTRATION OF CREDIT RISK The Company maintains cash balances in a major financial institution, which limits the amount of credit exposure. Periodically throughout the initial period, the Company has maintained balances in excess of federally insured limits of $100,000. At December 31, 2000 the company had $7,354 in excess of federally insured limits. The Company primarily transacts its business within one business segment, mainly home building. If any conditions occurred, which would have an adverse effect on the home building industry, operating results could be adversely affected. INVENTORIES Inventories are priced at the lower of cost or market with cost being determined on a first-in, first-out (FIFO) method. 9 10 LST, INC. D/B/A LIFESTYLE TECHNOLOGIES Notes to Financial Statements December 31, 2000 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) FURNITURE, FIXTURES AND EQUIPMENT Furniture, fixtures and equipment are recorded at cost, net of accumulated depreciation. Depreciation is calculated by using the straight-line method over the estimated useful lives of the assets, which is five to seven years for all categories except for computer software, which is depreciated over 3 years. Repairs and maintenance are charged to expense as incurred. Expenditures for betterments and renewals are capitalized. The cost of furniture, fixtures and equipment and the related accumulated depreciation are removed from the accounts upon retirement or disposal with any resulting gain or loss being recorded as other income or expense. INCOME TAXES Income taxes are accounted for in accordance with Statement of Financial Accounting Standards, SFAS 109, "Accounting for Income Taxes". This Statement prescribes the use of the asset/liability method. Deferred taxes represent the expected future tax consequences when the reported amounts of assets and liabilities are recovered or paid. They arise from differences between the financial reporting and tax basis of assets and liabilities and are adjusted for changes in tax laws and tax rates when those changes are enacted. The provision for income taxes represents the total of income taxes paid or payable for the current year, plus the change in deferred taxes during the year. COST OF GOODS SOLD Gross profit is negative as the majority of direct labor and operating overhead dollars, two significant components of cost of goods sold, are mostly fixed in nature and revenues during the initial period were not sufficient to absorb these costs. ADVERTISING COSTS Advertising costs are generally charged to operations in the year incurred and totaled $64,771 for the initial period ending December 31, 2000. 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 reported amounts of assets and liabilities, the 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. 10 11 LST, INC. D/B/A LIFESTYLE TECHNOLOGIES Notes to Financial Statements December 31, 2000 NOTE 2: INVENTORIES At December 31, 2000 inventories consisted of equipment and installation supplies, which are used in the Company's installation of the various technology products. NOTE 3: FURNITURE, FIXTURES AND EQUIPMENT A summary of furniture, fixtures and equipment at December 31, 2000 is as follows: Furniture and fixtures $ 63,618 Computer equipment 74,264 Office equipment 26,553 Showroom equipment 36,592 Computer software 10,871 ---------- Total furniture, fixtures and equipment 211,898 Less: Accumulated depreciation (19,709) ---------- Net furniture, fixtures and equipment $ 192,189 ==========
NOTE 4: INCOME TAXES Deferred income taxes (benefits) are provided for certain income and expenses, which are recognized in different periods for tax and financial reporting purposes. Sources of temporary differences and the resulting tax assets are as follows:
Current Deferred Tax Period Assets Changes ------------ ------------ Net operating loss carryforward Federal and State $ (2,139,358) $ (2,139,358) ============ ============ Applicable tax rate: (34% Federal, 6.9% State) Deferred taxes $ 824,808 $ 824,808 Less: Valuation allowance (824,808) (824,808) ------------ ------------ Amount per balance sheet $ 0 $ 0 ============ ============
11 12 LST, INC. D/B/A LIFESTYLE TECHNOLOGIES Notes to Financial Statements December 31, 2000 NOTE 4: INCOME TAXES (CONTINUED) The provision (benefit) for taxes for the initial period ending December 31, 2000 is as follows: Current: Federal $0 State $0 Deferred: Federal $0 State $0
For federal and state income tax purposes, the Company has a net operating loss carryforward of $2,139,358, which expires in 2020. As the Company has operating losses and future profits cannot be assured, an allowance to reduce deferred tax asset for the full amount of the asset, has been recorded. NOTE 5: NOTE PAYABLE Note payable at December 31, 2000 represents a note payable to a director of the Company. The note has a 12% interest rate per annum and is due and payable with accrued interest on demand. The note is also personally guaranteed by an officer and by a stockholder of the Company. At December 31, 2000, accrued interest of $7,733 was included in accounts payable. NOTE 6: COMMITMENTS AND CONTINGENCIES OPERATING LEASES The Company leases a fleet of vehicles on an operating lease basis with a monthly lease commitment of $13,706. The term of each lease is for three years except for one vehicle, which has a two-year lease. At the lease expiration date, the Company has the option to purchase the vehicles at the residual value as determined at the inception of the lease. Vehicle lease expense amounted to $54,309 for the initial period ending December 31, 2000. The Company occupies office and warehouse space under several operating leases, which expire at various dates from June 30, 2001 to December 18, 2003. Minimum rental commitments for the premises are $19,242 per month. The rental commitments are subject to pro rata share increases of certain operating expenses incurred by the landlords for such items as common area maintenance expense and taxes. Rent expense amounted to $119,167 for the initial period ending December 31, 2000. 12 13 LST, INC. D/B/A LIFESTYLE TECHNOLOGIES Notes to Financial Statements December 31, 2000 NOTE 6: COMMITMENTS AND CONTINGENCIES (CONTINUED) Future minimum operating lease commitments, under non-cancelable leases, are summarized as follows:
Office Year Total Vehicles Premises -------- -------- -------- 2001 $389,856 $164,469 $225,387 2002 283,623 164,037 119,586 2003 167,136 104,783 62,353 -------- -------- -------- $840,615 $433,289 $407,326 ======== ======== ========
GOING CONCERN As shown in the accompanying financial statements, the Company incurred a net loss of $2,157,505 during the initial period from March 24, 2000 to December 31, 2000. This, as well as the Company's reliance on the home building industry, creates an uncertainty about the Company's ability to continue as a going concern. Management has a non-binding letter of intent as explained in NOTE 9: TRANSACTIONS WITH RELATED PARTIES to these financial statements. The ability of the Company to continue as a going concern is dependent on the success of that merger or obtaining additional financing. The financial statements do not include any adjustment that might be necessary if the Company is unable to continue as a going concern. NOTE 7: MAJOR CUSTOMER Revenue from a major customer amounted to 43% of net sales or $357,627. Amounts included in accounts receivable for this customer at December 31, 2000 were $26,320. NOTE 8: STOCK OPTIONS AND WARRANTS On September 29, 2000 the Company created an Omnibus Stock Option and Award Plan to help attract and retain personnel of superior ability for positions of exceptional responsibility, to reward employees and directors for past services and to motivate such individuals through added incentives to further contribute to the success of the Company. Awards under the Plan may be made to eligible persons in the form of incentive stock options to eligible employees only, nonqualified stock options, restricted stock, stock awards, performance shares or any combination of the foregoing. For the initial period ending December 31, 2000, the only awards outstanding were for incentive stock options to purchase shares of the Company's common stock. 13 14 LST, INC. D/B/A LIFESTYLE TECHNOLOGIES Notes to Financial Statements December 31, 2000 NOTE 8: STOCK OPTIONS AND WARRANTS (CONTINUED) Employee options vest and become exercisable at various dates between September 29, 2000 and September 29, 2002. From time to time, vested options may be exercised in whole or in part. In no event may the option be exercised after September 29, 2010, which represents the ending date of the ten-year option period. Special provisions apply in the event of death, disability or termination of employment other than for cause. As part of a non-binding letter of intent for the merger of LST, Inc. by eResource Capital Group, Inc., the Company cannot grant any additional stock options to employees and all stock options currently outstanding will be terminated as of the closing date of the merger at the Company's expense. See NOTE 9: TRANSACTIONS WITH RELATED PARTIES. Upon consummation of the merger, eResource will negotiate in good faith to enter into employee stock option agreements with the Company's employees who are not stockholders of the Company and whose options with the Company were terminated. Number of options outstanding on March 24, 2000 0 Number of options granted in 2000 355,000 Number of options terminated in 2000 5,000 Number of options outstanding on December 31, 2000 350,000 Number of options exercisable at December 31, 2000 242,500 Weighted average exercise price per share outstanding and per share exercisable $1.00 Grant date fair value of options granted in 2000 $355,000 Weighted average grant date fair value of options granted in 2000 $1.00 Weighted average remaining contractual life of options outstanding and exercisable 9 years and 9 months
No options were exercised or expired in 2000. At December 31, 2000, the Company had an obligation to issue a Common Stock Purchase Warrant entitling the holder to purchase 10,000 shares of common stock at $1.00 per share. 14 15 LST, INC. D/B/A LIFESTYLE TECHNOLOGIES Notes to Financial Statements December 31, 2000 NOTE 9: TRANSACTIONS WITH RELATED PARTIES On November 23, 2000, eResource Capital Group, Inc. (eResource), a publicly held American Stock Exchange company, and LST, Inc. signed a non-binding letter of intent for the acquisition of LST, Inc. According to the terms of the letter of intent, the Company would merge into a wholly-owned subsidiary of eResource. The stockholders of the Company would receive restricted common stock of eResource at a fixed exchange ratio based on the average closing prices on the American Stock Exchange of eResource's common stock over the ten trading days immediately preceding the closing date. If the average share price is less than $1, then the exchange ratio shall be based on a $1 share price for eResource. The acquisition price for the Company is $13 million. The President and Chief Executive Officer of eResource is also the Chairman of the Board of LST, Inc. Additionally, the Company is exploring other ways of structuring a transaction with eResource, including, but not limited to, a transaction in which eResource would purchase stock directly from the stockholders of the Company. NOTE 10: DEFINED CONTRIBUTION PLAN The Company has a 401(k) plan that covers all employees who have attained twenty-one years of age and completed six months of service. Contributions to the plan by the Company are at the discretion of the Company. For the initial period ended December 31, 2000, the Company incurred no expense for matching contributions to the Plan. 15 16 LST, INC. D/B/A LIFESTYLE TECHNOLOGIES Condensed Balance Sheets at March 31, 2001 and December 31, 2000
March 31, December 31, 2001 2000 ------------ ------------ (Unaudited) ASSETS Current assets: Cash $ 1,064 $ 108,454 Accounts receivable-trade 324,175 182,096 Accounts receivable-other 2,781 6,534 Inventories 112,297 85,416 Prepaid expenses 26,333 21,578 ------------ ------------ Total current assets 466,650 404,078 ------------ ------------ Furniture, fixtures and equipment, 208,289 192,189 net of accumulated depreciation ------------ ------------ Deferred income taxes -- -- Other assets: Deposits 35,322 32,184 Prepaid expenses-non current 36,578 36,007 ------------ ------------ Total other assets 71,900 68,191 ------------ ------------ Total assets $ 746,839 $ 664,458 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued expenses $ 503,879 $ 355,611 Payroll taxes payable 62,595 101,260 Unearned revenue 4,448 5,342 Note payables 550,000 100,000 ------------ ------------ Total current liabilities 1,120,922 562,213 ------------ ------------ Commitments and contingencies -- -- Stockholders' equity: Common stock ($.001 par value, 20,000,000 shares authorized, 8,099,750 and 8,259,750 shares issued, respectively) 8,100 8,260 Additional paid-in capital 2,591,150 2,251,490 Surrender of stock-retained earnings 500 -- Retained earnings (deficit) (2,973,833) (2,157,505) ------------ ------------ Total stockholders' equity (374,083) 102,245 ------------ ------------ Total liabilities and stockholders' equity $ 746,839 $ 664,458 ============ ============
The accompanying notes are an integral part of these condensed financial statements. 16 17 LST, INC. D/B/A LIFESTYLE TECHNOLOGIES Condensed Statements of Income (Loss) (Unaudited) For the Three Months Ended March 31, 2001 and March 31, 2000
Three Months Ended ------------------------------- March 31, March 31, 2001 2000 ---------- ---------- Net sales $ 734,923 $ 22,125 Cost of goods sold 632,131 59,821 ---------- ---------- Gross profit (deficit) 102,792 (37,696) Selling and general and administrative expenses 901,095 167,471 ---------- ---------- Loss from operations (798,303) (205,167) Other expenses: Interest expense 5,500 -- Depreciation expense 12,525 1,650 ---------- ---------- Net loss before income tax benefit (816,328) (206,817) Income taxes -- -- ---------- ---------- Net loss $ (816,328) $ (206,817) ========== ==========
The accompanying notes are an integral part of these condensed financial statements. 17 18 LST, INC. D/B/A LIFESTYLE TECHNOLOGIES Condensed Statement of Changes in Stockholders' Equity For the Period December 31, 2000 to March 31, 2001
Additional Retained Common Paid-in- Earnings Stock Capital (Deficit) Total ------- ---------- ----------- --------- Beginning balance, December 31, 2000 $ 8,260 $2,251,490 $(2,157,505) $ 102,245 Issuance of common stock 340 339,660 340,000 Surrender of common stock (500) -- 500 -- Net (loss) -- -- (816,328) (816,328) ------- ---------- ----------- --------- Ending balance, March 31, 2001 $ 8,100 $2,591,150 $(2,973,333) $(374,083) ======= ========== =========== =========
The accompanying notes are an integral part of these condensed financial statements. 18 19 LST, INC. D/B/A LIFESTYLE TECHNOLOGIES Condensed Statements of Cash Flows (Unaudited) For the Three Months Ended March 31, 2001 and March 31, 2000
Three Months Ended ------------------------------- March 31, March 31, 2001 2000 ---------- ---------- Cash flows from operating activities: Net loss $ (816,328) $ (206,817) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation expense 12,525 1,650 Changes in operating assets and liabilities: (Increase) in accounts receivable (138,326) (30,473) (Increase) in inventories (26,881) (8,889) (Increase) in prepaid expenses (4,755) (34,362) Increase in accounts payable and accrued expenses 148,268 106,083 Increase (decrease) in payroll taxes payable (38,665) 1,047 Increase (decrease) in unearned revenue (894) 259 Increase in notes payable 450,000 -- ---------- ---------- Net cash used in operating activities (415,056) (171,502) ---------- ---------- Cash flows from investing activities: Purchase of furniture, fixtures and equipment (28,625) (27,917) Increase in other assets (3,709) (1,650) ---------- ---------- Net cash used in investing activities (32,334) (29,567) ---------- ---------- Cash flows from financing activities: Issuance of common stock 340,000 300,000 ---------- ---------- Net cash provided by financing activities 340,000 300,000 ---------- ---------- Net increase (decrease) in cash (107,390) 98,931 Cash balance at beginning of period 108,454 -- ---------- ---------- Cash balance at end of period $ 1,064 $ 98,931 ========== ========== Supplemental Cash Flow Information: Cash paid during the period for interest $ 8,013 $ --
The accompanying notes are an integral part of these condensed financial statements. 19 20 LST, INC. Notes to Condensed Financial Statements (Unaudited) For The Quarter Ended March 31, 2001 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES NATURE OF OPERATIONS The Company is a privately held Delaware "C" corporation. It was formed on March 24, 2000 and provides a new emerging home networking technology, which integrates existing internet, security, satellite television, entertainment and communications technology for the home. The Company has positioned itself to be the "one stop shop" of technology needs for homebuilders and homebuyers in both North and South Carolina. REVENUE RECOGNITION AND BASIS OF ACCOUNTING The Company invoices its customers and records revenue as work is completed on each project. Generally, the work is completed in two phases-wiring, then hardware installation. For customers that purchase contracts for alarm monitoring services, revenue is recognized only when the contracts are sold to third parties. The Company sells substantially all of its alarm monitoring contracts immediately subsequent to the date the contracts are signed by the customer. The Company uses the accrual basis of accounting. CASH AND CASH EQUIVALENTS The Company considers all highly liquid investment instruments purchased with an original maturity of three months or less to be cash equivalents. FAIR VALUE OF FINANCIAL INSTRUMENTS The Company believes the carrying amount of cash, accounts receivable, other current assets, notes and accounts payable, and other accrued liabilities approximates fair value due to their short maturity. 20 21 CONCENTRATION OF CREDIT RISK The Company maintains cash balances in a major financial institution, which limits the amount of credit exposure. Periodically throughout the period, the Company has maintained balances in excess of federally insured limits of $100,000. At March 31, 2001 the Company was not in excess of federally insured limits. The Company primarily transacts its business within one business segment, mainly home building. If any conditions occurred, which would have an adverse effect on the home building industry, operating results could be adversely affected. INVENTORIES Inventories are priced at the lower of cost or market with cost being determined on a first-in, first-out (FIFO) method. Inventories consist of equipment and installation supplies, which are used in the Company's installation of the various technology products. FURNITURE, FIXTURES AND EQUIPMENT Furniture, fixtures and equipment are recorded at cost net of accumulated depreciation. Depreciation is calculated by using the straight-line method over the estimated useful lives of the assets, which is five to seven years for all categories except for computer software, which is depreciated over 3 years. Repairs and maintenance are charged to expense as incurred. Expenditures for betterments and renewals are capitalized. The cost of furniture, fixtures and equipment and the related accumulated depreciation are removed from the accounts upon retirement or disposal with any resulting gain or loss being recorded as other income or expense. INCOME TAXES Income taxes are accounted for in accordance with Statement of Financial Accounting Standards, SFAS 109, "Accounting for Income Taxes". This Statement prescribes the use of the asset/liability method. Deferred taxes represent the expected future tax consequences when the reported amounts of assets and liabilities are recovered or paid. They arise from differences between the financial reporting and tax bases of assets and liabilities and are adjusted for changes in tax laws and tax rates when those changes are enacted. The provision for income taxes represents the total of income taxes paid or payable for the current year, plus the change in deferred taxes during the year. For federal and state income tax purposes, the Company as of March 31, 2001 has net operating loss carryforwards of $2,953,774, which expire between 2020 and 2021. As the Company has operating losses and future profits cannot be assured, an allowance to reduce deferred tax asset for the full amount of the asset, has been recorded. COST OF GOODS SOLD Gross profit is negative at March 31, 2000 as the majority of direct labor and operating overhead dollars, two significant components of cost of goods sold, are mostly fixed in nature and revenues during the quarter were not sufficient to cover these costs. 21 22 ADVERTISING COSTS Advertising costs are generally charged to operations in the year incurred and totaled $35,338 and $10,956 for the quarters ending March 31, 2001 and 2000, respectively. 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 reported amounts of assets and liabilities, the 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. NOTE 2: NOTES PAYABLE Notes payable at March 31, 2001 represents a note payable to a director of the Company for $100,000 at a 12% interest rate per annum and is due and payable with accrued interest on demand. Also, during the quarter, the Company borrowed funds on two additional notes payable totaling $450,000. The notes have interest rates of 8% and 12% per annum and both are due and payable with accrued interest on demand. NOTE 3: RELATED PARTY TRANSACTIONS Included in notes payable at March 31, 2001 and December 31, 2000 is a note payable in the amount of $100,000 payable to a director of the Company, Michael D. Pruitt. The note has a 12% interest rate per annum and is due and payable with accrued interest on demand. NOTE 4: SUBSEQUENT EVENTS In April 2001 eResource Capital Group, Inc. (eResource), a publicly held American Stock Exchange company, acquired all of the outstanding common stock directly from the stockholders of the Company. As a result, the Company became a wholly-owned subsidiary of eResource. 22 23 Item 7.(b). Pro Forma Financial Statements On September 7, 2000, the Company completed the acquisition of DM Marketing, Inc. ("DMM") in accordance with a definitive purchase agreement dated August 16, 2000, which provided for the exchange of 8,450,000 shares of the Company's Common Stock for all of the common stock of DMM. On August 16, 2000, the 8,450,000 shares of common stock issued for DMM had a market value of $5,281,250. Including direct acquisition costs, the aggregate purchase price for DMM was $6,210,897 and the transaction was recorded using the purchase method of accounting. The excess value of the purchase price over the fair value of DMM's net assets on the acquisition date aggregating $5,722,267 has been allocated to goodwill which is being amortized over five years. On February 13, 2001, the Company acquired 100% of Avenel Ventures, Inc. ("Avenel") in exchange of 6.7 million shares of Common Stock pursuant to a share exchange purchase agreement dated as of November 8, 2000. The total purchase price aggregated $6,834,000 and the transaction was recorded using the purchase method of accounting. The excess value of the purchase price over the fair value of Avenel's net assets on the acquisition date aggregating $5,610,144 has been allocated to goodwill which is being amortized over five years. On April 3, 2001, the Company acquired LST, Inc. d/b/a Lifestyle Technologies, Inc. (LST) in exchange of 8,074,675 million shares of Common Stock pursuant to certain stock purchase agreements. The total purchase price aggregated $7,617,208 and the transaction was recorded using the purchase method of accounting. The excess value of the purchase price over the fair value of LST's net assets on the acquisition date aggregating $7,991,291 has been allocated to goodwill which is being amortized over five years. The acquisition of each DMM and Avenel has been reported by the Company in Current Reports on Form 8-K and 8-K/A filed prior to this Current Report. Therefore, the following unaudited pro forma consolidated financial statements of the Company and Lifestyle are derived from, and should be read in conjunction with the audited financial statements of Lifestyle included in item 7(a) herein and the audited consolidated financial statements of the Company as previously filed on Form 10-KSB for the year ended June 30, 2000 with the Securities and Exchange Commission, the unaudited consolidated financial statements of the Company as previously filed on Form 10-QSB for the quarters ended December 31, 2000 and September 30, 2000, and the financial statements as previously filed on Form 8-K/A on November 10, 2000 and March 28, 2001. 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 unaudited pro forma consolidated balance sheet reflects adjustments as if the acquisition had been consummated on December 31, 2000. The pro forma statements of operations reflect adjustments as if the acquisition had been consummated at the beginning of the period of each statement (i.e. July 1, 1999 for the twelve-month statement of operations and July 1, 2000 for the six-month statement of operations). 23 24 eResource Capital Group, Inc. and Subsidiaries Pro Forma Consolidated Balance Sheet (Unaudited) March 31, 2001 (In thousands, except share amounts)
eResource Pro Forma eResource Capital Adjustments Capital Group, Inc. LST, Inc. and Group, Inc. ASSETS Actual Actual Eliminations Pro Forma ------ ----------- --------- ------------ ----------- Cash and cash equivalents $ 442 $ -- $ -- $ 442 Investments 1,423 -- (350)(1) 1,073 Accounts and notes receivable 155 327 -- 482 Inventories -- 113 -- 113 Prepaid expenses - other 1,046 26 -- 1,072 -------- -------- ------ ---------- Total current assets 3,066 466 (350)(1) 3,182 Net assets of discontinued operations 68 -- -- 68 Deferred costs and other assets 232 72 -- 304 Property and equipment, net 8,618 209 -- 8,827 Goodwill 11,356 -- 7,991(1) 19,347 -------- -------- ------ ---------- Total assets $ 23,340 $ 747 $7,641 $ 31,728 ======== ======== ====== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Notes payable $ 7,616 $ -- $ -- $ 7,616 Accrued interest payable 848 -- -- 848 Accounts payable and accrued expenses 1,014 567 -- 1,581 Customer deposits 348 4 -- 352 -------- -------- ------ ---------- Total current liabilities 9,826 571 -- 10,397 Due to affiliates, net 26 550 -- 576 Commitments and contingent liabilities Shareholders' equity: Common stock, $.04 par value, 100,000,000 shares authorized, 51,324,584 and 68,099,259 issued, respectively 2,469 8 323(1) 2,792 (8)(2) Additional paid-in capital 96,776 2,591 6,944(1) 103,720 (2,591)(2) Accumulated deficit (85,681) (2,973) 2,973(2) (85,681) Unrealized loss on marketable securities (65) -- -- (65) Treasury stock - at cost (435,930 shares) (11) -- -- (11) -------- -------- ------ ---------- Total shareholders' equity 13,488 (374) 7,641 20,755 -------- -------- ------ ---------- Total liabilities and shareholders' equity $ 23,340 $ 747 $7,641 $ 31,728 ======== ======== ====== ==========
The accompanying notes are an integral part of these pro forma financial statements. 24 25 eResource Capital Group, Inc. and Subsidiaries Pro Forma Condensed Consolidated Statements of Operations (Unaudited) Nine Months Ended March 31, 2001 (In thousands, except share amounts)
eResource Pro Forma Capital DM Avenel Adjustment Group, Inc Marketing, Inc. Pro Forma Ventures, Inc. and Actual Actual(3) Adjustment Actual(4) Elimination SubTotal ------------ --------------- ---------- -------------- ----------- -------- Sales $ 6,547 $ 34 $ -- $ 545 $ (23)(5) $ 7,103 Lease income - commercial real estate 778 -- -- -- -- 778 ------------ ------ ------- -------- ------ -------- 7,325 34 -- 545 (23) 7,881 Cost of sales - aviation 6,020 -- -- -- -- 6,020 ------------ ------ ------- -------- ------ -------- Gross profit 1,305 34 -- 545 (23) 1,861 Compensation expense related to issuance of stock options and warrants 6,922 -- -- -- -- 6,922 Selling, general and administrative expenses 3,855 56 -- 910 (23)(5) 4,798 Depreciation and amortization 1,418 -- 192(6) 13 655(6) 2,278 Interest expense 629 -- -- (1) -- 628 Loss on investments 156 -- -- 263 -- 419 Write off of Web site development costs 754 -- -- -- -- 754 Write off of pre-development costs 1,164 -- -- -- -- 1,164 ------------ ------ ------- -------- ------ -------- Net loss $ (13,593) $ (22) (192) $ (640) (655) $(15,102) ============ ====== ======= ======== ====== ======== Basic and diluted net loss per share $ (.28) ============ Weighted average shares outstanding used in computing basic and diluted loss per share 48,740,469 ============ eResource Capital LST, Inc. Pro Forma Group, Inc. Actual Adjustment Pro Forma --------- ---------------- ------------ Sales $ 1,425 $ -- $ 8,528 Lease income - commercial real estate -- -- 778 -------- -------- ------------ 1,425 -- 9,306 Cost of sales - aviation 1,554 -- 7,574 -------- -------- ------------ Gross profit (129) -- 1,732 Compensation expense related to issuance of stock options and warrants -- -- 6,922 Selling, general and administrative expenses 2,124 -- 6,922 Depreciation and amortization 26 1,199(1) 3,503 Interest expense 21 -- 644 Loss on investments -- -- 419 Write off of Web site development costs -- -- 754 Write off of pre-development costs -- -- 1,164 -------- -------- ------------ Net loss $ (2,300) $ (1,199) $ (18,601) ======== ======== ============ Basic and diluted net loss per share $ (.25) ============ Weighted average shares outstanding used in computing basic and diluted loss per share 64,461,347 ============
The accompanying notes are an integral part of these pro forma financial statements. (1) The 8,074,675 shares of common stock issued by the Company for the Lifestyle acquisition had a value of $7,267,208 based upon the fair market value of the Company's stock over a reasonable period time prior and subsequent to April 3, 2001 which is the date the terms of the purchase agreement were reached and announced to the public. Also, the Company had invested $350,000 in Lifestyle stock prior to the acquisition. The excess value of the aggregate purchase price over the historical value of Lifestyle's net assets on the acquisition date has been allocated to goodwill which will be amortized over five years. Pro forma goodwill at March 31, 2001 is $7,991,000. Pro forma goodwill amortization aggregated $1,199,000 for nine months ended March 31, 2001. (2) Elimination of Lifestyle equity acquired. (3) Includes the period from July 1, 2000 through August 31, 2000. Results from September 1, 2000 through March 31, 2001 are included in the Company's actual results. (4) Includes the period from July 1, 2000 through January 31, 2001. Results from February 1, 2001 through March 31, 2001 are included in the Company's actual results. (5) Elimination of inter-company transactions. (6) Pro forma goodwill amortization. 25 26 eResource Capital Group, Inc. and Subsidiaries Pro Forma Condensed Consolidated Statements of Operations (Unaudited) Year Ended June 30, 2000 (In thousands, except share amounts)
eResource DM Avenel Capital Marketing, Ventures, Group, Inc Inc. Pro Forma Inc Pro Forma Actual Actual Adjustment Pro Forma(1) Adjustment SubTotal ----------- ---------- ---------- ------------ ---------- -------- (Unaudited) (Unaudited) Revenues Sales - aviation $ 10 $ 355 $ -- $ -- $ -- $ 365 Lease income - commercial real estate 1,108 -- -- -- -- 1,108 ------------ -------- ------- -------- ------- -------- 1,118 355 -- -- -- 1,473 Cost of sales 93 -- -- -- -- 93 ------------ -------- ------- -------- ------- -------- Gross profit 1,025 355 -- -- -- 1,380 Compensation expense related to issuance of stock options and warrants 48,996 -- -- -- -- 48,996 Selling, general and administrative expenses 7,023 298 -- 127 -- 7,448 Depreciation and amortization 467 7 1,200(4) -- 83(4) 1,757 Interest expense 863 -- -- -- -- 863 Loss on investment 1,012 -- -- -- -- 1,012 ------------ -------- ------- -------- ------- -------- Net loss before discontinued operations $ (57,336) $ 50 $(1,200) $ (127) $ (83) $(58,696) ============ ======== ------- ======== ------- ======== Basic net loss and diluted net loss net loss per share $ (1.81) ============ Weighted average shares outstanding used in computing basic and diluted loss per share 31,596,541 ============ eResource Pro Forma Capital LST, Inc Adjustments Group, Inc Actual(2) and Eliminations(3) Pro Forma --------- ------------------- ------------ (Unaudited) (Unaudited) (Unaudited) Revenues Sales - aviation $ 154 -- $ 519 Lease income - commercial real estate -- -- 1,108 ------ -------- ------------ 154 -- 1,627 Cost of sales 294 -- 387 ------ -------- ------------ Gross profit (140) -- 1,240 Compensation expense related to issuance of stock options and warrants -- -- 48,996 Selling, general and administrative expenses 523 -- 7,971 Depreciation and amortization 7 433 2,197 Interest expense 4 -- 867 Loss on investment -- -- 1,012 ------ -------- ------------ Net loss before discontinued operations $ (674) $ (433) $ (59,803) ====== ======== ============ Basic net loss and diluted net loss net loss per share $ (1.40) ============ Weighted average shares outstanding used in computing basic and diluted loss per share 42,706,267 ============
The accompanying notes are an integral part of these pro forma financial statements. (1) Includes the period from June 6, 2000 (date of incorporation) thru June 30, 2000. (2) Includes the period from March 24, 2000 (date of incorporation) through June 30, 2000. (3) The 8,074,675 shares of common stock issued by the Company for the Lifestyle acquisition had a value of $7,267,208 based upon the fair market value of the Company's stock over reasonable period of time prior and subsequent to April 3, 2001 which is the date the terms of the purchase agreement were reached and announced to the public. Also the Company had invested $350,000 in Lifestyle stock prior to the acquisition. The excess value of the aggregate purchase price over the historical value of Lifestyle's net assets on the acquisition date has been allocated to goodwill which will be amortized over five years. Pro forma goodwill at June 30, 2000 is $7,991,000. Pro forma goodwill amortization aggregated $433,000 for the year ended June 30, 2000. (4) Pro forma goodwill amortization. 26 27 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: July 13, 2001 By: /s/ WILLIAM L. WORTMAN ------------------------------------ William L. Wortman Vice President, Treasurer and Chief Financial Officer 27 -----END PRIVACY-ENHANCED MESSAGE-----