10QSB 1 etcr_10qsb-06302006.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-QSB Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarterly Period Ended: June 30, 2006 Commission File Number: 33-20582 EQUITY TECHNOLOGIES & RESOURCES, INC. -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 75-227-6137 ---------------------------------------- ---------------------- (State or other jurisdiction (IRS Employer of incorporation) Identification No.) 325 W. Main Street, Suite 240 Lexington, Kentucky 40507 ---------------------------------------- ---------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (859) 321-2466 ---------------------- Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 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 |_| Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes |X| No |_| State the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding as of July 21, 2006 ----------------------------- ------------------------------- Class A Common Stock 300,000,000 Class B Common Stock 100,000 PART I - FINANCIAL INFORMATION Item 1: Financial Statements Unaudited Condensed Consolidated Balance Sheet as of June 30, 2006 3 Unaudited Condensed Consolidated Statements of Operations For the three and six months ended June 30, 2006 and 2005 and for the period from inception of the development stage on January 1, 1994 through June 30, 2006 4 Unaudited Condensed Consolidated Statements of Cash Flows For the six months ended June 30, 2006 and 2005 and for the period from inception of the development stage on January 1, 1994 through June 30, 2006 5 Notes to Condensed Consolidated Financial Statements 6 Item 2: Management's Discussion and Analysis or Plan of Operation 16 Item 3: Controls and Procedures 21 PART II - OTHER INFORMATION Item 1: Legal Proceedings 21 Item 2: Unregistered Sales of Equity Securities and Use of Proceeds 21 Item 3: Defaults upon Senior Securities 23 Item 4: Submission of Matters to a Vote of Security Holders 23 Item 5: Other Information 23 Item 6: Exhibits 23 Signatures 26 PART I - FINANCIAL INFORMATION Item 1: Financial Statements
EQUITY TECHNOLOGIES & RESOURCES, INC. AND SUBSIDIARY (Development Stage Companies) UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET June 30, 2006 -------------------------------------------------------------------------------- ASSETS CURRENT ASSETS: Cash $ 698 ----------------------- Total current assets 698 ----------------------- TOTAL ASSETS $ 698 ======================= LIABILITIES AND STOCKHOLDERS' DEFICIENCY CURRENT LIABILITIES: Accounts payable $ 190,056 Accounts payable - related parties 410,754 Dividends payable 33,750 Accrued salaries 401,200 Accrued expenses 254,736 Accrued interest 344,827 Notes payable 38,400 Notes payable, current portion - related parties 1,002,454 ----------------------- Total current liabilities 2,676,177 ----------------------- Total liabilities 2,676,177 ----------------------- COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' DEFICIENCY: Preferred stock, class A - $0.001 par value, 2,000,000 shares authorized, 0 Preferred stock, class B - $0.001 par value, 300,000 shares authorized, 70 Preferred stock, class C - $0.001 par value, 100,000 shares authorized, 0 Common stock, class A - $0.0001 par value, 300,000,000 shares authorized, 30,009 Common stock, class B - $0.01 par value, 100,000 shares authorized, 1,000 Additional paid-in capital 21,180,798 Accumulated deficit prior to the development stage (8,390,740) Deficit accumulated during the development stage (15,496,616) ----------------------- Total stockholders' deficiency (2,675,479) ----------------------- TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY $ 698 =======================
See accompanying condensed notes to unaudited condensed consolidated financial statements. 3
EQUITY TECHNOLOGIES & RESOURCES, INC. AND SUBSIDIARY (Development Stage Companies) UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2006 AND 2005, AND FOR THE PERIOD FROM INCEPTION OF THE DEVELOPMENT STAGE ON JANUARY 1, 1994, THROUGH JUNE 30, 2006 -------------------------------------------------------------------------------- Accumulated Three Months Three Months Six Months Six Months During the Ended Ended Ended Ended Development June 30, 2006 June 30, 2005 June 30, 2006 June 30, 2005 Stage --------------- ---------------- ---------------- -------------- --------------- REVENUES $ 0 $ 16,667 $ 0 $ 16,667 $ 47,269 GENERAL AND ADMINISTRATIVE EXPENSES 23,747 43,829 97,038 72,682 10,872,157 --------------- ---------------- ---------------- -------------- --------------- LOSS FROM CONTINUING OPERATIONS (23,747) (27,162) (97,038) (56,015) (10,824,888) OTHER (EXPENSES) INCOME: Interest expense (27,291) (20,659) (50,487) (42,472) (739,740) Interest income 0 0 59 --------------- ---------------- ---------------- -------------- --------------- Total other expenses - net (27,291) (20,659) (50,487) (42,472) (739,681) --------------- ---------------- ---------------- -------------- --------------- NET LOSS FROM CONTINUING OPERATIONS (51,038) (47,821) (147,525) (98,487) (11,564,569) NET LOSS FROM DISCONTINUED OPERATIONS 0 0 0 0 (3,837,987) --------------- ---------------- ---------------- -------------- ---------------- NET LOSS $ (51,038) $ (47,821) $ (147,525) $ (98,487) $ (15,402,556) =============== ================ ================ ============== ================ DIVIDENDS ON PREFERRED STOCK $ 0 $ 0 $ 0 $ 0 $ 32,517 =============== ================ ================ ============== ================ Basic and diluted loss per share of common stock: Net loss from continuing operations $ (0.00) $ (0.00) $ (0.00) $ (0.00) Net loss from discontinuing operations 0.00 0.00 0.00 0.00 --------------- ---------------- ---------------- -------------- $ (0.00) $ (0.00) $ (0.00) $ (0.00) =============== ================ ================ ============== Weighted average number of common shares 267,477,564 143,893,594 206,026,971 143,893,594 =============== ================ ================ ================
See accompanying condensed notes to unaudited condensed consolidated financial statements. 4
EQUITY TECHNOLOGIES & RESOURCES, INC. AND SUBSIDIARY (Development Stage Companies) UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 2006 AND 2005, AND FOR THE PERIOD FROM INCEPTION OF THE DEVELOPMENT STAGE ON JANUARY 1, 1994, THROUGH JUNE 30, 2006 Six Months Six Months Accumulated Ended Ended During the June 30, June 30, Development 2006 2005 Stage ---------------- ---------------- ------------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (147,525) $ (98,487) $ (15,402,556) Adjustments to reconcile net loss to net cash (used in) provided by operation activities: Common stock issued for services or collateral on loans 8,166,584 Write-off of federal tax lien and related accrued expenses (68,836) Preferred stock issued for services 10,400 Depreciation and amortization 70,532 Bad debt expense 140,299 Loss on disposal of assets and partnership interests 2,364,508 (Gain) loss on foreign currency translation 95 (668) 65 Discontinued operations 456,078 Changes in assets and liabilities: Decrease in accounts receivable-trade 20,921 Increase in accounts payable 10,694 (6,152) 1,441,327 Increase in accrued expenses 109,528 99,551 1,378,208 Net cash (used in) provided by operating activities (27,208) (5,756) (1,422,470) ---------------- ---------------- ------------------ CASH FLOWS FROM INVESTING ACTIVITIES: Increase in note receivable (11,059) Sale of land (3,201) Other 64,000 ---------------- ---------------- ------------------ Net cash provided by investing activities 0 0 49,740 ---------------- ---------------- ------------------ CASH FLOWS FROM FINANCING ACTIVITIES: Sale of common stock for cash 15,620 338,670 Sale of preferred stock for cash 209,500 Proceeds from notes payable 15,000 14,000 904,822 Principal payments on notes payable (2,883) (7,146) (79,564) ---------------- ---------------- ------------------ Net cash provided by (used in) financing activities 27,737 6,854 1,373,428 ---------------- ---------------- ------------------ NET INCREASE (DECREASE) IN CASH 529 1,098 698 CASH, beginning of period 169 220 0 ---------------- ---------------- ------------------ CASH, end of period $ 698 $ 1,318 $ 698 ================ ================ ================== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during period for interest $ 0 $ 1,204 $ 107,357 ================ ================ ================== SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES: Accrued expenses converted to notes payable $ 0 $ 0 $ 220,997 ================ ================ ================== Accounts payable and accrued expenses converted to capital $ 0 $ 0 $ 823,475 ================ ================ ================== Common stock issued for services or collateral on loans $ 0 $ 0 $ 8,166,584 ================ ================ ================== Preferred stock issued for services $ 0 $ 0 $ 10,400 ================ ================ ================== Common stock issued for dividends $ 0 $ 0 $ 50,234 ================ ================ ================== Paid-in capital through cancellation of preferred stock and related dividends payable $ 0 $ 0 $ 465,400 ================ ================ ================== Common stock issued for debt $ 0 $ 0 $ 115,428 ================ ================ ==================
See accompanying condensed notes to unaudited condensed consolidated financial statements. 5 Equity Technologies & Resources, Inc. and Subsidiary (Development stage companies) CONDENSED NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (SUBSTANTIALLY ALL DISCLOSURES REQUIRED BY ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED STATES OF AMERICA ARE NOT INCLUDED) FOR THE THREE MONTHS AND SIX MONTHS ENDED June 30, 2006 AND 2005, AND FOR THE PERIOD FROM INCEPTION OF THE development STAGE ON JANUARY 1, 1994, THROUGH June 30, 2006 NOTE 1 - BASIS OF PRESENTATION The accompanying unaudited interim condensed consolidated financial statements presented are those of Equity Technologies & Resources, Inc. (the "Company") and its wholly-owned subsidiary, Verified Prescription Safeguards, Inc. ("VPS"). Collectively, they are referred to herein as the "Companies". These accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with Form 10-QSB and in the opinion of management, include all normal adjustments considered necessary to present fairly the financial position as of June 30, 2006, and the results of operations for the three months and six months ended June 30, 2006 and 2005, and cash flows for the six months ended June 30, 2006 and 2005. These results have been determined on the basis of generally accepted accounting principles and practices in the United States of America, and applied consistently with those used in the preparation of the Companies' audited consolidated financial statements and notes for the year ended December 31, 2005, on Form 10-KSB. Certain information and note disclosures normally included in the consolidated financial statements presented in accordance with accounting principles generally accepted in the United States of America, have been condensed or omitted. It is suggested that the accompanying unaudited interim condensed consolidated financial statements be read in conjunction with the audited consolidated financial statements and notes thereto incorporated by reference in the Companies' 2005 Annual Report on Form 10-KSB. The results of operations for the periods ended June 30, 2006 and 2005, are not necessarily indicative of the results for the full year. NOTE 2 - GOING CONCERN During their development stage, the Companies have had limited operations and have not been able to develop an ongoing, reliable source of revenue to fund their existence. The Companies' day-to-day expenses have been covered by proceeds obtained and services paid by the issuance of stock and notes payable. The adverse effect on the Companies' results of operations due to their lack of capital resources can be expected to continue until such time as the Companies are able to generate additional capital from other sources. These conditions raise substantial doubt about the Companies' ability to continue as going concerns. Management has implemented, or developed plans to implement, a number of actions to address these conditions including the acquisition of VPS and development of VPS's projects, which management believes will provide opportunities for growth 6 within the prescription drug and healthcare industry. Management's plans include obtaining working capital funds by seeking additional funding from shareholders, debt financing, and/or private placements of its common stock to meet such needs. Without realization of additional capital, it would be unlikely for the Companies to continue as going concerns. The Companies anticipate that their major shareholders will contribute sufficient funds to satisfy the cash needs of the Companies for the next twenty-four months. However, there can be no assurances to that effect, as the Companies expect minimal revenues and the Companies' need for additional funding will be necessary for the Companies' development plans and projects. If the Companies cannot obtain needed funds, they may be forced to curtail or cease their activities. Therefore, for at least the next twenty-four months management believes the Companies have viable plans to continue as going concerns. There can be no assurance that additional funding will be available when needed or, if available, that the terms of such financing will not adversely affect the Companies' results from operations (see Note 9 for subsequent events). These unaudited interim condensed consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty. The continuation of the Companies as going concerns is dependent upon the success of the Companies in obtaining additional funding and the success of their future operations (see Notes 6 and 7 for additional details). The Companies' ability to achieve these objectives cannot be determined at this time. The accompanying unaudited interim condensed consolidated financial statements should not be regarded as typical for normal operating periods. Note 3 - Notes Payable Notes payable of the Companies are as follows at June 30, 2006: Note payable to a related party dated July 2003, secured by Class A common stock and interest in related entries, bearing interest at 12% per annum through July 2005, with principal due on that date, with additional interest of 5% per annum until paid, personally guaranteed by a former officer of the Company (see Note 6) $ 300,000 Unsecured notes payable to a related party, bearing interest at 12%, with a late fee of 10% of the principal due, bearing 10% interest, past due 206,900 Unsecured notes payable to a related party dated September 2003, bearing interest at 10% per annum, matured October 1, 2004, past due (see Note 6) 217,800 Unsecured, non-interest bearing notes payable to various related parties, due on demand 168,638 Non-interest bearing notes payable to various related and third parties, secured by guarantees of common stock, due on demand 30,500 7 Unsecured notes payable to various related parties, bearing interest ranging from 10% to 12%, past due 24,300 Unsecured non-interest bearing notes payable, due on demand 21,900 Unsecured notes payable to a related party dated December 1999, past due, bearing interest at 12% per annum (default rate of 18% per annum), with a late fee of 10% of the principal due 20,000 Unsecured notes payable to a related party dated June 28, 2004, bearing interest at 10% per annum, refinanced September 15, 2005, matures March 31, 2006; past due 8,698 Unsecured promissory note to a related party, issued during 2005. bearing interest at 10%, due during 2006, interest payable annually in either stock or cash, or both 30,000 Unsecured promissory notes to related parties, issued during 2006 bearing interest at 10%, due during 2007, interest payable annually in either stock or cash, or both. 12,117 --------------- Total $ 1,040,853 Less related party amounts (1,002,453) =============== Total notes payable $ 38,400 Substantially all of the Companies' notes are in default. Accrued interest on the above notes at June 30, 2006, was $344,827. NOTE 4 - CONTINGENCIES AND COMMITMENTS (a) Federal Payroll Taxes - During 2005, the Company, based on discussions with and tax notices from the Internal Revenue Service, became aware of certain potential unpaid payroll taxes and related penalties and interest from 1993 and 1995 totaling $10,500. These liabilities have been recorded as accounts payable and general and administrative expenses at December 31, 2003, but will be subject to further research of the Company's historical tax records and of the statutes of limitations related to such liabilities, and to negotiations with the Internal Revenue Service. (b) Cancellation of Stock (1) On December 31, 1997, the Company canceled 168 Class A shares of common stock. These shares had been authorized for issue during prior years. No details were available as to whom the shares should be issued. Management canceled these shares, which resulted in contributed capital of $8,393. (2) On December 31, 1997, the Company canceled 98,000 shares of Class A preferred stock, 272,200 shares of Class B preferred stock, and 10,200 shares of Class C preferred stock. No record of owners of these shares could be determined. The results of the cancellation of these shares were contributed capital of $380,400. All dividends associated with the canceled shares were also canceled. The Companies may be liable to the owners of these shares, should the owners of these shares be identified. 8 (3) During the year ended December 31, 2002, the Company canceled 50,000 shares of Class A preferred stock and related dividends payable of $35,000, which was held by an affiliate of the Companies. (c) Claims from Creditors (1) At December 31, 1998, a creditor made a claim for approximately $20,000. Management contends the amount is not owed due to non-performance by the lessor. The amount has been due since February 1994. (2) At December 31, 1998, a creditor made a claim for approximately $19,000. Management contends the amount is not owed due to non-performance by the creditor. The amount has been due since June 1996. (d) Notes Payable - Substantially all of the Companies' notes payable are currently in default status (see Note 3). (e) Resignation of Principal Officer and Director - During the third quarter of 2002, a principal officer and director of the Companies resigned following an indictment for conspiracy to commit securities fraud to which he pled guilty. No charges or claims were or have since been made against the Companies or their other officers and directors. The Companies are of the opinion that this incident will not have any material adverse impact on the Companies. (f) Class B Preferred Stock Dividend - Pursuant to an agreement with Growth Fund, the Company agreed to pay a dividend on the Class B preferred stock on June 1, 2003, in cash equal to two percent of the value of the Class B Preferred Stock, or in restricted Class A common stock equal to three percent of the value of the Class B Preferred Stock. During 2003, a demand was made by Growth Fund through the circuit courts for the dividend payment, which the Companies had not paid. On March 10, 2005, the circuit court dismissed without prejudice this action for lack of prosecution by Growth Fund. (g) Purchase Commitment Cancellation - On July 19, 2001, the Company signed a purchase order to purchase 1,000 MEDTURFTM appliances over the next 24 months from MB Software Corporation at $450 per unit. The Companies paid $7,250 to MB Software, Inc., pursuant to the purchase order and the letter of intent between Medeway, Inc. ("Medeway") and the Companies (also dated July 19, 2001), which represented one-half of the total amount payable for 10 appliances and programming work to be performed, with the balance of $7,250 to be paid upon the delivery of said appliances. The MEDTURFTM appliance is a combination of a computer appliance and point of sale device, and is designed for physician practices, pharmacies, and home use. The MEDTURFTM appliance has a proprietary 'touchscreen' application installed. Medeway is the owner of the intellectual property, which is being used by over 4,500 physicians under contract with Medeway and/or its affiliates. The Companies planned to install the patent-pending system of VPS, the Company's wholly-owned subsidiary, which is developing a system for electronically transmitting prescriptions using the Internet. The purchase order and letter of intent have subsequently been canceled and there is no future purchase commitment due. 9 (h) Consulting Agreements (1) On August 1, 2001, the Companies entered into an agreement for consulting services with HEB, LLC, a Nevada limited liability company, based on a one-year term and a fee of $100,000, payable upon services rendered and presentation of an invoice. The consulting services included organizing and assisting the Company, including any subsidiaries or affiliates, in areas including, but not limited to, identifying and implementing appropriate incentive participation programs for prescribing physicians, pharmacies, pharmaceutical companies, HMO's and insurers. No amount has been provided for in these condensed consolidated financial statements as no services have been rendered. (2) During August 2001, the Companies entered into an agreement for consulting services and issued 250,000 shares of common stock as payment of services rendered. The balance due under the agreement is $70,000; however, the consultant has not performed any work and the Companies contend the consultant is in breach of contract due to non-performance. No accrual has been provided for in these condensed consolidated financial statements. (3) On April 21, 2003, the Companies entered into an agreement with a former consultant whereby the Companies owe this consultant a total of $199,650 as payment for services rendered. Under the terms of this agreement, this entire liability may be satisfied by the issuance of 6,655,000 shares of the Companies' common stock. As of June 30, 2006, these shares have not been issued and the liability of $199,650 is recorded in the accompanying condensed consolidated balance sheet in accrued expenses. (4) During the year ended December 31, 2003, the Companies renegotiated an existing consulting agreement with a related party for consulting services, defined by the agreement, totaling $125,000 through March 31, 2004, which is included in Accounts Payable - related party as of June 30, 2006. Also, during the year ended December 31, 2003, the Companies entered into two new consulting agreements with related parties for consulting services, defined by the agreements, totaling $67,500 through completion of the projects, or earlier termination by agreement of the parties, which is included in Accounts Payable - related party as of June 30, 2006. All three of these agreements provide for payment to be made in cash or, in lieu of cash, Securities and Exchange Commission Rule S-8 stock of the Companies. The two new agreements contain incentive clauses that could result in the issuance of up to 2,000,000 shares of the Companies' common stock. As of June 30, 2006, the Companies have not issued any shares of common stock related to these agreements. (5) An Agreement by and between the Company and ABSZ, LLC was entered into May 9, 2005 for the purpose of paying for accounting, auditing, tax and legal work to enable the company to make current filings with SEC and Internal Revenue Service in order to maintain its current stock registration and to operate as a viable public company. ABSZ agreed to provide oversight of all such work, obtaining invoice from and making direct payments to those providing the various services. This agreement was originally filed as Exhibit 10.8 of the Company's Form 10-KSB, dated December 31, 2003. Under terms of this agreement contributing members (Lenders) each loaned 500,000 unrestricted shares 10 of Class A Common Stock to ABSZ. Also under the terms of this agreement, the Company, upon filing all necessary documents with the SEC and meeting regulatory guidelines to issue said shares, agrees to issue 3,500,000 shares of unrestricted Class A Common Stock to ABSZ for equal distribution of 1,000,000 shares each to the Lenders with 500,000 shares to the Managing Member, or his designee. ABSZ has paid to date $33,774.23 for the benefit of the Company. An account payable of $105,000 has been recorded for the value of the 3,500,000 shares to be issued. (6) On April 17, 2006, the Company entered into a Stock Purchase Agreement with MLH Investments, LLC, a Nevada limited liability company, to sell 156,196,406 authorized but unissued shares of Class A Common Stock, par value $0.0001 per share, at a purchase price of $0.0001 per share ($15,619. in the aggregate). This transaction resulted in a change in control of the Company. (i) Securities and Exchange Act of 1934 Filings - Since December 31, 2003, the Companies have failed to comply with substantially all of the obligations imposed upon them by the Securities Exchange Act of 1934. The Companies were late in filing their annual reports on Form 10-KSB for the years ended December 31, 2004 and 2003, and their quarterly reports on Form 10-QSB for the quarterly periods ended in 2003 and 2004 and required current reports on Form 8-K. As a result, the Companies and their officers and directors could be subject to substantial civil and criminal penalties due to such non-compliance. There can be no assurance that substantial civil and criminal penalties will not be imposed. (j) At June 30, 2006 the Company had commitments to issue Class A Common Stock in excess of its authorized shares. Subsequent to June 30, 2006 the Company has taken steps to effect a reverse stock split and to increase its available authorized shares to resolve this situation. NOTE 5 - RELATED PARTY TRANSACTIONS During the year ended December 31, 2003, the Company converted two related party notes payable with principal balances of $120,000 and $139,003 and accrued interest of $28,899 and $93,042, respectively, at December 31, 2002, into two new notes with principal balances of $180,000 and $300,000 at December 31, 2003, accruing interest at 10% and 12%, respectively. The Company also entered into consulting and employment agreements totaling $192,500 during the year ended December 31, 2003, which is included in Accounts Payable - related party as of June 30, 2006. Also, there are unreimbursed expenses due to officers totaling $8,148 at June 30, 2006. On March 18, 2005, the Company issued a note payable in the amount of $4,000.00 to James Kemper Millard, President of ETCR and on April 25, 2005 issued an additional note of $10,000 to a relative of the president. The notes are due in 2006 and may be converted into stock equal in value to the principal amount of the Notes, with interest accrued thereon, calculated at 90% of the average bid price of said stock, in US dollars for the five business days immediately preceding and the five days immediately following March 31, 2006. If conversion is declined, re-payment of note shall occur as provided in paragraph (1) of said note. On January 5, 2006 the Company issued a note payable in the amount of $10,000 to Lee Tillman. The note is due in 2007 and may convert into stock equal in value to the principal amount of the notes, with the interest accrued thereon, calculated at 90% of the average bid price of said stock. 11 On March 22, 2006 the Company issued a note payable in the amount of $5,000 to Innovative Technologies. The note is due in 2007 and may convert into stock equal in value to the principal amount of the notes, with the interest accrued thereon, calculated at 90% of the average bid price of said stock. A repayment of $2,883 was made on the note payable during April 2006. NOTE 6 - JOINT VENTURE AGREEMENT On July 30, 2003, the Commonwealth of Kentucky, awarded a contract to VPS Holding, LLC ("VPSH") a Kentucky limited liability company incorporated on August 29, 2002, by the sole member and manager, James Millard, the current President and CEO of the Companies. The contract awarded allowed VPSH to lead a pilot project, in Perry and Harlan counties, at medical, clinical, and pharmacy facilities. The project will be conducted by a consortium of companies under license to VPSH, that includes Envoii, Inc., a San Francisco, California, software developer, and Computer Information Systems, Inc., a London, Kentucky, consulting firm and solutions provider for information technology, both of which are privately-held corporations. In order to perform under the terms and conditions of this state contract, VPSH will license the technologies from each corporation for a nominal fee. Any benefits or revenues, derived from the use of technology acquired by VPSH, shall pass directly through to the Companies, under the terms of the Joint Venture Agreement. The license to use and develop technology, intellectual property, and know-how related to prescription drug monitoring systems and all other matters pertaining to the healthcare industry was obtained pursuant to the terms of a Patent License Agreement and Release dated January 5, 2004, from the Companies. This Patent License Agreement and Release was granted with the understanding that VPSH would enter into an agreement with Envoii Healthcare, LLC, a Nevada limited liability company, to undertake the funding and development of the Verified Prescription Safeguards "Veriscrip (TM)" prescription drug monitoring system and in consideration of payments to be received by the Companies. Envoii Healthcare, LLC, owns the exclusive rights in the healthcare channel of trade rights to the "Envoii (TM)" system. The Patent License Agreement and Release was executed by the Companies, VPSH, and Envoii Healthcare, LLC, wherein Envoii Healthcare, LLC, in conjunction with Envoii, Inc., agreed to undertake the development of the real-time prescription drug monitoring system and raise the necessary funding for the project. The Joint Venture Agreement and the Patent License Agreement and Release were under negotiation prior to submission of the response to the Kentucky Request for Proposal on April 9, 2003, but executed thereafter, both of which have subsequently been provided and fully disclosed to the Commonwealth of Kentucky. Under the terms of the Patent License Agreement and Release, contract revenues, if any, other than the grant for the pilot project resulting from the development, implementation, and/or sale of real-time controlled substance prescription monitoring technology to any third party including governmental entities, are to be distributed to Envoii Healthcare, LLC (75%), VPSH (25%), with the Companies receiving 100% of the benefits and revenues distributed to VPSH. The contract with the Commonwealth of Kentucky governs the division of proceeds from the pilot project grant funding from the U. S. Department of Justice, Bureau of Justice Assistance. The terms of the contract were completed in April 2005. 12 NOTE 7 - VERISCRIP (TM) SYSTEM During January through April 2004, the Veriscrip (TM) System was programmed and beta-tested at the two pilot sites in Harlan and Perry counties in Southeastern Kentucky in preparation for implementing the project under the terms of the contract. During this period, the system was previewed by several third parties, including a state licensure board president and a key legislator. On April 28, 2004, the first real-time electronic prescription was transmitted and received using the Veriscrip (TM) System at a rural clinic in Harlan County, Kentucky. The pilot project was also conducted at a medical center practice and pharmacy in Hazard, Kentucky, and was concluded on September 23, 2004. On October 15, 2004, the first public demonstration of the Veriscrip (TM) System was conducted at the National Technology Meeting for State Prescription Drug Monitoring Programs in Lexington, Kentucky, sponsored by the National Alliance for Model State Drug Laws. In December 2004, the Companies contracted with a full-time lobbyist, Babbage Cofounder/InterSouth, Inc., of Lexington, Kentucky, for the duration of the 2005 Kentucky General Assembly, which concluded in April 2005, and unanimously passed Senate Bill 2, which provides for the preliminary framework for establishing an e-health information exchange in Kentucky. The University of Louisville ("U of L") School of Public Health and Information Sciences initiated the assessment phase of the project in October 2004, and the Assessment Report was completed and delivered to the Kentucky Office of Technology on May 12, 2005. The Office of Technology released the U of L Assessment Report as a public document on August 19, 2005. The Assessment Report recommends, "there may be significant benefits for the state to move ahead now with the proposed technology, either as an alternative or an enhancement for the existing KASPER ("Kentucky All-Schedule Prescription Electronic Reporting" system), or, potentially, as a plug-in to KASPER, providing a way for prescriber data to move in real-time from prescriber to dispenser to the regulatory side," but notes, "The major barrier to implementation will be resistance by physicians because of productivity costs and opportunity costs in the context of emerging health information exchange technologies." The Assessment Report also includes an appendix in which the U of L assessment concludes the Veriscrip (TM) System completely meets 18 criteria, and partially meets another 7 criteria, of the 60 Recommendations for Comparing Electronic Prescribing Systems made by the RAND Electronic Prescribing Advisory Board. Seventeen of the 60 recommendations are not expected to be met until 2007. The Verscrip (TM) System meets three of those future criteria completely, and one partially. During the next twelve months, the Companies expect to present the findings of the University of Louisville Assessment Report to interested state and federal regulatory agencies, as well as an accompanying report prepared for the California HealthCare Foundation in 2004 that concludes productivity and opportunity costs are minimal, if any, and additional savings may be accrued from "downstream time savings, chiefly from electronic data transmission and more thorough order entry (resulting in fewer pharmacy callbacks for clarification and revision)." The Companies also plan to have a presence at national meetings and conferences of law enforcement and regulatory professions, at which to demonstrate the Veriscrip (TM) System. At the same time, the Veriscrip (TM) System is constantly being improved and upgraded to meet and exceed emerging technology improvements. The Companies' working capital requirements for the foreseeable future will vary based upon a number of factors, including the cost to finish development of the Veriscrip (TM) System, and the costs associated with launching the system if successfully developed, the acceptance of the system and market penetration 13 along with other factors that may not be foreseeable at this time. The Companies have not made any commitments for capital expenditures. Management believes that the Companies will need at least $2,850,000 in financing to fund operations, pay off existing liabilities, and pay for required development work during the next twelve months. The Companies currently have liabilities in amounts in excess of $2,000,000, substantially all of which are in default, and the Companies do not have the funds to repay the amounts owing. The Companies have no commitments to provide additional funding and there can be no assurance that the Companies will be able to obtain additional funding on satisfactory terms, or at all. If the Companies do not receive the needed funding, they will not be able to execute their business plan. NOTE 8 - SUBSEQUENT EVENTS Effective June 15, 2006, the Company entered into a letter of intent with H.E.B. LLC, a Nevada corporation, hereafter "HEB," and MB Holding Corporation, a Nevada corporation and wholly owned subsidiary of HEB, hereafter "MBH," pursuant to which the Company would acquire MBH in exchange for shares of the Company's common stock. MBH is the sole member of VPS Holding, LLC, a Kentucky limited liability company, hereafter "VPSH", and Envoii Healthcare, LLC, a Nevada limited liability company, hereafter "Envoii." VPSH and Envoii developed and own certain technologies and led a consortium to conduct the first prescription drug monitoring pilot project in real time in the United States. Under the Stock Exchange Agreement, HEB is to receive 34,000,000 post split shares of the Company's common stock in exchange for all of the issued and outstanding shares of MBH. Effective July 20, 2006, the Company entered into a Stock Exchange Agreement with HEB and MBH incorporating the terms of the letter of intent (the "Stock Exchange Agreement"). The Stock Exchange Agreement was authorized and approved by the Company's board of directors by written consent dated July 20, 2006. The stock exchange transaction is subject to several conditions, including: * The cancellation of all of the Company's outstanding Class B Common Stock, par value $.01 per share ("Class B Common Stock"); * The adoption and approval of a 1 for 100 Reverse Stock Split; * The adoption and approval of the Amended and Restated Certificate; and * The agreement of the holders of approximately $2,600,000 of the Company's outstanding debt to exchange such debt for 2,600,000 post split shares of the Company's common stock. Mr. Scott Haire owns 90% of the membership interest in HEB and as manager, has voting control of HEB. Mr. Haire is also the sole member and the manager of MLH Investments LLC, a Nevada limited liability company, hereafter "MLH". On April 14, 2006, the Company, Mr. James K. Millard, our President and Chief Executive Officer, Mr. James Arch and MLH entered into a stock purchase agreement pursuant to which MLH acquired from the Company 156,196,406 newly issued shares of our Class A Common Stock for $15,619.64 and acquired from Mr. Arch all of our issued and outstanding shares of Class B Common Stock for $100. As a result of this transaction, Mr. Haire obtained effective voting control over a majority of the Company's outstanding voting securities.Also effective July 20, 2006, pursuant to the terms of a Stock Cancellation Agreement between the Company and MLH, all of the issued and outstanding shares of Class B Common Stock were cancelled. 14 Effective July 21, 2006 the Company received written consent of the Majority Stockholders, holding approximately 66% of the aggregate shares of Class A Common Stock entitled to vote, in accordance with Delaware General Corporation Law, adopted and approved, by written consent dated July 21, 2006, the 1 for 100 Reverse Stock Split and Amended and Restated Certificate. Accordingly, all necessary corporate approvals in connection with the matter referred to herein have been obtained. There will not be a meeting of stockholders and none is required under the Delaware General Corporate Law because the corporate action has been approved by written consent of the holders of a majority of the outstanding shares of Class A Common Stock. Final closing of the agreement is still pending. The reverse stock split has not yet been completed. [Balance of this page intentionally left blank.] 15 Item 2. Management's Discussion and Analysis or Plan of Operation. The following discussion and analysis provides information which management believes is relevant to an assessment and understanding of the Company's plan of operation and financial condition. The discussion should be read in conjunction with the consolidated financial statements and notes thereto. Financial Position The Company had $698 in cash as of June 30, 2006 and no other assets. The Company's liabilities were $2,676,177 and it had a working capital deficit of ($2,675,479). During the three months ended June 30, 2006 the Company had no revenues and it had no revenues for the comparable period from the prior year. During the six months ended June 30, 2006, the Company had general and administrative expenses of $97,038 and interest expenses of $50,487, and net losses of $147,525, compared to general and administrative expenses of $72,682 and interest expenses of $42,472, and net losses of $98,487, for the comparable period from the prior year. The Company does not have sufficient funds to execute its business plan or pay its current liabilities. There is no assurance that the Company will be successful in developing its electronic system to provide solutions for the prescription drug and healthcare industry or the Veriscrip(TM) System. Plan of Operation Equity Technologies & Resources, Inc., is a development stage company and has no current business operations. In December 2000 the Company acquired all of the common stock in Verified Prescription Safeguards, Inc., with the intention of developing an electronic system to provide solutions for the prescription drug and healthcare industry. The Company has a business plan and will seek to obtain favorable funding from sources outside its principal shareholders during the next twelve months. There can be no assurance that the Company will be successful in obtaining additional funding. In 2002, the Company lobbied for House Bill 26 in the Kentucky General Assembly that directed the Kentucky Office of Technology to apply for a United States Department of Justice Bureau of Justice Assistance grant to conduct a pilot project of its real-time prescription drug monitoring system in two rural Kentucky counties. On July 30, 2003, the Commonwealth of Kentucky, awarded a contract to VPS Holding, LLC, ("VPSH") a Kentucky limited liability company incorporated on August 29, 2002, by the sole member and manager, James Millard, the current President and CEO of the Company. The contract awarded allowed VPSH to lead a pilot project, in Perry and Harlan counties, Kentucky, at medical, clinical, and pharmacy facilities. After withstanding a competitive challenge to the contract, the planning for implementing the project commenced in November 2003. The project was conducted by a consortium of companies under license to VPSH, that includes Envoii Healthcare, LLC, a Nevada corporation, and Computer Information Systems, Inc., a London, Kentucky, consulting firm and solutions provider for information technology, both of which are privately-held corporations. In order to perform under the terms and conditions of the state contract, VPSH, licensed the technologies from each corporation for a nominal fee. Any benefits or revenues derived from the use of technology acquired by VPSH, shall pass directly through to the Company, under the terms of a Joint Venture Agreement. 16 The license to use and develop technology, intellectual property, and know-how related to prescription drug monitoring systems and all other matters pertaining to the healthcare industry was obtained pursuant to the terms of a Patent License Agreement and Release dated January 5, 2004, from the Company. This License and Release was granted with the understanding that VPSH would enter into an agreement with Envoii Healthcare to undertake the funding and development of the Verified Prescription Safeguards VeriscripTM prescription drug monitoring system and in consideration of payments to be received by the Company. Envoii Healthcare owns the exclusive rights in the healthcare channel of trade rights to the EnvoiiTM security system. A Joint Venture Agreement was executed by VPSH and Envoii Healthcare, wherein Envoii Healthcare in conjunction with RxNT, Inc., a Baltimore, Maryland, pharmaceutical software developer, agreed to undertake the development of the real-time prescription drug monitoring system and raise the necessary funding for the project. This Agreement and the Patent License Agreement and Release were under negotiation prior to submission of the response to the Kentucky Request for Proposal on April 9, 2003, but executed thereafter, both of which have subsequently been provided and fully disclosed to the Commonwealth of Kentucky. Under the terms of the Joint Venture Agreement, contract revenues, if any, other than the grant for the pilot project resulting from the development, implementation, and/or sale of real-time controlled substance prescription monitoring technology to any third party including governmental entities, are to be distributed to Envoii Healthcare, LLC (75%), VPSH (25%), with the Company receiving 100% of the benefits and revenues distributed to VPSH. The contract with the Commonwealth of Kentucky governs the division of proceeds from the pilot project grant funding. During January-April 2004 the Veriscrip(TM) System was programmed and beta-tested at the two pilot sites in Harlan and Perry counties in Southeastern Kentucky in preparation for implementing the project under the terms of the contract. During this period, the system was previewed by several third parties, including a state licensure board president and a key legislator. On April 28, 2004, the first real-time electronic prescription was transmitted and received using the Veriscrip(TM) System at a rural clinic in Harlan County, Kentucky. The pilot project was also conducted at a medical center practice and pharmacy in Hazard, Kentucky, and was concluded on September 23, 2004. On October 15, 2004, the first public demonstration of the Veriscrip(TM) System was conducted at the National Technology Meeting for State Prescription Drug Monitoring Programs in Lexington, Ky., sponsored by the National Alliance for Model State Drug Laws. In December 2004, the Company contracted with a full-time lobbyist, Babbage Cofounder/InterSouth, Inc., of Lexington, Kentucky, for the duration of the 2005 Kentucky General Assembly, which concluded in April, and unanimously passed Senate Bill 2, which provides for the preliminary framework for establishing an e-health information exchange in Kentucky. The University of Louisville School of Public Health and Information Sciences initiated the assessment phase of the project in October 2004, and the Assessment Report was completed and delivered to the Kentucky Office of Technology on May 12, 2005. The Office of Technology released the U of L Assessment Report as a public document on August 19, 2005. The Assessment Report states, "there may be significant benefits for the state to move ahead now with the proposed technology, either as an alternative or an enhancement for the existing KASPER ["Kentucky All-Schedule Prescription Electronic Reporting" system], or, potentially, as a plug-in to KASPER, providing a way for prescriber data to move in real-time from prescriber to dispenser to the regulatory side," 17 but notes, "[t]he major barrier to implementation will be resistance by physicians because of productivity costs and opportunity costs in the context of emerging health information exchange technologies." The Assessment Report also includes an appendix in which the U of L assessment concludes the Veriscrip(TM) System completely meets 18 criteria, and partially meets another 7 criteria, of the 60 Recommendations for Comparing Electronic Prescribing Systems made by the RAND Electronic Prescribing Advisory Board. Seventeen of the 60 recommendations are not expected to be met until 2007. The Veriscrip(TM) System meets three of those future criteria completely, and one partially. During the next twelve months, the Company expects to present the findings of the University of Louisville assessment report to interested state and federal regulatory agencies, as well as an accompanying report prepared for the California HealthCare Foundation in 2004 that concludes productivity and opportunity costs are minimal, if any, and additional savings may be accrued from "downstream time savings, chiefly from electronic data transmission and more thorough order entry (resulting in fewer pharmacy callbacks for clarification and revision." The Company also plans to have a presence at national meetings and conferences of law enforcement and regulatory professions, at which to demonstrate the Veriscrip(TM) System. At the same time, the Veriscrip(TM) System is constantly being improved and upgraded to meet and exceed emerging technology improvements under the terms of the Joint Venture Agreement. The Company's working capital requirements for the foreseeable future will vary based upon a number of factors, including the cost to finish development of the Veriscrip(TM) System, and the costs associated with launching the system if successfully developed, the acceptance of the system and market penetration along with other factors that may not be foreseeable at this time. The Company has not made any commitments for capital expenditures. Management believes that the Company will need at least $2,850,000 in financing to fund operations, pay off existing debt and pay for required development work during the next twelve months. We currently have debt obligations in amounts in excess of $2,600,000, substantially all of which are in default, and we do not have the funds to repay the amounts owing. We have no commitments to provide additional funding and there can be no assurance that we will be able to obtain additional funding on satisfactory terms, or at all. If we do not receive the needed funding, we will not be able to execute our business plan. Third Party Claims and Contingencies In addition to the foregoing, we are subject to a number of additional potential third party claims. These potential claims include the following: On December 31, 1997, the Company canceled 168 Class A shares of common stock. These shares had been authorized for issue during prior years. No details were available as to whom the shares should be issued. Management canceled these shares, which resulted in contributed capital of $8,393. On December 31, 1997, the Company canceled 98,000 shares of Class A preferred stock, 272,200 shares of Class B preferred stock, and 10,200 shares of Class C preferred stock. No record of owners of these shares could be determined. The results of the cancellation of these shares was contributed capital of $380,400. All dividends associated with the canceled shares were also canceled. The Company may be liable to the owners of these shares, should the owners of these shares be identified. 18 During the year ended December 31, 2002, the Company canceled 50,000 shares of Class A preferred stock and related dividends payable of $35,000, which was held by an affiliate of the Company. At December 31, 1998, a creditor made a claim for approximately $20,000. Management contends the amount is not owed due to non-performance by the lessor. The amount has been due since February 1994. At December 31, 1998, a creditor made a claim for approximately $19,000. Management contends the amount is not owed due to non-performance by the creditor. The amount has been due since June 1996. Substantially all of the Company's notes payable are currently in default. During the third quarter of 2002, a principal officer and director of the Company resigned following an indictment for conspiracy to commit securities fraud to which he plead guilty. No charges or claims were or have since been made against the Company or their other officers and directors. Management is of the opinion that this incident will not have any material adverse impact on the Company. Pursuant to an agreement with Growth Fund Partnership, Inc., the Company agreed to pay a dividend on the Class B preferred stock on June 1, 2003, in cash equal to two percent of the value of the Class B Preferred Stock, or in restricted Class A common stock equal to three percent of the value of the Class B Preferred Stock. On August 15, 2003, a demand was made by Growth Fund Partnership, Inc., for the dividend payment, which the Company did not pay. During August 2001, the Company entered into an agreement for consulting services and issued 250,000 shares of common stock as payment of services rendered. The balance due under the agreement is $70,000, however, the consultant has not performed any work and the Company contends the consultant is in breach of contract due to non-performance. On April 21, 2003, the Company entered into an agreement with a former consultant whereby the Company owes this consultant a total of $199,650 as payment for services rendered. Under the terms of this agreement, this entire liability may be satisfied by the issuance of 6,655,000 shares of the Company's common stock. As of June 30, 2006, these shares have not been issued and the liability of $199,650 is recorded in the accompanying consolidated balance sheet in accrued expenses. On March 18, 2005 the Company issued a note payable in the amount of $4,000 to James Kemper Millard, President of ETCR and on April 25, 2005 issued an additional note of $10,000 to a relative of the President. The notes are due in 2006 and may convert into stock equal in value to the principal amount of the notes, with the interest accrued thereon, calculated at 90% of the average bid price of said stock, in US dollars for the five business days immediately preceeding and the five days immediately following March 31, 2006. If conversion is declined, re-payment of note shall occur as provided in paragraph (1) of said note. On January 5, 2006 the Company issued a note payable in the amount of $10,000 to Lee Tillman. The note is due in 2007 and may convert into stock equal in value to the principal amount of the notes, with the interest accrued thereon, calculated at 90% of the average bid price of said stock. 19 On March 22, 2006 the Company issued a note payable in the amount of $5,000 to Innovative Technologies. The note is due in 2007 and may convert into stock equal in value to the principal amount of the notes, with the interest accrued thereon, calculated at 90% of the average bid price of said stock. A repayment of $2,883 was made on the note payable during April 2006. An Agreement by and between the Company and ABSZ, LLC was entered into May 9, 2005 for the purpose of paying for accounting, auditing, tax and legal work to enable the Company to make current filings with SEC and Internal Revenue Service in order to maintain its current stock registration and to operate as a viable public company. ABSZ agreed to provide oversight of all such work, obtaining invoices from and making direct payments to those providing the various services. This agreement was originally filed as Exhibit 10.8 of the Company's Form 10-KSB, dated December 31, 2003. Under terms of this agreement contributing members (Lenders) each loaned 500,000 unrestricted shares of Class A Common Stock to ABSZ. Also under the terms of this agreement, the Company, upon filing all necessary documents with the SEC and meeting regulatory guidelines to issue said shares, agrees to issue 3,500,000 shares of unrestricted Class A Common Stock to ABSZ for equal distribution of 1,000,000 shares each to the Lenders with 500,000 shares to the Managing Member, or his designee. ABSZ has paid to date $33,774 for the benefit of the Company. An account payable of $105,000 has been recorded for the value of the 3,500,000 shares to be issued. From December 31, 2003 through December 2005, the Company failed to comply with substantially all of the obligations imposed upon it by the Securities Exchange Act of 1934 Act (the "1934 Act") and was delinquent in filing its annual reports on Form 10-KSB for the periods ended December 31, 2003 and December 31, 2004, and were delinquent in filing our quarterly reports on Form 10-QSB for the quarterly periods ending in 2003 and 2004 and required current reports on Form 8-K. As a result, the Company and its officers and directors could be subject to substantial civil and criminal penalties due to such non-compliance. There can be no assurance that substantial civil and criminal penalties will not be imposed. Off Balance Sheet Arrangements The Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors. Critical Accounting Policies Due to the lack of current operations and limited business activities, the Company does not have any accounting policies that it believes are critical to facilitate an investor's understanding of the Company's financial and operating status. Recent Accounting Pronouncements The Company has not adopted any new accounting policies that would have a material impact on the Company's financial condition, changes in financial conditions or results of operations. 20 Forward-Looking Statements When used in this Form 10-QSB or other filings by the Company with the Securities and Exchange Commission, in the Company's press releases or other public or shareholder communications, or in oral statements made with the approval of an authorized officer of the Company's executive officers, the words or phrases "would be", "will allow", "intends to", "will likely result", "are expected to", "will continue", "is anticipated", "estimate", "project", or similar expressions are intended to identify "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. The Company cautions readers not to place undue reliance on any forward-looking statements, which speak only as of the date made, and advises readers that forward-looking statements involve various risks and uncertainties. The Company does not undertake, and specifically disclaims any obligation to update any forward-looking statements to reflect occurrences or unanticipated events or circumstances after the date of such statement. Item 3. Controls and Procedures We have evaluated, with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of the design and operation of our disclosure controls and procedures as June 30, 2006, pursuant to Exchange Act Rule 13a-15. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective. There have been no significant changes to our internal controls over financial reporting during the period ended June 30, 2006, that have materially affected, or that are reasonably likely to materially affect, our internal controls over financial reporting. PART II -- OTHER INFORMATION Item 1. Legal Proceedings. None Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. Effective April 14, 2006, the Company entered into a Stock Purchase Agreement with MLH Investments, LLC ("MLH"), a Nevada limited liability corporation, where MLH purchased 156,196,406 shares of authorized but unissued shares of Class A Common Stock, par value $0.0001 per share, at a purchase price of $0.0001 per share ($15,619.64 in the aggregate). Simultaneously, an additional 100,000 shares of Class B Common Stock were also purchased by MLH Investments from James Arch, Chairman of the Board of the Company, at a purchase price of $0.001 per share ($100 in the aggregate). The sale of the Class B shares was a private transaction. The sale of the Class A shares was approved by unanimous written consent of the Board of Directors of the Company. The reasons behind the consent were (a) the insolvency of the Company and the inability to obtain sufficient funding to execute its business plan, (b) the Company's unsuccessful attempts to obtain 21 funding from any other sources, (c) the fact that without an immediate infusion of operating capital, the Company will be forced to cease operating and liquidate, (d) MLH offered to immediately wire more than $15,000 to the Company's account, (e) MLH will explore a potential restructuring of the debt and equity of the Company on terms to be determined, (f) this is the only funding alternative available to the Company, and (g) the Board determined all shareholders and creditors of the Company will be better served by the stock purchase than liquidation. The Company did not use an underwriter in connection with the above described transaction and the transaction was exempt from registration pursuant to Section 4(2) of the Securities Act of 1933 and Rule 506 as promulgated thereunder. Effective June 15, 2006, the Company entered into a letter of intent with H.E.B. LLC, a Nevada corporation, hereafter "HEB," and MB Holding Corporation, a Nevada corporation and wholly owned subsidiary of HEB, hereafter "MBH," pursuant to which the Company would acquire MBH in exchange for shares of the Company's common stock. MBH is the sole member of VPS Holding, LLC, a Kentucky limited liability company, hereafter "VPSH", and Envoii Healthcare, LLC, a Nevada limited liability company, hereafter "Envoii." VPSH and Envoii developed and own certain technologies and led a consortium to conduct the first prescription drug monitoring pilot project in real time in the United States. Under the Stock Exchange Agreement, HEB is to receive 34,000,000 post split shares of the Company's common stock in exchange for all of the issued and outstanding shares of MBH. Effective July 20, 2006, the Company entered into a Stock Exchange Agreement with HEB and MBH incorporating the terms of the letter of intent (the "Stock Exchange Agreement"). The Stock Exchange Agreement was authorized and approved by the Company's board of directors by written consent dated July 20, 2006. The stock exchange transaction is subject to several conditions, including: * The cancellation of all of the Company's outstanding Class B Common Stock, par value $.01 per share ("Class B Common Stock"); * The adoption and approval of the Reverse Stock Split; * The adoption and approval of the Amended and Restated Certificate; and * The agreement of the holders of approximately $2,600,000 of the Company's outstanding debt to exchange such debt for approximately 2,600,000 post split shares of the Company's common stock. Mr. Scott Haire owns 90% of the membership interest in HEB and as manager, has voting control of HEB. Mr. Haire is also the sole member and the manager of MLH Investments LLC, a Nevada limited liability company, hereafter "MLH". On April 14, 2006, the Company, Mr. James K. Millard, our President and Chief Executive Officer, Mr. James Arch and MLH entered into a stock purchase agreement pursuant to which MLH acquired from the Company 156,196,406 newly issued shares of our Class A Common Stock for $15,619.64 and acquired from Mr. Arch all of our issued and outstanding shares of Class B Common Stock for $100. As a result of this transaction, Mr. Haire obtained effective voting control over a majority of the Company's outstanding voting securities. 22 Also effective July 20, 2006, pursuant to the terms of a Stock Cancellation Agreement between the Company and MLH, all of the issued and outstanding shares of Class B Common Stock were cancelled. Item 3. Defaults Upon Senior Securities. The Company owes over $1,200,000 in principal and accrued interest under outstanding notes payable. Substantially all of the Company's notes payable are currently in default. Item 4. Submission of Matters to a Vote of Security Holders. Effective July 21, 2006 the Company received written consent of the Majority Stockholders, holding approximately 66% of the aggregate shares of Class A Common Stock entitled to vote, in accordance with Delaware General Corporation Law, adopted and approved, by written consent dated July 21, 2006, the Reverse Stock Split and Amended and Restated Certificate. Accordingly, all necessary corporate approvals in connection with the matter referred to herein have been obtained. There will not be a meeting of stockholders and none is required under the Delaware General Corporate Law because the corporate action has been approved by written consent of the holders of a majority of the outstanding shares of Class A Common Stock. Item 5. Other Information. None Item 6. Exhibits and Reports on Form 8-K. The following agreements were entered into with resulting reports during and subsequent to this reporting period and have been properly disclosed: 1. Stock Exchange Agreement dated July 20, 2006, 2. Stock Cancellation Agreement dated July 20, 2006 between the Company and MLH, all of the issued and outstanding shares of Class B Common Stock were cancelled. 3. On July 21, 2006, pursuant to Debt Exchange Agreements, the holders of approximately $2,600,000 of the Company's outstanding debt agreed to exchange such debt for approximately 2,600,000 post split shares of common stock. 4. On July 25, 2006 the Form 14C, Preliminary Information Statement was filed reporting Majority Shareholder approval setting the Record Date as July 21, 2006, a 100:1 reverse stock split of the issued and outstanding shares of the Company's Class A Common Stock and an Amended and Restated Certificate of Incorporation. Exhibit No. Description ---------- -------------------------------- 3(i).1 Certificate of Incorporation, dated March 3, 1988 (Incorporated by reference to Exhibit 3(i).1 of the Company's Form 10-KSB, dated December 31, 2003) 23 3(i).2 Articles of Amendment to the Articles of Incorporation, dated December 5, 1988 (Incorporated by reference to Exhibit 3(i).2 of the Company's Form 10-KSB, dated December 31, 2003) 3(i).3 Certificate of Amendment to the Certificate of Incorporation, dated January 20, 1989 (Incorporated by reference to Exhibit 3(i).3 of the Company's Form 10-KSB, dated December 31, 2003) 3(i).4 Certificate of Amendment to the Certificate of Incorporation, dated March 13, 1989 (Incorporated by reference to Exhibit 3(i).4 of the Company's Form 10-KSB, dated December 31, 2003) 3(i).5 Certificate of Amendment to the Certificate of Incorporation, dated September 30, 1991 (Incorporated by reference to Exhibit 3(i).5 of the Company's Form 10-KSB, dated December 31, 2003) 3(i).6 Certificate of Amendment to the Certificate of Incorporation, dated February 14, 1992 (Incorporated by reference to Exhibit 3(i).6 of the Company's Form 10-KSB, dated December 31, 2003) 3(i).7 Certificate of Amendment to the Certificate of Incorporation, dated February 2, 2000 (Incorporated by reference to Exhibit 3(i).7 of the Company's Form 10-KSB, dated December 31, 2003) 3(i).8 Certificate of Amendment to the Certificate of Incorporation, dated July 21, 2000 (Incorporated by reference to Exhibit 3(i).8 of the Company's Form 10-KSB, dated December 31, 2004) 3(i).9 Certificate of Amendment to the Certificate of Incorporation, dated August 1, 2002 (Incorporated by reference to Exhibit 3(i).8 of the Company's Form 10-KSB, dated December 31, 2003) 3(ii).1 By-Laws (Incorporated by reference to Exhibit 3(ii).1 of the Company's Form 10-KSB, dated December 31, 2003) 10.1 Consulting Agreement by and between the Company and Rusbar Financial Services, Inc., dated April 2001 (Incorporated by reference to Exhibit 10.1 of the Company's Form 10-KSB, dated December 31, 2003) 10.2 Consulting Agreement by and between the Company and Harry M. Zachem, dated May 14, 2001(Incorporated by reference to Exhibit 10.2 of the Company's Form 10-KSB, dated December 31, 2003) 10.3 Consulting Agreement by and between the Company, Verified Prescription Safeguards, Inc. and Fairmund International Services, Ltd., dated April 21, 2003 (Incorporated by reference to Exhibit 10.3 of the Company's Form 10-KSB, dated December 31, 2003) 10.4 Consulting Agreement by and between the Company and Internet Capital.com, LLC, dated July 2003 (Incorporated by reference to Exhibit 10.4 of the Company's Form 10-KSB, dated December 31, 2003) 24 10.5 Consulting Agreement by and between the Company and Innovative Technologies, dated October, 2003 (Incorporated by reference to Exhibit 10.5 of the Company's Form 10-KSB, dated December 31, 2003) 10.6 Employment Agreement by and between the Company and James Kemper Millard, dated December 31, 2003 (Incorporated by reference to Exhibit 10.6 of the Company's Form 10-KSB, dated December 31, 2003) 10.7 Patent License Agreement and Release by and between the Company, Verified Prescription Safeguards, Inc., Envoii Healthcare, LLC, and VPS Holdings, LLC, dated January 5, 2004 (Incorporated by reference to Exhibit 10.7 of the Company's Form 10-KSB, dated December 31, 2003) 10.8 Stock Loan Agreement, by and between the Company and the parties referenced therein, dated May 9, 2005 (Incorporated by reference to Exhibit 10.8 of the Company's Form 10-KSB, dated December 31, 2003) 10.9 Promissory Note payable to Kentrust, Inc., dated November 14, 1998 (Incorporated by reference to Exhibit 10.9 of the Company's Form 10-KSB, dated December 31, 2003) 10.10 Promissory Note payable to Kentrust, Inc., dated December 23, 1998 (Incorporated by reference to Exhibit 10.10 of the Company's Form 10-KSB, dated December 31, 2003) 10.11 Promissory Note payable to Kentrust, Inc., dated January 27,1999 (Incorporated by reference to Exhibit 10.11 of the Company's Form 10-KSB, dated December 31, 2003) 10.12 Promissory Note payable to James Arch, dated August 1, 2000 (Incorporated by reference to Exhibit 10.12 of the Company's Form 10-KSB, dated December 31, 2003) 10.13 Promissory Note payable to Lee M. Tillman, dated September 7, 2005 (Incorporated by reference to Exhibit 10.13 of the Company's Form 10-KSB, dated December 31, 2003) 10.14 Promissory Note payable to FV Investments, dated July 31, 2003 (Incorporated by reference to Exhibit 10.14 of the Company's Form 10-KSB, dated December 31, 2003) 10.15 Promissory Note payable to James Arch, dated September 15, 2003 (Incorporated by reference to Exhibit 10.15 of the Company's Form 10-KSB, dated December 31, 2003) 10.16 Promissory Note payable to Cora Spence Carrick, dated April 27, 2005 (Incorporated by reference to Exhibit 10.16 of the Company's Form 10-KSB, dated December 31, 2003) 25 10.17 Promissory Note payable to James Kemper Millard, dated March 18, 2005 (Incorporated by reference to Exhibit 10.17 of the Company's Form 10-KSB, dated December 31, 2003) 10.18 Promissory Note payable to Lee M. Tillman, dated January 5, 2006 (Incorporated by reference to Exhibit 10.18 of the Company's Form 10-QSB, dated March 31, 2005) 10.19 Stock Purchase Agreement by and between the Company and MLH Investments, LLC, dated April 14, 2006 (Incorporated by reference to Exhibit 10.19 of the Company's Form 10-KSB, dated December 31, 2005). 10.20 Promissory Note payable to Innovative Technologies dated March 22, 2006 (Incorporated by reference to Exhibit 10.20 of the Company's From 10KSB, dated December 31, 2005). 10.21 Stock Exchange Agreement dated July 20, 2006 between Equity Technologies & Resources, Inc., MB Holding Corporation, and H.E.B., LLC., (Previously filed as Exhibit 10.20) 10.22 This Stock Cancellation Agreement (Class B Common Stock) dated July 20, 2006 between Equity Technologies & Resources, Inc., and MLH INVESTMENTS, LLC., (Previously filed as Exhibit 10.21.) 10.23 Form of Debt Exchange Agreement between Equity Technologies & Resources, Inc., and Holder (Previously filed as Exhibit 10.22.) 31.1* Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 31.2* Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32.1* Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 --------------- * Filed herewith. SIGNATURES 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. EQUITY TECHNOLOGIES & RESOURCES, INC. (Registrant) Date: August 10, 2006 By /s/ James K. Millard ---------------------- James K. Millard Director, CEO, President and CFO 26