UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB/A
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended June 30, 2002
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. or Employer
incorporation or organization) Identification No.)
5962 La Place Court, Suite 230
Carlsbad, California 92008
(Principal executive offices) (Zip Code)
(760) 438-7245
(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 August 18, 2002, there were 35,834,012 shares of the registrant's
common stock, par value $0.001 issued and outstanding.
RETURN ASSURED INCORPORATED
JUNE 30, 2002 QUARTERLY REPORT ON FORM 10-QSB
TABLE OF CONTENTS
Page
Number
Special Note Regarding Forward-Looking Statements .................. 2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements ..................................... 3
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations .................... 11
PART II - OTHER INFORMATION
Item 1. Legal Proceedings ........................................ 15
Item 2. Changes in Securities and Use of Proceeds ................ 15
Item 3. Defaults in Senior Securities ............................ 16
Item 4. Submission of Matters to a Vote of Security Holders ...... 16
Item 5. Other Information ........................................ 16
Item 6. Exhibits and Reports on Form 8-K ......................... 16
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
To the extent that the information presented in this Amended Quarterly
Report on Form 10-QSB/A for the quarter ended June 30, 2002 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 Amended 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 Amended
Quarterly Report. When considering such forward-looking statements, you should
keep in mind the risks referenced above and the other cautionary statements in
this Amended Quarterly Report.
Page 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Independent Accountant's Report ...................................... 4
Consolidated Balance Sheet as of June 30, 2002 and December 31, 2001 ... 5
Consolidated Statements of Operations for the three months
ended June 30, 2002 and June 30, 2001 and for the
six months ended June 30, 2002 and June 30, 2001 ..................... 6
Consolidated Statements of Cash Flows for the six months ended
June 30, 2002 and June 30, 2001 .....................................7
Notes to Consolidated Financial Statements ...................... 8-10
Page 3
INDEPENDENT ACCOUNTANT'S REPORT
To the Board of Directors and Shareholders of
EliteJet, Inc. and Subsidiaries,
The accompanying consolidated financial statements have been prepared giving
effect to the acquisition of Return Assured Incorporated and Subsidiaries by
EliteJet Inc., an increase in the number of authorized shares, a 1 for 60
reverse stock split, and the change of the name of Return Assured Incorporated
to EliteJet, Inc. These transactions are described in Note 1 to the consolidated
financial statements.
We have reviewed the accompanying consolidated balance sheet of EliteJet Inc.
and Subsidiaries as of June 30, 2002, and the related consolidated statements of
operations, and cash flows for the six-month periods ended June 30, 2002 and
2001, and the related consolidated statements of operations for the three-month
periods then ended. These financial statements are the responsibility of the
Company's management.
We conducted our reviews 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 reviews, 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.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note 1 to the consolidated
financial statements reported upon, the Company has sustained recurring net
operating losses and has a shareholders' deficit. In addition, the holders of
the preferred stock currently have the right to redeem their shares for cash in
an amount which exceeds currently available funds. These factors raise
substantial doubt about the Company's ability to continue as a going concern.
The financial statements do not include any adjustments that might result from
this uncertainty.
The information set forth in the accompanying consolidated balance sheet has
been derived from the financial statements of EliteJet, Inc. and subsidiary as
of December 31, 2001, which were audited by other auditors whose report, dated
July 10, 2002, expressed an unqualified opinion on those statements.
GOLDSTEIN GOLUB KESSLER LLP
New York, New York
July 22, 2002
Page 4
ELITEJET, INC. AND SUBSIDIARIES
(SEE NOTE 1 TO THE CONSOLIDATED FINANCIAL STATEMENTS)
CONSOLIDATED BALANCE SHEET
JUNE 30 DECEMBER 31
2002 2001
(UNAUDITED) (AUDITED)
----------- -----------
ASSETS
Current Assets:
Cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 49,060 $ 341,899
Cash in escrow. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,791,752
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 179,481 220,053
Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . . 1,883 2,194
- ------------------------------------------------------------------------------- ------------ ------------
TOTAL CURRENT ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,022,176 564,146
Property and Equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,575,981 2,562,211
Other Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,960
- ------------------------------------------------------------------------------- ------------ ------------
TOTAL ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,610,117 $ 3,126,357
=============================================================================== ============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Accounts payable and accrued liabilities. . . . . . . . . . . . . . . . . . . . $ 1,756,008 $ 243,893
Current portion of long term debt . . . . . . . . . . . . . . . . . . . . . . . 96,781 242,967
Customer deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,000
Due to shareholder. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98,198 105,798
Secured convertible note. . . . . . . . . . . . . . . . . . . . . . . . . . . . 350,000
- ------------------------------------------------------------------------------- ------------ ------------
TOTAL CURRENT LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,300,987 642,658
Long Term Debt, net of current portion. . . . . . . . . . . . . . . . . . . . . 2,236,598 2,045,357
- ------------------------------------------------------------------------------- ------------ ------------
TOTAL LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,537,585 2,688,015
- ------------------------------------------------------------------------------- ------------ ------------
Commitments and Contingencies
Minority interest in equity of subsidiary . . . . . . . . . . . . . . . . . . . 255,000 299,258
- ------------------------------------------------------------------------------- ------------ ------------
Redeemable Preferred Stock, 5,000,000 authorized, 6,000 designated as series A,
$1,000 stated value; issued 5,000 shares, and outstanding 3,829 shares;
no liquidation preference. . . . . . . . . . . . . . . . . . . . . . . . . . 3,828,873
- ------------------------------------------------------------------------------- ------------ ------------
Shareholders' Equity (Deficit):
Common stock - $.001 par value; authorized 100,000,000, issued
and outstanding 7,697,234 and 7,000,000 shares, respectively. 7,697 7,000
Additional paid-in capital. . . . . . . . . . . . . . . . . . . . . . . . . . . (123,333) 2,107.882
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,895,705) (1,975,798)
- ------------------------------------------------------------------------------- ------------ ------------
TOTAL SHAREHOLDERS' EQUITY (DEFICIT). . . . .. . . . . . . . . . . . . . (3,011,341) 139,084
- ------------------------------------------------------------------------------- ------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) . . . . . . . . . . . . . $ 5,610,117 $ 3,126,357
=============================================================================== ============ ============
Page 5
ELITEJET, INC. AND SUBSIDIARIES
(SEE NOTE 1 TO THE CONSOLIDATED FINANCIAL
STATEMENTS)
CONSOLIDATED STATEMENT OF OPERATIONS
UNAUDITED
---------------------------------------------------
THREE-MONTH SIX-MONTH
PERIOD ENDED PERIOD ENDED
------------------------ -------------------------
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
2002 2001 2002 2001
Charter revenue. .. . . . . . . . . . . . . . $ 877,349 $ 132,990 $1,324,316 $ 132,990
Cost of revenue . . . . . . . . . . . . . . . 461,266 99,548 1,128,663 169,413
- --------------------------------------------- ----------- ----------- ------------ -----------
Margin. . . . . . . . . . . . . . . . . . . . 416,083 33,442 195,653 (36,423)
Selling, General and administrative expenses. 625,403 537,484 1,007,959 782,830
- --------------------------------------------- ----------- ----------- ------------ -----------
Loss from operations. . . . . . . . . . . . . (209,320) (504,042) (812,306) (819,253)
Other expense:
Interest expense . . . . . . . . . . . . 56,567 48,962 100,831 91,492
- --------------------------------------------- ----------- ----------- ------------ -----------
Net loss before minority interest . . . . . . (265,887) (553,004) (913,137) (910,745)
Minority interest in loss of subsidiary . . . - - 49 -
- --------------------------------------------- ----------- ----------- ------------ -----------
Net Loss. . . . . . . . . . . . . . . . . . . (265,887) (553,004) (913,088) (910,745)
Dividends on preferred stock. . . . . . . . . 6,819 - 6,819 -
- --------------------------------------------- ----------- ----------- ------------ -----------
Net loss attributable to common shareholders. $ (272,706) $ (553,004) $ (919,907) $ (910,745)
============================================= =========== =========== =========== ===========
Net loss per share - basic and diluted. . . . $ (0.04) $ (0.08) $ (0.12) $ (0.13)
============================================= =========== =========== =========== ===========
Weighted-average number of shares outstanding 7,597,234 7,000,000 7,472,406 7,000,000
============================================= =========== =========== =========== ===========
Page 6
ELITEJET, INC. AND SUBSIDIARIES
(SEE NOTE 1 TO THE CONSOLIDATED FINANCIAL STATEMENTS)
CONSOLIDATED STATEMENT OF CASH FLOWS
UNAUDITED
----------------------
SIX-MONTH
PERIOD ENDED
----------------------
JUNE 30, JUNE 30,
2002 2001
Operating activities:
Net loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (913,088) $(910,745)
Items not involving cash:
Minority interest . . . . . . . . . . . . . . . . . . . . . . . . . 49
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . 414,136 677,915
Legal services rendered in exchange for shares. . . . . . . . . . . . . 1,000
Non cash interest expense . . . . . . . . . . . . . . . . . . . . . . . 18,164
(Increase) decrease in operating assets:
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . 40,572 (60,229)
Prepaid expenses and other current assets . . . . . . . . . . . . . 311
Other assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . (8,874) -
Increase (decrease) in operating liabilities:
Accounts payable and accrued liabilities. . . . . . . . . . . . . . 244,506 31,319
Customer deposits . . . . . . . . . . . . . . . . . . . . . . . . . (50,000)
- ----------------------------------------------------------------------- ----------- ----------
NET CASH USED IN OPERATING ACTIVITIES . . . . . . . . . . . . . . . . . (253,224) (261,740)
- ----------------------------------------------------------------------- ----------- ----------
Investing activities:
Acquisition of property and equipment . . . . . . . . . . . . . . . . . (427,906)
Net cash received on merger . . . . . . . . . . . . . . . . . . . . . . 2,792,588
- ----------------------------------------------------------------------- ----------- ----------
NET CASH PROVIDED BY INVESTING ACTIVITIES . . . . . . . . . . . . . . . 2,364,682
- ----------------------------------------------------------------------- ----------- ----------
Financing activities:
Principal payments on long term debt. . . . . . . . . . . . . . . . . . (493,143) (55,235)
Repayments to shareholder . . . . . . . . . . . . . . . . . . . . . . . (7,600)
Cash received from loans. . . . . . . . . . . . . . . . . . . . . . 888,198 185,098
- ----------------------------------------------------------------------- ----------- ----------
NET CASH PROVIDED BY FINANCING ACTIVITIES . . . . . . . . . . . . . . . 387,455 129,863
- ----------------------------------------------------------------------- ----------- ----------
Increase (decrease) in cash . . . . . . . . . . . . . . . . . . . . . . 2,498,913 (131,877)
- ----------------------------------------------------------------------- ----------- ----------
Cash at beginning of period . . . . . . . . . . . . . . . . . . . . . . 341,899 138,235
Cash at end of period . . . . . . . . . . . . . . . . . . . . . . . . . $2,840,812 $ 6,358
======================================================================= =========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for Interest. . . . . . . . . . . . . . . . $ 82,667 $ 91,492
======================================================================= =========== ==========
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Net Assets received in acquisition. . . . . . . . . . . . . . . . . . $1,574,369
======================================================================= ===========
Accrual of dividends on preferred stock . . . . . . . . . . . . . . . $ 6,819
======================================================================= ===========
Page 7
RETURN ASSURED INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. PRINCIPAL BUSINESS ACTIVITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
EliteJet, Inc. ("EliteJet Nevada") was incorporated under the laws of the
State of Nevada on November 16, 1999. The Company was formed to acquire,
own, and operate jet air transportation. The company and its subsidiary,
Elite Jet Partners, LLC ("Elite Jet Partners"), provide charter services
throughout North America and the Caribbean.
These financial statements have been prepared giving effect to the
acquisition of Return Assured Incorporated, a Delaware Corporation
("Return Assured Delaware") and Subsidiaries by EliteJet Nevada, an
increase in the number of authorized shares from 51,000,000 (50,000,000
common and 1,000,000 preferred) to 105,000,000 shares (100,000,000 common
and 5,000,000 preferred), a 1 for 60 reverse stock split, and the change of
the name of Return Assured Delaware to EliteJet, Inc. (the "Merger
Transaction") The board of directors of Return Assured Delaware and its
majority stockholders approved these corporate actions on April 25, 2002
and prior. The approval by Return Assured Delaware's board of directors and
the majority stockholders is adequate under Delaware law to effect these
corporate actions. The corporate actions will not become effective until 20
days after Return Assured Delaware has mailed an information statement to
its stockholders. Stockholders of Return Assured Delaware have no right
under Delaware Law or Return Assured Delaware's certificate of
incorporation or bylaws to dissent these corporate actions. To date, the
information statement has not been declared effective by the Securities and
Exchange Commission and as such, has not been mailed to Return Assured
Delaware's stockholders. However, since no further decisions by the Company
need to be made regarding these corporate actions, the Company has
accounted for them effective April 26, 2002.
On April 26, 2002, EliteJet Nevada, through a reverse triangular merger,
became the accounting parent and the legal subsidiary of Return Assured
Delaware. Return Assured Delaware issued 7,000,000 shares of its stock to
the shareholder of EliteJet Nevada in exchange for his shares of EliteJet
Nevada in the Merger Transaction. On April 25, 2002, Return Assured
Delaware's assets amounted to $2,795,724, liabilities amounted to
$1,221,355 and Redeemable Preferred Stock amounted to $2,828,873. Return
Assured Delaware's name will now be EliteJet, Inc. ("EliteJet Delaware"), a
Delaware corporation. As a result, the former subsidiaries of Return
Assured Delaware became wholly owned subsidiaries of EliteJet Delaware. The
merger was accounted for as a capital transaction, accompanied by a
recapitalization. The consolidated statements of operations and cash flows
include the activity of Return Assured Delaware and its subsidiaries only
since the date of the merger. The consolidated financial statements include
the following companies, EliteJet Nevada, EliteJet Delaware, Elite Jet
Partners, Return Assured Incorporated (a Nevada Corporation) ("Return
Assured Nevada"), and Edutec Computer Education Institute, Inc. ("Edutec")
(collectively, the "Company"). At the date of the merger, Return Assured
Nevada and Edutec were inactive companies.
The accompanying consolidated financial statements have been prepared
assuming the Company will continue as a going concern. As shown in the
accompanying consolidated financial statements, the Company has sustained
recurring net losses, and has a shareholders' deficit. In addition, the
holders of the preferred stock currently have the right to redeem their
shares for cash in an amount which exceeds currently available funds.
Page 8
For comparability, certain 2001 amounts have been reclassified, where
appropriate, to conform to the financial statement presentation used in
2002.
The consolidated financial statements have been prepared without audit
pursuant to the rules and regulations of the SEC. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with accounting principles generally accepted in the United
States of America have been condensed of omitted pursuant to such rules and
regulations.
The interim financial statements include all adjustments consisting only of
normal recurring accruals which, in the opinion of management, are
necessary to ensure that the financial statements are not misleading.
Cash in escrow denotes cash being held by an attorney. These amounts are
not considered restricted because these funds are subject to withdrawal by
the Company at the Company's option.
Amounts due to shareholder represents funds advanced to the Company from
the Company's majority shareholder, who is also an officer of the Company.
These amounts are non-interest bearing and have no specific repayment
terms.
2. CONTINGENCIES:
The Company was named in a lawsuit against Internet Business International,
Inc. by Michael Rose, et al, in Orange County California Superior Court.
The lawsuit alleges that the Company breached a contract to pay a finder's
fee on the merger transaction. It is the Company's position that no
liability exists, and the Company intends to vigorously defend the suit. If
the Company is unsuccessful in defending this suit, the Company could incur
a loss of $750,000.
A legal proceeding is pending against the Company and two former officers,
by a former officer of a subsidiary of Return Assured Delaware. This former
officer of the Company's subsidiary is claiming that he is entitled to
receive shares from the Company for contributions he made in founding
Return Assured Delaware. It is the Company's position that its defense has
merit. The two former officers of the Company have escrowed 780,000 shares
of the Company's common stock they own to secure the claim if it is
successful.
Several other lawsuits have been asserted against the Company for amounts
which are not material to the Company's results of operations or financial
position. The Company believes that its defense of such suits have merit.
The aggregate of the amount claimed against the Company under these other
lawsuits is approximately $60,000.
Since, in the opinion of management, estimated losses under legal
proceedings were not probable, no accrual is required in accordance with
Statement of Financial Accounting Standards No. 5.
Page 9
3. PRO FORMA INFORMATION:
The following pro forma information assumes that the acquisition had
occurred at the beginning of the periods presented:
Six-Month Period Ended Three-MonthsPeriod Ended
--------------------------- -------------------------
June 30, June 30, June 30, June 30,
2002 2001 2002 2001
Sales $ 1,324,316 $ 132,990 $ 877,349 $ 132,990
Loss from continuing
operations (1,362,377) (2,932,183) (332,224) (1,390,256)
Loss per share - basic
and diluted (0.18) (0.41) (0.04) (0.19)
Weighted average number
of shares 7,472,406 7,140,566 7,597,234 7,145,368
4. SECURED CONVERTIBLE NOTE:
On April 23, 2002, the Company received $350,000 in exchange for a secured
convertible note. The holder of the note is entitled to 50 hours of private
flying service valued at $100,000 in lieu of interest which equates to an
interest rate of approximately 29% and is being recorded as interest
expense over the term of the loan. The note is due on April 23, 2003. On
the due date of the loan, the holders have the option to convert the note
into shares of the Company. The conversion price shall be the lesser of
$3.00 or the average of the three lowest closing price of the Company's
common stock for the 40 days immediately preceding the conversion date. The
loan is secured by substantially all of the assets of the Company subject
to the security on the long-term debt.
5. MINORITY INTEREST:
During 2001, the Company sold a 2% interest in Elite Jet Partners to a
previously unrelated third party (the "client") in return for the use of
private aircraft for 50 hours per year valued at $300,000. The client can
sell its ownership percentage to the Company at any time after two years
for 85% of its initial investment. As such, the company records minority
interest for this investment at 85% of the client's initial investment,
which is $255,000.
6. REDEEMABLE PREFERRED STOCK
The Company's redeemable preferred stock (the "Preferred Shares") carry a
dividend rate of 1%, of which approximately $61,000 is accrued and in
arrears at June 30, 2002. The Preferred Shares are convertible at the
lesser of the 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 Preferred Shares are redeemable based on factors outside the Company's
control. At June 30, 2002, these factors had been met and as such, the
preferred shares can be redeemed at any time for cash at the holder's
option.
Page 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
We are in the business of operating a fractional aircraft ownership
program. We sell ownership interests in a limited liability company which
entitles the purchaser to utilize our aircraft for a specified number of flight
hours per annum. In addition, we provide management, ground support and flight
operation services to customers after the sale. Our revenues derive from
management and usage fees charged to clients in connection with flight
operations. We place great emphasis on customer service. Our programs are
designed to offer customers guaranteed availability of aircraft, lower and
predictable operating costs and liquidity.
We were incorporated during the fourth quarter of 1999 and commenced operations
in 2000. We did not realize operating income from our charter services during
calendar year 2000. We began to realize income from our charter services during
2001.
We derive our revenue primarily from the charter of our aircraft. Interests in
our controlled LLC are sold to customers who pay our management and hourly fees.
We derive revenue from charging our owner-customers three types of fees:
- Monthly management fees which are a portion of
monthly shared fixed expenses;
- Hourly fees for actual flight time; and
- Miscellaneous fees, such as catering
We have low operating expenses because we operate a single type of aircraft,
have a highly productive workforce and use advanced technologies. The largest
components of our cost of sales are aircraft fuel and pilot costs. The largest
components of our operating expenses are salaries, wages and benefits provided
to our employees. Sales and marketing expenses include advertising, promotion
and client entertainment. Maintenance materials and repairs are expensed when
incurred. Because the average age of our aircraft is about twenty-two years, all
of our aircraft require less maintenance now than they will in the future. Our
maintenance costs will increase, both on an absolute basis and as a percentage
of our unit costs, as our fleet ages. Other costs of sale and operating expenses
consist of depreciation, certain purchased services, insurance, passenger
refreshments, personnel expenses, communication costs, supplies and taxes other
than payroll taxes.
RECENT DEVELOPMENTS
On April 26, 2002, our predecessor company, Return Assured Incorporated,
agreed to acquire all of the stock of EliteJet, Inc. This transaction gave us
access to all of the cash on hand of Return Assured to continue our aircraft
charter business.
RESULTS OF OPERATIONS
The following discussion of our results of operations, and liquidity and
capital resources, concerns our fractional aircraft ownership program. We have
not discussed any of the results of our discontinued operations. Our discussion
of liquidity and capital resources relates to our financial condition following
the acquisition of all of the outstanding shares of EliteJet by our predecessor
company.
Page 11
Three Months Ended June 30, 2002 Compared to Three Months Ended June 30, 2001
Charter Revenue
Charter revenue increased from $132,990 during the three months ended June
30, 2001 to $877,349 during the three months ended June 30, 2002. The increase
was due to the commencement of charter operations during 2001 while during 2002
we were fully operational during the entire three month period. Cost of sales
increased from $99,548 during the three months ended June 30, 2001 to $461,266
during the three months ended June 30, 2002. This increase corresponded to our
becoming fully operational during 2002.
Operating Expenses
Operating expenses consist of selling expenses, general and administrative
expenses, and depreciation expense. Operating expenses were $537,484 during the
three months ended June 30, 2001 and $625,403 during the three months ended June
30. 2002. The slight increase was based on increased operations offset by a
decision to conserve cash for equipment and other hard costs.
Loss From Operations
During the three month periods ended June 30, 2001 and June 30, 2002, our
losses from operations were $504,042 and $209,320, respectively. The loss in the
2001 period was due to our start-up of operations during that period without any
corresponding income from charter services. During the 2002 period we realized
charter revenue of approximately $877,000 but corresponding increases in
cost of sales and operating expenses resulted in our loss during this period.
Other Expenses
Other expenses were $48,962 during the three months ended June 30, 2001 and
$56,567 during the three months ended June 30, 2002. These other expenses
consist primarily of interest and reflect an increased level of borrowing.
Six Months Ended June 30, 2002 Compared to Six Months Ended June 30, 2001
Charter Revenue
Charter revenue increased from $132,990 during the six months ended June
30, 2001 to $1,324,316 during the six months ended June 30, 2002. The increase
was due to the commencement of charter operations during 2001 while during 2002
we were fully operational during the entire six month period. Cost of sales
increased from $169,413 during the six months ended June 30, 2001 to $1,128,663
during the six months ended June 30, 2002. This increase corresponded to our
becoming fully operational during 2002.
Page 12
Operating Expenses
Operating expenses consist of selling expenses, general and administrative
expenses, and depreciation expense. Operating expenses were $782,830 during the
six months ended June 30, 2001 and $1,128,668 during the six months ended June
30. 2002. The increase was based on increased operations offset by a decision to
conserve cash for equipment and other hard costs.
Loss From Operations
During the six month periods ended June 30, 2001 and June 30, 2002, our
losses from operations were $819,253 and $812,306, respectively. The loss in the
2001 period was due to our start-up of operations during that period without any
corresponding income from charter services. During the 2002 period we realized
charter revenue of approximately $1,324,316 but corresponding increases
in cost of sales and operating expenses resulted in our loss during this period.
Other Expenses
Other expenses were $91,492 during the six months ended June 30, 2001 and
$100,831 during the six months ended June 30, 2002. These other expenses consist
primarily of interest, and reflect an increased level of borrowing.
LIQUIDITY AND CAPITAL RESOURCES
Working Capital
As of December 31, 2001, we had cash of $341,899 and accounts receivable of
$220,053. At the end of our first quarter, on March 31, 2002, we had a cash
overdraft of $1,882 and accounts receivable of $42,116. We recognized the need
for immediate capital in order to continue operations. After exploring all of
our alternatives, we entered into the transaction with Return Assured under
which Return Assured acquired all of our outstanding stock. As of June 30, 2002,
we had cash on hand of $49,060 and unrestricted cash held by an attorney of
$2,791,752.
We believe that our cash on hand will allow us to continue with our planned
operations for a period of two years. Cash will be used to pay all of our
operating expenses. Aircraft will in all likelihood not be acquired unless they
can be leased or obtained with seller or third party financing. Acquisition of
aircraft by these methods, as compared to being purchased for cash, allows us to
pay for the cost of aircraft over time as income from charter operations is
earned.
Financing Activities
Our financing activities have consisted primarily of issuances of common
stock, sale of limited liability company interests in our controlled limited
liability company and long term debt.
Page 13
During the six months ended June 30, 2002, we borrowed $340,000 from a
third party lender, and $100,000 from the Small Business Administration.
During the year ended December 31, 2001, we received $300,000 from the sale
of limited liability company units. We did not receive any amounts from the sale
of limited liability company units during the six months ended June 30, 2002. We
expect to realize substantial financing from the sale of these units in the
remainder of 2002 and thereafter. It is through the sale of these units that
customers join our fractional share ownership program.
Capital Resources
Our primary capital resource is our cash on hand. Additional aircraft will
not be obtained unless they are available on terms that will allow us to finance
their acquisition. If necessary we believe we can raise additional funds through
the sale of common or preferred stock in one or more private placements. We do
not anticipate that we will be able to obtain debt financing except for secured
debt incurred in acquiring aircraft.
Going Concern Qualification
In its review of our financial statements for the period ended June 30,
2002 included in this report, our independent accountant's have noted factors
which raise substantial doubt about our ability to continue as a going concern.
These factors include that we have sustained recurring net operating losses and
have a shareholders' deficit. In addition, holders of preferred stock have the
right to redeem their shares for cash in an amount which exceeds available
funds.
Management believes that our access to the cash on hand of Return Assured
will provide us with the working capital to continue our aircraft charter
business. Management also believes that our preferred shareholders will not seek
to redeem their shares out of funds needed for our continued operation.
NEW ACCOUNTING STANDARDS
In June 2001, the Financial Accounting Standards Board issued Statement No.
141, "Business Combinations" and Statement No. 142, "Goodwill and Other
Intangible Assets". These statements become effective for us on July 1, 2001 for
Statement No. 141 and January 1, 2002 for Statement No. 142.
In June 2001, the Financial Accounting Standards Board also issued
Statement No. 143 "Accounting For Asset Retirement Obligations" and in August,
2001, Statement No. 144 "Accounting For Impairment and Disposal of Long Lived
Assets". Statement No. 143 will change the accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and the
associated asset retirement costs.
In August 2001, the FASB issued SFAS No. 144 Accounting for the Impairment
of Long-Lived Assets. SFAS No. 144 addresses financial accounting and reporting
for the impairment or disposal of long-lived assets. SFAS No. 144 is effective
for fiscal years beginning after December 15, 2001, and interim periods within
those fiscal years, with early application encouraged.
In May 2002, the Financial Accounting Standards Board issued SFAS No. 145,
Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB No. 13, and
Technical Corrections (SFAS No. 145). SFAS No. 145 eliminates Statement 4 (and
Statement 64, as it amends Statement 4, which requires gains and losses from the
extinguishment of debt to be aggregated and, if material, classified as an
extraordinary item, net of the related income tax effect. The criteria in APB
Opinion No. 30 will now be used to classify those gains and losses. SFAS No. 145
amends FASB Statement No. 13 to require that certain lease modifications that
have economic effects similar to sale-leaseback transactions be accounted for in
the same manner as sale-leaseback transactions.
We are in the process of analyzing SFAS No. 141 through 145. Management
cannot currently assess what effect the adoption of these pronouncements will
have on our financial position or results of operations.
Page 14
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not applicable.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On April 10, 2002, Matthew J. Sebal was issued 14,000,000 shares of the
Company's common stock in connection with a cancellation of a debt for $140,000.
Mr. Sebal was the Company's President, he now serves as the Company's Secretary
and as a director.
On April 10, 2002, Kaplan Gottbetter & Levenson, LLP, the Company's
counsel, was issued 1,705,420 shares of the Company's common stock in connection
with cancellation of a debt for $17,054.
On April 10, 2002, Todd J. Cusolle was issued 900,000 shares of the
Company's common stock for services rendered by Mr. Cusolle to
the Company. Mr. Cusolle is a director of the Company.
On April 10, 2002, Darren Lozinik was issued 300,000 shares of the
Company's common stock in connection with a cancellation of debt for past wages
valued at $40,000.
On April 10, 2002, Accent Pacific Capital, Inc. was issued 300,000 shares
of the Company's common stock in connection with a cancellation of debt valued
at $62,155.73 and for services rendered by Mr. Michael Sweatman to the Company.
On April 10, 2002, Peter Coker Sr. was issued 1,624,460 shares of the
Company's common stock in connection with a cancellation of debt valued at
$36,000 and for services rendered by Mr. Coker to the Company.
On April 23, 2002, the Company issued 14,000 shares of its common stock to
KGL Investments, Ltd. ("KGL") in satisfaction of a $100,000 loan provided by KGL
to the Company.
On April 23, 2002, the Company issued 14,000 shares of its common stock to
Joseph Campagna ("Campagna") in satisfaction of a $100,000 loan provided by
Campagna to the Company.
On April 23, 2002, the Company issued 30,000 shares of its common stock to
Ascension Holdings Limited ("Ascension")in settlement of a claim held against
the Company.
On April 23, 2002, the Company issued 12,000 shares of its common stock to
KGL Investments, Ltd. ("KGL") in settlement of a claim held against the Company.
On April 23, 2002, the Company also issued 33,333 shares of its common stock to
KGL in payment of service fees owed by the Company to KGL.
On April 23, 2002, the Company issued 5,000 shares of its common stock to
Dunlap Industries, Inc. ("Dunlap")in payment of service fees owed by the Company
to Dunlap.
On April 23, 2002, the Company issued 25,000 shares of its common stock to
Walter Davidson ("Davidson")in payment of service fees owed by the Company to
Davidson.
On April 23, 2002, the Company issued 10,000 shares of its common stock to
Alex Crohn ("Crohn")in payment of service fees owed by the Company to Crohn.
On April 23, 2002, the Company issued 10,000 shares of its common stock to
Mike Newman ("Newman")in payment of service fees owed by the Company to Newman.
Page 15
All of the foregoing securities were sold under the exemption 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. All purchasers represented in
writing that they acquired the securities for their own accounts. A legend was
placed on the stock certificates stating that the securities have not been
registered under the Securities Act and cannot be sold or otherwise transferred
without registration or an exemption therefrom.
ITEM 3. DEFAULTS IN SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On March 15, 2002, our board of directors approved the corporate actions
described below. These corporate actions were approved by the written consent of
the majority of our shareholders on April 23, 2002. The corporate actions
approved were:
Amendments to the Company's Certificate of Incorporation to: (1) increase
the number of authorized shares of the Company's capital stock from 51,000,000
shares to 105,000,000 shares, of which 100,000,000 shares shall be Common Stock,
par value $0.001 per share, and 5,000,000 shares shall be preferred stock, par
value $0.001 per share; (2) reverse split the outstanding shares of the
Company's Common Stock on a one-for-sixty basis, so that every sixty issued and
outstanding shares of Common Stock before the split shall represent one share of
Common Stock after the split with all fractional shares equal to or greater than
$.050 rounded up to the next whole share and those less than $0.50 eliminated
and paid for in cash; and (3) change the name of the Company to "EliteJet
Holdings, Inc."; and
The acquisition by the Company of all of the issued and outstanding capital
stock of EliteJet, Inc., a Nevada corporation.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
(b) Reports on Form 8-K:
On May 10, 2002, we filed a Report on Form 8-K that reported an
"acquisition or disposition of assets" that occurred on April 26, 2002. The
report describes our acquisition of all of the outstanding stock of EliteJets,
Inc. in exchange for 7,000,000 shares of our common stock.
On June 11, 2002, we filed a Report on Form 8-K that reported an "other
event" that occurred on June 10, 2002. The report described our discontinuance
of our operation that involved assuring that participating merchants accepted
returns of products purchased by consumers and businesses.
On July 15, 2002, we filed a Report on Form 8-K which we amended with a
Report on Form 8-K/A dated July 23, 2002. This Report included the financial
statements of EliteJet, Inc. and pro forma financial statements of EliteJet,
Inc. and Return Assured. These financial statements and pro forma information
related to the acquisition described in our Report on 8-K that was filed on May
10, 2002.
No other Form 8-K's were filed during the period represented by this
Quarterly Report on Form 10-QSB.
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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: August 20, 2002 By: /s/ Scott Walker
------------------
Scott Walker
President and Chairman
(principal financial officer)
The undersigned, the Chief Executive Officer and Chief Financial Officer of
the Registrant, certifies that this report complies with all of the requirements
of section 13(a) and 15(d) of the Exchange Act and the information contained in
this report fairly presents, in all material respects, the financial condition
and results of operations of the Registrant.
Date: August 20, 2002 By: /s/ Scott Walker
------------------
Scott Walker
Page 17