SCHEDULE 14C
(RULE 14c-101)
INFORMATION REQUIRED IN INFORMATION STATEMENT
SCHEDULE 14C INFORMATION
INFORMATION STATEMENT PURSUANT TO SECTION 14(C)
OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. 3)
-----------------
FILED BY THE REGISTRANT [X]
FILED BY A PARTY OTHER THAN THE REGISTRANT [ ]
Check the appropriate box:
[X] Preliminary Information Statement [ ] Confidential, for Use of
[ ] Definitive Information Statement the Commission Only (as
permitted by Rule 14c-5(d)(2))
RETURN ASSURED INCORPORATED
---------------------------
(Name of Registrant as Specified In Its Charter)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined): N/A
(4) Proposed maximum aggregate value of transaction: N/A
(5) Total fee paid: N/A
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: N/A
(2) Form, Schedule or Registration Statement No.: N/A
(3) Filing Party: N/A
(4) Date Filed: N/A
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RETURN ASSURED INCORPORATED
5962 La Place Court, Suite 230
Carlsbad, CA 92008
INFORMATION STATEMENT AND NOTICE
OF ACTION TAKEN WITHOUT A MEETING
This Information Statement and Notice of Action Taken Without a Meeting is being
furnished by the Board of Directors of Return Assured Incorporated (the
"Company") to the Company's stockholders to advise them of the following
corporate actions (the "Corporate Actions") taken by the Board of Directors and
the holders of a majority of the Company's voting stock ("Majority
Stockholders") by written consent:
- Amendments to the Company's Certificate of Incorporation to:
- 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;
- 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 rounded up to
the next whole share;
- change the name of the Company to "EliteJet Holdings, Inc."; and
- Acquisition of all of the issued and outstanding capital stock of
EliteJet, Inc., a Nevada corporation.
- --------------------------------------------------------------------------------
| The material terms of the Company's acquisition of all of the |
| Outstanding capital stock of EliteJet, Inc. are as follows: |
| |
| - Seller: Scott Walker, sole shareholder of EliteJet, Inc. |
| (see Item No. 3 below entitled "Acquisition of |
| EliteJet, Inc.") |
| |
| - Purchaser: The Company (see Item No. 3 below entitled |
| "Acquisition of EliteJet, Inc.") |
| |
| - Capital Stock |
| to be Acquired: 500 shares of common stock, representing all of the |
| issued and outstanding shares of the capital stock of |
| EliteJet, Inc. (see Item No. 3 below entitled |
| "Acquisition of EliteJet, Inc.") |
| |
| - Purchase Price: 7,000,000 shares of the Company's Common Stock (after |
| the reverse stock split) (see Item No. 3 below entitled |
| "Acquisition of EliteJet, Inc." and Item No. 1 entitled |
| "Reverse Stock Split") |
| |
| - EliteJet, Inc: EliteJet, Inc. was incorporated in Nevada on November |
| 16, 1999. It is engaged in the business of owning, |
| managing, operating and chartering aircraft in |
| connection with providing private and corporate |
| aviation services to individuals and business (see Item |
| No. 3 below entitled "Acquisition of EliteJet, Inc.") |
- --------------------------------------------------------------------------------
Page 2
The Corporate Actions for the increase in the number of authorized shares of the
Company's capital stock and the reverse stock split were approved by our Board
of Directors by written consent on March 15, 2002 and the Majority Stockholders
by written consent on April 23, 2002. The Corporate Actions for the acquisition
of EliteJet, Inc. and the change in name of the Company to "EliteJet Holdings,
Inc." were approved by our Board of Directors and the Majority Stockholders by
written consent on April 25, 2002. The Corporate Action for the amendment to
the terms of the acquisition of EliteJet, Inc. was approved by our Board of
Directors and the Majority Stockholders by written consent on April 27, 2002.
In accordance with the regulations under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), the Corporate Actions will not become effective
until 20 days after we have mailed this Information Statement to our
stockholders. Promptly following the expiration of this 20-day period, we
intend to file the amendment to our Certificate of Incorporation with the
Delaware Department of State. A copy of the form of Certificate of Amendment of
the Certificate of Incorporation is attached to this Information Statement. The
increase in our authorized number of shares, the reverse stock split and the
change of our name to EliteJet Holdings, Inc. will become effective at the time
of such filing. The acquisition of EliteJet, Inc. will become effective
promptly following the expiration of the 20-day period.
Approval of the Corporate Actions requires the affirmative vote of a majority of
the outstanding shares of our voting capital stock. Our Common Stock is our
only voting stock. Holders of our Common Stock are entitled to one vote for
each share of Common Stock held. The total number of shares of our Common Stock
outstanding on each of April 23, 2002, April 25, 2002 and April 27, 2002 was
35,834,012. The Majority Stockholders held 18,894,860 shares (approximately
52.8%) of our Common Stock on each of April 23, 2002, April 25, 2002 and April
27, 2002.
The names and the number of shares of Common Stock held by each of the Majority
Stockholders is as follows:
---------------------------------------------
Number of
----------
Name Shares Held
---- ------------
Matthew J. Sebal 14,300,000
Todd Cusolle 900,000
Peter Coker, Sr. 1,624,460
Michael Sweatman 5,400
Darren Lozinik 300,000
KGL Investments Ltd. 1,765,000
----------
Total 18,894,860
==========
---------------------------------------------
Section 228 of the Delaware General Corporation Law ("Delaware GCL") permits
stockholder action by written consent in lieu of a meeting of stockholders if
holders of a sufficient number of voting shares consent to the actions in
writing. Accordingly, all corporate actions necessary to authorize and approve
the Corporate Actions have been taken.
Page 3
Your consent is not required and is not being solicited in connection with the
approval of the Corporate Actions. Stockholders have no right under Delaware
law or the Company's Certificate of Incorporation or Bylaws to dissent from any
of the Corporate Actions. This Information Statement is furnished solely for
the purpose of informing you of these Corporate Actions before they take effect
in the manner required under the Exchange Act.
Only stockholders of record of the Company's voting stock outstanding at the
close of business on October 7, 2002 (the "Record Date") are entitled to receive
this Information Statement and Notice of Action Taken Without a Meeting. This
Information Statement is first being mailed to such stockholders on or about
____________, 2002.
Our principal executive office is located at 5962 La Place Court, Suite 230,
Carlsbad, CA 92008.
PLEASE BE ADVISED THAT THIS IS ONLY AN INFORMATION STATEMENT AND NOTICE OF
ACTION TAKEN WITHOUT A MEETING. WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE
REQUESTED NOT TO SEND US A PROXY.
1. REVERSE STOCK SPLIT
On March 15, 2002, our Board of Directors approved an amendment to our
Certificate of Incorporation to affect a one-for-sixty reverse stock split (the
"Reverse Stock Split") of the Company's issued and outstanding Common Stock.
The Majority Stockholders approved the Reverse Stock Split on April 23, 2002 by
written consent. The approval by our Board of Directors and the Majority
Stockholders is adequate under Delaware law to affect the Reverse Stock Split.
The Reverse Stock Split will become effective (the "Reverse Stock Split
Effective Date") upon the filing of the amendment to our Certificate of
Incorporation with the Delaware Department of State. The Corporate Action
approving the amendment to our Certificate of Incorporation for the Reverse
Stock Split will not become effective until 20 days after we have mailed this
Information Statement to our stockholders. We intend to file the amendment
promptly following the expiration of this 20-day period. A copy of the form of
Certificate of Amendment of the Certificate of Incorporation is attached to this
Information Statement. Stockholders have no right under Delaware law or the
Company's Certificate of Incorporation or Bylaws to dissent from the Reverse
Stock Split.
On the Reverse Stock Split Effective Date, each sixty shares of our Common Stock
issued and outstanding immediately prior to the Reverse Stock Split Effective
Date (the "Old Common Stock") will automatically and without any action on the
part of the stockholders be converted into one share of our Common Stock (the
"New Common Stock"). All fractional shares resulting from the Reverse Stock
Split shall be rounded up to the next whole share. The Reverse Stock Split will
not materially affect the proportionate equity interest in the Company of any
holder of Old Common Stock or the relative rights, preferences, privileges or
priorities of any such stockholder.
EXCHANGE OF STOCK CERTIFICATES
Shortly after the Reverse Stock Split Effective Date, stockholders will be asked
to surrender their certificates representing shares of Old Common Stock in
accordance with the procedures set forth in a letter of transmittal to be sent
by the Company. Upon such surrender, a certificate representing shares
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of New Common Stock will be issued and forwarded to the stockholders; however,
each certificate representing shares of Old Common Stock will continue to be
valid and represent the number of shares of New Common Stock equal to the number
of shares of Old Common Stock adjusted for the Reverse Stock Split.
STOCKHOLDERS SHOULD NOT SEND THEIR STOCK CERTIFICATES UNTIL THEY RECEIVE A
LETTER OF TRANSMITTAL.
PURPOSE OF THE REVERSE SPLIT
The Board believes that the Reverse Stock Split is desirable for several
reasons. The Reverse Stock Split should enhance the acceptability of the Common
Stock by the financial community and the investing public. The reduction in the
number of issued and outstanding shares of Common Stock caused by the Reverse
Stock Split is anticipated initially to increase proportionally the per share
market price of the Common Stock. The Board also believes that the Reverse
Stock Split may result in a broader market for the Common Stock than that which
currently exists. The expected increased price level may encourage interest and
trading in the Common Stock and possibly promote greater liquidity for the
Company's stockholders, although such liquidity could be adversely affected by
the reduced number of shares of Common Stock outstanding after the Reverse Stock
Split Effective Date.
Additionally, a variety of brokerage house policies and practices tend to
discourage individual brokers within those firms from dealing with lower-priced
stocks. Some of those policies and practices pertain to the payment of broker's
commissions and to time consuming procedures that function to make the handling
of lower-priced stocks economically unattractive to brokers. In addition, the
structure of trading commissions tends to have an adverse impact upon holders of
lower-priced stock because the brokerage commission on a sale of lower-priced
stock generally represents a higher percentage of the sales price than the
commission on a relatively higher-priced issue. The proposed Reverse Stock
Split could result in a price level for the Common Stock that will reduce, to
some extent, the effect of the above-referenced policies and practices of
brokerage firms and diminish the adverse impact of trading commissions on the
market for the Common Stock. Any reduction in brokerage commissions resulting
from the Reverse Stock Split may be offset, however, in whole or in part, by
increased brokerage commissions required to be paid by stockholders selling "odd
lots" created by such Reverse Stock Split.
However, there can be no assurance that any or all of these effects will occur;
including, without limitation, that the market price per share of New Common
Stock after the Reverse Stock Split will be equal to the applicable multiple of
the market price per share of Old Common Stock before the Reverse Stock Split,
or that such price will either exceed or remain in excess of the current market
price. Further, there is no assurance that the market for the Common Stock will
be improved. Stockholders should be aware that we cannot predict what effect
the Reverse Stock Split will have on the market price of the Common Stock.
EFFECT OF THE REVERSE STOCK SPLIT
Consummation of the Reverse Stock Split will not alter the number of authorized
shares of Common Stock. Separate action is being taken to increase the number
of authorized shares of Common Stock from 50,000,000 shares to 100,000,000
shares (see the section below entitled "Increase in the Number of Authorized
Shares of Capital Stock"). The Reverse Stock Split will not affect the
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proportionate equity interest in the Company of any holder of Old Common Stock
or the relative rights, preferences, privileges or priorities of any such
stockholder.
Stockholders should note that certain disadvantages may result from the adoption
of the Reverse Stock Split. The number of outstanding shares of Common Stock
will be decreased as a result of the Reverse Stock Split, but the number of
authorized shares of Common Stock will not be decreased. The Company will
therefore have the authority to issue a greater number of shares of Common Stock
following the Reverse Stock Split without the need to obtain stockholder
approval to authorize additional shares. Any such additional issuance may have
the effect of significantly reducing the interest of the existing stockholders
of the Company with respect to earnings per share, voting, liquidation value and
book and market value per share.
The par value of the Common Stock will remain at $.001 per share following the
Reverse Stock Split, and the number of shares of Common Stock outstanding will
be reduced. As a consequence, the aggregate par value of the outstanding Common
Stock will be reduced, while the aggregate capital in excess of par value
attributable to the outstanding Common Stock for statutory and accounting
purposes will be correspondingly increased. The Reverse Stock Split will not
affect the Company's total stockholders' equity. All share and per share
information would be retroactively adjusted following the Reverse Stock Split
Effective Date to reflect the Reverse Stock Split for all periods presented in
future filings.
The Common Stock is currently registered under Section 12(g) of the Securities
Exchange Act of 1934 (the "Exchange Act") and, as a result, the Company is
subject to the periodic reporting and other requirements of the Exchange Act.
The Reverse Stock Split will not effect the registration of the Common Stock
under the Exchange Act. After the Reverse Stock Split Effective Date, trades of
the New Common Stock will be reported on the Nasdaq electronic "Bulletin Board"
under the Company's current symbol RTRN, which will be changed in connection
with our name change (see item below entitled "Corporate Name Change").
FEDERAL INCOME TAX CONSEQUENCES OF THE REVERSE STOCK SPLIT
We have not sought and will not seek an opinion of counsel or a ruling from the
Internal Revenue Service regarding the federal income tax consequences of the
Reverse Stock Split. We believe that because the Reverse Stock Split is not
part of a plan to increase any stockholder's proportionate interest in the
assets or earnings and profits of the Company, the Reverse Stock Split will have
the federal income tax effects set forth below.
Except as described below with respect to cash received in lieu of fractional
share interests, the receipt of New Common Stock in the Reverse Stock Split
should not result in any taxable gain or loss to stockholders for federal income
tax purposes. The tax basis of New Common Stock received as a result of the
Reverse Stock Split (when added to the basis for any fractional share interest
to which a stockholder is entitled) will be equal, in the aggregate, to the
basis of the Old Common Stock exchanged for New Common Stock. The per share tax
basis of the New Common Stock is based on the tax basis of the Old Common Stock
for which the New Common Stock is exchanged. For the purposes of determining
whether short-term or long-term capital gains treatment will be applied to a
stockholder's disposition of New Common Stock subsequent to the Reverse Stock
Split, a stockholder's holding period for the shares of Old Common Stock
Page 6
will be included in the holding period for the New Common Stock received as a
result of the Reverse Stock Split.
A stockholder who receives cash in lieu of fractional shares of New Common Stock
will be treated as first receiving such fractional shares and then receiving
cash as payment in exchange for such fractional shares of New Common Stock and,
except for dealers, will recognize capital gain or loss in an amount equal to
the difference between the amount of cash received and the adjusted basis of
such fractional shares.
The Reverse Stock Split will constitute a reorganization within the meaning of
Section 368(a)(1)(E) of the Internal Revenue Code or will otherwise qualify for
general nonrecognition treatment, and the Company will not recognize any gain or
loss as a result of the Reverse Stock Split.
THE DISCUSSION SET FORTH ABOVE RELATES TO THE MATERIAL FEDERAL INCOME TAX
CONSEQUENCES OF THE REVERSE STOCK SPLIT. STOCKHOLDERS ARE URGED TO CONSULT
THEIR TAX ADVISERS AS TO THE PARTICULAR TAX CONSEQUENCES TO THEM OF THE REVERSE
STOCK SPLIT, INCLUDING THE FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX
CONSEQUENCES TO THEM OF THE REVERSE STOCK SPLIT.
2. INCREASE IN NUMBER OF AUTHORIZED SHARES OF CAPITAL STOCK
On March 15, 2002, our Board of Directors approved an amendment to our
Certificate of Incorporation to increase the number of authorized shares of
capital stock from 51,000,000 shares to 105,000,000 shares, of which 100,000,000
shares shall be Common Stock, par value $.001 per share, and 5,000,000 shares
shall be Preferred Stock, par value $.001 per share (the "Stock Increase"). The
Majority Stockholders approved the Stock Increase on April 23, 2002 by written
consent. The approval by our Board of Directors and by the Majority
Stockholders is adequate under Delaware law to effect the Stock Increase. The
Stock Increase will become effective upon the filing of the amendment to our
Certificate of Incorporation with the Delaware Department of State. The
Corporate Action approving the amendment to our Certificate of Incorporation for
the Stock Increase will not become effective until 20 days after we have mailed
this Information Statement to our stockholders. We intend to file the amendment
promptly following the expiration of this 20-day period. A copy of the form of
Certificate of Amendment of the Certificate of Incorporation is attached to this
Information Statement. Stockholders have no right under Delaware law or the
Company's Certificate of Incorporation or Bylaws to dissent from the Stock
Increase.
The Board believes that the Stock Increase is desirable in order to provide the
Company with a greater degree of flexibility to issue shares of Common Stock,
without the expense and delay of a special stockholders' meeting, in connection
with possible future stock dividends or stock splits, equity financings, future
opportunities for expanding the business through investments or acquisitions,
management incentive and employee benefit plans and for other general corporate
purposes.
Authorized but unissued shares of Common Stock may be issued at such times, for
such purposes and for such consideration as the Board of Directors may determine
to be appropriate without further authority from the Company's stockholders,
Page 7
except as otherwise required by applicable law or stock exchange policies.
The Stock Increase will not have any immediate effect on the rights of existing
stockholders. However, the Board will have the authority to issue authorized
Common Stock without requiring future stockholder approval of such issuances,
except as may be required by applicable law or exchange regulations. To the
extent that additional authorized shares are issued in the future, they will
decrease the existing stockholders' percentage equity ownership and, depending
upon the price at which they are issued, could be dilutive to the existing
stockholders. The holders of Common Stock have no preemptive rights.
The Stock Increase with respect to the authorized number of shares of Common
Stock and the subsequent issuance of such shares could have the effect of
delaying or preventing a change in control of the Company without further action
by the stockholders. Shares of authorized and unissued Common Stock could be
issued (within the limits imposed by applicable law) in one or more
transactions. Any such issuance of additional stock could have the effect of
diluting the earnings per share and book value per share of outstanding shares
of Common Stock, and such additional shares could be used to dilute the stock
ownership or voting rights of a person seeking to obtain control of the Company.
The Company has previously adopted certain measures that may have the effect of
helping to resist an unsolicited takeover attempt.
3. ACQUISITION OF ELITEJET, INC.
On April 25, 2002 our Board of Directors and Majority Stockholders approved the
acquisition of all of the issued and outstanding capital stock of EliteJet,
Inc., a Nevada corporation ("EliteJet"), by written consent (the "EliteJet
Acquisition"). On April 27, 2002, our Board of Directors and Majority
Stockholders approved an amendment to the terms of the EliteJet Acquisition (the
"Amended EliteJet Acquisition") by written consent. The approval by our Board
of Directors and by the Majority Stockholders is adequate under Delaware law to
effect both the EliteJet Acquisition and the Amended EliteJet Acquisition. The
Corporate Actions approving the EliteJet Acquisition and the Amended EliteJet
Acquisition will not become effective until 20 days after we have mailed this
Information Statement to our stockholders. A copy of the amended agreement is
attached to this Information Statement. Stockholders have no right under
Delaware law or the Company's Certificate of Incorporation or Bylaws to dissent
from either the EliteJet Acquisition or the Amended EliteJet Acquisition.
In connection with the EliteJet Acquisition, we have agreed to acquire all of
the issued and outstanding capital stock of EliteJet in exchange for the
issuance of 7,000,000 shares of Common Stock to Scott Walker, the sole
stockholder of EliteJet. The transaction and the contemplated issuance of
Common Stock to Mr. Walker will be effectuated pursuant to an exemption from
registration under Section 4(2) of the Securities Act of 1933. The transaction
was made without the use of any general solicitation or general advertising.
Mr. Walker had access to all information he required concerning the Company and
had the opportunity to ask questions and receive answers from Company
representatives concerning the transaction and the Company's business. The
Company and Mr. Walker were introduced to each other by business associates with
preexisting business relationships with both of them. Mr. Walker was
represented by counsel during the negotiations leading to the transaction and
the preparation of the transaction documents. The issuance of the 7,000,000
shares of Common Stock to Mr. Walker will result in a change in control of the
Page 8
Company and will dilute the value of current stockholders' existing shares of
Common Stock. The 7,000,000 shares of Common Stock issued to Mr. Walker, after
the Reverse Stock Split is completed, will represent approximately ninety-two
percent (92%) of the outstanding shares of Common Stock.
In connection with the Amended EliteJet Acquisition, the acquisition agreement
pursuant to which we agreed to acquire EliteJet was amended to clarify that the
shares of Common Stock to be issued to the EliteJet stockholder represent shares
of Common Stock after taking into account the contemplated change in the
Company's capitalization pursuant to the 1 for 60 reverse stock split of the
Common Stock approved by the Board of Directors of the Company on March 15, 2002
and the Majority Stockholders by written consent on April 23, 2002 and described
in the Section of this Information Statement entitled "Reverse Stock Split."
EliteJet was incorporated on November 16, 1999. EliteJet is in the business of
owning, managing, operating and chartering aircraft in connection with providing
private and corporate aviation services to individuals and businesses through
its fractional share aircraft ownership program.
EliteJet's fractional ownership program permits customers to acquire a specific
percentage of a limited liability company which entitles them to utilize
EliteJet aircraft for a specified number of flight hours per annum. In
addition, EliteJet provides management, ground support and flight operation
services to customers after the sale. EliteJet's revenues derive from the
management and usage fees charged to clients in connection with flight
operations.
Mr. Walker is the founder and sole shareholder of EliteJet. Mr. Walker was
issued his common stock in EliteJet in a private transaction that was exempt
from registration under Section 4(2) of the Securities Act of 1933. This
transaction was made without any general solicitation or general advertising.
This transaction involved the initial issuance of stock to the founder of
EliteJet. EliteJet did not make any private placements of its equity securities
other than the transaction with Mr. Walker.
See below for EliteJet's financial statements for the year ended December 31,
2001 and the six months ended June 30, 2002 and management's discussion and
analysis of financial condition and results of operations for these periods.
4. CORPORATE NAME CHANGE
On April 25, 2002, our Board of Directors approved an amendment to our
Certificate of Incorporation to change our name to EliteJet Holdings, Inc. The
Majority Stockholders approved the name change on April 23, 2002 by written
consent. The approval by our Board of Directors and by the Majority
Stockholders is adequate under Delaware law to effect the name change. The name
change will become effective upon the filing of the amendment to our Certificate
of Incorporation with the Delaware Department of State. The Corporate Action
approving the amendment to our Certificate of Incorporation for the name change
will not become effective until 20 days after we have mailed this Information
Statement to our stockholders. We intend to file the amendment promptly
following the expiration of this 20-day period. A copy of the form of
Certificate of Amendment of the Certificate of Incorporation is attached to this
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Information Statement. Stockholders have no right under Delaware law or the
Company's Certificate of Incorporation or Bylaws to dissent from the name
change.
We believe that it is in the best interest of the Company and our stockholders
to continue our operations under a new name. We recently acquired EliteJet,
Inc., a Nevada corporation engaged in the business of owning, managing,
operating and chartering aircraft in connection with providing private and
corporate aviation services to individuals and businesses. At this time, our
operations consist solely of the operations of EliteJet, Inc. Our board
believes that the Company would benefit from a name that reflects our current
business. See the section above entitled "ACQUISITION OF ELITEJET, INC." for
further details on this acquisition.
Upon the filing of the Certificate of Amendment, Common Stock certificates that
previously represented stock of the Company in the name of Return Assured
Incorporated shall be deemed to represent shares of EliteJet Holdings, Inc.
without any further action by the Common Stockholders of the Company or any
other party. Notwithstanding the foregoing, it is requested that stockholders
exchange their existing certificates for certificates bearing the name EliteJet
Holdings, Inc. In connection with the name change, we will obtain a new trading
symbol and CUSIP number.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
A. The following table sets forth information regarding the beneficial
ownership of our Common Stock as of May 24, 2002. The information in this table
provides the ownership information for:
- each person known by us to be the beneficial owner of more that 5% of
our Common Stock,
- each of our directors,
- each of our executive officers, and
- our executive officers and directors as a group.
Beneficial ownership has been determined in accordance with the rules and
regulations of the SEC and includes voting or investment power with respect to
the shares. Unless otherwise indicated, the persons named in the table below
have sole voting and investment power with respect to the number of shares
indicated as beneficially owned by them.
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Amount of
Beneficial Percentage
Name and Address of Beneficial Owner Position Ownership Owned
- ------------------------------------ -------- --------- -----
Scott Walker Director, Chairman of the 0 0%
c/o Return Assured Incorporated Board, and President
5962 La Place Court, Suite 230
Carlsbad, CA 92008
Matthew Sebal Director and Secretary 14,300,000 39.90%
c/o Return Assured Incorporated
5962 La Place Court, Suite 230
Carlsbad, CA 92008
David Rector Director 0 0%
c/o Return Assured Incorporated
5962 La Place Court, Suite 230
Carlsbad, CA 92008
Todd Cusolle Director 900,000 .97%
c/o Return Assured Incorporated
5962 La Place Court, Suite 230
Carlsbad, CA 92008
All officers and directors as a group 15,200,000 40.87%
We have contacted stock brokerage firms holding shares of our Common Stock in
"street name" to determine whether there are additional substantial holders of
our Common Stock.
B. The following table sets forth information regarding the beneficial
ownership of our Common Stock after the Reverse Stock Split and the acquisition
of EliteJet, Inc. have been completed. The information in this table provides
the ownership information for:
- each person known by us to be the beneficial owner of more that 5% of
our Common Stock,
- each of our directors,
- each of our executive officers, and
- our executive officers and directors as a group.
Beneficial ownership has been determined in accordance with the rules and
regulations of the SEC and includes voting or investment power with respect to
the shares. Unless otherwise indicated, the persons named in the table below
have sole voting and investment power with respect to the number of shares
indicated as beneficially owned by them.
Amount of
Beneficial Percentage
Name and Address of Beneficial Owner Position Ownership Owned
- ------------------------------------ -------- --------- -----
Scott Walker Director, Chairman of 7,000,000 92.14%
c/o Return Assured Incorporated the Board, and President
5962 La Place Court, Suite 230
Carlsbad, CA 92008
Matthew Sebal Director and Secretary 238,333 3.14%
c/o Return Assured Incorporated
5962 La Place Court, Suite 230
Carlsbad, CA 92008
David Rector Director 0 0%
c/o Return Assured Incorporated
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5962 La Place Court, Suite 230
Carlsbad, CA 92008
Todd Cusolle Director 15,000 .2%
c/o Return Assured Incorporated
5962 La Place Court, Suite 230
Carlsbad, CA 92008
All officers and directors as a group 7,253,333 95.48%
Page 12
[Letterhead of Rogoff & Company, P.C.]
INDEPENDENT AUDITORS' REPORT
----------------------------
To the Board of Directors and Stockholders of
ELITEJET, INC. AND SUBSIDIARY
We have audited the accompanying consolidated balance sheet of EliteJet, Inc. (a
Nevada corporation) and Subsidiary as of December 31, 2001, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the two years then ended. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
EliteJet, Inc. and Subsidiary as of December 31, 2001, and the consolidated
results of their operations and their cash flows for each of the two years then
ended in conformity with accounting principles generally accepted in the United
States of America.
/s/ Rogoff & Company, P.C.
NEW YORK, NEW YORK
JULY 10, 2002
Page F-1
ELITEJET, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31,
2001
------------
ASSETS
Current assets:
- ---------------
Cash $ 341,899
Accounts receivable 220,053
Prepaid expenses 2,194
------------
TOTAL CURRENT ASSETS 564,146
Other assets:
- -------------
Fixed assets 2,562,211
------------
TOTAL OTHER ASSETS 2,562,211
------------
TOTAL ASSETS $ 3,126,357
============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
- --------------------
Accounts payable and accrued expenses 243,893
Current portion of long-term debt 242,967
Customer deposits 50,000
------------
TOTAL CURRENT LIABILITIES 536,860
------------
Other liabilities:
- ------------------
Long-term debt, net of current portion 2,151,155
Commitments and contingencies ---
------------
TOTAL OTHER LIABILITIES 2,151,155
------------
TOTAL LIABILITIES 2,688,015
------------
Minority interest in equity of subsidiary 299,258
Stockholders' equity:
- ---------------------
Common stock, $1.00 par value, 25,000 shares
authorized, 500 shares issued and outstanding 500
Additional paid-in capital 2,114,382
Retained earning (deficit) (1,975,798)
------------
TOTAL STOCKHOLDERS' EQUITY 139,084
------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY. . . . . . . . . . . $ 3,126,357
===============
SEE NOTES TO FINANCIAL STATEMENTS
Page F-2
ELITEJET, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
YEAR YEAR
ENDED ENDED
DECEMBER 31, DECEMBER 31,
2001 2000
------------ ------------
Operating income:
- ------------------
Revenue $ 1,328,980 $ ---
Cost of revenue 901,688 87,048
------------ ------------
MARGIN 427,292 (87,048)
Operating expenses:
- --------------------
Selling expenses 78,851 110,647
General and administrative expenses 258,791 174,236
Depreciation expense 785,232 581,261
------------ ------------
TOTAL OPERATING EXPENSES 1,122,874 866,144
INCOME (LOSS) FROM OPERATIONS (695,582) (953,192)
Other income and (expenses):
- -------------------------------
Interest income --- 3,368
Other income and (expenses) (176,172) (154,512)
------------ ------------
TOTAL OTHER INCOME AND (EXPENSES) (176,172) (151,144)
------------ ------------
LOSS BEFORE MINORITY INTEREST $ (871,754) $ (1,104,336)
Minority Interest in Loss of Subsidiary 292 ---
- -------------------------------------------- ------------ ------------
NET INCOME (LOSS) $ (871,462) $ (1,104,336)
========= ===========
WEIGHTED AVERAGE SHARES OUTSTANDING 500 500
=== ===
EARNINGS (LOSS) PER SHARE $ (1,742.92) $(2,208.67)
========== ==========
SEE NOTES TO FINANCIAL STATEMENTS
Page F-3
ELITEJET, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 2001 AND 2000
ADDITIONAL RETAINED
NUMBER COMMON PAID-IN EARNINGS
OF SHARES STOCK CAPITAL (DEFICIT) TOTAL
--------- ------ ---------- ------------- -----------
BALANCE, JANUARY 1, 2000 --- $ --- $ --- $ --- $ ---
Net proceeds from the issuance
of common stock-Founder 500 500 2,114,382 --- 2,114,882
Net income (loss) for the year
ended December 31, 2000 --- --- --- (1,104,336) (1,104,336)
--------- ------ ---------- ------------- -----------
BALANCE, DECEMBER
31, 2000. . . . . . . . . . . 500 $ 500 $2,114,382 ($1,104,336) $ 1,010,546
Net income (loss) for the year
ended December 31, 2001 --- --- --- (871,462) (871,462)
--------- ------ ---------- ------------- -----------
BALANCE, DECEMBER
31, 2001. . . . . . . . . . . 500 $ 500 $2,114,382 ($1,975,798) $ 139,084
========= ====== ========== ============= ===========
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Page F-4
ELITEJET, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR YEAR
ENDED ENDED
DECEMBER 31, DECEMBER 31,
2001 2000
CASH FLOWS FROM:
OPERATING ACTIVITIES:
- ---------------------
NET INCOME (LOSS) . . . . . . . . . . . . . . . . $ (871,462) $ (1,104,336)
Non-cash transaction -
Professional services 25,000 ---
Adjustments to reconcile net (loss) to net cash
provided by (used in) operating activities:
Depreciation. . . . . . . . . . . . . . . . . . . . 785,232 581,261
Minority interest (292) ---
Change in:
Accounts receivable (220,053) ---
Prepaid expenses. . . . . . . . . . . . . . . . . 7,500 (9,694)
Accounts payable and
accrued expenses. . . . . . . . . . . . . . . 231,743 12,152
Customer deposits 50,000 ---
-------------- -------------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES . . . . . . . . . . . . . . . 7,668 (520,617)
-------------- -------------
FINANCING ACTIVITIES:
- ---------------------------------------------------
Issuance of common stock --- 2,114,882
Sale of LLC Units 274,550 ---
Aircraft acquisition loan --- 2,449,073
Repayment of long-term debt . . . . . . . . . . . (24,366) (30,586)
-------------- -------------
NET CASH PROVIDED BY
FINANCING ACTIVITIES . . . . . . . . . $ 250,184 $ 4,533,369
-------------- -------------
(CONTINUED)
Page F-5
ELITEJET, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
YEAR YEAR
ENDED ENDED
DECEMBER 31, DECEMBER 31,
2001 2000
CASH FLOWS FROM:
INVESTING ACTIVITIES:
- ---------------------
Acquisition of property, plant
and equipment . . . . . . . . . . . . ($54,188) $ (3,874,517)
-------------- -------------
NET CASH (USED IN)
INVESTING ACTIVITIES . . . . . . . . . (54,188) (3,874,517)
-------------- -------------
NET INCREASE IN CASH AND
CASH EQUIVALENTS . . . . . . . . . . . . . . . . . 203,664 138,235
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD $ 138,235 ---
-------------- -------------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD . . . . . . . . . . . . . . . . . $ 341,899 $ 138,235
============== =============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
- ---------------------------------------------------
Interest . . . . . . . . . . . . . . . . . . . . $ 176,238 $ 151,143
============== =============
Income taxes $ --- $ ---
============== =============
Non-cash transactions:
- ---------------------------------------------------
Consulting services for LLC Units $ 25,000 $ ---
============== =============
SEE NOTES TO FINANCIAL STATEMENTS
Page F-6
ELITEJET, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001 AND 2000
NOTE 1: ORGANIZATION AND BUSINESS
ELITEJET, INC. (the "Parent") was organized on November 16, 1999, pursuant to
the corporation laws of the State of Nevada as EXEC JET, INC. On September 28,
2001, the Parent amended its Articles of Incorporation and Corporate Charter to
change its name to EliteJet, Inc. On May 16, 2001, the Parent was qualified and
authorized to transact intrastate business in the State of California. The
Company was formed to acquire, own and operate jet air transportation. Its
current operations are to provide certain management services to Elite Jet
Partners, LLC. The company provides charter services throughout North America
and the Caribbean.
ELITE JET PARTNERS, LLC (the "Subsidiary") was organized on May 2, 2001,
pursuant to the Beverly-Lillea Limited Liability Company Act of the State of
California as EXECJET PARTNERS, LLC. On July 25, 2001, the Company amended its
Articles of Organization to change its name to Elite Jet Partners, LLC. The
Company was formed to acquire, own and provide jet air transportation for the
cooperative use of its members.
The Company's ability to remain operational is dependent upon its ability to
raise additional funds and have positive cash flows from operations. The
Company's future capital requirements will depend on numerous factors including,
but not limited to, continued progress in its selling capabilities and
implementing its marketing strategies. The Company plans to engage in such
ongoing financing efforts on a continuing basis.
NOTE 2: BASIS OF PRESENTATION
The consolidated financial statements include the accounts of the Parent,
EliteJet, Inc., and its majority-owned Subsidiary, Elite Jet Partners, LLC
(collectively referred to herein as the "Company", from their respective dates
of incorporation/organization). All significant inter-company transactions and
account balances have been eliminated in consolidation.
Page F-7
ELITEJET, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2001 AND 2000
NOTE 3: PRIVATE PLACEMENT OFFERING
During the year ended December 31, 2001, the Managing Member of the Subsidiary
passed a resolution authorizing the management to initiate steps to make a
private placement of the Subsidiary's Member Interests or "Units" in order to
raise capital. The Subsidiary initiated an offering of securities under an
exemption pursuant to Rule 506 of Regulation D, "Rules Governing the Limited
Offer and Sale of Securities Without Registration Under the Securities Act of
1933 (as amended)" (the "Offering"). The Offering includes the sale of up to six
hundred (600) Units, including rights in the Subsidiary consisting of the
Member's Economic Interest, any right to vote or participate in management, and
any right to information concerning the business and affairs of the Subsidiary,
at the offering price of $25,000.00 per Unit, for an aggregate of $15,000,000.00
on a best efforts, twelve (12) Unit minimum investment basis.
The Offering was commenced on August 31, 2001, with the first and only sale to
date of twelve (12) Units of the Subsidiary that raised an aggregate of
$300,000. Offering costs of $31,732, for legal fees, registration fees, printing
fees and other related expenses, were charged to the proceeds of the offering.
NOTE 4: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and cash equivalents
- ----------------------------
The Company considers all highly liquid debt instruments purchased with original
maturities of three months or less to be cash equivalents.
Accounts receivable
- --------------------
Accounts receivable is stated at its gross amount. No allowance for doubtful
accounts has been provided for. Based upon its past history, the Company has not
experienced bad debt and does not expect to. The Company evaluates accounts
receivable as part of its determination of profit and loss.
In addition the Balance Sheet includes the value attributed to the minority
interest of the subsidiary. As a result of operations, the minority interest of
the subsidiary has been charged with their share of the subsidiary's loss.
Page F-8
ELITEJET, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2001 AND 2000
NOTE 4: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Fixed assets
- -------------
The Company's policy is to capitalize the cost of the acquisition and
significant improvements to its aircraft, as well as significant furniture and
fixtures, equipment and leasehold improvements. Purchased assets are capitalized
and stated at cost. Normal repairs and maintenance are expensed as incurred.
Expenditures, such as improvements, which materially increase values, change
capacities or extend useful lives are capitalized. Furniture, fixtures and
equipment are depreciated using the straight-line method over the estimated
useful lives of the assets for financial statement reporting purposes. For
federal income tax purposes, depreciation is provided for under the guidelines
in the Internal Revenue Code. Gains or losses on disposals of fixed assets are
recorded as current activities. The Company assesses at least annually the
recovery of its long-lived and intangible assets. If an impairment exists, the
carrying amount of the related asset is reduced to fair value. The estimated
useful lives of fixed assets are as follows:
Aircraft 5 years
Computer equipment 5 years
Furniture & fixtures 7 years
Organization costs
- -------------------
Organization costs incurred in conjunction with the formation of the Company
have been expensed to operations.
Year-end
- --------
The Company has adopted a year-end of December 31 for financial statement and
income tax reporting purposes.
Revenue Recognition
- --------------------
The company recognizes revenue from the rental of its aircraft. Revenue is
recorded at the time the services are rendered.
Page F-9
ELITEJET, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2001 AND 2000
NOTE 4: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Major customers
- ----------------
The Company has a concentration risk as defined by American Institute of
Certified Public Accountants (AICPA) Statement of Position (SOP) 94-6,
Disclosure of Certain Risks and Uncertainties in that the Company conducts
virtually all of its business with a relatively small number of customers, the
loss of any of which may have a materially negative effect on the Company's
financial position and/or results of operations. During the year ended December
31,2001 two customers accounted for approximately 28% and 26% respectively of
company revenues.
Income taxes
- -------------
The Company reports income (loss) for income tax reporting purposes on a
calendar year basis. The results of operations for the years ended December 31,
2001 and 2000 do not contain a substantial provision for income taxes because of
the Company's S Corporation election under the Internal Revenue Code, which was
involuntarily terminated on April 26, 2002 upon a business combination. Income
taxes on earnings of the Company are payable by the Stockholder individually
under the Internal Revenue Code and, accordingly, are not reflected in the
historical financial statements. State income taxes were immaterial.
Earnings (loss) per share
- ----------------------------
Earnings (loss) per share has been computed by dividing the net (loss) by the
weighted average number of common stock outstanding.
Estimates
- ---------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Accordingly, actual results
could differ from those estimates.
Page F-10
ELITEJET, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2001 AND 2000
NOTE 5: FIXED ASSETS
Fixed assets includes aircraft and improvements, furniture, fixtures and
computer equipment at December 31, 2001 and consists of the following:
Aircraft and improvements $ 3,923,642
Furniture and fixtures 1,671
Computer equipment 3,391
---------------
TOTAL FIXED ASSETS 3,928,704
Accumulated depreciation and amortization (1,366,493)
------------
TOTAL FIXED ASSETS, NET $ 2,562,211
=========
NOTE 6: NOTE PAYABLE
The Company has a note payable outstanding at December 31, 2001, in the amount
of $2,394,122, for the acquisition and upgrade of an aircraft. The note bears
interest at the rate of two-and-a-quarter percent (2.25%) above the Governing
Rate ("The Wall Street Journal One Year Treasury Bill Rate" 2.22% at December
31, 2001), is due May 1, 2010, and is payable in monthly principal installments
of $23,975.
Page F-11
ELITEJET, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2001 AND 2000
NOTE 6: NOTE PAYABLE (CONTINUED)
FUTURE PRINCIPAL PAYMENTS OF LONG-TERM DEBT - The future principal payments for
long-term debt as of December 31, 2001 are as follows:
DECEMBER 31,
2001
--------------
2002 $ 242,967
2003 242,967
2004 242,967
2005 242,967
2006 242,967
2007 and thereafter 1,179,287
-----------
TOTAL FUTURE MINIMUM PRINCIPAL PAYMENTS $ 2,394,122
=========
NOTE 7: REAL ESTATE LEASE
The Company leases its executive offices and operating facilities under a
non-cancelable agreement accounted for as an operating lease that expires on
January 31, 2003. The terms of the agreement require the Company to make
minimum fixed rental payments plus pay amounts as additional rent for 3.85% of
the Landlord's share of real estate taxes, water charges, sewer rent, sprinkler
charges vault taxes and assessments apportioned on a pro rata basis.
Minimum lease payments for the years ended December 31
2002 $ 32,538
2003 2,958
Page F-12
ELITEJET, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2001 AND 2000
NOTE 8: OPERATING LEASE
On November 19, 2001 the Company entered into an agreement accounted for as an
operating lease for a Dassault 10 aircraft. Minimum monthly payments are
$10,938. Additional lease payments may be due under certain conditions pursuant
to the agreement.
Schedule of future lease payments at December 31, 2001 are as follows:
DECEMBER 31,
2001
--------------
2002 $ 131,250
2003 131,250
2004 131,250
2005 131,250
2006 131,250
2007 and thereafter 1,301,563
---------
TOTAL FUTURE MINIMUM LEASE PAYMENTS $ 1,957,813
=========
NOTE 9: ISSUANCE OF UNITS
On May 2, 2001 the Subsidiary issued 1 LLC Unit to Bruce Jenner in exchange for
marketing and promotion services. The transaction has been valued at the
offering price of $25,000 per Unit for financial statement reporting purposes at
December 31, 2001 since this was more readily determinable than the value of the
services. Accordingly, the Company charged $25,000 to operations (general and
administrative expenses).
NOTE 10: RELATED PARTY TRANSACTIONS
Issuance of Units
- -------------------
On May 2, 2001, the Subsidiary issued 612 LLC Units to its managing member,
EliteJet, Inc., the Parent, a Nevada corporation authorized to do business in
the State of California in exchange for cash payments of the Company's costs,
including legal and filing fees for the establishment of the Subsidiary and the
preparation of the Private Placement Offering.
Page F-13
ELITEJET, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2001 AND 2000
NOTE 10: RELATED PARTY TRANSACTIONS (CONTINUED)
Loan to Managing Member
- --------------------------
The Subsidiary has made an advance to its managing member, EliteJet, Inc., the
Parent. The advance, which is non-interest bearing, amounted to $300,000 at
December 31, 2001. The proceeds were utilized to upgrade and refurbish the
managing member's aircraft.
Real estate leases
- --------------------
The Subsidiary occupies space at the office of its managing member, EliteJet,
Inc., the Parent, located at 5962 La Place Court, Carlsbad, California 92008 on
a month-to-month basis, at no charge, pursuant to an informal verbal agreement.
This lease is accounted for as an operating lease.
NOTE 11: SUBSEQUENT EVENTS
On April 26, 2002 the Company entered into a transaction whereby the
Shareholders exchanged all of their common stock for 7,000,000 shares of common
stock of Return Assured Incorporated.
NOTE 12: RECENT ACCOUNTING PRONOUNCEMENTS
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 to the Company on July 1, 2001 for
Statement No. 141 and August 1, 2002 for Statement No. 142. The Company has not
completed any business combinations as of December 31, 2001 and management
cannot currently assess what effect the future adoption of these pronouncements
will have on the Company's financial statements.
In June 15, 2001, the Financial Accounting Standards Board also issued Statement
No. 143 Accounting For Asset Retirement Obligations and in August 15, 2001,
Statement No. 144 Accounting For Impairment and Disposal of Long Lived Assets.
Page F-14
ELITEJET, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2001 AND 2000
NOTE 12: RECENT ACCOUNTING PRONOUNCEMENTS (CONTINUED)
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 four significant ways. First, Statement 143 requires
that the amount initially recognized for an asset retirement obligation be
measured at fair market value and not under the current practice of using a
cost-accumulation measurement approach. Second, Statement 143 requires that the
retirement obligation liability is discounted and accretion expense is
recognized using the credit-adjusted risk-free interest rate in effect when the
liability was initially recognized.
Prior practice did not require discounting of the retirement obligation
liability and therefore no accretion was recorded in periods subsequent to the
initial recognition period. Third, under prior practice, dismantlement and
restoration costs were taken into account in determining amortization and
depreciation rates and often the recognized asset retirement obligation was
recorded as a contra-asset. Under Statement 143, recognized asset retirement
obligations are recognized as a liability. Fourth, under prior practice, the
asset retirement obligation was recognized over that useful life of the related
asset and under Statement 143 the obligation is recognized over that useful life
of the related asset and under Statement 143 the obligation is recognized when
the liability is incurred. The effective date for Statement No. 143 is for
fiscal years beginning after June 15, 2002.
Statement No. 144, changes the accounting for long lived assets to be held and
used by eliminating the requirement to allocate goodwill to long-lived assets to
be tested for impairment, by providing a probability-weighted cash flow
estimation approach to deal with situations in which alternative courses of
action to recover the carrying amount of possible future cash flows and
establishing a "primary-asset" approach to determine the cash flow estimation
period for a group of assets and liabilities that represents the unit of
accounting for a long-lived asset to be held and used. Statement No. 144 changes
the accounting for long-lived assets to be disposed of other than the sale by
requiring that the depreciable life of a long lived asset to be abandoned, be
revised to reflect a shortened useful life and by requiring that an impairment
loss be recognized at the date a long-lived asset is exchanged for a similar
productive asset or distributed to owners in a spin-off if the carrying amount
of the asset exceeds its fair value. Statement No. 144 changes the accounting
for long lived assets to be disposed of by sale by requiring that discontinued
operations no longer be measured on a net realizable value basis (but at the
lower of carrying amount or fair value less costs to sell), by eliminating the
recognition of future operating losses of discontinued components before they
occur and by broadening the presentation of discontinued operations in the
income statement to include a component of an entity rather than a segment of a
business. A component of an entity comprises operations and cash flows that can
be clearly distinguished, operationally, and for financial reporting purposes,
from the rest of the entity. The effective date for Statement No. 144 is for
fiscal years beginning after December 15, 2001.
Page F-15
ELITEJET, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONCLUDED)
DECEMBER 31, 2001 AND 2000
NOTE 12: RECENT ACCOUNTING PRONOUNCEMENTS (CONTINUED)
The Company expects that the adoption of the new statements will not have a
significant impact on its financial statements. It is not possible to quantify
the impact until the newly issued statements have been studied.
Page F-16
FINANCIAL STATEMENTS
Independent Accountant's Report .................................... G-2
Consolidated Balance Sheet as of June 30, 2002 and December 31, 2001 ..G-3
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 ....................G-4
Consolidated Statements of Cash Flows for the six months ended
June 30, 2002 and June 30, 2001 ...................................G-5
Notes to Consolidated Financial Statements .................G-6 to G-8
Page G-1
INDEPENDENT ACCOUNTANT'S REPORT
To the Board of Directors and Shareholders of
EliteJet Holdings, 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 Holdings, Inc. These transactions are described in Note 1 to the
consolidated financial statements.
We have reviewed the accompanying consolidated balance sheet of EliteJet
Holdings, 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 G-2
ELITEJET HOLDINGS, 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 G-3
ELITEJET HOLDINGS, 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 G-4
ELITEJET HOLDINGS, INC. AND SUBSIDIARIES
(SEE NOTE 1 TO THE CONSOLIDATED FINANCIAL STATEMENTS)
CONSOLIDATED STATEMENT OF CASH FLOWS
UNAUDITED
-----------------
SIX-MONTH PERIOD ENDED 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 G-5
ELITEJET HOLDINGS, INC. 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 Holdings, 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 G-6
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 G-7
3. PRO FORMA INFORMATION:
The following pro forma information assumes that the acquisition had
occurred at the beginning of the periods presented:
Six-Months Period Ended Three-Months Period 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 G-8
PRO FORMA FINANCIAL INFORMATION
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited consolidated pro forma financial statements give effect
to the acquisition by Return Assured Incorporated ("Return Assured") of
EliteJet, Inc. ("EliteJet"). This transaction has been accounted for as a
reverse acquisition with EliteJet as the accounting acquiror. The annual
unaudited pro forma consolidated statements of operations give effect to this
transaction between Return Assured and EliteJet by combining the results of
operations of Return Assured for the twelve months ended November 30, 2001 with
the results of EliteJet for the year ended December 31, 2001. Due to the
difference in year ends, the results of operations for the three months ended
November 30, 2000 of Return Assured have been removed from and the results of
operations for the three months ended November 30, 2001 have been added to
Return Assured's results of operations for their fiscal year ended August 31,
2001 in order to present twelve month results. The effective date of this
acquisition was deemed to be April 26, 2002. Therefore, the results of
operations of Return Assured from April 26, 2002 have been included in the
consolidated results of operations of EliteJet. The interim unaudited pro forma
consolidated statements of operations give effect to this transaction between
Return Assured and EliteJet by combining the results of operations of EliteJet
for the six months ended June 30, 2002 and the results of operations of Return
Assured for the period December 1, 2001 to April 25, 2002 as if the transactions
had occurred on January 1, 2002. Due to the difference in year ends, the results
of operations of Return Assured are shown for a seven month period while the
results of EliteJet are shown for a six month period. The additional month of
operations of Return Assured shown is immaterial to the financial statements
taken as a whole. During the year ended December 31, 2001 and the six months
ended June 30, 2002, the consolidated pro forma statements of operations also
give effect to a reverse split of Return Assured common stock, on a 1 for 60
basis, which will be effective prior to the closing of the acquisition.
The unaudited pro forma consolidated financial statements are based on the
estimates and assumptions set forth in the notes to these financial statements,
which have been made solely for purposes of developing this pro forma
information. The unaudited pro forma consolidated financial statements are not
necessarily an indication of the results that would have been achieved had such
transactions been consummated as of the dates indicated or that may be achieved
in the future.
These unaudited pro forma combined consolidated financial statements should be
read in conjunction with the historical financial statements and related notes
of Return Assured and EliteJet.
Page H-1
RETURN ASSURED INCORPORATED AND SUBSIDIARIES
PROFORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX-MONTHS ENDED JUNE 30, 2002 (ELITEJET)
AND THE SEVEN MONTHS ENDED JUNE 30, 2002 (RETURN ASSURED)
(UNAUDITED)
Historical
-------------------------------------
EliteJet and
Return Assured Subsidiaries
and Subsidiaries (including Return
(through April 25, Assured from
2002) April 26, 2002) Pro Forma
----------------- ---------------- ------------
Revenue . . . . . . . . . . . . . . . . $1,324,316 $ 1,324,316
Cost of Revenue . . . . . . . . . . . . 1,128,663 1,128,663
---------------- ------------
Margin. . . . . . . . . . . . . . . . . 195,653 195,653
General and administrative expenses . . $ 411,234 1,007,959 1,419,193
----------- ---------------- ------------
Operating loss. . . . . . . . . . . . . (411,234) (812,306) (1,223,540)
Interest expense. . . . . . . . . . . . 31,187 100,831 132,018
----------- ---------------- ------------
Loss before minority interest . . . . . (442,421) (913,137) (1,355,558)
Minority interest in loss of subsidiary 49 49
---------------- ------------
Net Loss. . . . . . . . . . . . . . . . (442,421) (913,088) (1,355,509)
Dividends on preferred stock. . . . . . (5,979) (6,819) (12,798)
----------- ---------------- ------------
Net loss attributable to common
shareholders. . . . . . . . . . . . . $ (448,400) $ (919,907) $(1,368,307)
=========== ================ ============
Net Loss per share, basic and diluted . $ (0.15) $ (0.12) $ (0.18)
=========== ================ ============
Weighted Average number of shares
outstanding . . . . . . . . . . . . 1 3,000,184 7,472,406 2 7,472,406
= =========== ================ = ===========
Page H-2
Return Assured Incorporated and Subsidiaries
Notes to unaudited Pro Forma Consolidated Statement of Operations
For the year ended December 31, 2001
The pro forma consolidated statement of operations of Return Assured and
EliteJet gives effect to the issuance of Return Assured common stock in exchange
for all the outstanding stock of EliteJet as if it had occurred on January 1,
2001.
1. Adjustment to the historical financial statements of Return Assured to
reflect the one for sixty reverse stock split.
2. Pro forma net income per share is computed by dividing the pro forma net
income by Return Assured's weighted average number of shares and the
issuance of 7,000,000 shares of common stock to the shareholders of
EliteJet in exchange for all the outstanding common stock of EliteJet.
Incremental shares from the effect of options, warrants and convertible
preferred stock have not been included in the weighted average shares
calculation on a diluted basis as the effect would have been anti-dilutive.
Page H-3
RETURN ASSURED INCORPORATED AND SUBSIDIARIES
PROFORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED NOVEMBER 30, 2001 (RETURN ASSURED) AND
THE YEAR ENDED DECEMBER 31, 2001 (ELITEJET)
(UNAUDITED)
Historical
---------------------------
Return EliteJet
Assured and and
Subsidiaries Subsidiary Pro Forma
-------------- ------------ ------------
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 10,851 $ 1,328,980 $ 1,339,831
Cost of Revenue . . . . . . . . . . . . . . . . . . . . . . . . 32,177 901,688 933,865
-------------- ------------ ------------
Margin. . . . . . . . . . . . . . . . . . . . . . . . . . . . . (21,326) 427,292 405,966
Selling, general and administrative expenses. . . . . . . . . . 3,016,778 1,122,874 4,139,652
-------------- ------------ ------------
Operating loss. . . . . . . . . . . . . . . . . . . . . . . . . (3,038,104) (695,582) (3,733,686)
Interest expense. . . . . . . . . . . . . . . . . . . . . . . . 561,097 176,172 737,269
-------------- ------------ ------------
Loss from continuing operations before minority interest. . . . (3,599,201) (871,754) (4,470,955)
Minority interest in loss of subsidiary . . . . . . . . . . . . 292 292
------------ ------------
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,599,201) (871,462) (4,470,663)
Dividends on preferred stock. . . . . . . . . . . . . . . . . . (51,980) (51,980)
-------------- ------------
Net loss attributable to common shareholders. . . . . . . . . . $ (3,651,181) $ (871,462) $(4,522,643)
============== ============ ============
Net Loss per share, basic and diluted . . . . . . . . . . . . . $ (17.33) $ (1,742.92) $ (0.63)
============== ============ ============
Weighted Average number of shares outstanding . . . . . . . . 1 210,684 500 2 7,210,684
= ============== ============ = ===========
Page H-4
Return Assured Incorporated and Subsidiaries
Notes to unaudited Pro Forma Consolidated Statement of Operations
For the six months ended June 30, 2002
The pro forma consolidated statement of operations of Return Assured and
EliteJet gives effect to the issuance of Return Assured common stock in
exchange for all the outstanding stock of EliteJet as if it had occurred on
January 1, 2002. The one for sixty reverse stock split and the issuance of
7,000,000 shares of common stock to the shareholders of EliteJet in
exchange for all the outstanding common stock of EliteJet have been
accounted for in the historical consolidated financial statements for the
six months ended June 30, 2002 and therefore no additional pro forma
adjustments were necessary.
Page H-5
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS OF ELITEJET, INC. FOR THE PERIOD ENDED DECEMBER 31, 2001
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 the sale of
management and usage fees charged to clients in connection with flight
operations. We also derive revenues from our sky club program in which
customers prepay for flight time on an hourly basis. 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. This transaction is accounted for as a reverse acquisition with EliteJet,
Inc. being the accounting acquirer. 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.
Our management fees were $92,500 during calendar year 2001 and $135,675 during
the first quarter of 2002. Hourly flight charges were $1,181,778 during
calendar year 2001 and $307,454 during the first quarter of 2002. Miscellaneous
fees were not significant during these periods.
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.
Page 13
RECENT DEVELOPMENTS
On April 26, 2002 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. Our discussion
of liquidity and capital resources relates to our financial condition following
the acquisition of all of the outstanding shares of EliteJet by Return Assured.
FISCAL YEAR 2001 COMPARED TO FISCAL YEAR 2000
OPERATING INCOME
Operating income increased from $0 during the year ended December 31, 2000 to
$1,328,980 during the year ended December 31, 2001. The increase was due to the
commencement of charter operations during 2001 while 2000 was devoted to gearing
up the business for future operations. Cost of revenue increased from $87,048
in the period ending December 31, 2000 to $901,688 in the period ending December
31, 2001. This increase corresponded to our commencement of charter operations
during 2001. Cost of revenues during the 2000 period related to income that was
not realized until the 2001 period.
OPERATING EXPENSES
Operating expenses consist of selling expenses, general and administrative
expenses, and depreciation expense. Selling expenses were $110,647 during the
year ended December 31, 2000 and $78,851 during the year ended December 31,
2001. The slight decrease was based on a decision to conserve cash for
equipment and other hard costs. General and administrative expenses increased
from $174,236 during the 2000 period to $258,791 during the 2001 period. This
increase of approximately 64% was due to the increased hiring of staff and
professional development, and the establishment of our executive offices during
the 2001 period. Depreciation expenses increased from $581,261 during the 2000
period to $785,232 during the 2001 period. This increase was due to the
inclusion of a full year of depreciation expense for our aircraft during the
2001 period and only a partial year of depreciation during 2000.
LOSS FROM OPERATIONS
During the years ended December 31, 2000 and 2001, our losses from operations
were $953,192 and $695,582, respectively. The loss in the 2000 period was due
to our start-up of operations during that period without any corresponding
income from charter services. During 2001, we realized income from operations
of approximately $1,329,000 but corresponding increases in cost of sales and
operating expenses resulted in our loss during this period.
Page 14
OTHER EXPENSES
During the year ended December 31, 2001, other expenses increased slightly to
$176,172 from $151,143 during the period ended December 31, 2000. These other
expenses consist primarily of interest, and remained relatively constant as
there was more borrowing at lower interest rates.
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 during our current fiscal year, 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. On a pro forma basis, combining our assets with those of
Return Assured as of March 31, 2002, our cash was $2,808,056 and our accounts
receivable were $42,116. These amounts represented substantially all of our
current assets. Our current liabilities were $917,326 and $536,860 as of the
quarter ended March 31, 2002 and the year ended December 31, 2001, respectively.
Our cash on hand should be adequate to pay all current liabilities as they
become due.
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.
INVESTING ACTIVITIES
During the fiscal years ended December 31, 2000 and 2001 our income from
investing activities was negligible. Commencing with the completion of the
transaction with Return Assured we intend to invest our cash in certificates of
deposit, money market funds and other insured investments paying a fixed rate of
interest. We do not intend to use our cash to make investments in other
businesses.
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.
During the year ended December 31, 2000, we received $2,114,882 from the
issuance of common stock and $2,449,073 from long term loans. All of the stock
issuances and loans came from our founder, Scott Walker. We do not anticipate
that Mr. Walker will purchase any more of our stock or make any loans to the
company in the next two years.
During the year ended December 31, 2001, we received $300,000 from the sale of
limited liability company units. We expect to realize substantial financing
from the sale of these units in the remainder of 2002 and thereafter. It is
Page 15
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 which 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.
Page 16
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS OF ELITEJET HOLDINGS, INC. FOR THE PERIOD ENDED JUNE 30, 2002.
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 also
derive revenues from our sky club program in which customers prepay for flight
time on an hourly basis. 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
Page 17
charter business. This transaction is accounted for as a reverse acquisition
with EliteJet, Inc. being the accounting acquirer.
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.
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
income from operations 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 $38,790 during the three months ended June 30, 2001 and $979
during the three months ended June 30, 2002. These other expenses consist
primarily of interest, and reflect a reduced level of borrowing.
Page 18
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.
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
income from operations of $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 of $49,060 and unrestricted cash held by an attorney of
$2,791,752.
As of June 30, 2002, our current assets on a consolidated basis consisted
primarily of cash of approximately $2,841,000 and accounts receivable of
approximately $179,000, a total of approximately $3,020,000. Our current trade
payables and accrued liabilities as of June 30, 2002 were approximately
$1,756,000. Our working capital of approximately $1,264,000 and charter revenue
will be our primary capital resources.
Page 19
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 received.
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.
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.
Page 20
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 21
PROPOSALS FOR 2002 ANNUAL MEETING
Stockholder proposals intended to be presented at the 2002 Annual Meeting of
Stockholders must be received by the Company at its principal offices no later
than October 18, 2002 for inclusion in the 2002 Proxy Statement and form of
proxy. All proposals should be sent to Scott Walker, President, Return Assured
Incorporated, 5962 La Place Court, Suite 230, Carlsbad, CA 92008.
MATERIAL INCORPORATED BY REFERENCE
The following documents filed by the Company with the Commission pursuant to the
Securities Exchange Act of 1934 (the "Exchange Act") are incorporated in this
Information Statement by reference:
(1) The audited balance sheets of the Company as of August 31, 2001 and
August 31, 2000 and the related statements of operations, stockholders' equity
and cash flows for the years ended August 31, 2001 and August 31, 2000 are
incorporated herein by reference to the Company's Annual Reports on Form 10-KSB
and Form 10-KSB/A, as amended, for the fiscal years ended August 31, 2001 and
August 31, 2000 (the "Annual Reports"), respectively.
(2) The Company's unaudited balance sheet as of November 30, 2001 and the
related statements of operations and cash flows for the three month period ended
November 30, 2001 are incorporated herein by reference to the Company's
Quarterly Report on Form 10-QSB for that period.
(3) The Company's unaudited balance sheet as of February 28, 2002 and the
related statements of operations for the three- and six-month periods ended
February 28, 2002 and cash flows for the six month period ended February 28,
2002 are incorporated herein by reference to the Company's Quarterly Report on
Form 10-QSB for that period.
(4) The Company's unaudited balance sheet as of June 30, 2002 and the
related statements of operations for the three- and six-month periods ended June
30, 2002 and cash flows for the six month period ended June 30, 2002 are
incorporated herein by reference to the Company's Quarterly Report on Form
10-QSB/A for that period.
(5) Current Report on Form 8-K dated April 26, 2002.
(6) Current Report on Form 8-K dated June 10, 2002.
(7) Current Report on Form 8-K dated July 15, 2002.
(8) Current Report on Form 8-K/A dated July 23, 2002.
(9) Current Report on Form 8-K dated August 1, 2002.
(10) Current Report on Form 8-K/A dated April 26, 2002
Page 22
Management's Discussion and Analysis of Financial Condition and Results of
Operations of the Company is hereby incorporated by reference to the Annual
Reports listed above.
ADDITIONAL INFORMATION
The Company's Annual Report on Form 10-KSB for the fiscal year ended August 31,
2001, Quarterly Reports on Form 10-QSB for the quarters ended November 30, 2001,
February 28, 2002 and June 30, 2002, Current Reports on Form 8-K dated April 26,
2002, June 10, 2002 and July 15, 2002 and Current Report on Form 8K/A dated
July, 23, 2002 are being delivered to you with this Information Statement. The
Company will furnish a copy of any exhibit thereto or other information upon
request by a stockholder to Scott Walker, President, Return Assured
Incorporated, 5962 La Place Court, Suite 230, Carlsbad, CA 92008, telephone
(760) 438-7245.
BY ORDER OF THE BOARD OF DIRECTORS
/s/Scott Walker
President, Chairman & Director
Carlsbad, California
September __, 2002
Page 23
EXHIBIT LIST
EXHIBIT A Certificate of Amendment of the Certificate of Incorporation
EXHIBIT B Amendment Agreement dated as of April 27, 2002 by and between
Return Assured Incorporated, EliteJet Inc. and Scott Walker
EXHIBIT C Awareness Letter of Goldstein Golub Kessler LLP
EXHIBIT D Awareness Letter of Goldstein Golub Kessler LLP
EXHIBIT E Consent of Goldstein Golub Kessler LLP
EXHIBIT F Consent of Goldstein Golub Kessler LLP
EXHIBIT G Consent of Pannell Kerr Forster
EXHIBIT H Consent of Rogoff & Company P.C.
EXHIBIT I Awareness Letter of Goldstein Golub Kessler LLP
Page 24
EXHIBIT A
CERTIFICATE OF AMENDMENT
OF THE CERTIFICATE OF INCORPORATION
OF
RETURN ASSURED INCORPORATED
Under Section 242
of the
Delaware General Corporation Law
The undersigned, President and Chairman of Return Assured Incorporated, a
corporation existing under the laws of the state of Delaware, does hereby
certify as follows:
First: That the name of the corporation (the "Corporation") is Return Assured
Incorporated.
Second: That the certificate of incorporation of the Corporation was filed with
the Delaware Secretary of State on June 18, 1996.
Third: That the board of directors of the Corporation adopted resolutions
setting forth proposed amendments to the certificate of incorporation of the
Corporation, declaring said amendments to the certificate of incorporation to be
advisable and requesting the consent of the stockholders of the Corporation for
consideration thereof. The resolutions setting forth the proposed amendments
are as follows:
RESOLVED, that it is deemed advisable and in the best interests of the
Corporation that the Certificate of Incorporation of the Corporation be amended
as follows:
1. Article FIRST, which sets forth the name of the Corporation, is amended to
read as follows:
"FIRST: The name of the corporation (hereinafter called the "Corporation") is
EliteJet Holdings, Inc."
2. The first paragraph of Article FOURTH, which sets forth the total number of
shares of stock which the Corporation shall have authority to issue, is amended
to read as follows:
"FOURTH: The total number of shares of capital stock which the Corporation shall
have authority to issue is 105,000,000 shares of which 100,000,000 shares shall
be Common Stock, par value $.001 per share, and 5,000,000 shares shall be
Preferred Stock, par value $.001 per share."
3. By adding the following subsection to Article IV:
"All issued and outstanding shares of Common Stock, par value $.001 per share
("Old Common Stock"), outstanding as of the close of business on the date this
Certificate of Amendment to the Certificate of Incorporation is filed with the
Page 25
Secretary of State of the State of Delaware (the "Effective Date") shall
automatically without any action on the part of the holder of the Old Common
Stock be converted into one sixtieth (1/60) of the number of shares of Common
Stock, par value $.001 per share ("New Common Stock"). Each holder of a
certificate or certificates which immediately prior to the Effective Date
represented outstanding shares of Old Common Stock (the "Old Certificates")
shall, from and after the Effective Date, be entitled to receive a certificate
or certificates (the "New Certificates") representing the shares of New Common
Stock into which the shares of Old Common Stock formerly represented by such Old
Certificates are converted under the terms hereof. Prior to the Effective Date,
there are 35,834,012 shares of issued and outstanding shares of Old Common Stock
and 14,165,988 shares of authorized but unissued shares of Old Common Stock. On
the Effective Date, there will be approximately 597,234 issued and outstanding
shares of New Common Stock and 99,402,766 shares of authorized but unissued
shares of New Common Stock. The 35,834,012 shares of Old Common Stock are
hereby changed into approximately 597,234 shares of New Common Stock at the rate
of one share of New Common Stock for every sixty shares of Old Common Stock with
all fractional shares equal to or greater than .50 rounded up to the next whole
share and those less than .50 eliminated and paid for in cash.
Fourth: That thereafter, pursuant to resolutions of the board of directors, the
amendments were authorized by resolutions adopted by the affirmative vote of the
stockholders holding not less than the necessary number of shares required by
written consent to so authorize, all in accordance with Section 228 of the
General Corporation Law of the State of Delaware.
Fifth: That said amendments to the Certificate of Incorporation were duly
adopted in accordance with Section 242 of the General Corporation Law of the
State of Delaware.
Sixth: That the capital of the corporation shall not be reduced under or by
reason of said amendments.
IN WITNESS WHEREOF, the undersigned has executed this Certificate as of the ____
day of September, 2002.
RETURN ASSURED INCORPORATIED
By: _________________________________
Scott Walker, President and Chairman
Page 26
EXHIBIT B
AMENDMENT AGREEMENT
THIS AMENDMENT AGREEMENT (the "Amendment") is made and entered into as of this
27th day of April, 2002, by and among Return Assured Incorporated, a Delaware
corporation with its principal place of business at 1901 Avenue of the Stars,
Suite 1710, Los Angeles, California 90067 (the "Company"), EliteJet, Inc., a
Nevada corporation with its principal place of business at 5962 La Place Court,
Suite 230, Carlsbad, California 92008 ("Elite"), and Scott Walker, an individual
and the sole shareholder of Elite (the "Shareholder" and together with the
Company and Elite, the "Parties").
WHEREAS, the Parties entered into an Acquisition Agreement dated April 26, 2002
(the "Agreement") pursuant to which Elite and the Shareholder agreed to transfer
and deliver to the Company all of the issued and outstanding capital stock of
Elite in exchange for an aggregate of 7,000,000 shares of the Company's common
stock, par value $.001 per share ("Common Stock"); and
WHEREAS, the Parties desire to make certain amendments to the Agreement.
NOW, THEREFORE, in consideration of the premises, and of the promises, covenants
and conditions contained herein, the Parties intending to be legally bound
hereby agree as follows:
1. Number of Shares of Common Stock to be Issued. Each of (i) the Fourth
Whereas clause, (ii) Article 1 and (iii) Article 2(b) of the Agreement is hereby
amended to replace the words "seven million (7,000,000)" contained therein in
their entirety with the words "four hundred twenty million (420,000,000)", it
being the absolute and unequivocal intention of each of the Parties that the
number of shares of Common Stock to be issued to the Shareholder in connection
with the transactions contemplated by the Agreement be an amount equal to four
hundred twenty million (420,000,000) before giving effect to any change in
capitalization of the Company or seven million (7,000,000) after taking into
account the contemplated change in the Company's capitalization pursuant to a
pending 1 for 60 reverse split of the Common Stock, but not both. For purposes
of clarity, the following table sets forth the proper issuance of Common Stock
to the Shareholder pursuant to the Agreement either pre- or post-reverse split:
-----------------------------------------------------------------------------
CAPITALIZATION NO. OF SHARES OF COMMON STOCK
Pre-Split 420,000,000
or
Post-1 for 60 Reverse Split 7,000,000
-----------------------------------------------------------------------------
Page 27
2. Condition Subsequent to Closing. Article 6 is hereby amended to add a
second paragraph as follows:
"Furthermore, the obligations of each party to this Agreement are expressly
subject to a condition subsequent to the Closing that both a (i) one-for-sixty
(1-60) reverse split of the Common Stock and (ii) change in the Company's
authorized Common Stock to an amount no less than 100,000,000 shares of Common
Stock shall have been approved by the shareholders of the Company and shall have
taken effect."
3. Terms of Agreement. Any term or condition contained in the Agreement and
not otherwise amended pursuant to this Amendment shall remain in full force and
effect in each and every respect.
4. Governing Law. This Amendment shall be governed by and construed in
accordance with the laws of the State of New York without giving effect to
principles of conflicts or choice of laws thereof.
5. Counterparts. This Amendment may be executed in counterparts, each of
which shall be deemed an original, and all of which, when taken together, shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Amendment as of the date first written above.
RETURN ASSURED INCORPORATED
By: ________________________________
Name:
Title:
ELITEJET, INC.
By: ________________________________
Name:
Title:
SHAREHOLDER
SCOTT WALKER
By: ________________________________
Name:
Title:
Page 28
EXHIBIT C
ACCOUNTANT'S AWARENESS LETTER
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
We are aware that our report dated April 4, 2002 on our review of the interim
financial statements of Return Assured Incorporated and Subsidiaries as of
February 28, 2002 and for the three-month and six-month periods ended February
28, 2002 and 2001 included in the Form 10-QSB for the quarter ended February 28,
2002 is being incorporated by reference in the Company's Preliminary Information
Statement on Schedule 14C. Pursuant to Rule 436(c) under the Securities Act of
1933, this report should not be considered as part of the Registration Statement
prepared or certified by us within the meaning of Sections 7 and 11 of that Act.
GOLDSTEIN GOLUB KESSLER LLP
New York, New York
September 13, 2002
Page 29
EXHIBIT D
ACCOUNTANT'S AWARENESS LETTER
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
We are aware that our report dated January 14, 2002, on our review of the
interim financial statements of Return Assured Incorporated and Subsidiaries as
of November 30, 2001 and for the three month periods ended November 30, 2001 and
2000 included in the Form 10-QSB for the quarter ended November 30, 2001 is
being incorporated by reference in the Company's Preliminary Information
Statement on Schedule 14C. Pursuant to Rule 436(c) under the Securities Act of
1933, this report should not be considered as part of the Information Statement
prepared or certified by us within the meaning of Sections 7 and 11 of that Act.
GOLDSTEIN GOLUB KESSLER LLP
New York, New York
September 13, 2002
Page 30
EXHIBIT E
CONSENT OF INDEPENDENT AUDITORS
INDEPENDENT AUDITOR'S CONSENT
To the Board of Directors
Return Assured Incorporated
We hereby consent to the incorporation by reference in this Preliminary
Information Statement on Schedule 14C of our report dated November 30, 2001 on
the consolidated financial statements of Return Assured Incorporated and
Subsidiaries appearing in the Annual Report on Form 10- KSB of Return Assured
Incorporated, for the year ended August 31, 2001.
GOLDSTEIN GOLUB KESSLER LLP
New York, New York
September 13, 2002
Page 31
EXHIBIT F
CONSENT OF INDEPENDENT AUDITORS
To the Board of Directors
Return Assured Incorporated
We hereby consent to the incorporation by reference in this Preliminary
Information Statement on Schedule 14C of Return Assured Incorporated, formerly
known as Hertz Technology Group, Inc., of our report dated October 26, 2000 on
the consolidated financial statements of Hertz Technology Group, Inc and
Subsidiaries appearing in the Annual Report on Form 10-KSB, as amended, of
Return Assured Incorporated for the year ended August 31, 2000.
GOLDSTEIN GOLUB KESSLER LLP
New York, New York
September 13, 2002
Page 32
EXHIBIT G
CONSENT OF INDEPENDENT AUDITORS
September 12, 2002
Board of Directors
Return Assured Incorporated
5962 La Place Court, Suite 230
Carlsbad, CA 92008
Dear Sirs,
We consent to the incorporation by reference in this Preliminary Information
Statement on Schedule 14C of Return Assured Incorporated, formerly known as
Hertz Technology Inc., of our report dated September 27, 2000 and October 17,
2000 relating to the audited financial statements for the period ending August
31, 2000 of Return Assured Incorporated (formerly A Sure eCommerce, Inc.)
appearing in the Annual Report on Form 10-KSB, as amended, of Return Assured
Incorporated, formerly known as Hertz Technology Group, Inc., for the year ended
August 31, 2000.
PANNELL KERR FORSTER
CHARTERED ACCOUNTANTS
VANCOUVER, CANADA
Page 33
EXHIBIT H
CONSENT OF INDEPENDENT AUDITORS
INDEPENDENT AUDITOR'S CONSENT
To the Board Of Directors
Return Assured Incorporated
We hereby consent to the incorporation by reference in Amendment No. 3 to the
Information Statement Pursuant to Section 14(c) of the Securities Exchange Act
of 1934, as amended of Return Assured Incorporated on Schedule 14C of our report
dated July 10, 2002 relating to our audit of the consolidated financial
statements of EliteJet, Inc. and Subsidiary (a Nevada corporation formerly known
as ExecJet, Inc.) as of December 31, 2001, and the related consolidated
statements of operations, stockholder's equity, and cash flows for the two-year
period ended December 31, 2001 which appear in such Schedule 14C.
Rogoff & Company, P.C.
New York, New York
September 12, 2002
Page 34
EXHIBIT I
ACCOUNTANT'S AWARENESS LETTER
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
We are aware that our report dated July 22, 2002 on our review of the interim
financial statements of EliteJet Holdings, Inc. and Subsidiaries as of June 30,
2002 and for the three-month and six-month periods ended June 30, 2002 and 2001
included in the Form 10-QSB of Return Assured Incorporated for the quarter ended
June 30, 2002 is being incorporated by reference in Return Assured
Incorporated's Preliminary Information Statement on Schedule 14C. Pursuant to
Rule 436(c) under the Securities Act of 1933, this report should not be
considered as part of the Registration Statement prepared or certified by us
within the meaning of Sections 7 and 11 of that Act.
GOLDSTEIN GOLUB KESSLER LLP
New York, New York
September 13, 2002
Page 35