U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarter Ended September 30, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
COMMISSION FILE NUMBER 1-8662
ERESOURCE CAPITAL GROUP, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 23-2265039
(State of Incorporation) (IRS Employer Identification No.)
1225 NORTHMEADOW PARKWAY
SUITE 116
ROSWELL, GA 30076
(770)754-9449
(Address of registrant's principal executive
offices including zip code and telephone number, including area code)
Check whether the Registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
twelve months (or for such shorter period that the Registrant was required to
file such reports), and (2) has been subject to such filing requirements for the
past 90 days. Yes [X] No [ ]
Check whether the issuer filed all reports required to be filed by Section 12,
13 or 15(d) of the Exchange Act after the distribution of securities under a
plan confirmed by a court. Yes [X] No [ ]
The number of shares outstanding of the Registrant's Common Stock as of November
14, 2001: 76,805,616
Transitional Small Business Disclosure Format: Yes [ ] No [X]
ERESOURCE CAPITAL GROUP, INC.
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION Page No
-------
ITEM 1. Condensed Consolidated Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets at September 30, 2001 and June 30, 2001................................ 3
Condensed Consolidated Statements of Operations for the three months ended September 30, 2001 and 2000..... 4
Condensed Consolidated Statements of Cash Flows for the three months ended September 30, 2001 and 2000..... 5
Notes to Condensed Consolidated Financial Statements......................................................... 6
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations........................ 17
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings............................................................................................ 20
ITEM 2. Changes in Securities........................................................................................ 21
ITEM 3. Defaults Upon Senior Securities.............................................................................. 21
ITEM 4. Submission of Matters to a Vote of Security Holders.......................................................... 21
ITEM 5. Other Information............................................................................................ 21
ITEM 6. Exhibits and Reports on Form 8-K............................................................................. 21
2
ERESOURCE CAPITAL GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
September 30, June 30,
2001 2001
------------- ----------
(Unaudited)
ASSETS
Cash and cash equivalents ......................................................... $ 1,090 $ 1,286
Accounts receivable, net .......................................................... 2,439 2,018
Inventory ......................................................................... 142 126
Investments ....................................................................... 1,097 1,592
Prepaid expenses .................................................................. 2,044 1,858
---------- ----------
Total current assets ........................................................ 6,812 6,880
Deferred costs and other assets ................................................... 297 319
Property and equipment, net ....................................................... 1,622 1,645
Goodwill .......................................................................... 18,970 17,898
---------- ----------
Total assets ............................................................. $ 27,701 $ 26,742
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Notes payable - current portion ................................................... $ 2,267 $ 489
Notes and amounts due to affiliates ............................................... 336 336
Accounts payable and accrued expenses ............................................. 5,012 4,730
Deposits and other liabilities .................................................... 440 658
Unearned income ................................................................... 494 1,161
---------- ----------
Total current liabilities .................................................. 8,549 7,374
Notes payable ..................................................................... 385 179
Net liabilities of discontinued operations ........................................ -- 201
Shareholders' equity:
Common stock, $.04 par value, 200,000,000 shares authorized,
76,809,284 and 75,833,728 issued, respectively ................................ 3,073 3,033
Additional paid-in capital ..................................................... 110,253 109,357
Accumulated deficit ........................................................... (94,203) (93,479)
Unrealized (loss) gain on marketable securities ................................ (348) 88
Treasury stock - at cost (24,502 and 35,930 shares, respectively) .............. (8) (11)
---------- ----------
Total shareholders' equity ................................................. 18,767 18,988
---------- ----------
Total liabilities and shareholders' equity ............................... $ 27,701 $ 26,742
========== ==========
The accompanying notes are an integral part of these condensed
consolidated financial statements.
3
ERESOURCE CAPITAL GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
Three Months September 30,
-------------------------------
2001 2000
----------- -----------
Sales ................................................................ $ 9,606 $ 12
Cost of sales ........................................................ 8,483 --
----------- -----------
Gross profit ................................................... 1,123 12
Selling, general and administrative expenses - compensation
related to issuance of stock options and warrants ................ -- 3,328
Selling, general and administrative expenses - other ................. 2,228 802
Provision for bad debts .............................................. 59 --
Depreciation and amortization ........................................ 87 217
Interest expense (income), net ....................................... 9 (3)
Loss on investments .................................................. 211 --
Gain on sale of assets ............................................... (171) --
----------- -----------
Loss before discontinued operations ............................ (1,300) (4,332)
Loss of discontinued operations ...................................... -- (205)
Gain on disposal of discontinued operations .......................... 576 --
----------- -----------
Net loss........................................................ $ (724) $ (4,537)
=========== ===========
Basic and diluted net loss per share:
Loss from continuing operations.................................... $ (.02) $ (.11)
Loss from discontinued operations.................................. .01 (.01)
----------- -----------
Net loss........................................................ $ (.01) $ (.12)
=========== ===========
Weighted average shares outstanding................................. 76,678,043 38,510,176
----------- -----------
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
ERESOURCE CAPITAL GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN THOUSANDS)
Three Months Ended September 30,
-------------------------------
2001 2000
--------- ---------
Cash flows from operating activities:
Net loss before discontinued operations ..................................... $ (1,300) $ (4,332)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization ............................................ 87 217
Bad debt expense ......................................................... 59 --
Common stock issued for services ......................................... 7 --
Stock purchase warrants received for services ............................ (25) --
Unrealized loss on stock purchase warrants ............................... 211 --
Gain on sale of assets ................................................... (171) --
Compensation expense related to stock options and warrants ............... -- 3,328
Changes in operating assets and liabilities:
Accounts and notes receivables ......................................... (349) 40
Inventory .............................................................. (100) --
Prepaid expenses ....................................................... (200) 41
Deferred costs and other assets ................................................ 7 (200)
Accounts payable and accrued expenses .................................. 755 (137)
Unearned income ........................................................ (667) --
--------- ---------
Cash used in operating activities before discontinued operations ...... (1,686) (1,043)
Discontinued operations, net ................................................ 150 (102)
--------- ---------
Net cash used in operating activities ................................. (1,536) (1,145)
--------- ---------
Cash flows from investing activities:
Purchase of property and equipment .......................................... (124) (19)
Sale of investments ......................................................... 23 --
Sale of assets .............................................................. (53) --
Cash (paid) acquired in connection with business acquisitions, net ......... (290) 416
--------- ---------
Net cash (used in) provided by investing activities ................... (444) 397
--------- ---------
Cash flows from financing activities:
Notes payable proceeds ...................................................... 1,740 --
Principal debt payments ..................................................... (6) --
Capital contribution by shareholder ......................................... 50 --
Sales of common stock ....................................................... -- 2,659
--------- ---------
Net cash provided by financing activities ............................. 1,784 2,659
--------- ---------
Net (decrease) increase in cash and cash equivalents ........................... (196) 1,911
Cash and cash equivalents at beginning of period ............................... 1,286 420
--------- ---------
Cash and cash equivalents at end of period ..................................... $ 1,090 2,331
========= =========
The accompanying notes are an integral part of these condensed
consolidated financial statements.
5
ERESOURCE CAPITAL GROUP, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
These financial statements include the operations of eResource Capital
Group, Inc., a Delaware Corporation ("RCG"), and its subsidiaries (collectively
- "the Company"). In October 2000, RCG changed its name from flightserv.com to
reflect the new business direction of the Company. Prior to June 30, 2000, the
Company was engaged in the development of its private aviation business and
limited commercial real estate activities. In fiscal 2001, the Company acquired
several companies and businesses. The Company currently operates aviation travel
services, telecommunications call center, technology business consulting, home
technology services, and Internet/technology solutions businesses in the United
States.
All significant intercompany balances and transactions have been
eliminated. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been omitted pursuant to the rules of the Securities and
Exchange Commission (the "SEC"). Certain prior period amounts have been
reclassified to conform to the current period presentation and to reflect the
commercial real estate business segment as a discontinued operation. In the
opinion of management, all adjustments considered necessary for a fair
presentation of the financial position of the Company as of September 30, 2001
and of the results of operations for the periods presented have been included.
The financial data at June 30, 2001 is derived from audited financial statements
which are included in the Company's Annual Report on Form 10-KSB for the year
ended June 30, 2001 and should be read in conjunction with the audited financial
statements and notes thereto. Interim results are not necessarily indicative of
results for the full year.
The Company experienced net losses in recent fiscal years and a net
loss of $724,000 during the three months ended September 30, 2001. The Company
used cash of $1.5 million in operations during the three months ended September
30, 2001 and has cash equivalents of $1.1 million at September 30, 2001. As a
result of these factors, the Company will continue to monitor costs in relation
to revenues, and if necessary, undertake cost reduction measures. In addition,
the Company is actively pursuing debt and equity investment alternatives to
provide additional cash to support operations.
The Company believes the existing balances of cash and cash equivalents
and cash flow from operations, coupled with the $4 million term loan commitment
obtained by the Company in November 2001 and the assurance of financial support
from one of the company's shareholders, will be sufficient to meet working
capital and capital expenditure requirements for the next twelve months.
CASH AND CASH EQUIVALENTS
The Company classifies as cash equivalents any investments, which can
be readily converted to cash and have an original maturity of less than three
months. At times cash and cash equivalent balances at a limited number of banks
and financial institutions may exceed insurable amounts. The Company believes it
mitigates its risks by depositing cash or investing in cash equivalents in major
financial institutions.
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of cash, accounts receivable,
investments, and notes payable. The Company places its temporary cash with high
credit quality principal institutions. The Company performs periodic credit
evaluations of its customers' financial condition and generally does not require
collateral. Although due dates of receivables vary based on contract terms,
credit losses have been within management's estimates in determining the level
of allowance for doubtful accounts. Overall financial strategies are reviewed
periodically.
6
The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments:
- Cash and cash equivalents: The carrying amount reported in the
balance sheet for cash approximates its fair value.
- Accounts receivable and accounts payable: Due to their short
term nature, the carrying amounts reported in the balance
sheet for accounts receivable and accounts payable approximate
their fair value.
- Marketable Securities: The fair values for available-for-sale
equity securities are based on quoted market prices.
- Notes Payable: The carrying amount of the Company's note
payable approximates its fair value.
INVESTMENTS
Investments, including certificates of deposit with maturities of
greater than three months, not readily marketable equity securities, and other
marketable securities, are classified as available for sale. Investment
securities that are not readily marketable include securities (a) for which
there is no market on a securities exchange or no independent publicly quoted
market, (b) that cannot be publicly offered or sold unless registration has been
effected under the Securities Act of 1933 as amended (the "Securities Act"), or
(c) that cannot be offered or sold because of other arrangements, restrictions,
or conditions applicable to the securities or the Company. Certificates of
deposit are recorded at cost plus accrued interest. Marketable equity securities
are recorded at estimated values based on quoted market values for marketable
securities of the investee discounted for trading restrictions. If there is no
quoted market value, the recorded values are based on the most recent
transactions in the securities discounted for lack of marketability. Investment
securities transactions are recorded on a trade date basis. The difference
between cost and fair value is recorded as unrealized gain or loss on available
for sale securities as a component of comprehensive income.
Investments also include stock purchase warrants, which the Company
periodically receives as part of its compensation for services. Stock purchase
warrants from companies with publicly traded common stock are considered
derivatives in accordance with FAS 133 "Accounting for Derivative Investments
and Hedging Activities". The Company recognizes revenue at the fair value of
such stock purchase warrants when earned based on the Black - Scholes valuation
model. The Company recognizes unrealized gains or losses in the statement of
operations based on the changes in value in the stock purchase warrants as
determined by the Black - Scholes valuation model subsequent to the date
received. Unrealized losses for the three months ended September 30, 2001
aggregated $211,000.
INVENTORY
Inventory is stated at cost using the first-in, first-out method.
Inventory consists primarily of finished goods.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost, less accumulated
depreciation. Depreciation is computed on the straight-line basis over the
assets' estimated useful lives. Expenditures for maintenance and repairs are
expensed as incurred. Expenditures for improvements which extend the useful life
or add value to the asset are capitalized and then expensed over the assets
remaining useful life.
Sales and disposals of assets are recorded by removing the related cost
and accumulated depreciation amounts with any resulting gain or loss reflected
in the statement of operations.
The carrying value of property and equipment and predevelopment costs
is reviewed for impairment whenever events or changes in circumstances indicate
that such amounts may not be recoverable. If such an event occurred, the Company
would prepare projections of future results of operations for the remaining
useful lives of such assets. If such projections indicated that the expected
future net cash flows (undiscounted and without interest) are less than the
carrying amounts of the property and equipment and the predevelopment costs, the
Company would record an impairment loss in the period it made such
determination.
7
REVENUE RECOGNITION
Aviation Travel Services
Revenue related to the Company's aviation travel services consists of
fees for charter flights and is recognized upon completion of the related
flight.
Technology Business Consulting
The Company provides e-commerce and business development services to
clients pursuant to contracts with varying terms. The contracts generally
provide for monthly payments and, in some cases, advance deposits. Revenue is
recognized over the respective contract period as services are provided.
Home Technology
The Company's home technology business completes work in two phases -
wiring, then hardware installation. The Company invoices its customers and
records revenue as work is completed on each project. Also, the Company sells
contracts to customers for alarm monitoring services. The Company recognizes
revenue from alarm monitoring contracts when it sells contracts to third parties
or monthly over the contract term when contracts are retained by the Company.
Sales of franchise licenses are recognized as revenue when the
Company's obligations under the franchise agreement are "substantially
complete." The Company generally defines "substantially complete" as the
completion of training by the franchisee's General Manager and the approval by
the Company of the franchise location.
Internet/Technology Solutions
Internet services project revenue is recognized on a percentage of
completion basis for fixed fee contracts, based on the ratio of costs incurred
to total estimated costs for individual projects. Revenue is recognized as
services are performed for time and material contracts at the applicable billing
rates.
Unbilled revenue represents revenue earned under contracts in advance
of billings. Such amounts are normally converted to accounts receivable within
90 days. Advanced billings represent amounts billed or cash received in advance
of services performed or cost incurred under contracts. Any anticipated losses
on contracts are charged to earnings when identified.
Revenue from uncollateralized e-commerce sales or sales of hardware and
software is recognized upon passage of title of the related goods to the
customer.
IMPAIRMENT OF LONG-LIVED ASSETS
Goodwill represents the excess of cost over net tangible assets
acquired of purchased businesses and, through June 30, 2001, was being amortized
using the straight-line method over five years.
The Company evaluates goodwill for impairment when events and
circumstances indicate that the assets might be impaired and records an
impairment loss if the undiscounted cash flows estimated to be generated by
those assets are less than the carrying amount of those assets. The impairment
loss recognized is equal to the difference between the discounted cash flows and
the carrying amount of the assets.
NET LOSS PER SHARE
The Company computes net loss per share in accordance with SFAS No.
128, "Earnings per Share" which requires dual presentations of basic earnings
per share ("EPS") and diluted EPS.
8
Basic earnings per share is computed using the weighted average number
of common shares outstanding during the period. Diluted earnings per share is
computed using the weighted average number of common shares outstanding and
potentially dilutive shares outstanding during the period. Options and warrants
to purchase 25,883,398 and 25,545,120 shares of the Company's common stock, par
value $0.04 per share (the "Common Stock"), were outstanding at September 30,
2001 and 2000, respectively. Such outstanding options and warrants could
potentially dilute earnings per share in the future but have not been included
in the computation of diluted net loss per share in the three months ended
September 30, 2001 and 2000 as the impact would have been antidilutive.
ADVERTISING
The Company expenses advertising costs as incurred. Advertising expense
aggregated approximately $120,000 and $6,000 for the three months ended
September 30, 2001 and 2000, respectively.
COMPREHENSIVE INCOME
Components of comprehensive income are net loss and all other non-owner
changes in equity. The only component of other comprehensive income consists of
unrealized holding losses on securities available for sale. Total comprehensive
loss for the three month period ended September 30, 2001 and 2000 was $1,160,000
and $4,537,000, respectively.
INCOME TAXES
The Company accounts for income taxes in accordance with the liability
method as provided under SFAS No. 109, "Accounting for Income Taxes."
Accordingly, deferred income taxes are recognized for the tax consequences of
differences between the financial statement carrying amounts and the tax bases
of existing assets and liabilities. The measurement of deferred tax assets is
reduced, if necessary, by the amount of any benefits that, based on available
evidence, are not expected to be realized.
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reported period. Actual results could differ from those estimates.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 2001, the Financial Accounting Standards Board issued FAS No.
141 "Business Combinations" ("FAS 141") and FAS No. 142 "Goodwill and Other
Intangible Assets" ("FAS 142"). FAS 141 requires that the purchase method of
accounting be used for all business combinations initiated after June 30, 2001.
FAS 141 also specifies the criteria applicable to intangible assets acquired in
a purchase method business combination to be recognized and reported apart from
goodwill. FAS 142 requires that goodwill and intangible assets with indefinite
useful lives no longer be amortized, but instead be tested at least annually for
impairment. FAS 142 also requires that intangible assets with definite useful
lives be amortized over their respective estimated useful lives to their
estimated residual values, and be reviewed for impairment.
The Company adopted FAS 142 effective July 1, 2001. In accordance with
FAS 142, the Company no longer amortizes goodwill. The Company recorded $114,153
of goodwill amortization in the three months ended September 30, 2000 or the
equivalent of $0.03 per share. If the Company had not adopted FAS 142, then the
Company would have recorded approximately $1,010,000 of goodwill amortization in
the three months ended September 30, 2001 based on the Company's existing
goodwill at June 30, 2001 and the goodwill related to the business acquisition
in July 2001. The Company currently does not expect FAS 142 to have any other
effect on the Company's results of operations or financial position.
In October 2001, the FASB issued the Statement of Financial Accounting
Standards No. 144 "Accounting for the Impairment or Disposal of Long-Lived
Assets" ("FAS 144"). FAS 144 addresses financial accounting and reporting for
the
9
disposal of long-lived assets. FAS 144 becomes effective for financial
statements issued for fiscal years beginning after December 15, 2001 and interim
periods within those fiscal years. The Company is currently evaluating the
potential impact, if any, the adoption of FAS 144 will have on its financial
position and results of operations.
NOTE 2. CONTINUING OPERATIONS
Recent Developments
On July 10, 2001, the Company acquired certain net assets, liabilities
and the business of a home technology company located in Atlanta, Georgia for an
aggregated purchase price of $1,255,000, which was paid by delivery of a cash
payment ($275,000), Common Stock (975,556 shares) and a four-year term
promissory note ($250,000). Including direct acquisition costs, the total
purchase price aggregated $1,259,857 and the transaction was accounted for using
the purchase method of accounting. The excess value of the purchase price over
the fair value of the net assets on the acquisition date aggregated
approximately $1,135,860 which was allocated to goodwill.
Aviation Travel Services
In fiscal 2000, the Company introduced its Private Seats charter flight
program to provide Internet access to private jet flight and related travel
services and operated the business from March 2000 through June 30, 2000. Due to
limited capital availability, the Company did not actively pursue development of
the Private Seats program and, as a result, did not realize any revenue from
this business after June 30, 2000. In fiscal 2001, the Company determined that
it would not pursue further development or marketing of the Private Seats
program.
In August 2000, the Company completed the acquisition of Internet
Aviation Services, Ltd. ("IASL"). IASL was a new leisure and business travel
services company, which offered charter services. The Company now operates its
charter aviation services as part of its aviation travel services business
through the Company's subsidiary, flightserv.com, Inc., a Delaware corporation
("FSW"). FSW has an agreement with a tour operator to provide air charter
services between Charlotte, North Carolina and Cancun, Mexico for a 12-month
period ending December 21, 2001. FSW has an agreement with Southeast Airlines to
operate the aircraft. In addition, FSW signed a contract with Casino Express
Airline to charter jet aircraft to provide airlift for casinos in Tunica,
Mississippi and additional Cancun service for a major tour operator.
In October 2000, FSW entered into a contract with Southeast Airlines to
charter two additional jet aircraft to provide jet shuttle service between
Norfolk, Virginia and New York City, New York and between Norfolk and Orlando,
Florida. Due to low consumer demand for this service FSW suspended its jet
shuttle operations in January 2001 and terminated its contract with Southeast
for the two aircraft.
In July 2001, FSW entered into an agreement with Vacation Express to
create a passenger hub in Orlando-Sanford International Airport. Pursuant to the
terms of the agreement, six commercial jet aircrafts will originate in six
eastern and Midwestern cities and serve five Caribbean destinations and Orlando.
Technology Business Consulting
In February 2001, the Company acquired 100% of Avenel Ventures, Inc.
("Avenel"), which provides investment and advisory services to technology
companies, and through its wholly-owned subsidiary, Avenel Alliance, provides
e-commerce and business development services to clients implementing innovative
strategies in e-commerce internet marketing.
Telecommunications Call Center
In September 2000, the Company completed the acquisition of DM
Marketing, Inc. ("DMM"), which operates a telecommunications call center
providing telemarketing, help desk and other services for Internet related and
other companies.
Home Technology
10
In April 2001, the Company acquired LST, Inc. d/b/a Lifestyle
Technologies ("LST"), which is a full service home technology integration
company providing complete installation and equipment for structured wiring,
home security, personal computer networking, home audio, home theater, central
vacuum and accent lighting. LST has also secured relationships with product
manufacturers, distributors and service providers (cable, Internet service,
broadband and security).
In September 2001, LST commenced its national franchising program. In
connection with the franchising program, LST has completed the sale of franchise
licenses in 10 markets, including all of the LST-operated markets except
Charlotte, North Carolina. Also, the Company has received a non-binding letter
of intent from a prospective franchisee for the sale of a franchise license for
one additional market. LST expects to close the sale of the remaining market on
or before December 31, 2001. Also, in July 2001, LST acquired a home technology
business located in Atlanta, Georgia. LST plans to own and operate the Charlotte
and Atlanta markets.
Internet/Technology Solutions
In June 2001, the Company acquired Logisoft Computer Products Corp.
("Logisoft"), which works with clients on projects ranging from e-commerce
strategies and implementation, to software and hardware needs, to LAN
configurations and system integration consulting. Logisoft, which was founded in
1989, conducts its business through two units:
- Technology Solutions, which provides data networking and
communications infrastructure consulting and implementation and is a
leading distributor of third party software to corporate and
educational customers; and
- Internet Solutions, which through Logisoft Interactive,
Logisoft's strategic Internet services business ("LGI"), is a full
spectrum Internet services provider with a focus on enabling
globalization of e-business. LGI creates global and localized Internet
solutions for Global 2000 and top tier private companies that require a
sophisticated cost-effective Internet presence. LGI employs a
comprehensive approach to Internet services engagements including
up-front planning with its strategic consulting services, custom
front-end-architecture and web site development as well as
comprehensive back end support upon web site completion. LGI's
e-commerce and globalization services address business strategy,
currency exchange, cultural assessment, logistical support, tax, legal
and fraud issues, language requirements and micro-marketing. In
addition, LGI partners with traditional and pure web-base businesses to
take those businesses to the Internet through partner sites. LGI
participates in the development and implementation of the business plan
in exchange for revenue-sharing and/or equity-based arrangements.
The Company's consolidated results of operations include the results of
operation of each of the acquired companies discussed above for the period from
each respective purchase date through September 30, 2001 and 2000.
Pro Forma Results of Operations
Following is selected pro forma consolidated financial information
reflecting the Company's acquisitions of IASL, DMM, Avenel, LST and Logisoft as
if such acquisitions had occurred as of the beginning of the three month period
ended September 30, 2000 (in thousands, except share amounts):
Revenue............................................. $ 2,036
Net loss from continuing operations................. $ (7,284)
Net loss............................................ $ (7,489)
Net loss per share.................................. $ (.11)
Weighted average shares............................. 66,187,568
Note 3. DISCONTINUED OPERATIONS
Commercial Real Estate
11
In fiscal 2001, the Company discontinued its commercial real estate
business, which consisted of two strip-mall shopping centers in the Atlanta,
Georgia area. In August 2001, the Company completed the sale of all of the
outstanding shares of the capital stock of the Company's subsidiary which owned
the commercial real estate business in exchange for cash ($312,500) and a 60-day
note receivable ($62,500), which was collected in October 2001. The Company
realized a gain of approximately $576,000 on the sale in the quarter ended
September 30, 2001. The Company's financial statements for the quarter ended
September 30, 2000 have been reclassified to reflect the commercial real estate
business as a discontinued operation.
Residential Real Estate
In fiscal 1999, the Company discontinued its residential real estate
development operations. Residential real estate operations include developed
lots, undeveloped land, and equity investments in residential real estate
development companies, partnerships, and joint ventures. The Company completed
the disposal of its residential real estate business in fiscal 2001.
NOTE 4. INVESTMENTS
Investments consist of the following (in thousands):
September 30, 2001 June 30, 2001
--------------------------------- --------------------------------
Gross Gross
Unrealized Fair Unrealized Fair
Cost Losses Value Cost Gains Value
------- ------ ------ ------- ----- -------
Equity securities $ 1,169 $ (348) $ 821 $ 1,020 $ 88 $ 1,108
Certificates of deposit 76 -- 76 99 -- 99
------- ------ ------ ------- ----- -------
$ 1,245 $ (348) 897 $ 1,119 $ 88 1,207
======= ====== ======= =====
Stock purchase warrants 200 385
------ -------
$1,097 $1,592
------ -------
Of the Company's certificates of deposit at September 30, and June 30, 2001,
$57,604 and $81,041, respectively, was pledged as collateral security for the
Company's letters of credit for office space leases.
NOTE 5. NOTES PAYABLE
Notes payable consists of the following (in thousands):
September 30, June 30,
2001 2001
------------ --------
Notes payable - due on demand with an interest rate of 12% and unsecured $ 560 $ 425
Notes payable - due on demand with interest inputed at 8% and unsecured 313 57
Mortgage payable to a bank in monthly installments of $1,751, including interest at
7.96% through October 2015 and collateralized by a building 185 186
Note payable - due in monthly installments of $3,000 and a balloon payment in July
2005 with monthly interest at 8.00% and collateralized by home technology
accounts receivable 244 --
Note payable - due in July 2002 with interest at 10% and collateralized by certain
home technology assets 300 --
Note payable - due in July 2002 with interest at 12% and unsecured 200 --
Note payable - due in July 2002 with interest at 10% and unsecured 200 --
12
Note payable - due in September 2002 with interest at 12% and collateralized by
certain home technology accounts receivable and inventory(1) 650 --
------- ------
2,652 668
Less current maturities
(2,267) (489)
------- ------
Long-term portion $ 385 $ 179
======= ======
(1) At the option of the noteholder, this note can be converted into
RCG's Common Stock at a ratio of one (1) share of Common Stock for each $0.65 of
outstanding principal and interest.
In November 2001, the Company received a commitment for a $4 million
term loan. The loan would be repayable in 10 annual installments of
approximately $689,000 including interest at 12% and it is secured by all of the
Company's assets. The Company expects to close the loan on or before November
27, 2001.
NOTE 6. INCOME TAXES
As of September 30, 2001, the Company had approximately $38,800,000 of
net operating loss carry forwards ("NOLs") for federal income tax purposes,
which expire between 2019 through 2021. A deferred income tax asset valuation
allowance has been established against all deferred income tax assets as
management is not certain that the deferred income tax assets will be realized.
In addition, due to the substantial limitations placed on the utilization of net
operating losses following a change in control, utilization of such NOLs could
be limited.
In fiscal 2001, the Company received a preliminary Internal Revenue
Service report on the Company's 1996 and 1997 and one of its subsidiary's 1994
and 1995 tax returns. The Company plans to appeal the IRS assessment when
received in fiscal 2002. At September 30, 2001, and June 30, 2001, the Company
had recorded a federal tax liability of $305,830 related to such assessment.
NOTE 7. ISSUANCE OF COMMON STOCK
In July 2001, the Company issued 975,556 shares of restricted Common
Stock in connection with the acquisition of a home technology business.
In September 2001, the Company issued 11,428 shares of restricted
Common Stock from treasury stock in connection with the payment of certain legal
fees.
The Company's purchase agreements for LST and Logisoft provide for
2,000,000 and 500,000 of additional shares of Common Stock, respectively, to be
issued to certain parties contingent upon operating performance criteria for
each company acquired. In October 2001, the Company issued 20,834 shares of
Common Stock representing additional shares earned in accordance with the
Logisoft purchase agreement. No additional shares have been earned in accordance
with the LST purchase agreements.
NOTE 8. STOCK OPTIONS AND WARRANTS
The Company accounts for stock option grants in accordance with APB
Opinion No. 25, "Accounting For Stock Issued To Employees" and options and
warrants issued to non-employees under FASB No. 123, "Accounting For Stock Based
Compensation". For the options and warrants issued to non-employees, the fair
value of each award has been calculated using the Black-Scholes Model in
accordance with FASB No. 123.
13
In fiscal 2001, the Company adopted a stock compensation plan (the
"Option Plan"). The Option Plan provides for the granting of either incentive
stock options or non-qualified options to purchase shares of the Company's
Common Stock to provide incentives to employees, directors and other individuals
or companies at the discretion of the Board of Directors. The Option Plan allows
participants to purchase Common Stock of the Company at prices set by the Board
of Directors, but in the case of incentive stock options not less than fair
market value at the date the option is granted. Unexercised options expire 10
years after the date of grant unless otherwise specified by the Board of
Directors. There are 20,000,000 shares authorized for the granting of incentive
stock options under the Option Plan. In the three months ended September 30,
2001, the Company issued qualified options under the Option Plan to purchase
450,000 shares of Common Stock at $0.85.
14
The following table summarizes the Company's outstanding options:
September 30, 2001 June 30, 2001
Vesting Vesting
Exercise Term Period Exercise Term Period
Shares Price (Years) (Months) Shares Price (Years) (Months)
---------- -------- ------- -------- ---------- -------- ------- --------
2,940,000 $ 0.25 10 12 2,940,000 $ 0.25 10 12
3,100,000 0.70 10 12 to 48 3,100,000 0.70 10 12 to 48
1,000,000 0.75 10 -- 1,000,000 0.75 10 --
480,000 0.84 10 36 to 42 480,000 0.84 10 36 to 42
1,477,650 0.85 10 12 to 38 1,027,650 0.85 10 12 to 38
320,628 0.90 10 18 320,628 0.90 10 18
270,000 0.95 10 12 to 46 270,000 0.95 10 12 to 46
500,000 1.44 10 -- 500,000 1.44 10 --
125,000 3.00 10 -- 125,000 3.00 10 --
---------- ---------
10,213,278 9,763,278
========== =========
Of the outstanding options at September 30, 2001, 5,414,091 are exercisable.
The Company has issued warrants to purchase shares of its Common Stock
in exchange for consulting and legal services and for strategic vendor alliances
provided by outside third parties. In addition, the Company has issued warrants
in connection with Common Stock private placement transactions. Certain of the
warrants issued contained registration rights provisions. In the three month
period ended September 30, 2000, the Company recognized compensation expense of
$3,328,000 in connection with the issuance of warrants, including $100,000
related to the repricing of warrants to purchase 500,000 shares of Common Stock
that were exercised in August 2000.
The following table summarizes the Company's outstanding warrants at September
30 and June 30, 2001:
Exercise Term
Shares Price (Months)
--------- -------- -------
5,556,377 $0.04 54
400,000 0.50 120
4,753,743 0.75 120
100,000 0.81 48
10,000 1.00 --
50,000 1.10 36
600,000 1.75 --
575,000 3.00 *
3,625,000 4.00 120*
---------
15,670,120
==========
* All of the $3.00 warrants and 575,000 of the $4.00 warrants in the above table
have a term that is variable, subject to the market value of the Common Stock
and other conditions.
At September 30, 2001, all of the above warrants are exercisable,
except for 1,666,913 with an exercise price of $0.04 of which 1,111,275 vest on
December 31, 2001 and 555,638 vest on December 31, 2002 and 100,000 with an
exercise price of $0.81 that vest over 36 months.
15
The Company accounts for options issued to employees under APB No. 25
and options and warrants issued to nonemployees under FASB No. 123. The total
compensation cost recognized during the three month periods ended September 30,
2001 and 2000 for these awards was $-0- and $3,328,000, respectively.
NOTE 9: GENERAL AND ADMINISTRATIVE EXPENSE - OTHER
Following is a summary of the Company's general and administrative expenses (in
thousands):
Three Months Ended September 30,
2001 2000
------ -----
Compensation expense $1,220 $317
Legal and professional fees 173 171
Public and investor relations 57 31
Marketing and advertising 120 6
Rent expense 174 44
Insurance 99 44
Website and telecommunications 100 73
Office and printing expense 104 66
Travel and entertainment 68 21
Other 113 29
------ ----
$2,228 $ 802
====== =====
NOTE 10. RELATED PARTY TRANSACTIONS
In fiscal 2001, Michael D. Pruitt, the President, Chief Executive
Officer and a director of the Company, and a company owned by Mr. Pruitt made
loans to the Company. At September 30 and June 30, 2001, notes and advances due
to affiliates of the Company consist of the following (in thousands):
Note payable to Mr. Pruitt $ 100
Advance payable to Mr. Pruitt 20
Notes payable to a company owned by Mr. Pruitt 216
-----
$ 336
=====
The note payable to Mr. Pruitt indicated in the above table bears
interest at 12% per annum and is due on demand. The advance to Mr. Pruitt and
notes payable to the company owned by Mr. Pruitt bear imputed interest at 8% and
are due on demand.
Mr. Pruitt is also a minority investor in a company that in September
2001 purchased franchise licenses and business operations of the Company's home
technology business in three markets in South Carolina and in another company
that intends to become a franchisee of the Company's home technology business in
Baltimore, Maryland upon regulatory approval of the Company's franchising
program.
Paul B. Johnson, a director of the Company, is an investor in a
company which in November 2001 became a franchisee of the Company's home
technology business in the Dallas, Texas market.
16
NOTE 11. BUSINESS SEGMENT INFORMATION
Information related to business segments is as follows (in thousands):
September 30, 2001:
Aviation Technology Internet/
Travel Call Business Home Technology
Services Center Consulting Technology Solutions Corporate Total
-------- ------ ---------- ---------- ---------- --------- --------
Revenue $ 6,042 $ 20 $ 61 $ 744 $ 2,739 $ -- $ 9,606
Net income (loss) before discontinued operations 60 (45) (187) (309) (331) (488) (1,300)
Identifiable assets 2,659 261 6,144 10,533 7,245 859 27,701
Capital expenditures -- -- -- 69 55 -- 124
Depreciation and amortization 11 5 -- 16 55 -- 87
September 30, 2000:
Aviation Technology Internet/
Travel Call Business Home Technology
Services Center Consulting Technology Solutions Corporate Total
-------- ------ ---------- ---------- ---------- --------- --------
Revenue $ -- $ 12 $ -- $ -- $ -- $ -- $ 12
Net loss before discontinued operations (158) (124) -- -- -- (4,050) (4,332)
Identifiable assets 2,159 6,112 -- -- -- 6,541* 14,812
Capital expenditures -- 19 -- -- -- -- 19
Depreciation and amortization 118 99 -- -- -- -- 217
*Includes $1,164,000 of identifiable assets of the Stratos Inns Concept, which
were written off in fiscal 2001.
Item 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Overview
In the quarter ended September 30, 2000, the Company acquired its
leisure aviation travel services and telecommunications call center businesses.
In the third and fourth quarters of fiscal 2001, the Company acquired its
technology business consulting, home technology and Internet/technology
solutions businesses. Also, in the quarter ended September 30, 2001, the Company
acquired an additional home technology business.
The following table summarizes results of operations by business
segment (in thousands):
Three Months Ended September 30, 2001 Three Months Ended September 30, 2000
--------------------------------------- --------------------------------------
Gross Net Income Gross Net
Sales Profit (Loss) Sales Profit Loss
------ -------- ---------- ----- -------- --------
Aviation Travel Services $6,042 $ 325 $ 60 $ -- $ -- $ (158)
Telecommunications Call Center 20 20 (45) 12 12 (124)
Technology Business Consulting 61 61 (187) -- -- --
Home Technology 744 152 (309) -- -- --
Internet/Technology Solutions 2,739 565 (331) -- -- --
Corporate -- -- (488) -- -- (4,050)
------ -------- ------- ----- -------- --------
$9,606 $ 1,123 $(1,300) $ 12 $ 12 $ (4,332)
====== ======== ======= ===== ======== ========
17
Results of Continuing Operations
The Company's revenues in the three months ended September 30, 2001
were $9,606,000 compared to $12,000 in the same period a year ago. The increase
in the current period is due to the newly acquired businesses.
Gross profit in the three months ended September 30, 2001 was
$1,123,000 compared to $12,000 in the same period a year ago. The increase in
the current period is due to the newly acquired businesses.
In the three months ended September 30, 2000, the Company recognized
$3,328,000 of non-cash expense related to the issuance of stock options and
warrants. The Company did not incur any such expense in the period ended
September 30, 2001 because the Company did not grant any compensatory options
and warrants in this period.
Selling, general and administrative expenses-other in the three months
ended September 30, 2001 was $2,228,000 compared to $802,000 in the comparable
period a year ago. This increase is due to expenses of the newly acquired
businesses partially offset by reduced corporate expenses.
The Company's depreciation and amortization expense in the three month
period ended September 30, 2001 was $87,000 compared to $217,000 in the same
period a year ago. The decrease is due primarily to the discontinuance of
goodwill amortization in accordance with recent accounting pronouncements offset
partially by depreciation of the newly acquired businesses.
Bad debt expense in the three months ended September 30, 2001 is
$59,000 and is related to the newly acquired businesses.
Also, in the three months ended September 30, 2001, the Company
realized a non-cash loss on investments of $211,000 and a gain of $171,000 on
the sale of certain home technology net assets to companies that intend to
operate these businesses as franchises.
The Company realized a gain of $576,000 on the sale of its discontinued
commercial real estate business in the three months ended September 30, 2001.
Liquidity and Capital Resources
The net loss in the three months ended September 30, 2001 of $724,000
and unrealized loss on marketable securities of $436,000 were partially offset
by increases in stockholder's equity related to a business acquisition and a
capital contribution resulting in a net decrease in stockholders' equity of
$221,000.
In the three months ended September 30, 2001, continuing operations
used $1,686,000 of cash and discontinued operations provided $150,000 of cash.
Note payable proceeds of $1,784,000 offset this decrease resulting in a net cash
decrease of $196,000 for the three months ended September 30, 2001.
The Company experienced operating losses in recent fiscal years and a
net loss of $724,000 for the current quarter. The Company used cash of $1.7
million in continuing operations in the three months ended September 30, 2001,
has a working capital deficit of $1.7 million at September 30, 2001, and has
cash and cash equivalents of $1.1 million at September 30, 2001. As a result of
these factors, the Company will continue to monitor costs in relation to
revenues, and if necessary, undertake cost reduction measures. In addition, the
Company is actively pursuing debt and equity investment alternatives to provide
additional cash to support operations.
The Company believes the existing balances of cash and cash equivalents
and cash flow from operations, coupled with the $4 million term loan commitment
obtained in November 2001 and the assurance of financial support from one of the
Company's shareholders, will be sufficient to meet working capital and capital
expenditure requirements. There can be no assurance, however, that the $4.0
million loan will close and that the Company will receive the proceeds thereof.
Also, the assurance of financial support from one of the Company's shareholders
is non-binding and there
18
is no assurance that the Company will receive any such support or, that if the
Company does receive such support, that such support will be adequate to meet
the Company's needs or that it will be available on terms favorable to the
Company.
The Company's aviation travel service business was cash flow positive
in the current quarter. The Company expects cash flow from this business to
increase significantly in the second quarter of fiscal 2002 when it realizes the
benefit of its new leisure charter contract, which is projected to generate
$40,000,000 in annual revenues and $1,600,000 of annual cash flow.
The Company's 35-seat telecommunication call center is currently
underutilized. The success of the telecommunication call center is dependent
upon securing service contracts with third parties. To date, DMM has been unable
to secure sufficient contracts to utilize its call center in a consistent and
profitable manner and currently none of the seats in the call center are being
utilized. However, the Company continues to pursue service contracts in an
attempt to generate revenue from its call center.
During fiscal 2001, the Company's technology business consulting
operations declined substantially due in part to the economic conditions in the
technology market place and in part to the transition of certain employees of
Avenel to the Company. After joining the Company, these employees focused on
developing the Company's business plan as opposed to providing services for
third parties. Currently, the Company has one employee providing technology
consulting services and, while it intends to attempt to grow this business in
the future, does not expect significant revenue increases from consulting
services during fiscal year 2002.
In the quarter ended September 30, 2001, the Company implemented its
national franchising program for its home technology business and sold certain
geographic markets to franchisees. The Company expects home technology revenues
to increase and operating results to improve during the last three quarters of
2002 from franchise license sales and royalties, recent price increases, cost
reductions and a restructuring of its sales force. Also, the home technology
business continues to add products to the portfolio offered to builders and
consumers and has expanded its sales activity in the commercial market in key
cities.
In fiscal 2002, the Company intends to continue the development of its
Internet/technology solutions business. The Company added two (2) new markets in
June 2001, has restructured its administrative staff and rationalized
development projects to reduce costs. Currently, the Company expects the
Internet/technology solutions business to significantly reduce its cash flow
deficit from the previous 12 months of operations.
Also, the Company's corporate expense in the current quarter decreased
88% from a year ago due to the issuance of fewer stock options and warrants,
staff reductions and other costs saving measures. The Company expects to realize
additional corporate savings during the last three quarters of fiscal 2002.
In addition to the operational changes discussed above, the Company
obtained a $4 million term loan commitment in November 2001 which the Company
expects to fund on or before November 27, 2001. With this loan, the Company
expects to have adequate cash balances to operate and grow its businesses while
it continues to focus on improving its cash flow. The Company may need
additional debt or equity financing depending upon its ability to grow its
businesses and improve cash flow from operations. There can be no assurance that
additional financing will be available when needed or, if available, that it
will be on terms favorable to the Company and its stockholders. If the Company
is not successful in generating sufficient cash flow from operations, or in
raising additional capital when required in sufficient amounts and on terms
acceptable to the Company, these failures would have a material adverse effect
on the Company's business, results of operations and financial condition. If
additional funds are raised through the issuance of equity securities, the
percentage ownership of its then-current stockholders would be diluted.
The Company's business, results of operations, and financial condition
are subject to many risks. In addition, statements in this quarterly report
relating to matters that are not historical facts are forward-looking statements
based on management's belief and assumptions based upon currently available
information. Such forward-looking statements include statements relating to
estimates of future revenue and operating income, cash flow and liquidity. Words
such as "expects", "intends", "believes", "may", "will" or similar
expressions are intended to identify certain forward-looking statements. In
addition, any statements that refer to expectations, projections or other
characterizations of future events or circumstances are forward-looking
statements. Although the Company believes that the expectations reflected in
such forward-looking statements are reasonable, it cannot give any assurances
that these expectations will prove to be correct. Such statements involve a
number of risks and uncertainties, including, but not limited to those discussed
herein or in other documents filed by the Company with the SEC, including the
Company's Annual Report on Form 10-KSB filed on October 4, 2001.
19
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The Company and its subsidiaries are involved from time to time in
various claims and legal actions in the ordinary course of business. In the
opinion of management, the Company and its subsidiaries are not party to any
legal proceedings, the adverse outcome of which, would have any material adverse
effect on the Company's business, its assets, or results of operations.
20
ITEM 2. CHANGES IN SECURITIES
Since July 1, 2001, the Company has issued 1,028,651 shares of
restricted Common Stock in connection with the following transactions:
(i) In July 2001, the Company issued 975,556 shares of restricted
Common Stock in connection with the acquisition of a home
technology business located in Atlanta, Georgia.
(ii) In September 2001, the Company issued 11,428 shares of
restricted Common Stock from treasury stock in exchange for
legal services rendered to the Company; and
(iii) In October 2001, the Company issued 20,834 shares of
restricted Common Stock to former shareholders of Logisoft in
exchange for Logisoft reaching certain performance criteria
set forth in the purchase agreement governing the Company's
acquisitions of Logisoft.
The securities issued in connection with the Company's acquisition of
Logisoft and the home technology business referenced above were issued without
registration under the Securities Act in reliance upon the exemption in
Regulation D promulgated under Section 4(2) of the Securities Act. The Company
based such reliance on factual representations made to the Company by the
recipients of such securities as to such recipients' investment intent and
sophistication, among other things.
The securities issued in connection with the legal services rendered to
the Company were issued without registration under the Securities Act in
reliance upon Section 4(2) of the Securities Act. The Company based such
reliance on representations made to the Company by the recipient of such
securities as to such recipient's investment intent and sophistication, among
other things.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
2.1 Stock Purchase Agreement between the Company and the
majority of the stockholders of LST (incorporated by
reference to Exhibit 2.1 to the Company's Current
Report on Form 8-K filed on Form 8-K filed on April
18, 2001).
2.2 Stock Purchase Agreement dated as of March 16, 2001
between the Company and Glenn Barrett, Jr.
(incorporated by reference to Exhibit 2.2 to the
Company's Current Report on Form 8-K filed on April
18, 2001).
2.3 Stock Purchase Agreement dated as of March 31, 2001
between the Company and Brandon
21
Holdings, Inc. (incorporated by reference to Exhibit
2.3 to the Company's Current Report on Form 8-K filed
on April 18, 2001).
2.4 Agreement and Plan of Merger dated as of June 5, 2001
between the Company, Logisoft Acquisition Corporation
and the individuals listed on Exhibit A thereto (the
"Logisoft Merger Agreement") (incorporated by
reference to Exhibit 2.1 the Company's Current Report
on Form 8-K filed on June 13, 2001).
2.5 Joinder to the Logisoft Merger Agreement executed by
Logisoft (incorporated by reference to Exhibit 2.2 to
the Company's Current Report on Form 8-K filed on
June 13, 2001).
2.6 Asset Purchase Agreement dated as of June 20, 2001,
by and among Greater Atlanta Alarm Services, Inc.,
the Company, a wholly-owned subsidiary of the
Company, Glenda Watson and David Watson (incorporated
by reference to Exhibit 2.1 to the Company's Current
Report on Form 8-K filed on August 14, 2001).
2.7 Stock Purchase Agreement dated as of May 15, 2001
between the Company and Brikor, Inc. (incorporated by
reference to Exhibit 2.1 to the Company's Current
Report on Form 8-K filed on September 17, 2001).
(b) Financial Reports on Form 8-K
The Company has filed the following reports on Form 8-K and
8-K/A with the SEC since July 1, 2001:
(i) The Company filed a Current Report on Form 8-K/A with
the SEC on July 13, 2001 amending Item 7 of the
Company's Current Reports on Form 8-K and Form 8-K/A
filed on April 18, 2001 and May 15, 2001,
respectively, to set for the (i) audited financial
statements of LST as of December 31, 2000, (ii) the
unaudited condensed financial statements as of March
31, 2001, and (iii) unaudited pro forma condensed
consolidated financial information as of March 31,
2001;
(ii) The Company filed a Current Report on Form 8-K/A with
the SEC on August 10, 2001 amending Item 7 of the
Company's Current Report on Form 8-K filed June 29,
2001 to set forth the (i) audited financial
statements of Team Sports Entertainment, Inc.
formerly known as Logisoft Corp. ("TSE"), for the
years ended December 31, 2000 and 1999, (ii)
unaudited financial statements of TSE and subsidiary
for the three months ended March 31, 2001 and 2000,
and (iii) unaudited pro forma condensed consolidated
financial statements as of March 31, 2001;
(iii) The Company filed a Current Report on Form 8-K with
the SEC on August 14, 2001 reporting under Item 5 of
such Report the Company's acquisition of certain
assets, liabilities and the business of a home
technology company located in Atlanta, Georgia;
(iv) The Company filed a Current Report on Form 8-K with
the SEC on September 17, 2001 reporting under Item 2
of such report the sale of its commercial real estate
business (the "Commercial Real Estate 8-K"); and
(v) The Company filed a Current Report on Form 8-K/A with
the SEC on October 19, 2001 amending Item 7 of the
Commercial Real Estate 8-K to set forth the pro forma
financial information of the Company as of June 30,
2001.
22
SIGNATURE
In accordance with the requirements of the Exchange Act, the Registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
eResource Capital Group, Inc.
Date: November 14, 2001 By: /s/ WILLIAM L. WORTMAN
-----------------------------------
William L. Wortman
Vice President, Treasurer and
Chief Financial Officer
23
Exhibit Index
2.1 Stock Purchase Agreement between the Company and the
majority of the stockholders of LST (incorporated by
reference to Exhibit 2.1 to the Company's Current
Report on Form 8-K filed on Form 8-K filed on April
18, 2001).
2.2 Stock Purchase Agreement dated as of March 16, 2001
between the Company and Glenn Barrett, Jr.
(incorporated by reference to Exhibit 2.2 to the
Company's Current Report on Form 8-K filed on April
18, 2001).
2.3 Stock Purchase Agreement dated as of March 31, 2001
between the Company and Brandon Holdings, Inc.
(incorporated by reference to Exhibit 2.3 to the
Company's Current Report on Form 8-K filed on April
18, 2001).
2.4 Agreement and Plan of Merger dated as of June 5, 2001
between the Company, Logisoft Acquisition Corporation
and the individuals listed on Exhibit A thereto (the
"Logisoft Merger Agreement") (incorporated by
reference to Exhibit 2.1 the Company's Current Report
on Form 8-K filed on June 13, 2001).
2.5 Joinder to the Logisoft Merger Agreement executed by
Logisoft (incorporated by reference to Exhibit 2.2 to
the Company's Current Report on Form 8-K filed on
June 13, 2001).
2.6 Asset Purchase Agreement dated as of June 20, 2001,
by and among Greater Atlanta Alarm Services, Inc.,
the Company, a wholly-owned subsidiary of the
Company, Glenda Watson and David Watson (incorporated
by reference to Exhibit 2.1 to the Company's Current
Report on Form 8-K filed on August 14, 2001).
2.7 Stock Purchase Agreement dated as of May 15, 2001
between the Company and Brikor, Inc. (incorporated by
reference to Exhibit 2.1 to the Company's Current
Report on Form 8-K filed on September 17, 2001).
24