From the ANNUAL Report filed 5/8/02
Our subsidiaries have ceased operations.
In the first fiscal quarter of 2002, the Company ceased operations in all of its three subsidiaries due to a lack of funding to sustain operations. The Company does not intend to resume
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operations in its subsidiaries. The Company has sold certain video equipment used by one of its subsidiaries. The Company may seek shareholder approval to sell all or substantially all of the assets of the Company.
The Company has no revenues.
Because the Company has ceased operations in all of its subsidiaries, the subsidiaries currently do not produce any revenue. The Company is a holding company and currently does not produce any revenue. If the Company can obtain funding, it is management's intention to prepare it to become an acquisition target. Therefore, management believes that the Company will not produce any revenues and will only incur expenses for the foreseeable future. If we seek and obtain shareholder approval to sell all or substantially all of the assets of the Company, we intend to apply the proceeds of such sales to pay some of the Company expenses; however, we do not believe the amount of money generated from the sale of Company assets will be adequate to cover the Company's expenses.
We incurred significant losses in 2001.
We incurred significant operating losses in fiscal 2001, and we expect that we will continue to incur losses for the foreseeable future. The Company will continue to incur general and administrative expenses even without operations, which will place significant burdens on the Company. Without operations, we will be unable to generate any revenues and we will not be able to achieve and maintain profitability.
The Company has no funds to implement its plan.
If the Company obtains funding, it intends to market itself as a candidate for acquisition, possibly as a suitable reverse merger target. At the present, the Company has not entered into an agreement with any person to be acquired and the Company can make no assurances that it will be able to locate a suitable acquisition candidate. Even if such a candidate is found, the Company must obtain funding to negotiate and complete the acquisition of the Company, possibly through a reverse merger transaction. There is no assurance that the Company will be able to obtain such funding.
We will need to raise additional funds. These funds may not be available when we need them.
We do not have enough cash or other sources or funding to fund our Company. We need to raise funds to manage our Company, to pay our expenses, and to negotiate and complete an acquisition of the Company, possibly through a reverse merger transaction. There can be no assurance that financing will be available on favorable terms, or at all. Our subsidiaries have ceased operations, and if we do not obtain funding, the Company may cease to operate. If we issue equity securities to obtain such financing, the ownership interest of our shareholders will be diluted. The issuance of debt securities to obtain financing will increase the risk of investing in our Company.
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The Company is currently inadequately capitalized.
As of May 8, 2001, the Company reserved 49,200,000 shares of common stock for conversion of certain convertible debentures and the exercise of warrants sold pursuant to a Securities Purchase Agreement dated May 8, 2001. Pursuant to a letter agreement dated March 29, 2002, the Company sold additional convertible debentures and warrants and agreed to reserve an additional 35,814,285 shares of common stock. For more information about these transactions, see "Recent Sales of Unregistered Securities" beginning on page 14 of this Form 10-KSB. The actual number of shares of Common Stock to be issued upon conversion of the debentures or exercise of the warrants fluctuates depending upon the market price of our common stock. Because the average trading price of the Company's Common Stock on the OTCBB has dropped substantially over fiscal year 2001, the Company does not have an adequate number of shares of common stock authorized by its Articles of Incorporation to issue, at current market prices, all of the shares to be issued pursuant to the convertible debentures and the warrants dated May 8, 2001 and July 30, 2001, and March 29, 2002, respectively. The Company would need to amend its Articles of Incorporation in order to increase its authorized capital stock, which requires shareholder approval.
The Company's shareholders face substantial future dilution.
In 2001 and in 2002, the Company sold certain convertible debentures and warrants to four accredited investors. For more information about these transactions, see "Recent Sales of Unregistered Securities" beginning on page 14 of this Form 10-KSB. 41,200,000 shares of common stock were registered with the Securities and Exchange Commission in 2001. The Company is required to register an additional 35,814,285 shares of common stock. Furthermore, because of fluctuations in market prices of the Company's common stock, the accredited investors may require the Company to register an indeterminate number of additional shares. Therefore, it is expected that the Company's shareholders will sustain substantial dilution as the convertible debentures are converted into, and the warrants are exercised for, shares of the Company's common stock, and such shares are sold on the market.
There are risks associated with our stock trading on the NASD OTC Bulletin Board rather than a National Exchange.
There are significant consequences associated with our common stock trading on the NASD OTC Bulletin Board rather than a national exchange. The effects of not being able to list our securities on a national exchange include limited release of the market prices of our securities, limited coverage of the Company, and volatility of our stock prices due to low trading volume. The foregoing factors may limit our ability to issue additional securities or to secure financing.
Business of Issuer
During fiscal year 2001, e resources was engaged primarily in operation of its three wholly-owned subsidiaries, with a focus on the creation and development of innovative marketing, media and communications solutions. In the first quarter of 2002, the Company's three
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subsidiaries, CareMart, Inc. ("CareMart"), Vistastream inc. ("Vistastream"), and I'm On Air, Inc. ("IOA"), ceased operations.
In 2001, our Company operated in the technology sector. 2001 was a difficult year for businesses in the technology sector, as markets continued the decline that began in 2000 and investors continued to turn away from technology-based businesses. The continuing decline in the technology sector through the year deeply impacted our ability to implement our business plan and to raise funds for Company operations. In the first quarter of 2002, operations in the Company's subsidiaries were ceased due to the Company's lack of working capital combined with its inability to secure additional funding to sustain it subsidiaries
In the first quarter of 2002, the Company sold certain equipment used by Vistastream and applied the proceeds of such sale to pay some of the Company's outstanding debts. The Company may seek shareholder approval to sell all or substantially all of the assets of the Company, including the assets of CareMart and I'm On Air, and if such assets are sold, it intends to apply such proceeds to pay outstanding Company debts. The assets of CareMart may have little or no value.
In fiscal 2001, two of the Company's subsidiaries, Vistastream and CareMart, had existing operations, while its third subsidiary, IOA, was engaged primarily in research and development. Vistastream operated as a full-service video production house, as well as a producer, aggregator and broadcaster of streaming media programming for the Internet. CareMart operated as a value-added re-seller for a diverse line of health care products, and as a marketer and distributor of health care supplies for individual and institutional consumption. CareMart's products were marketed and sold primarily through the Internet, however, CareMart's web site was taken down on March 31, 2002. IOA was involved in the research and development of a communication and marketing system based on a proprietary digital media platform.
CareMart
In fiscal 2001, CareMart marketed its products to the health-care providers and caregivers of people suffering from reduced or impaired mobility and self-care limitations due to age, injuries or disease. CareMart's products were marketed and sold primarily through its web site. CareMart operated in the home medical equipment ("HME") distribution market, which includes home health care products, physical rehabilitation products and other disposable and non-disposable products used for the recovery and long-term care of patients. In 2001 there were an estimated 10,000 HME dealers in the United States, where CareMart operated its business. CareMart's competitors in the HME distribution market included independent HME dealers, medical/surgical distributors, and home health agencies and providers which deliver HME products to patients bundled with nursing services. In addition, many of the estimated 10,000 HME companies have established a web presence that competed directly with CareMart for Internet sales.
Throughout its operations, CareMart did not spend substantial capital on marketing its web site presence. The majority of the Company's customers located its web site through online searches or by word of mouth. CareMart did not have a large concentration of its sales dependent on one
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customer or a group of customers. CareMart is not a Part B Medicare supplier, and therefore was not subject to government regulation on its pricing or on its payment for its product offerings.
Vistastream
In fiscal 2001, Vistastream operated as a full-service video production house, as well as a producer, aggregator and broadcaster of streaming media programming for the Internet. Vistastream's products consisted of complete line video and audio solutions for corporate consumption, including script to screen production, editing and video duplication. Vistastream also produced interactive digital media.
Vistastream's services were marketed by targeted advertising in regional business journals. Vistastream utilizes a small sales force to handle the leads generated by the advertising. The majority of Vistastream's competitors were independent producers that out-source their production and post-production needs. Vistastream marketed its services to corporations that have audio and video presentation needs. Vistastream did not have a single customer or group of customers that account for a large percentage or a material amount of revenue.
I'm On Air
In January 2001, the Company began research and development of IOA, a communication and marketing system based on a proprietary digital media platform. IOA was intended to be a promotion based sales and marketing tool that could advance brand awareness and create sales and promotional opportunities for its customers. IOA remained in the research and development phase throughout 2001 and never began operations.
Intellectual Property
The Company has registered the I'm On Air name and logo with the United States Patent and Trademark Office.
Research and Development
The Company invested resources in the research and development of IOA in 2001. The Company spent $42,544 to create a prototype of the IOA product. Because IOA never commenced operations, none of these research and development costs were passed on to the Company's customers.
Environmental Laws
Due to the nature of its business, in fiscal 2001, the Company did not expend a material amount of funds on compliance with environmental laws.
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Employees
As of December 31, 2001, the Company employed four full-time employees. As of April 29, 2002, the Company employed two full-time employees and no part-time employees. None of the Company's employees are represented by labor unions. The Company considers its relations with its employees to be good.
Business Development
e resources (formerly Dryden Industries, Inc., ("Dryden") and previously Dry Dairy International, Inc. and Wonder Capital, Inc.), was incorporated under the laws of the state of Utah on March 6, 1987. The Company was originally formed as an acquisition vehicle for ongoing privately held business entities, which would be aggregated in order to maximize the value of their equity.
The Company engaged in a public offering of its securities and on February 11, 1988, the Company closed its initial public offering having sold 1,990,000 units at the offering price of $0.10 per unit. The Company subsequently attempted to conduct various businesses, but was unsuccessful in its efforts. In 1998, the Company discontinued operations in its operating subsidiaries as a result of recurring losses and sold the corporations that comprised its previous operating subsidiaries. The Company then changed its status to a development stage company in December 1999.
Consistent with its new development strategy, in January 2000, the Company completed a contribution agreement whereby it issued 46,630,863 shares of its common stock before a 1-for-20 reverse split in exchange for all partnership interests in Vista Photographic and Video Group, Ltd. ("Vista"). The shares issued by the Company represented approximately 25% of the total shares of the Company's issued and outstanding shares immediately following the acquisition, which was completed in February 2000. The Company then formed vistastream inc., a wholly-owned subsidiary of the Company, to operate the former Vista business and to form a full-service video production house and a producer, aggregator and broadcaster of streaming media programming for the Internet.
On April 28, 2000, the Company acquired all the outstanding capital stock of CareMart, Inc., a Delaware company. The acquisition was accomplished pursuant to a reverse triangular merger, whereby CareMart, Inc. 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, Inc. acquired all the outstanding capital stock of Cunningham & Cunningham Health Concerns, a Texas corporation ("CC&H"). CC&H operated the business of CareMart, Inc. prior to the merger. CareMart, an online niche marketer and distributor of home healthcare products and supplies for general and institutional consumption, is operated as a wholly-owned subsidiary of the Company.
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During fiscal year 2000, e resources inc was engaged primarily in operation of its three wholly-owned subsidiaries, Vistastream inc, CareMart, Inc., and eGROW, inc., all Delaware corporations. Vistastream operated as a full-service video production house, as well as a producer, aggregator and broadcaster of streaming media programming for the Internet. CareMart operated as a value-added re-seller for a diverse line of health care products, and as a marketer and distributor of health care supplies for individual and institutional consumption. CareMart's products were marketed and sold primarily through the internet. The Company intended to operate eGROW as a for-profit business incubator which would develop, invest and direct the business strategy of a network of companies with Internet, Intranet and electronic commerce based applications.
After sustaining significant losses for fiscal year 2000, the Company refined its business strategy in 2001. The Company repositioned Vistastream to focus on video production, abandoned the eGROW business incubator, continued CartMart operations, and altered the Company's business model to focus on the creation and development of innovative marketing, media and communications solutions. In January 2001, the Company began development of IOA, a communication and marketing system based on a proprietary digital media platform. IOA was planned as a marketing tool that could advance brand awareness and create sales and promotional opportunities for its customers. Despite the Company's efforts, CareMart and Vistastream, the Company's two operating subsidiaries in fiscal 2001, continued to incur losses. IOA was in the research and development stage in fiscal 2001 and also incurred losses.
Events Subsequent to the Company's Fiscal Year End
In the first quarter of 2002, the Company's three subsidiaries, CareMart, Vistastream and IOA, ceased operations. Operations in the Company's subsidiaries were ceased due to the Company's lack of working capital combined with its inability to secure additional funding to sustain its subsidiaries.
On January 28, 2002, Chris Curtis on behalf of the Company entered into a letter agreement with Doug Via, a former employee of the Company, to sell certain video equipment used by Vistastream to Mr. Via. The purchase price paid to the Company for the equipment was $22,000 in cash. The net book value of the assets sold was $49,725. Mr. Via was employed by the Company as general manager of Vistastream from November 1, 2001 until January 18, 2002, when he was laid off by the Company. The proceeds of the equipment sold by the Company was applied towards payment of the Company's expenses.
The Company may seek shareholder approval to sell all or substantially all of the assets of the Company, including the assets of CareMart and IOA, and in such event, intends to apply the proceeds to the Company's expenses.
On April 8, 2002, the Company received $50,000 in cash (less $10,000 in expenses) in connection with the sale of convertible debentures and warrants to four accredited investors. This transaction is described in "Recent Sales of Unregistered Securities," beginning on page 14 of this Form 10-KSB. The Company intends to use the proceeds of this funding to pay expenses
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incurred in connection with complying with its reporting requirements under the Securities Exchange Act of 1934 (the "Exchange Act").
ITEM 2. DESCRIPTION OF PROPERTIES
(a) Principal Plants and Properties of the Company
Beginning February 1, 2000, the Company leased 2,100 square feet of office and edit space at 2155 Chenault, Suite 310, in Dallas, Texas to house Vistastream's sales and production operations under a lease that expires on January 31, 2003. In the first quarter of 2002, the Company closed the Vistastream office and no longer occupies the property. The Company has not paid the rent on this office space, in the amount of $2,153.40 per month, for December 2001 and January, February, March, April and May of 2002. In February of 2000, the Company leased 1,400 square feet of office space at 304 North U.S. Highway 377 in Roanoke, Texas to locate e resources' corporate offices on a month-to-month basis. The rent is $1,400 per month. The Company continues to operate out of the Roanoke location. The Roanoke property is in good condition and is adequate for its current use. The Company owns no real property.
ITEM 3. LEGAL PROCEEDINGS
On January 29, 2001, the Company filed suit against Shields Publishing Group, Inc. ("SPG"), for breach of contract. The lawsuit is styled as e resources inc. v. Shields Publishing Group, Inc., Cause No. 2001-50025-367 and is filed in the 367th Judicial District Court of Denton County, Texas.
On May 8th, 2001, the court entered a default judgment in favor of e resources, and entered an order in favor of the Company in the amount of $300,000 plus attorneys' fees and costs. However, the default judgment could be overturned, and the Company has not been successful in recovering any money under the default judgment.
On October 25, 2001, Vista Photographic and Video Group, Ltd., a now defunct Texas limited partnership, was served with a lawsuit filed by CIT Communications Finance Corp., a Delaware corporation, for amounts owed under a telephone equipment financing agreement. The lawsuit is styled Docket No. MRS-L-23-82-01, CIT Communications Finance Corporation v. Vista Photographic and Video Group, and is pending before the Superior Court of New Jersey, Law Division, Morris County. The claim is for $53,408.20 plus costs and attorneys' fees. A default judgment in the foregoing amount was granted on March 8, 2002 or have held against Vista Photographic and Video Group. A subsidiary of the Company may have held certain of the assets involved in this lawsuit.
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