UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended February 28, 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 0-21679
RETURN ASSURED INCORPORATED
(Exact name of registrant as specified in its charter)
Delaware 13-3896069
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1901 Avenue of the Stars Suite 1710
Los Angeles, California
90067
(Address of principal executive offices) (Zip Code)
887-807-4664
(Registrant's 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 12 months, and (2) has been subject to such filing requirements for
the past 90 days. Yes |X | No | |
As of April 19, 2001, there were 9,113,265 shares of the registrant's
common stock, par value $0.001 issued and outstanding.
RETURN ASSURED INCORPORATED
NOVEMBER 30, 2000 QUARTERLY REPORT ON FORM 10-QSB
TABLE OF CONTENTS
Page Number
Special Note Regarding Forward Looking Information ...........................2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements .........................................................3
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations..................................................12-13
Item 3. Quantitative and Qualitative Disclosures About Market Risk...................14
PART II - OTHER INFORMATION
Item 1. Legal Proceedings............................................................14
Item 2. Changes in Securities and Use of Proceeds....................................15
Item 3. Defaults Upon Senior Securities..............................................15
Item 4. Submission of Matters to a Vote of Security Holders..........................15
Item 5. Other Information............................................................15
Item 6. Exhibits and Reports on Form 8-K..........................................16-17
References in this report to "we", "us", "our" and similar terms means
Return Assured Incorporated, a Delaware corporation, formerly Hertz Technology
Group, Inc.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
To the extent that the information presented in this Quarterly Report on
Form 10-QSB for the quarter ended February 28, 2001 discusses financial
projections, information or expectations about our products or markets, or
otherwise makes statements about future events, such statements are
forward-looking. We are making these forward-looking statements in reliance on
the safe harbor provisions of the Private Securities Litigation Reform Act of
1995. Although we believe that the expectations reflected in these
forward-looking statements are based on reasonable assumptions, there are a
number of risks and uncertainties that could cause actual results to differ
materially from such forward-looking statements. These risks and uncertainties
are described, among other places in this Quarterly Report, in "Management's
Discussion and Analysis of Financial Condition and Results of Operations".
In addition, we disclaim any obligations to update any forward-looking
statements to reflect events or circumstances after the date of this Quarterly
Report. When considering such forward-looking statements, you should keep in
mind the risks referenced above and the other cautionary statements in this
Quarterly Report.
2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Independent Accountant's Report...............................................4
Consolidated Balance Sheet as of February 28, 2001 and August 31, 2000........5
Consolidated Statements of Operations
for the three and six month periods ended February 28, 2001 and
February 29, 2000..........................................................6
Consolidated Statement of Shareholders' Equity................................7
Consolidated Statements of Cash Flows
for the six months ended February 28, 2001 and February 29, 2000 ..........8
Notes to Consolidated Financial Statements.................................9-11
3
INDEPENDENT ACCOUNTANT'S REPORT
To the Board of Directors and Shareholders of
Return Assured Incorporated
We have reviewed the accompanying consolidated balance sheet of Return Assured
Incorporated and Subsidiaries as of February 28, 2001, and the related
consolidated statements of operations for the three-month and six-month periods
then ended, and the consolidated statements of shareholders' equity, and cash
flows for the six-month period then ended. These financial statements are the
responsibility of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying consolidated financial statements for them to be in
conformity with generally accepted accounting principles.
GOLDSTEIN GOLUB KESSLER LLP
New York, New York
March 27, 2001
4
(Draft April 20, 2001)
RETURN ASSURED INCORPORATED
(formerly A Sure eCommerce, Inc.)
- ------------------------------------------------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEET
February 28, August 31,
2001 2000
- ------------------------------------------------------------------------------------------------------------------------
(unaudited)
ASSETS
Current:
Cash $ 519,819 $ 132,107
Cash in Escrow 3,200,000
Accounts receivable (net of allowance for doubtful accounts
of $54,525 as of February 28, 2001) 1,004,249 37,759
Inventory (Note 2) 401,112
Prepaid expenses 444,217 270,599
- ------------------------------------------------------------------------------------------------------------------------
Total current assets 5,569,397 440,465
Goodwill (net of accumulated amortization of $189,526) 10,493,289
Property and Equipment (net of accumulated depreciation of
$273,492 and $16,817, respectively) 1,018,988 97,036
Deferred Offering Cost 1,129,361
Other Assets 175,000
- ------------------------------------------------------------------------------------------------------------------------
Total Assets $17,256,674 $ 1,666,862
========================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued liabilities $ 961,046 $ 346,166
Current portion of capital lease obligations 64,483
Notes payable 290,000
- ------------------------------------------------------------------------------------------------------------------------
Total current liabilities 1,315,529 346,166
Capital Lease Obligation, net of current portion 199,550
Notes Payable 200,000
- ------------------------------------------------------------------------------------------------------------------------
Total liabilities 1,515,079 546,166
Shareholders' Equity:
Preferred stock, series A, stated value $1,000,
authorized 6,000 shares, issued and outstanding
4,838.252 shares 4,838,252
Common stock - $0.001 par value; authorized
100,000,000 shares, issued and outstanding
8,512,961 and 4,695,685 shares, respectively 8,514 4,696
Additional paid-in capital 16,783,368 3,438,516
Accumulated other comprehensive income 503 503
Accumulated deficit (5,889,042) (2,323,019)
- ------------------------------------------------------------------------------------------------------------------------
Total Shareholders' Equity 15,741,595 1,120,696
- ------------------------------------------------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $17,256,674 $ 1,666,862
========================================================================================================================
See Notes to Consolidated Financial Statements.
5
RETURN ASSURED INCORPORATED AND SUBSIDIARIES
(formerly A Sure eCommerce, Inc.)
- -------------------------------------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF OPERATIONS
- -------------------------------------------------------------------------------------------------------------------------------
Three months Three months Six months Six months
ended ended ended ended
February 28, February 29, February 28, February 29,
2001 2000 2001 2000
- -------------------------------------------------------------------------------------------------------------------------------
(unaudited) (unaudited) (unaudited) (unaudited)
Sales $ 1,457,608 $ 2,235,907
Cost of sales 858,670 1,317,473
- -------------------------------------------------------------------------------------------------------------------------------
Margin 598,938 918,434
General and administrative expenses:
Wages and salaries 809,195 $ 62,515 1,368,657 $ 97,618
Professional fees 204,323 7,938 305,245 18,071
Development costs
Financing Fees 506,000
Insurance 13,125 31,608
Travel and promotion 47,015 16,584 120,062 16,584
Consulting fees 81,715 268,932
Rent 55,990 13,971 73,519 18,464
Office and miscellaneous 253,779 4,195 555,917 15,558
Internet service and web design 17,366 4,495 57,617 7,438
Telephone 2,370 1,223 27,792 1,997
Loan receivable write-off 13,230 13,230
Interest and finance charges 517,284 1,128 533,914
Depreciation and amortization 136,025 2,906 373,019 5,811
- -------------------------------------------------------------------------------------------------------------------------------
Net loss from operations (1,539,249) (128,185) (3,303,848) (194,771)
Other Income 425,513 425,513
- -------------------------------------------------------------------------------------------------------------------------------
Net Loss (1,113,736) (128,185) (2,878,335) (194,771)
Value of warrants issued in connection
with preferred stock (669,350)
Dividends on preferred stock (18,338) (18,338)
- -------------------------------------------------------------------------------------------------------------------------------
Net loss attributable to common shareholders $(1,132,074) $(128,185) $(3,566,023) $(194,771)
===============================================================================================================================
Net loss per share - basic and diluted $ (0.15) N/A $ (0.52) N/A
===============================================================================================================================
Weighted average number of shares 7,762,209 90 6,875,769 90
===============================================================================================================================
See Notes to Consolidated Financial Statements.
6
RETURN ASSURED INCORPORATED AND SUBSIDIARIES
(formerly A Sure eCommerce, Inc.)
- -------------------------------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY
- -------------------------------------------------------------------------------------------------------------------------
Common Shares
and Paid in Capital in Additional
Preferred Excess of $0.001 Par Value Paid-in Accumulated
Stock Number Capital Deficit
- -------------------------------------------------------------------------------------------------------------------------
Issuance of common stock:
For cash:
Initial shares 90 $ 1
Subscriptions received
Exchange loss
Net loss $ (61,713)
- -------------------------------------------------------------------------------------------------------------------------
Balance at August 31, 1999 90 1 (61,713)
Common Stock:
Private placement 1,445,685 1,446 $ 1,054,864
Shares issued for offering costs:
For proposed offering 340,000 340 485,860
For private placement 200,000 200 285,800
For private placement 200,000 200 285,800
Value of warrants issued in connection
with proposed offering 233,726
Shares issued to founders' and other
employees and consultants and
recapitalization 2,095,000 2,095 885,381
Cancellation of original shares (90) (1)
Financing fees 415,000 415 207,085
Exchange gain
Net loss (2,261,306)
- -------------------------------------------------------------------------------------------------------------------------
Balance at August 31, 2000 4,695,685 4,696 3,438,516 (2,323,019)
Unaudited:
Preference shares issued for cash $5,000,000
Exercise warrants for cash 100,000 100 199,900
Issuance of shares for financing fee 100,000 100 199,900
Common stock issued as consequence of merger 2,353,304 2,353 12,351,329
Accrual of dividends on preferred stock (18,338)
Repurchase of common stock (115,385) (115) (724,885)
Common stock issued on conversion of preferred stock (161,748) 579,661 580 174,420
Value of warrants attached to preferred stock 669,350 (669,350)
Common stock issued to for Services (Plasmanet) 799,696 800 352,838
Value of options and warrants granted to consultants 122,000
Net loss (2,878,335)
- -------------------------------------------------------------------------------------------------------------------------
Balance February 28, 2001 $4,838,252 8,512,961 $ 8,514 $16,783,368 $(5,889,042)
=========================================================================================================================
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
Comprehensive Total Shareholders'
Income Subscriptions Equity
(Loss) Received (Deficiency)
- --------------------------------------------------------------------------------------------------
Issuance of common stock:
For cash:
Initial shares $ 1
Subscriptions received $ 35,426 35,426
Exchange loss $ (33) (33)
Net loss (61,713)
- --------------------------------------------------------------------------------------------------
Balance at August 31, 1999 (33) 35,426 (26,319)
Common Stock: 0
Private placement 1,056,310
Shares issued for offering costs: 0
For proposed offering 486,200
For private placement 286,000
For private placement 286,000
Value of warrants issued in connection 0
with proposed offering 233,726
Shares issued to founders' and other 0
employees and consultants and 0
recapitalization (35,426) 852,050
Cancellation of original shares (1)
Financing fees 207,500
Exchange gain 536 536
Net loss (2,261,306)
- --------------------------------------------------------------------------------------------------
Balance at August 31, 2000 503 1,120,696
Unaudited:
Preference shares issued for cash 5,000,000
Exercise warrants for cash 200,000
Issuance of shares for financing fee 200,000
Common stock issued as consequence of merger 12,353,682
Accrual of dividends on preferred stock (18,338)
Repurchase of common stock (725,000)
Common stock issued on conversion of preferred stock 13,252
Value of warrants attached to preferred stock 0
Common stock issued to for Services (Plasmanet) 353,638
Value of options and warrants granted to consultants 122,000
Net loss (2,878,335)
- --------------------------------------------------------------------------------------------------
Balance February 28, 2001 $ 503 $ - $15,741,595
==================================================================================================
See Notes to Consolidated Financial Statements.
7
RETURN ASSURED INCORPORATED AND SUBSIDIARIES
(formerly A Sure eCommerce, Inc.)
- ----------------------------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF CASH FLOWS
Six months Six months
ended ended
February 28, February 29,
2001 2000
- ----------------------------------------------------------------------------------------------------------------------
(unaudited) (unaudited)
Operating activities:
Net loss $(2,878,335) $(194,771)
Items not involving cash:
Depreciation and amortization 457,537 5,811
Services rendered in exchange for shares, options
and warrants 961,638
Loss on abandonment of assets 82,429
Changes in operating assets and liabilities:
Accounts receivable (270,765) (9,013)
Inventory 32,983
Prepaid expenses (30,295) (9,605)
Accounts payable and accrued liabilities 469,652 40,266
- ----------------------------------------------------------------------------------------------------------------------
Net cash used in operating activities (1,175,156) (167,312)
Investing activities:
Acquisition of property and equipment (17,659) (79,850)
Advances to shareholder (16,302)
Cash received in acquisition 249,492
- ----------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities 231,833 (96,152)
Financing activities:
Capital lease payments (33,965)
Payment of notes payable (200,000)
Issuance of common stock (cash) 200,000 263,362
Repurchase of common stock (435,000)
Issuance of preferred stock 5,000,000
- ----------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 4,531,035 263,362
Effect of Foreign Currency Translation (560)
Increase in cash 3,587,712 (662)
Cash, beginning of period 132,107 2,674
- ----------------------------------------------------------------------------------------------------------------------
Cash, end of period $ 3,719,819 $ 2,012
======================================================================================================================
See Notes to Consolidated Financial Statements.
8
(Draft April 20, 2001)
RETURN ASSURED INCORPORATED AND SUBSIDIARIES
(Formerly A Sure eCommerce, Inc.)
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
1. BASIS OF PRESENTATION, ORGANIZATION AND NATURE OF OPERATIONS
The accompanying consolidated financial statements are unaudited and in
the opinion of management reflect all adjustments (consisting of normal
recurring adjustments) considered necessary for a fair presentation in
accordance with generally accepted accounting principles and with the
instructions to Form 10-QSB. Operating results for the three-month and
six-month periods ended February 28, 2001 are not necessarily indicative
of the results that may be expected for the fiscal year ended August 31,
2001. For further information refer to the annual financial statements of
Return Assured Incorporated and Hertz Technology Group Inc. included in
the 10-KSB report previously filed.
Return Assured Incorporated (the "Company") was incorporated under the
laws of the State of Nevada on June 10, 1999. The Company was deemed to
be in the development stage as more fully defined in Statement No. 7 of
the Financial Accounting Standards Board through the period ended August
31, 2000. The Company intends to provide a service that will guarantee
customers who order products through the web sites of merchant members
will get the product and that the merchant member will honour its stated
return policies.
On October 13, 2000 the Company, through a reverse triangular merger,
became the accounting parent company and the legal subsidiary of Hertz
Technology Group Inc. ("Hertz") Hertz subsequently was renamed Return
Assured Incorporated, a Delaware corporation. As a result the former
subsidiaries of Hertz have become wholly owned subsidiaries. The
Consolidated Financial Statements now include the following Companies,
Return Assured Incorporated (Delaware), Return Assured Incorporated
(Nevada), Hertz Computer Corporation, Hergo Ergonomic Support Systems
Inc., Remote IT.com, Inc. and Edutec Computer Education Institute, Inc.
The merger has been accounted for as a purchase with resulting goodwill
amounting to $10,683,000. The consolidated Statements of Operations
include the operations of Hertz and its subsidiaries since the date of
the merger.
9
(Draft April 20, 2001)
RETURN ASSURED INCORPORATED AND SUBSIDIARIES
(Formerly A Sure eCommerce, Inc.)
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
The following pro forma information assumes the acquisition had occurred
at the beginning of the periods presented:
Six Months Three Months
Ended Ended
February 28, February 29, February 29,
2001 2000 2000
----- ---- -----
Sales $2,070,016 $3,280,316 $1,700,868
Net Loss (1,481,503) (1,335,469) (799,621)
Loss per share - basic and
diluted $(0.20) $(0.63) $(0.38)
Weighted average number of
shares outstanding 7,386,225 2,129,173 2,129,173
The operations have ceased in Hertz Computer Corporation during the
previous fiscal year and in Edutec during the current quarter.
2. INVENTORY
As at February 28, 2001 inventory consists of:
Raw materials $54,069
Work in progress 101,553
Finished goods 245,490
---------------
401,112
===============
3. SEGMENT INFORMATION
For the six months ended February 28, 2001: .
Financial Technology
Services Hergo Group Corporate Consolidated
Assets $424,410 $2,849,410 $ 280,397 $13,702,057 $17,256,674
Sales
(unaffiliated) 9,982 1,772,850 453,075 2,235,907
Net Loss (1,706,947) (76,973) (126,260) (968,155) (2,878,335)
10
(Draft April 20, 2001)
RETURN ASSURED INCORPORATED AND SUBSIDIARIES
(Formerly A Sure eCommerce, Inc.)
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
For the three months ended February 28, 2001:
Financial Technology
Services Hergo Group Corporate Consolidated
Assets $424,410 $2,849,410 $ 280,397 $13,702,057 $17,256,674
Sales
(unaffiliated) 9,982 994,551 453,075 1,457,608
Net Loss (751,781) (23,941) 119,732 (457,746) (1,113,736)
4. CAPITAL TRANSACTIONS
The Company completed a financing of Series A Convertible Preferred
Stock at the same time as the merger. The preferred shares carry a
dividend of 1% and are convertible at the lesser of the average three
lowest Per Share Market Value Prices for the previous 45 day period
preceding the conversion date or $3.00. Per Share Market Price is
defined as the closing bid prices of the Company's common shares.
The Company has placed in Escrow 8,267,195 common shares to facilitate
conversion of the preference shares. As at February 28, 2001 the holder
of the preferred shares had converted $161,748 of preference shares and
$13,252 of accrued dividends into 579,661 common shares.
5. NOTES PAYABLE
Notes payable due at February 28, 2001 are due to a consultant of the
Company on April 17, 2001. This payment had not been paid as of the date
of this filing. The Company is currently in negotiations with the
consultant regarding this note.
6. OTHER INCOME
Other income consists of the amount paid to the Company to vacate the
Varick Street location and the buyout of a consulting contract the
Company had previously entered into.
11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
the Financial Statements and Notes thereto appearing elsewhere in this Quarterly
Report. Certain statements in this Quarterly Report, which are not statements of
historical fact, are forward-looking statements. See "Special Note Regarding
Forward-Looking Information" on Page 3.
General
The Merger
We recently closed the business combination of our Return Assured business and
Hertz Technology Group business. On October 13, 2000, Asure Acquisition Corp., a
wholly-owned subsidiary of Hertz Technology Group, Inc., a Delaware Corporation,
was merged into Return Assured Incorporated, a Nevada Corporation.
Simultaneously, Hertz Technology Group changed its name to Return Assured
Incorporated.
As a result of this merger (the "Merger"), Return Assured Incorporated (Nevada)
became the predecessor for accounting purposes. The Consolidated Financial
Statements now include the following companies: Return Assured Incorporated
(Delaware); Hergo Ergonomic Support Systems, Inc.; Return Assured Incorporated
(Nevada); Hertz Computer Corporation; Remote IT.com, Inc.; and Edutec Computer
Education Institute, Inc. ("Edutec").
Subsequent to the Merger we operated in three areas: our financial services area
comprising the Return Assured Business and its "Web Seal of Approval" and
related services; the Hergo Group, which is comprised of Hergo Ergonomic Support
Systems, Inc.; and the Technology Group, which is comprised of Remote IT.Com,
Inc., Hertz Computer Corporation and Edutec Computer Education Institute, Inc.
Hertz Computer Corporation ceased manufacturing in the later part of Fiscal 2000
(ended August 31, 2000), and Edutec ceased active operations in December 2000
with the surrender of the Varick Street Lease.
The financial statements include only the Hertz operations from October 13,
2000, the date of the merger, to February 28, 2001.
Plan of Operations
Results of Operations
The timing of the commencement of our Return Assured operations has coincided
with a significant downturn in the entire internet sector, and although initial
sign ups with a number of merchants were encouraging, follow through revenue has
been disappointing. In addition the initial rush of inquiries and sign ups
announced in early January have not resulted in significant revenues. As a
result the Company has reduced operations and is looking towards a redefinition
of the Return Assured Seal of Approval program and defining other areas where
the seal may be applicable.
In addition the Company has commenced the search for acquisition and merger
candidates which will allow the Company to sustain operations beyond the
resources which are currently in hand. Management recognizes that the raising of
additional funds for a largely internet retail based business will be
particularly difficult given the depressed state of the technology capital
markets.
12
The Company entered into a letter of intent to merge with the Affinity Group of
St Petersburg, Florida in February, 2001. This letter of intent was abandoned by
mutual consent of the parties. The Company continues its search for appropriate
merger candidates.
At the completion of the Merger, we also completed a financing in the amount of
$5,000,000 through the issuance of 5,000 convertible preferred shares. As a
result of the financing, we expect that we will have sufficient cash resources
to fund all of our proposed operations for the next 12 months.
We have recently commenced our Return Assured operations and have not generated
any revenues since inception in June 1999 through August 31, 2000. Our Return
Assured operations have consisted of:
o determining the feasibility and potential market acceptance of our web
seal service;
o developing the infrastructure to deliver and monitor our web seal
service;
o structuring our cyber insurance policy with Lloyd's of London;
o pursuing our marketing strategy by forming strategic relationships
with web portals;
o raising capital to finance our business plan; and
o assembling our management team.
As noted above, we have scaled back the Return Assured operations and are in the
process of redefining our markets and products as a response to the poor sales
results.
13
Most of our expenses through February 28, 2001 have been for wages and salaries;
professional and consulting fees; and February 28, 2001 fees.
Liquidity And Capital Resources
o In October 2000, we raised $5,000,000 from the sale of our Series A
convertible preferred stock. After giving effect to the Merger, the sale
of our Series A preferred stock and the redemption of Eli Hertz' common
stock pursuant to the Merger, we had, as of February 28, 2001,
approximately:
o $ 3,719,819 in cash; and
o $ 4,253,868 in working capital.
A significant portion of our working capital will be used to launch our
web seal operations.
We believe that our current cash will be sufficient to meet our
anticipated cash needs for working capital and capital expenditures for at least
the next twelve months. If cash generated from operations is insufficient to
satisfy our liquidity requirements, we may seek to sell additional equity or
debt securities or to obtain a credit facility. The sale of additional equity or
convertible debt securities could result in additional dilution to our
stockholders. If we issue debt securities, our fixed obligations will increase
and we may become subject to covenants that would restrict our operations. Such
financing may not be available in amounts or on terms acceptable to us, if at
all.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Applicable.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
14
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On December 15, 2000, we entered into a Program Promotion Agreement with Plasma
Net Inc., the provider of FreeLotto.com, a free online sweepstakes. Under the
Agreement, PlasmaNet and Return Assured will create promotional programs
enhanced by FreeLotto's relationship with its approximate 12,000,000 registered
users. Under the programs, FreeLotto members that opt in will have their
contact information forwarded to us in real time for the purpose of new
membership / database relationship management.
In exchange for the above-mentioned membership generation, we will at the end of
each calendar week, issue $6.00 worth of our common stock to PlasmaNet for each
new member referred by us for that week. We have delivered into escrow 1,400,000
shares of common stock. Of the 1,400,000 shares in escrow, 799,696 shares have
been delivered to PlasmaNet for the first 200,000 registrations, which shares
will be returned to us if the program fails to result in 200,000 registrations.
These securities were sold under the exemptions from registration provided by
Section 4(2) of the Securities Act. Neither we nor any person acting on our
behalf offered or sold the securities by means of any form of general
solicitation or general advertising. PlasmaNet, Inc. represented in writing that
it acquired the securities for its own account. A legend was placed on the
certificates stating that the securities have not been registered under the
Securities Act and cannot be sold or otherwise transferred without an effective
registration or an applicable exemption.
The holder of our outstanding Series A Preferred Stock converted a portion of
such preferred stock. On November 11, 2000, it converted $50,000 worth of the
preferred stock for 50,000 shares of common stock. On January 17, 2001, it
converted $125,000 worth of the preferred stock for 529,661 shares of common
stock. These shares of common stock were delivered from escrow to the holder
upon conversion under the exemption from registration provided by Section 4(2)
of the Securities Act. Of the $175,000 worth of preferred stock converted by the
holder, $13,252 was accrued dividends and the difference reduced the amount of
preferred stock by $161,748.
ITEM 3. DEFAULTS IN SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
The Company has received a letter from NASDAQ indicating that it has not
met the ongoing listing requirements in that the Company's common stock has
traded below $1.00 for more than 30 trading days. The Company's shares now must
close above $1.00 for 10 consecutive trading days by June 15, 2001, or the
Company may be at risk of losing its listing on NASDAQ. There are a number of
courses of action which are being considered by the Company and include merging
with another Company, as noted above, or a consolidation of the Company's common
stock. No decisions have been made in this regard.
15
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
(b) Reports on Form 8-K.
We have filed a Current Report on Form 8-K on January 12, 2001
disclosing the agreement with PlasmaNet Inc.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
RETURN ASSURED INCORPORATED
Dated: April 20, 2001 By: /s/ Matthew Sebal
----------------------------------------
Matthew Sebal
President and Chief Executive Officer
Dated: April 20, 2001 By: /s/ Michael Sweatman
----------------------------------------
Michael Sweatman
Chief Accounting Officer
16