UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM 10-Q
----------------------
(Mark One)
|X| QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
FOR THE QUARTER ENDED JUNE 30, 2008
|_| TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT
COMMISSION FILE NUMBER: 333-132028
----------------------
ENSURAPET, INC.
(Small Business Issuer in its Charter)
----------------------
NEVADA 13-4303483
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P.O. Box 7496
CANTON, OH 44705
(Address of principal executive offices) (Zip Code)
|
Issuer's Telephone Number: (877) 440-7387
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
COMMON STOCK, PAR VALUE $.001
(Title of each class)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes |X| No |_|
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer |_| Accelerated filer |_|
Non-accelerated filer |_| Smaller reporting company |X|
(Do not check if a smaller reporting
company)
Indicate by check mark whether the registrant is a shell company (as defined in
rule 12b-2 of the Exchange Act). Yes |_| No |X|
Number of shares of the issuer's common stock, par value $.001, outstanding as
of June 30, 2008: 40,000,000 shares.
ENSURAPET, INC. AND SUBSIDIARIES
TABLE OF CONTENTS TO FORM 10-Q
Page
Numbers
-------
Forward-Looking Statements 2
PART I - FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements (unaudited)
Condensed Consolidated Balance Sheets 3
Condensed Consolidated Statements of Income 5
Condensed Consolidated Statement of Cash Flows 6
Notes to Condensed Consolidated Financial Statements 8
Item 2. Management Discussion & Analysis of Financial Condition and Results of Operations 13
Item 3 Quantitative and Qualitative Disclosures About Market Risk 18
Item 4. Controls and Procedures 18
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 18
Item 1A Risk Factors 18
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 23
Item 3. Defaults Upon Senior Securities 24
Item 4. Submission of Matters to a Vote of Security Holders 24
Item 5 Other information 24
Item 6. Exhibits 24
Signatures 25
Index to Exhibits 26
|
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains both historical and forward-looking
statements. All statements, other than statements of historical fact, are or may
be forward-looking statements. For example, statements concerning projections,
predictions, expectations, estimates or forecasts and statements that describe
our objectives, future performance, plans or goals are, or may be,
forward-looking statements. These forward-looking statements reflect
management's current expectations concerning future results and events and can
generally be identified by the use of expressions such as "may," "will,"
"should," "could," "would," "likely," "predict," "potential," "continue,"
"future," "estimate," "believe," "expect," "anticipate," "intend," "plan,"
"foresee," and other similar words or phrases, as well as statements in the
future tense.
Forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause our actual results, performance or achievements to
be different from any future results, performance and achievements expressed or
implied by these statements. The following important risks and uncertainties
could affect our future results, causing those results to differ materially from
those expressed in our forward-looking statements:
o the failure to achieve sufficient levels of usage of our public
portals;
o the inability to successfully deploy new or updated applications or
services;
o the inability to successfully sell our pet health insurance products;
o the anticipated benefits from acquisitions not being fully realized or
not being realized within the expected time frames;
o the inability to attract and retain qualified personnel and other
filings with the Securities and Exchange Commission;
o general economic, business or regulatory conditions affecting the pet
healthcare, information technology and Internet industries being less
favorable than expected; and
o the Risk Factors described in Item 1A of this Quarterly Report.
These factors are not necessarily all of the important factors that could cause
actual results to differ materially from those expressed in any of our
forward-looking statements. Other factors, including unknown or unpredictable
ones could also have material adverse effects on our future results.
The forward-looking statements included in this Annual Report on Form 10-Q are
made only as of the date of this Quarterly Report. We expressly disclaim any
intent or obligation to update any forward-looking statements to reflect
subsequent events or circumstances.
2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
EnsurApet, Inc. and Subsidiary
(A Development Stage Company)
Consolidated Balance Sheet
June 30, 2008 and December 31, 2007
ASSETS March 31, 2008 December 31, 2007
--------------------------------------------------------------------------------------------------- -------------------
Current Assets
Cash and cash equivalents $ 1,279 $ 15,757
Commissions receivable 5,547 751
Prepaid expenses - -
------------------- -------------------
Total Current Assets 6,827 16,508
Fixed Assets
Property and equipment - net 30,825 43,957
------------------- -------------------
Other Assets
Software 61,116 122,214
Trademarks 25,576 25,576
Vet MD data base 105,000 105,000
Goodwill - -
Insurance Agency Licenses - -
------------------- -------------------
191,692 252,790
------------------- -------------------
Total Assets $ 229,344 $ 313,255
=================== ===================
See accompanying notes to financial statements
|
3
EnsurApet, Inc. and Subsidiary
(A Development Stage Company)
Consolidated Balance Sheet
June 30, 2008 and December 31, 2007
LIABILITIES AND STOCKHOLDERS' EQUITY June 30, 2008 December 31, 2007
-------------------------------------------------------------------------------------------------- -------------------
Current Liabilities
Accounts payable $ 167,145 $ 132,765
Accounts payable - in dispute 1,201,880 1,201,880
Line of Credit 39,981 48,001
Note payable - -
Accrued interest - -
Accrued wages 24,573 24,573
Shareholder advances 349,203 334,737
Loan extension fee payable - -
Current portion of long-term debt 1,263,875 1,263,875
------------------ -------------------
Total Current Liabilities 3,046,657 3,005,831
Long-term Debt
Note payable 1,000,000 1,000,000
Stockholders' Equity
Stock subscriptions receivable (4,740,996) -
Preferred stock 100 12,810
Common stock 40,000 3,112
Additional paid in capital 13,115,422 8,223,220
Deficit accumulated during the development stage (12,231,839) (11,931,718)
------------------ -------------------
Total Stockholders' Equity (3,817,313) (3,692,576)
------------------ -------------------
Total Liabilities and Stockholders' Equity $ 229,344 $ 313,255
================== ===================
See accompanying notes to financial statements
|
4
EnsurApet, Inc. and Subsidiary
(A Development Stage Company)
Consolidated Statements of Income
For the Quarter Ending June 30, 2008 and the Year ending December 31, 2007
and From July 20, 2005 (Inception) through June 30, 2008
Since
2008 2007 Inception
--------------------------------------------------------------------------------------------------------------------------
Revenues $ 18,965 $ 47,848 $ 91,708
--------------- ----------- -------------
Marketing expenses 954 160,862 463,286
General and administrative expenses 142,405 6,116,355 11,298,581
--------------- ----------- -------------
Income (loss) before taxes (124,393) (6,229,369) (11,670,158)
Other Income/Expense
Abandonment loss - 561,680 561,680
Provision for taxes - - -
--------------- ----------- -------------
NET INCOME (LOSS) $ (124,393) $ (6,791,049) $(12,231,839)
=============== =========== =============
Earnings Per Share
Basic $ (0.01) $ (3,747.82)
Average Shares Outstanding 14,881,375 1,812
|
See accompanying notes to financial statements
5
EnsurApet, Inc. and Subsidiary
(A Development Stage Company)
Consolidated Statements of Cash Flow
For the Quarter Ending June 30, 2008 and the Year ending December 31, 2007
and From July 20, 2005 (Inception) through June 30, 2008
Since
2008 2007 Inception
-------------------------------------------------------------------------------------------------------------------------------
Cash Flows From/For Operating Activities
Net Income (Loss) $ (124,393) $ (6,791,049) $ (12,107,445)
Adjustments to reconcile net income (loss) to net
cash provided by (used for) operating activities
Depreciation 6,566 95,329 113,719
Amortization 30,554 338,220 590,962
Stock issued for services 2,380 1,740,500 2,096,338
Interest accrual - 2,506,518 2,506,518
Abandonment loss - 561,680 561,680
Increase in Commissions receivable - 274 (751)
Increase in Prepaid Expenses - 496,666 -
(Decrease) Increase in Accounts payable - 755,989 1,369,023
Increase in Accrued interest - (58,333) 23,014
Increase in Accrued wages - 24,573 24,573
Increase in Loan extension fee payable - (500,000) -
--------------- -------------- ---------------
Net Cash Used in Operation Activities (84,893) (829,633) (4,822,369)
Cash Flows For Investing Activities
Purchase of Fixed assets - (10,000) (150,610)
Software costs - - (660,122)
Trademarks - - (22,390)
Investment Animal ID - - (250,000)
Vet MD data base - - (105,000)
--------------- -------------- ---------------
Net Cash Used in Investing Activities - (10,000) (1,188,122)
Cash Flows From Financing Activities
Proceeds from Line of credit (59) (1,172) 45,233
Proceeds from Shareholder advances 24,700 (334,737) (344,971)
Payments on Long term debt - (11,225) (11,225)
Proceeds from Notes Payable - 50,000 4,281,986
Proceeds from Stock subscriptions 37,966 430,477 551,515
Sale of Capital Stock - 615,000 1,511,518
--------------- -------------- ---------------
Net Cash From Financing Activities 62,607 748,343 6,034,056
--------------- -------------- ---------------
Net Increase (Decrease) in Cash and Cash Equivalents (22,286) (91,290) 23,565
Cash and Cash Equivalents - Beginning 23,565 107,047 -
--------------- -------------- ---------------
Cash and Cash Equivalents - Ending $ 1,279 $ 15,757 23,565
=============== ============== ===============
See accompanying notes to financial statements
|
6
EnsurApet, Inc. and Subsidiary
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity
For the Period From July 20, 2005 (Inception) through June 30, 2008 Deficit
Accumulated
Additional Stock During the Total
Preferred Stock Common Stock Paid in Subscriptions Development Stockholders'
Shares Amount Shares Amount Capital Receivable Stage Equity
------------------------------------------------------------------------------------------------------------------------------------
Balance July 20, 2005 - $ - - $ - $ - $ - $ - $ -
Sale of shares 437,650 438 100,000 100 122,005 - - 122,543
Stock issued for equipment 62,500 62 - 438 - - 500
Shares issued for services 3,000,000 3,000 - - 83,937 - - 86,937
Shares issued for software 750,000 750 - 21,750 - - 22,500
Shares issued for Debt 1,200,000 1,200 - - (1,200) - - -
Net loss - - - - - - (1,078,449) (1,078,449)
----------- ------- ------------ -------- ------------ ------------ ----------- ----------
Balance December 31, 2005 5,450,150 5,450 100,000 100 226,930 - (1,078,449) (845,969)
Shares converted to common (320,000) (320) 1,500,000 1,500 (1,180) - - -
Shares issued for Debt 600,000 600 - - (600) - - -
Shares issued for services 1,005,000 1,005 25,000 25 263,870 - - 264,900
Shares issued for Debt conversion 50,000 50 1,723,230 1,723 722,627 - - 724,400
Shares issued for Investment in
Animal ID 205,500 206 249,000 249 164,545 - - 165,000
Shares sold - - 95,150 95 49,480 - - 49,575
Net Loss - - - - - - (4,062,219) (4,062,219)
----------- ------- ------------ -------- ------------ ------------ ----------- -----------
Balance December 31, 2006 6,990,650 6,991 3,692,380 3,692 1,425,672 - (5,140,668) (3,704,313)
Shares for services - - 1,000,000 1,000 749,000 - - 750,000
Sale of shares - - 15,800,000 15,800 15,599,200 (15,000,000) - 615,000
Net loss - - - - - - (1,357,038) (1,357,038)
----------- ------- ------------ -------- ------------ ------------ ----------- -----------
Balance March 31, 2007 6,990,650 6,991 20,492,380 20,492 17,773,872 (15,000,000) (6,497,706) (3,696,351)
Preferred shares converted (1,800,000) (1,800) 9,000,000 9,000 (7,200) - - -
Funds received from stock
subscriptions - - - - - 128,300 - 128,300
Shares issued for services 7,017,000 7,017 900,000 900 866,583 - - 874,500
Shares issued for debt - - 16,810 17 16,793 - - 16,810
Sale of shares - - 100,000,000 100,000 100,400,000 (100,500,000) - -
Net loss - - - - - - (2,886,948) (2,886,948)
----------- ------- ------------ -------- ------------ ------------ ----------- -----------
Balance June 30, 2007 12,207,650 12,208 130,409,190 130,409 119,050,048 (115,371,700) (9,384,654) (5,563,689)
Conversion of Preferred shares
and
reverse stock split (12,107,650) (12,108) (65,208,932) (65,209) 77,317 - - -
Funds received from stock -
subscriptions - - - - - 132,177 - 132,177
Net loss - - - - - - (888,935) (888,935)
----------- ------- ------------ -------- ------------ ------------ ----------- -----------
Balance September 30, 2007 100,000 100 65,200,258 65,200 119,127,365 (115,239,523) (10,273,589) (6,320,447)
Redemption of Common to
Preferred E 12,450,000 12,450 (12,450,000) (12,450) - - - -
Funds received from stock -
subscriptions - - - - - 170,000 - 170,000
Cancellation of subscriptions
receivable - - - - (115,069,523) 115,069,523 - -
Stock for services 260,000 260 60,000,000 60,000 55,740 - - 116,000
To record 1000 to 1 reverse
split - - (112,637,508) (112,638) 112,638 - - -
Shares issued for debt - - 3,000,000 3,000 3,997,000 - - 4,000,000
Net Loss - - - - - - (1,658,129) (1,658,129)
----------- ------- ------------ -------- ------------ ------------ ----------- -----------
Balance December 31, 2007 12,810,000 12,810 3,112,750 3,112 8,223,220 - (11,931,718) (3,692,576)
Conversion of Preferred E to
Common (12,450,000) (12,450) 12,450,000 12,450 - - - -
Conversion of Preferred F to
Common (200,000) (200) 10,000,000 10,000 (9,800) - - -
Stock for services - - 2,000,000 2,000 2,000 - - 4,000
Retirement of Preferred F (60,000) (60) - - 60 - - -
Sale of shares - - 2,200,000 2,200 4,897,800 (4,778,962) - 121,038
Net loss - - - - - - (175,728) (175,728)
----------- ------- ------------ -------- ------------ ------------ ----------- -----------
Balance March 31, 2008 100,000 $ 100 29,762,750 $ 29,762 $ 13,113,280 $ (4,778,962)$(12,107,446) $(3,743,266)
Stock for services 10,237,250 10,238 $ 2,142 $ 12,380
Funds received from stock
subscriptions $ 37,966 $ 37,966
Net loss - $ - - $ - $ - $ - $ (124,393) $ (124,393)
----------- -------- ------------ --------- ------------- ------------- ------------ -------------
Balance June 30, 2008 100,000 $ 100 40,000,000 $ 40,000 $ 13,115,422 $ (4,740,996)$(12,231,839) $(3,817,313)
=========== ======== ============ ========= ============= ============= ============ =============
|
See accompanying notes to financial statements
7
EnsurApet, Inc. and Subsidiary
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2008
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Development Stage Company
Ensurapet, Inc., f/k/a Vsurance, Inc. and wholly owned Subsidiary, Vsurance
Insurance Agency, Inc. (the Company) are development stage companies as defined
under Statements of Financial Accounting Standards No. 7. Vsurance, Inc. was
incorporated on July 26, 2005, in the State of Nevada. Purrfect Pet Insurance
Agency, Inc. was incorporated on July 20, 2005, in the State of Ohio. Purrfect
Pet Insurance Agency changed its name to Vsurance Insurance Agency, Inc.,
re-domiciled to New Mexico on December 31, 2005, and later re-domiciled to
Arkansas on June 13, 2006. Vsurance changed its name to Ensurapet on January 31,
2008, and is a development stage Company. Ensurapet intends to provide
beneficial pet / horse resource centers--VetpetMD, Spot the Pet, and Purrfect
Pet Club--via the worldwide web in order to sell pet merchandise as an online
affiliate of a leading pet retailer, lost and found registration services (Pet
ID tags), global positioning system technologies to locate lost pets and horses,
and lastly liability, life, and health insurance policies to cover property
damage and veterinary expenses from and on pets and horses in the United States,
United Kingdom and in other pet and horse concentrated countries.
On January 17, 2006, the Company formed Purrfect Pet Club, a Michigan
corporation. At September 30, 2007 this subsidiary was still dormant.
The consolidated financial statements include the accounts of the Ensurapet,
Inc., Vsurance Insurance Agency and Purrfect Pet Club. All significant
inter-company accounts and transactions have been eliminated in consolidation.
The statements reflect the reverse stock splits of July 27, 2007 of 80 to 1 and
the January 31, 2008 of 1,000 to 1. The statements also reflect the conversion
of the Samir Financial loan on April 9, 2008 into a $2,000,000 loan and
3,000,000 shares of common stock valued at $4,000,000.
Revenue Recognition
Ensurapet uses the accrual basis of accounting.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all
short-term debt securities purchased with a maturity of three months or less to
be cash equivalents.
Income Taxes
The Company accounts for income taxes under the provisions of Statements of
Financial Accounting Standards No. 109 "Accounting for Income Taxes", which
requires a company to recognize deferred tax assets and liabilities for the
expected future tax consequences of events that have been recognized in a
company's financial statements or tax returns. Under this method, deferred tax
assets and liabilities are determined based on the difference between the
financial statement carrying amounts and tax bases of assets and liabilities
using enacted tax rates. The Company has no differences between book and tax
accounting.
Property and Equipment
Property and equipment are carried at cost. Maintenance, repairs and renewals
are expensed as incurred. Depreciation of property and equipment is provided for
over their estimated useful life.
Estimated useful lives
Used Office Equipment 2 Years
Computer Equipment 3 Years
|
8
Use of Estimates
The preparation of the consolidated 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.
Concentration of Credit Risks
During 2008, the Company had no deposits in banks in excess of the FDIC
insurance limit.
NOTE 2 - OTHER NONCURRENT ASSETS
Software
Software represents internal use insurance operating software and development
utilities software valued on August 20, 2005, at $22,500. The Company in
exchange for 745,000 shares of Preferred Class A stock received for internal use
insurance operating software on August 20, 2005, valued at $22,350. The Company
in exchange for 5,000 shares of Preferred Class A stock received development
utilities software valued at $150. During the six months ended December 31,
2006, the Company spent an additional $660,122 with a third party vender in
continued development of input software for use with the initial software. The
Company capitalizes costs incurred during the application development stage and
amortizes these costs to expense over the software's useful life. Costs incurred
during the preliminary project stage and costs incurred during the
post-implementation and operation stage are be expensed as incurred. The Company
has begun amortizing these costs. The utilities software valued at $150 useful
life is 1 year. The internal insurance operating software has a 2 year life. The
straight-lined method is used. Amortization for the periods ending June 30,
2008, the year ended December 31 2007, and since inception was $30,554, 338,220
and $590,962 respectively.
Trademarks
Trademarks represent the third party costs in connection with the filing of
trademark applications and related research. The Company evaluates, at least
annually, for potential impairment, this recorded amount, by means of a cash
flow analysis in accordance with SFAS 142.
Vet MD Data Base
Vet MD Data Base represents third party costs incurred in the development of an
internet based veterinary medicine reference library. These cost will be
amortized over a, to be determined useful life, when placed into service. The
Company hopes to have this data base complete and in service by the end of 2008.
Goodwill
On June 2, 2006 the Company entered into an agreement to purchase 100% of the
outstanding stock of Animal ID LLC for $415,000. The final agreement for the
acquisition was completed on February 2, 2007. The purchase price consists of
$20,000 cash, $165,000 in the Company's common stock and a note for $230,000.The
upon closing the acquired company had no assets and minimal liabilities. The
entire purchase price represents Goodwill and will be accounted for in
accordance with SFAS 142. At December 31, 2007, management wrote the balance of
this investment down to zero as impaired.
Insurance Agency Licenses
Insurance Agency Licenses represents 102 admitted and surplus lines insurance
licenses assigned to it by a shareholder and a consultant. Due to the difficulty
in valuing these licenses the Company has assigned a carrying value of $0.
Prepaid Expenses
Prepaid expenses represent prepaid promotional expenses from a contract entered
into in January 2007. The Company issued 1,000,000 shares of its Common stock
for services valued at $750,000. The services are to be delivered over a three
year period. The prepaid portion of this contract is being amortized over its 36
month life on the straight line basis. The prepaid marketing fees were
determined my management to be of no value in the second quarter of 2007. The
balance of the prepaid fees at that time was written off.
NOTE 3 - PROPERTY AND EQUIPMENT
Property and equipment are summarized by major classifications as follows:
9
June 30, 2008 December 31, 2007
Equipment $ 80,427 $ 80,427
Leasehold Improvements 0 0
Less Accumulated Depreciation (49,602) (36,470)
-------- --------
$ 30,825 $ 43,957
========= =========
|
Lease hold Improvements were not in service during 2007. The Company abandoned
its Little Rock office at June 30, 2007. The balance of the leasehold
improvement was written off to Abandonment loss.
Depreciation expense for the periods ending June 30, 2008, the year ending
December 31, 2007 and since inception was $6,566, $95,329, and $113,719
respectively.
NOTE 4 - ACCOUNTS PAYABLE IN DISPUTE
The balance represents trade payable arising since inception that the Company is
disputing and hope to be able to reduce and satisfy the balance with issues of
the Company's common stock during 2008.
NOTE 5 - NOTES PAYABLE
On April 17, 2006, the Company borrowed $50,000 under a line of credit
agreement. The loan is due upon demand, unsecured with interest at bank's prime
plus 2 points. The balance outstanding at September 30, 2007 and December 31,
2006 was $45,233 and $50,784 respectively.
On December 15, 2005, the Company executed a Loan and Security Agreement with
Samir Financial, LLC for $4,000,000. This loan is due in full at the end of
twelve months. All interest and expenses have been prepaid. The stated interest
rate is 30% per annum. The effective interest rate is 129% per annum. Security
is all company assets including un-disbursed funds. Closing fees totaling
$1,250,000 were paid at closing by the company which netted $1,750,000 in
proceeds that will be disbursed in accordance with a draw down schedule
($1,750,000 at closing less closing fees of $1,250,000 at closing: $250,000 on
January 31, 2006; $250,000 on February 28, 2006; $250,000 on March 31, 2006 and
$300,000 on April 30, 2006 resulted in net cash proceeds to the Company of
$1,550,000. The closing fees totaling $1,250,000 together with the prepaid
interest of $1,200,000 totaling $2,450,000 were all prepaid at closing thereby
netting the Company, from the $4,000,000 loan, the sum of $1,550,000..Fees at
closing were; $800,000 closing fee which were expensed, $100,000 collateral
Management fee, $100,000 audit fees, $200,000 good faith deposit and $50,000
Legal fees and expenses which were all capitalized at closing since they were
non-refundable and represents items which apply to the live of the loan. The
capitalized amounts totaling $450,000 are being amortized over the twelve month
life of the loan using the effective interest rate method. These items were
fully amortized at December 31, 2006.
In connection with the above loan the lender has agreed on December 14, 2005 and
again on January 31, 2006 to purchase 1,200,000 and 600,000 shares of Preferred
A stock for $500,000 and $300,000 reduction of the loan respectively. Under the
terms of the agreement the shares have been issued to the lender. In addition
the agreement requires the shares to be repurchased by the Company at the
lenders cost and returned to the Company if the loan is not repaid when due on
December 15, 2006. The loan was not repaid timely and the Company has forfeited
its right to compensation for these shares. In December 2006, the lender agreed
verbally to extend the loan for an additional six months for a $500,000
extension fee. There is still $300,000 of this fee outstanding at September 30,
2007. This fee is being amortized over the six month extension period. On
September 15, 2007, the principal guarantor of this loan did hereby forgive,
assume, obligate itself, and indemnify the Company for any and all amounts
associated and incurred with this loan above $2,000,000. The Company has not
obtained release from the lender for the amounts assumed by the principal
guarantor; accordingly it will continue to carry the amount on its books until
release is received. On April 9, 2008, the Company entered into an agreement
with the lender to exchange $4,000,000 of the debt was exchanged for 3,000,000
shares of the Company's common stock and a new $2,000,000 note due $1,000,000
due May 19, 2008 and the balance beginning to amortize at the rate of $250,000
per quarter on July 1, 2009. This transaction was recorded as of December 31,
2007.
The balance of the loan at March 31, 2008 and December 31, 2007, as restated,
was $2,000,000.
On December 5, 2006 the Company borrowed $25,000 from a shareholder. The note is
due March 1, 2007 and is at 30% interest. The loan was not repaid on its due
date. The balance outstanding on the loan at March 31, 2008 and December 31,
2007 was $38,775.
10
In connection with the Animal ID purchase the Company issued a $230,000 note
payable to one of the former owners of Animal ID. The note calls for quarterly
payments totaling $55,000 the first year, $70,000 the second year and $75,000
the third year. The note bears interest at 1.5% per month if in default. The
lender received a default judgment on this loan in 2007 for $225,100.The balance
of the loan at March 31, 2008 and December 31, 2007, was $225,100.
NOTE 6 - INCOME TAXES
The Company has a net operating loss of approximately $10,000,000 available for
carry-forward of up to twenty (20) years for federal purposes. Pursuant to
Internal Revenue Code Section 382 and the regulations there under, the amounts
of utilizable carryover may be limited as a result of ownership changes or even
eliminated if business continuity requirements are not met. There were no
temporary differences allowing no deferred tax liabilities to arise.
NOTE 7 - EQUITY
Earnings per share
The Company has adopted the provisions of SFAS 128 in the computation of
earnings whereby the convertible Preferred Stock was deemed converted to common
stock on date of issue.
Common Stock
The Company has 500,000,000 and 250,000,000 shares of common stock authorized
with 40,000,000 and 3,112,750 share outstanding at June 30, 2008 and December
31, 2007 respectively. The common shares of the Company were reverse split 1 for
80 shares on July 11, 2007. The shares were further reversed split on January
31, 2008 1,000 to 1. Share values in these statements and footnotes indicate if
they are pre or post split shares.
Preferred Stock Class A
The Company has 8,000,000 shares of $0.001 par value authorized, with 0 and
6,015,150 shares outstanding at September 30, 2007 and December 31, 2006
respectively. The shares have no dividend rights and convert at the holder's or
the Company's option to the Company's Common Stock at the rate of 5 to 1. The
shares vote with the common share holders at the same rate as the conversion
rights. The shares have no liquation value, no liquidation rights, no dividend
rights and no redemption rights. It is management's intent to convert all shares
of Preferred A to common. In connection with the note payable the lender has
agreed on December 14, 2005 and again on January 31, 2006 to purchase 1,200,000
and 600,000 shares of Preferred A stock for a $500,000 and $300,000 reduction of
the loan respectively. Under the terms of the agreement the shares have been
issued to the lender. In addition the agreement requires the shares to be
repurchased by the Company at the lenders cost and returned to the Company if
the loan is not repaid when due on December 15, 2006. The loan was not repaid
timely and the Company has forfeited it right to compensation for these shares.
There were 0 shares outstanding at June 31, 2008, March 31, 2008 and December
31, 2007; further, this class of stock no longer exists and was eliminated with
the Nevada Secretary of State.
Preferred Stock Class B
The Company has 2,000,000 shares of $0.001 par value authorized, with 0 and
975,500 shares outstanding at both September 30, 2007 and December 31, 2006. The
shares have no dividend rights and convert at the holder's or the Company's
option to the Company's Common Stock at the rate of 2 to 1. The shares vote with
the common share holders at the same rate as the conversion rights. The shares
have no liquation value, no liquidation rights, no dividend rights and no
redemption rights. There were 0 shares outstanding at June 30, 2008, March 31,
2008, and December 31, 2007; further, this class of stock no longer exists and
was eliminated with the Nevada Secretary of State.
Preferred Stock Class C
The Company has 0 and 0 shares outstanding at September 30, 2007 or December 31,
2006. The shares have no dividend rights and convert at the holder's or the
Company's discretion to the Company's Common Stock at the rate of 25 to 1. The
shares vote with the common share holders at the same rate as the conversion
rights. The shares have no liquation value, no liquidation rights, no dividend
rights and no redemption rights. There were no shares outstanding at June 30,
3008, March 31, 2008 and December 31, 2007; further, this class of stock no
longer exists and was eliminated with the Nevada Secretary of State.
11
Preferred Stock Class D
On July 11, 2007, the shareholders and Board of Directors created a Preferred
Stock Class D. This class of preferred stock has non-dilutive voting rights, a
par value of $0.001 per share, and 100,000 shares authorized. There were 100,000
shares outstanding at June 30, 2008 and December 31, 2007 and 2006.
Preferred Stock Class E
In the fourth quarter of 2007 the Board of Directors created a Preferred Stock
Class E. The shares have no dividend rights and convert at the holder's or
Company's discretion to the Company's common stock at the rate of 2.2 shares of
preferred to one share of common. The shares were converted in the first quarter
of 2008. There were 0 shares outstanding at March31, 2008 and December 31, 2007
as restated; further, this class of stock no longer exists and was eliminated
with the Nevada Secretary of State.
Preferred Stock Class F
In the first quarter of 2008 the Board of Directors created a Preferred Stock
Class F. The shares have no voting or dividend rights and convert at the
holder's or Company's discretion to the Company's common stock at a rate of 1
shares of preferred to fifty common shares. The shares were converted in the
first quarter of 2008. There were 0 shares outstanding at March 31, 2008 and
December 31, 2007 as restated; further, this class of stock no longer exists and
was eliminated with the Nevada Secretary of State.
.
NOTE 8 - RELATED PARTY TRANSACTIONS
On December 5, 2006 the Company borrowed $25,000 from a shareholder. The note
was due March 1, 2007 and is at 30% interest. The loan was not repaid on its due
date. The balance of the loan at June 30, 2008 and December 31, 2007 was
$38,775.
The Company also owed another shareholder and officer $349,203 and $334,737 at
June 30, 2008, March 31, 2008 and December 31, 2007 respectively, for funds
advanced.
The Company has leased over 4,000 square feet of office space from its
President. The lease was abandoned on June 30, 2007.
NOTE 9 - OPERATING SEGMENTS
The Company organizes its business into three reportable segments: the parent
company (Vsurance, Inc.), the insurance agency (Vsurance Insurance Agency, Inc.)
and the pet club (Purrfect Pet Club); however, all assets and expenditures are
reported through the parent company (Vsurance) since operations have not
commenced. Therefore, there are no supplemental schedules on the subsidiary that
would breakdown assets, liabilities and operations for each of these segments.
NOTE 10 - ABANDOMENT LOSS
The Company decided on June 30, 2007, to abandon its Little Rock offices. A loss
of $146,680 was recognized as the estimated cost of this decision. Also, in the
second quarter of 2007 management determined that the prepaid marketing fees
capitalized in the first quarter 0f 2007 were of no value. The Company on
December 31, 2007 wrote off the balance of Goodwill from Animal ID as fully
impaired.
The Company abandoned its offices located at 540 N Golden Circle, Santa, CA and
utilize its shared data center facilities from a shareholder at no cost in order
to reduce operating expenditures.
NOTE 11 - GOING CONCERN
The Company has not generated any revenues significant or profits to date. This
factor among others including the pass due payables due and the Company's
inability to pay the principal payment due under the note to Samir Financial
raises substantial doubt about the Company's ability to continue as a going
concern. Management feels the Company's continuation as a going concern depends
upon its ability to obtain additional sources of capital and financing.
Management feels it can raise the necessary working capital in 2008 to provide
the necessary working capital and repay the delinquent notes payable provided
the lender (Samir Financial) cooperates with the Company and if need be accept
stock as payment as a full and complete satisfaction of this indebtedness. The
accompanying financial statements do not include any adjustments that may result
from the outcome of this uncertainty.
12
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Management's Discussion and Analysis of Consolidated Results of Financial
Condition and Results of Operations ("MD&A") contains forward-looking statements
that involve risk and uncertainties. Please see "Forward-Looking Statements" for
a discussion of the uncertainties, risks, and assumptions associated with these
statements. The results of operations for the periods reflected herein are not
necessarily indicative of results that may be expected for future periods, and
our actual results may differ materially from those discussed in the
forward-looking statements as a result of various factors, including but not
limited to those listed under "Risk Factors" and included elsewhere in this
Quarterly Report. Further historic disclosures can be found on Form 10-K (as
amended) for December 31, 2007, 10-KSB for December 31, 2006, and in the 2006
registration statement (SEC File number 333-132028).
Overview
MD&A is a supplement to our consolidated financial statements and notes thereto
included elsewhere in this Quarterly Report, and are provided to enhance your
understanding of our results of operations and financial condition. Our MD&A is
organized as follows:
o Introduction. This section provides a general description of our
company, background information on certain trends, strategies and
other matters discussed in the MD&A, a description of the basis for
presentation of our financial statements, a summary discussion of
our plan of operations, and a discussion on our acquisition.
o Critical Accounting Policies and Estimates. This section discusses
those accounting policies that are considered important to the
evaluation and reporting of our financial condition and results of
operations, and whose application requires us to exercise subjective
and often complex judgments in making estimated and assumptions.
o Results of Operation. This section provides our analysis and outlook
for the significant line items on our statement of operations, as
well as other information that we deem meaningful to understand our
results of operations.
o Liquidity and Capital Resources. This section provides an analysis
of our liquidity and cash flows, as well as a discussion of our
commitments that existed as of March 31, 2008.
o Recent Accounting Pronouncements. This section provides a summary of
the most recent authoritative accounting standards and guidance that
have either been recently adopted by our company or may be adopted
in the future.
Introduction
Our Company
We are a provider of pet health information services to pet owners,
veterinarians, animal healthcare professionals, and pet service providers, which
includes life and health insurance for pets, horses, and other companion animals
through our public online portals. We are organizing our business into these two
operating segments as follows; however, since we remained a development stage
company at March 31, 2008, we have represented the business as one operating
segment at this time:
o Online and Other Services. The Ensurapet Beneficial Resource Centers
consist of the public portals that we own, such as www.VetpetMD.com.
These along with our other pet/animal owner portals help owners take
an active role in managing their pet's health by providing objective
healthcare and lifestyle information. Our public portals generate
revenue primarily through the sale of advertising and sponsorship
products from Petsmart(R) as an affiliate.
o Insurance Services. We sell several pet health insurance plans for
dogs and cats that provide reimbursement of veterinary expenses
incurred to treat an illness or injury and on some policies
routine/preventive care treatment such as vaccinations: Protect 1,
Protect 2, Protect 3, and Protect 4 all of which provided an
accidental life insurance policy with an endorsement for death due
to an illness. We are authorized to underwrite a pet replacement
(life) insurance plan for dogs and cats with death benefit limits
ranging from $1,000 to $10,000. We have not yet introduced this
product to the marketplace but look to do so in late 2007.
13
Background Information on Certain Trends and Strategies
Several key trends in the pet healthcare and Internet industries are influencing
the use of pet/animal healthcare information services of the types we provide or
are developing. Those trends, and the strategies we have developed in response,
are described briefly below:
Use of the Internet by pet owners and veterinarians. The Internet has emerged as
a major communications medium and has already fundamentally changed many sectors
of the economy, including the marketing and sales of financial services, travel,
and entertainment, among others. The Internet is also changing the pet/animal
healthcare industry and has transformed how pet/animal owners and veterinarians
find and utilize healthcare information. Since pet owners presently assume all
of the financial responsibility veterinary costs, which are presently rising,
the Internet serves as a valuable resource by providing them with immediate
access to searchable and dynamic interactive content to check symptoms, assess
risks, understand diseases, find veterinarians and evaluate treatment options.
The Internet has also become a primary source of information for veterinarians
seeking to improve clinical practice and is growing relative to traditional
information sources, such as conferences, meetings and offline journals.
Increased Online Marketing and Education Spending for Pet Healthcare Products.
Pharmaceutical, biotechnology and medical device companies spend large amounts
each year marketing their products and educating pet owners and veterinarians
about them, however, only a small portion of this amount is currently spent on
online services. We believe that these companies, which look to be and comprise
the majority of our advertisers and sponsors, are becoming increasingly aware of
the effectiveness of the Internet relative to traditional media in providing
health, clinical and product-related information to pet owners and
veterinarians, and this increasing awareness will result in increasing demand
for our services.
Changes in the Veterinary Profession with Pet Insurance. A new report published
by Packaged Facts on Pet Insurance in North America, stated that North Americans
will take an increasingly strong interest in pet insurance during the next five
years, placing sales as high as $1.1 billion in 2012. This forecast is
consistent with soaring revenues in the overall pet market due to affluent
households and their willingness to spend more on the health and wellness of
their beloved furry family members. A conservative estimate in this study
indicated revenues of pet insurance were at $248 million in 2007, up 21% from
$205 million in 2006. The report further stated that North America is primed for
expansion in the pet insurance market.
For the first time insurance plans are being sold under nationally known pet
care brands, including PurinaCare and the American Kennel Club. Helping to drive
further interest and awareness, companies are targeting consumers through new
distribution channels, such as, direct-to-consumer, veterinarian offices, pet
care service providers, supermarkets and insurance agencies. The report went on
to say that many new companies have entered the market over the past three years
and it's a sure bet that more well-funded companies will jump on-board in the
coming year. Each company has its own version of pet insurance products, ranging
from highly customizable plans to greatly simplified ones for a mass market. In
the pet insurance spotlight is PurinaCare, AKC, ASPCA, as well as dedicated pet
insurance underwriters such as American Pet Insurance Company and SecuriCan, who
all appear to be following in the footsteps Kroger who now too provides pet
insurance. For further information on this report visit:
http://www.packagedfacts.com/Pet-Insurance-1391937/
Basis of Presentation
Ensurapet, Inc. is a Nevada corporation formerly known as Vsurance, Inc., that
was incorporated on July 26, 2005. We are a development stage company. We were
created to provide beneficial pet and horse resource centers--VetpetMD, Spot the
Pet, and Purrfect Pet Club--via the worldwide web in order to sell pet
merchandise as an online affiliate of a leading pet retailer, lost and found
registration services (Pet ID tags), global positioning system technologies to
locate lost pets and horses, and lastly liability, life, and health insurance
policies to cover property damage and veterinary expenses from and on pets and
horses in the United States, United Kingdom and in other pet and horse
concentrated countries. At June 30, 2008, there were 40,100,000 capital shares
issued and outstanding, consisting of 40,000,000 common shares (out of
500,000,000 authorized) and 100,000 Class D preferred shares (out of the 100,000
authorized).
Acquisitions
The Animal-ID acquisition which occurred during 2006 and reported in that
periods annual report has been and will again be in litigation. The position of
the Company is that the asset being the software was never delivered in its
entirety to Ensurapet. It was determined that the sellers did not possess the
all of the rights and that a key module was not owned by the sellers. The This
acquisition resulted in a case #070C014621B involving one of the sellers, Kathy
Ranson seller of Animal-ID in the First Judicial Court in the State of Nevada.
The Company plans to contest and seek to have the judgment set-aside in the
amount of $210,000.00 based on fraud and failure to deliver assets unencumbered
as described in the Purchase Agreement.
14
Plan of Operations
We commenced operations June 2006 on a small scale as our public portals were
under initial development. At that time the VetpetMD
portal--www.vetpetmd.com--since the site was made public has had: 274,812 site
hits; 46,241 page views; and established 6,605 visits of which 3,316 were unique
visitors. The pet insurance site--www.purrfectinsurance.com--since going live
has had: 858,418 site hits; 203,134 page views; and established 14,727 visits of
which 8,171 were unique visitors. Our main home
page--www.vsurance.com--delivered similar results: 559,125 site hits; 296,747
page views; and established 18,637 visits of which 8,964 were unique visitors.
From this visitation we have approximately 400 policyholders with annual written
premium in excess of $80,000. As we ended the year our network of associations,
employer groups, and insurance brokerage partnerships continued to grow. We
acquired more than 90 relationships and had the potential to reach more than 30
million members who are potential pet owners. Company resources to capitalize on
these achievements were stifled by the need to raise capital in order to repay
the large indebtedness due Samir Financial, thus marketing to these
relationships has been delayed and slowed.
In 2008 and 2009, our plan, which depends on the Company's ability to raise
capital, is to: increase traffic to our public portals; expand VetpetMD to
include an online pharmacy; grow our pet insurance sales through the
introduction of our kennel coverage program, caring vet program, retail in-store
offer, and expand our group/association network. In order to build traffic and
ramp up policy sales will require further capital; therefore, we have engaged
JPC Capital Partners and Wakabayashi Fund LLC to raise $5 million or more in
capital. Additionally, since our stock is quoted on the OTCBB we need to
increase investor awareness and deliver returns for shareholders. DME Capital
has been engaged--March 2008--to act as the Company's public relations "IR
Firm." Due to limited capital the relationship with DME Capital ceased on or
about June 1, 2008; further JPC Capital and Wakabayashi Fund LLC has not
achieved any success in raising capital since their engagement.
Our continuation as a going concern depends upon our ability to increase website
traffic, ramp up policy sales while obtaining further capital wherein the past
due payment to Samir Financial can be made. This is the overall objective of
this operating year and the one to follow. With that said, while there is a high
degree of risk and the possibility of foreclosure my the senior lender (Samir
Financial) management feels it can raise the necessary working capital in 2008
and 2009 to provide the necessary working capital and repay the delinquent note
payable provided the lender (Samir Financial) cooperates with the Company and if
need be accept stock as payment as a full and complete satisfaction of this
indebtedness.
Critical Accounting Policies and Estimates
Our MD&A is based upon our consolidated financial statements and notes to
consolidated financial statements, which were prepared in conformity with U.S.
generally accepted accounting principles. The preparation of the consolidated
financial statements requires us to make estimates and assumptions that affect
the amounts reported in the consolidated financial statements and accompanying
notes. We base our estimates on historical experience, current business factors,
and various other assumptions that we believe are necessary to consider to form
a basis for making judgments about the carrying values of assets and liabilities
and disclosure of contingent assets and liabilities. We are subject to
uncertainties such as the impact of future events, economic and political
factors, and changes in our business environment; therefore, actual results
could differ from these estimates. Accordingly, the accounting estimates used in
preparation of our financial statements will change as new events occur, as more
experience is acquired, as additional information is obtained and as our
operating environment changes. Changes in estimates are made when circumstances
warrant. Such changes in estimates and refinements in estimation methodologies
are reflected in reported results of operations; if material, the effects of
changes in estimates are disclosed in the notes to our consolidated financial
statements.
We evaluate our estimates on an ongoing basis, including those related to
revenue recognition, the allowance for doubtful accounts, the carrying value of
prepaid advertising, policy acquisition costs, the carrying value of long-lived
assets (including goodwill and intangible assets), the amortization period of
long-lived assets (excluding goodwill), the carrying value, capitalization and
amortization of software and website development costs, the provision for income
taxes and related deferred tax accounts, certain accrued expenses and
contingencies.
We believe the following reflects our critical accounting policies and our more
significant judgments and estimates used in the preparation of our consolidated
financial statements:
o Revenue Recognition. Revenue from advertising is recognized as
advertisements are delivered. Revenue from sponsorship
arrangements, content syndication and distribution arrangements,
and licenses of pet healthcare management tools and public
portals are recognized along with the revenue from the sale of
pet health insurance policies are recognized on an accrual basis
accounting.
15
o Long-Lived Assets. Long-lived assets consist of property,
software, and equipment, goodwill, if any and other intangible
assets. Goodwill and other intangible assets could arise from
acquisitions, specifically Animal-ID which was in escrow at
December 31, 2006; however, this amount which had been recorded
as goodwill was written off December 31, 2007, due to the
litigation. The amount assigned to intangible assets is
subjective and based on our estimates of the future benefit of
the intangible assets using accepted valuation techniques, such
as discounted cash flow and replacement cost models. Our
long-lived assets, excluding goodwill, are amortized over their
estimated useful lives, which we determined based on the
consideration of several factors including the period of time the
asset is expected to remain in service. We evaluate the carrying
value and remaining useful lives of long-lived assets, excluding
goodwill, whenever indicators of impairment are present. We will
evaluate the carrying value of goodwill annually, and whenever
indicators of impairment are present. We will use a discounted
cash flow approach to determine the fair value of goodwill.
o Deferred Tax Assets. The Company accounts for income taxes under
the provisions of Statements of Financial Accounting Standards
No. 109 "Accounting for Income Taxes", which requires a company
to recognize deferred tax assets and liabilities for the expected
future tax consequences of events that have been recognized in a
company's financial statements or tax returns. Under this method,
deferred tax assets and liabilities are determined based on the
difference between the financial statement carrying amounts and
tax bases of assets and liabilities using enacted tax rates. The
Company has no differences between book and tax accounting.
Results of Operations
For the quarter ending 2008 and year ending 2007 we reported a Net Loss of
$(124,393) and $(6,791,049) and Basic (Loss) per Share of $(0.00) and
$(3,747.82) respectfully.
We are a development stage company because we have not commenced any significant
operations so far with the exception of a minimal number (1,412) of membership
and certificates of insurance to Purrfect Pet Club members that amounts to more
than $80,000 in annualized written premium. The Company's wholly-owned
reinsurance company "Vsurance Re, Inc" has been incorporated with the Nevis
Office of the Registrar of Companies corporation number C-304999; however, the
Company must deposit the necessary reserves no later than October 1, 2008 if the
charter is to be maintained. The VetpetMD website, Spot the Pet lost and found
24/7 ID program, Purrfect Pet Club with online pet merchandise sales, and
Purrfect Pet Insurance online websites are operational. The club's membership
base has been expanded and its services, including pet health/life insurance is
now available to more than 30 million people through our agent partnerships.
With that said, capital is needed to develop and expand these relationships if
not these agents, associations, and groups will seek an alternate pet health
insurance provider. The Company has withdrawn its Form "A" application with the
Idaho Department of Insurance to purchase of the Universal Life Insurance
Company charter. The Company intends, at the direction of legal counsel, to file
a new Form A for a new insurance company charter in the State of Arizona which
is underway. Further the Company will seek to utilize the expedited NAIC
mono-line filing service in the other states. There is no assurance that our
application will be approved by the Insurance Department; however, if and when
an order was to be given certifying the terms of the purchase the required
disclosures shall be made.
On January 31, 2008, the Company entered into a revised and new investment
banking agreement with The October Fund on a best efforts basis to raise $4.9
million in capital in exchange for 2,200,000 commons shares. The agreement
combined deliverables on the part of the company--policy sales--with capital
investments as follows: $2 million in exchange for 1,463,414 common shares;
$500,000 on or before November 7, 2008 in exchange for 248,780 common shares and
annualized gross written premiums in-force of $1 million; $1,000,000 on or
before January 5, 2009 in exchange for 243,903 common shares with the addition
of 5,000 new pet insurance policies; and $1,400,000 on or before April 5, 2009
in exchange for 243,903 common shares with the addition of 8,000 new pet
insurance policies. The focus of management remains on development of the
company, online websites/computer operating systems and the procurement of
further capital for operations. So far efforts to raise capital by the October
Fund have been unsuccessful and are taking much longer than the Company
anticipated.
Revenues - were $47,848 at December 31, 2007 and $18,965 at June 30, 2008, which
when combined with first quarter revenues of $20,876 represents 83% of last
years revenue, primarily as a result of the continuance of pet health insurance
plan sales.
Operating Expenses - were $6,277,217 at December 31, 2007, $196,604 at March 31,
2008, and $143,359 at June 30, 2008, which when combined represents 5% of last
years expenses, primarily as a result of a slowing of marketing initiatives and
the discontinuance of the amortization of prepaid closing costs and recent
settlement of the note payable to Samir Financial (Footnote 4).
16
Net Income (Loss) - there was a net loss from net income of $(6,791,049) at
December 31, 2007, $(175,728) at March 31, 2008, and $(124,393) at June 30,
2008, which combined represents 4% of last year loss. The decrease is primarily
the result of a slowing of marketing initiatives and the discontinuance of the
amortization of prepaid closing costs and recent settlement of the note payable
to Samir Financial (Footnote 4).
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 2008 we had total assets of $229,344 of which $1,279 was in cash.
As a result of our current lack of capital and loan obligation to the Lender,
wherein all company assets including cash is pledged as collateral, we are
completely dependent upon further capital implement our business plan;
furthermore, the need for additional capital beyond any immediate offering is
predicated because in order to write insurance policies we must maintain
adequate surplus with state insurance departments. Regulation requires insurers
to limit policy sales to only three times their surplus deposit, for example,
having a surplus deposit of $2,000,000 we could write $6,000,000 in premium
(policy sales). In the event that we cannot raise additional capital and policy
sales exceed our surplus deposit we would have to transfer the risk which is
above our surplus writing ratio to another company. This reinsurance process is
common.
Current Assets
Cash - decreased from $15,757 at December 31, 2007 to $1,279 at June 30, 2008, a
decrease of $14,478 primarily as a result of operating expenses absent any new
capital infusions under the investment banking agreement.
Commission receivable - increased from $751 at December 31, 2007 to $5,547 at
June 30, 2008, primarily as a result of the monies generated from pet health
insurance plan sales.
Prepaid expenses - was unchanged from $0 at December 31, 2007 to $0 at June 30,
2008, primarily as a result of the complete amortization of all prepaid closing
cost with the note payable to Samir Financial (Footnote 4).
Total Current Assets - decreased from $16,508 at December 31, 2007 to $6,827 at
June 30, 2008, a decrease of $9,681 primarily as a result of a lack of any new
capital investments under the investment banking agreement.
Net Fixed Assets - decreased from $43,857 at December 31, 2007 to $30,825 at
June 30, 2008, a decrease of $13,032, primarily as a result of depreciation and
no new fixed asset purchases.
Other Assets - decreased from $252,790 at December 31, 2007 to $191,692 at June
30, 2008, a decrease of $61,098, primarily as a result of amortization and
write-off of the Animal-ID acquisition and no new asset purchases.
Liabilities
Total Current Liabilities - increased from $3,005,831 at December 31, 2007 to
$3,046,657 at June 30, 2008, an increase of $40,826 primarily as a result of
normal operations.
The Company anticipates that its cash requirements will continue to increase as
it continues to expend substantial resources to build its infrastructure,
develop its business plan and establish its sales and marketing network
operations, customer support and administrative organizations. The Company
currently anticipates that its available cash resources and cash generated from
operations and the recent engagements of investment banking firms, will be
sufficient to meet its presently anticipated working capital and capital
expenditure requirements for the next twelve months. If the Company is unable to
maintain profitability, or seeks further expansion, additional funding will
become necessary. No assurances can be given that either equity or debt
financing will be available.
Recent Accounting Pronouncements
The Company has generated only minimal revenues to date. This factor among
others including the Note payable that was originally due December 14, 2006, now
settled for a near term payment in July 2008 and stock, raises substantial doubt
about the Company's ability to continue as a going concern. Management feels the
Company's continuation as a going concern depends upon its ability to obtain
additional sources of capital and financing. The accompanying consolidated
financial statements do not include any adjustments that may result from the
outcome of this uncertainty.
17
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Interest Rate Sensitivity
We have no investments since we have not capitalized our reinsurance company
yet; however, funds in excess of monthly operating costs are invested in money
market accounts with an FDIC Insured Bank. At which time when we capitalize our
reinsurance company the primary objective of our investment activities will be
to preserve principal and maintain adequate liquidity, while at the same time
maximizing the yield we receive from our investment portfolio in accordance with
investment regulations set forth by the Department of Insurance. This objective
will be accomplished by adherence to our investment policy, which establishes
the list of eligible types of securities and credit requirements for each
investment.
Item 4. Evaluation of Disclosure Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures. Our Chief
Executive Officer and Chief Financial Officer, evaluated the effectiveness of
our disclosure controls and procedures as of the end of the period covered by
this report. Based on that evaluation, Chief Executive Officer and Chief
Financial Officer concluded that our disclosure controls and procedures as of
the end of the period covered by this report were effective such that the
information required to be disclosed by us in reports filed under the Securities
Exchange Act of 1934 is (i) recorded, processed, summarized and reported within
the time periods specified in the SEC's rules and forms and (ii) accumulated and
communicated to the Chief Executive Officer and Chief Financial Officer, as
appropriate to allow timely decisions regarding disclosure. A controls system
cannot provide absolute assurance, however, that the objectives of the controls
system are met, and no evaluation of controls can provide absolute assurance
that all control issues and instances of fraud, if any, within a company have
been detected.
Management's Report on Internal Control over Financial Reporting. Our
Chief Executive Officer and Chief Financial Officer is responsible for
establishing and maintaining adequate internal control over financial reporting
(as defined in Rule 13a-15(f) under the Exchange Act). Our internal control over
financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with accounting
principles generally accepted in the United States.
Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Therefore, even those systems
determined to be effective can provide only reasonable assurance of achieving
their control objectives. Furthermore, smaller reporting companies face
additional limitations. Smaller reporting companies employ fewer individuals and
find it difficult to properly segregate duties. Often, one or two individuals
control every aspect of the Company's operation and are in a position to
override any system of internal control. Additionally, smaller reporting
companies tend to utilize general accounting software packages that lack a
rigorous set of software controls.
Our Chief Executive Officer and Chief Financial Officer evaluated the
effectiveness of the Company's internal control over financial reporting as of
June 30, 2008. In making this assessment, our Chief Executive Officer and Chief
Financial Officer used the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO) in Internal Control --
Integrated Framework. Based on this evaluation, our Chief Executive Officer and
Chief Financial Officer, concluded that, as of June 30, 2008, our internal
control over financial reporting was effective.
(b) Changes in Internal Control over Financial Reporting. There were no
changes in our internal control over financial reporting, as defined in Rules
13a-15(f) and 15d-15(f) under the Exchange Act, during our most recently
completed fiscal quarter that have materially affected, or are reasonably likely
to materially affect, our internal control over financial reporting.
18
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
There is a case #070C014621B involving Kathy Ranson seller of Animal-ID in the
First Judicial Court in the State of Nevada. The Company plans to contest and
seek to have the judgment set-aside in the amount of $210,000.00, based on fraud
and failure to deliver assets unencumbered as described in a purchase agreement.
between the parties.
Except as disclosed above, we are currently not involved in any litigation that
we believe could have a material adverse effect on our financial condition or
results of operations. There is no action, suit, proceeding, inquiry or
investigation before or by any court, public board, government agency,
self-regulatory organization or body pending or, to the knowledge of the
executive officers of our company or any of our subsidiaries, threatened against
or affecting our company, our common stock, any of our subsidiaries or of our
companies or our subsidiaries' officers or directors in their capacities as
such, in which an adverse decision could have a material adverse effect.
Item 1A. Risk Factors
This section describes circumstances or events that could have a negative effect
on our financial results or operations or that could change, for the worse,
existing trends in some or all of our businesses. The occurrence of one or more
of the circumstances or events described below could have a material adverse
effect on our financial condition, results of operations and cash flows or on
the trading prices of the Common Stock that we have issued or securities we may
issue in the future. We have also included a detailed discussion of risks and
uncertainties arising from governmental regulation of our businesses, one of the
most significant risks we face, in the section "Business -- Governmental
Regulation" above. We have updated the risk factors previously disclosed in on
our Form 10-K (as amended) for December 31, 2007, 10-KSB for December 31, 2006,
and in the 2006 registration statement (SEC File number 333-132028). The risks
and uncertainties described in herein and on our other filing are not the only
ones facing us. Additional risks and uncertainties that are not currently known
to us or that we currently believe are immaterial may also adversely affect our
business and operations.
We have incurred and may continue to incur losses
Our operating results have been impacted significantly due to the loan with
Samir Financial and may continue to do so in the future as the need for capital
continues. Our net loss for first quarter of 2008 totaled $(175,728). Many
companies with business plans based on providing pet health insurance have
failed to be profitable and some have ceased operations. Even if demand for
users exists, we cannot assure you that our business will be profitable.
In addition and while a veterinary health care expenses exceed $18 billion
yearly as reported by the American Veterinary Medical Association (AVMA) with 2%
of the 135 million dog and cat owners insuring their pets as reported by the
American Animal Hospital Association (AAHA), our online businesses, specifically
VetpetMD have a limited operating history and participate in a new market even
though its management collectively has over 30 years experience in the pet
insurance industry.
We have a significant financial indebtedness
On December 15, 2005, we executed a Loan and Security Agreement with Samir
Financial, LLC (the "Lender") for $4,000,000. This loan was due in full at the
end of twelve months (December 14, 2006). We were unable to pay off this loan at
that time. Samir Financial has agreed to extend the loan until June 15, 2007 in
exchange for a $500,000 extension fee. At December 31, 2006, we had not paid the
extension fee. A portion of the fee was paid - $200,000 - in January 2007;
however, a balance of $300,000 remains outstanding. The loan payoff at June 15,
2007, will be $5,000,000. Security for this loan is all company assets and a
controlling stock position if the loan were to be in default.
On April 9, 2008, the lender entered into an agreement with the Company and
forgave $4,000,000 in exchange for 3,000,000 restricted common shares. Further,
the Company shall repay then lender $1,000,000 on or before July 9, 2008 and the
remaining balance of $1,000,000 will remain on the books as a liability for a
period of 14 months paid as follows: the first payment shall be due and payable
on July 1, 2009; the second payment shall be due and payable on October 1, 2009;
with subsequent payments due and payable. The lender will not charge the company
any interest (non-interest bearing loan). The Company shall make quarterly
payments to the lender of $250,000 on the dates shown above. The three million
restricted shares of the company's common stock shall be subject to SEC Rule 144
restrictions as well as an executed 12 month lock up agreement.
19
The Company is in default on the $1,000,000 payment due July 9, 2008, with the
lender Samir Financial. This factor among others including the pass due payables
due and the Company's inability to pay the principal payment due under the note
to Samir Financial raises substantial doubt about the Company's ability to
continue as a going concern. Management feels the Company's continuation as a
going concern depends upon its ability to obtain additional sources of capital
and financing. Management feels it can raise the necessary working capital in
2008 and 2009 to provide the necessary working capital and repay the delinquent
notes payable provided the lender (Samir Financial) cooperates with the Company
and if need be accept stock as payment as a full and complete satisfaction of
this indebtedness.
Management is exploring all options that will bring about investor confidence in
operations, sales, profitability, and potential shareholder return on an
investment. Presently, the delinquency of the note with the lender (Samir
Financial) has brought about concern with investors which is witnessed by the
volatility of shareholder positions on the Over-the-Counter Bulletin Board.
Shareholder risks: first, can the company raise capital in such a volatile
market; second, will further issuance of stock due to lack of capital for
services, in an effort to raise capital and continue operations, add to greater
volatility; and third, what options are available to restore stability in the
stock? These are the immediate concerns of management and every effort,
including organizational restructure will be analyzed and options pursued in
order to continue operations so to invite new investment capital whereby
shareholder value can be sustained in lieu of foreclosure by Samir Financial.
If we are unable to provide content and services that attract and retain users
to The Beneficial Resource Center Network on a consistent basis, our advertising
and sponsorship revenue could be reduce, but more importantly, the database of
pet owners who would be potential policyholders could be greatly reduced Users
of The Beneficial Resource Center Network have numerous other online and offline
sources of pet healthcare information services. Our ability to compete for user
traffic on our public portals depends upon our ability to make available a
variety of pet health and veterinary content, decision-support applications and
other services that meet the needs of a variety of types users, including pet
owners, veterinarians, technicians, and other pet service professionals, with a
variety of reasons for seeking information. Our ability to do so depends, in
turn, on:
o our ability to hire and retain qualified authors, journalists and
independent writers;
o our ability to license quality content from third parties; and
o our ability to monitor and respond to increases and decreases in
user interest in specific topics.
We cannot assure you that we will be able to continue to develop or acquire
needed content, applications and tools at a reasonable cost. In addition, since
consumer users of our public portals may be attracted to The Beneficial Resource
Center Network as a result of a specific condition or for a specific purpose, it
is difficult for us to predict the rate at which they will return to the public
portals. Because we generate revenue by, among other things other than through
the sale of pet insurance plans, selling sponsorships of specific pages,
sections or events on VetpetMD, a decline in user traffic levels or a reduction
in the number of pages viewed by users could cause our revenue to decrease and
could have a material adverse effect on our results of operations.
Risks Related to Use of the Internet and to Our Technological Infrastructure
Our Internet-based services are dependent on the development and maintenance of
the Internet infrastructure
Our ability to deliver our Internet-based services is dependent on the
development and maintenance of the infrastructure of the Internet by third
parties. This includes maintenance of a reliable network backbone with the
necessary speed, data capacity and security, as well as timely development of
complementary products such as high-speed modems, for providing reliable
Internet access and services. The Internet has experienced, and is likely to
continue to experience, significant growth in the number of users and the amount
of traffic. If the Internet continues to experience increased usage, the
Internet infrastructure may be unable to support the demands placed on it. In
addition, the reliability and performance of the Internet may be harmed by
increased usage or by denial-of-service attacks.
The Internet has experienced a variety of outages and other delays as a result
of damages to portions of its infrastructure, and it could face outages and
delays in the future. These outages and delays could reduce the level of
Internet usage as well as the availability of the Internet to us for delivery of
our Internet-based services. In addition, customers who utilize our Web-based
services depend on Internet service providers, online service providers and
other Web site operators for access to our Web sites. All of these providers
have experienced significant outages in the past and could experience outages,
delays and other difficulties in the future due to system failures unrelated to
our systems. Any significant interruptions in our services or increases in
response time could result in a loss of potential or existing users of and
advertisers and sponsors on our Web sites and, if sustained or repeated, could
reduce the attractiveness of our services.
20
We rely on bandwidth providers, data center providers, other third parties and
our own systems for key aspects of the process of providing products and
services to our users, and any failure or interruption in the services provided
by these third parties or our own systems could harm our business
Our online services are designed to operate 24 hours a day, seven days a
week, without interruption. However, we have experienced and expect that we will
in the future experience interruptions and delays in services and availability
from time to time. We rely on internal systems as well as third-party vendors,
including data center providers and bandwidth providers, to provide our online
services. We do not maintain redundant systems or facilities for some of these
services. In the event of a catastrophic event with respect to one or more of
these systems or facilities, we may experience an extended period of system
unavailability, which could negatively impact our relationship with users. To
operate without interruption, both we and our service providers must guard
against:
o damage from fire, power loss and other natural disasters;
o communications failures;
o software and hardware errors, failures and crashes;
o security breaches, computer viruses and similar disruptive
problems; and
o other potential interruptions.
Any disruption in the network access or co-location services provided by these
third-party providers or any failure of or by these third-party providers or our
own systems to handle current or higher volume of use could significantly harm
our business. We exercise little control over these third-party vendors, which
increases our vulnerability to problems with services they provide.
Any errors, failures, interruptions or delays experienced in connection with
these third-party technologies and information services or our own systems could
negatively impact our relationships with users and adversely affect our brand
and our business and could expose us to liabilities to third parties. Although
we maintain insurance for our business, the coverage under our policies may not
be adequate to compensate us for all losses that may occur. In addition, we
cannot provide assurance that we will continue to be able to obtain adequate
insurance coverage at an acceptable cost.
Implementation of additions to or changes in hardware and software platforms
used to deliver our online services may result in performance problems and may
not provide the additional functionality that was expected
From time to time, we implement additions to or changes in the hardware and
software platforms we use for providing our online services. During and after
the implementation of additions or changes, a platform may not perform as
expected, which could result in interruptions in operations, an increase in
response time or an inability to track performance metrics. In addition, in
connection with integrating acquired businesses, we may move their operations to
our hardware and software platforms or make other changes, any of which could
result in interruptions in those operations. Any significant interruption in our
ability to operate any of our online services could have an adverse effect on
our relationships with users and clients and, as a result, on our financial
results. We rely on a combination of purchasing, licensing, internal
development, and acquisitions to develop our hardware and software platforms.
Our implementation of additions to or changes in these platforms may cost more
than originally expected, may take longer than originally expected, and may
require more testing than originally anticipated. In addition, we cannot provide
assurance that additions to or changes in these platforms will provide the
additional functionality and other benefits that were originally expected.
If the systems we use to provide online portals experience security breaches or
are otherwise perceived to be insecure, our business could suffer
We retain and transmit confidential information, including personal health
records, in the processing centers and other facilities we use to provide online
services. It is critical that these facilities and infrastructure remain secure
and be perceived by the marketplace as secure. A security breach could damage
our reputation or result in liability. We may be required to expend significant
capital and other resources to protect against security breaches and hackers or
to alleviate problems caused by breaches. Despite the implementation of security
measures, this infrastructure or other systems that we interface with, including
the Internet and related systems, may be vulnerable to physical break-ins,
hackers, improper employee or contractor access, computer viruses, programming
errors, denial-of-service attacks or other attacks by third parties or similar
disruptive problems. Any compromise of our security, whether as a result of our
own systems or the systems that they interface with, could reduce demand for our
services and could subject us to legal claims from our clients and users,
including for breach of contract or breach of warranty.
21
We will incur increased costs as a result of being a public company, which could
adversely affect our operating results.
As a public company, we will incur significant legal, accounting and other
expenses that we did not incur as a private company. In addition, the
Sarbanes-Oxley Act of 2002 and the new rules subsequently implemented by the
Securities and Exchange Commissions, the NASDAQ National Market and the Public
Company Accounting Oversight Board have imposed various new requirements on
public companies, including requiring changes in corporate governance practices.
We expect these rules and regulations to increase our legal and financial
compliance costs and to make some activities more time-consuming and costly. We
also expect these new rules and required to incur substantial costs to obtain
the same or similar coverage. These costs could materially adversely affect our
results of operations.
Failure To Achieve And Maintain Effective Internal Controls In Accordance With
Section 404 Of The Sarbanes-Oxley Act Could Have A Material Adverse Effect On
Our Business And Operating Results.
It may be time consuming, difficult and costly for us to develop and
implement the additional internal controls, processes and reporting procedures
required by the Sarbanes-Oxley Act. We may need to hire additional financial
reporting, internal auditing and other finance staff in order to develop and
implement appropriate additional internal controls, processes and reporting
procedures. If we are unable to comply with these requirements of the
Sarbanes-Oxley Act, we may not be able to obtain the independent accountant
certifications that the Sarbanes-Oxley Act requires of publicly traded
companies.
If we fail to comply in a timely manner with the requirements of
Section 404 of the Sarbanes-Oxley Act regarding internal control over financial
reporting or to remedy any material weaknesses in our internal controls that we
may identify, such failure could result in material misstatements in our
financial statements, cause investors to lose confidence in our reported
financial information and have a negative effect on the trading price of our
common stock.
Pursuant to Section 404 of the Sarbanes-Oxley Act and current SEC
regulations, beginning with our annual report on Form 10-K for our fiscal period
ending December 31, 2007, we will be required to prepare assessments regarding
internal controls over financial reporting and beginning with our annual report
on Form 10-K for our fiscal period ending December 31, 2008, furnish a report by
our management on our internal control over financial reporting. We have begun
the process of documenting and testing our internal control procedures in order
to satisfy these requirements, which is likely to result in increased general
and administrative expenses and may shift management time and attention from
revenue-generating activities to compliance activities. While our management is
expending significant resources in an effort to complete this important project,
there can be no assurance that we will be able to achieve our objective on a
timely basis. There also can be no assurance that our auditors will be able to
issue an unqualified opinion on management's assessment of the effectiveness of
our internal control over financial reporting. Failure to achieve and maintain
an effective internal control environment or complete our Section 404
certifications could have a material adverse effect on our stock price.
In addition, in connection with our on-going assessment of the
effectiveness of our internal control over financial reporting, we may discover
"material weaknesses" in our internal controls as defined in standards
established by the Public Company Accounting Oversight Board, or the PCAOB. A
material weakness is a significant deficiency, or combination of significant
deficiencies, that results in more than a remote likelihood that a material
misstatement of the annual or interim financial statements will not be prevented
or detected. The PCAOB defines "significant deficiency" as a deficiency that
results in more than a remote likelihood that a misstatement of the financial
statements that is more than inconsequential will not be prevented or detected.
In the event that a material weakness is identified, we will employ
qualified personnel and adopt and implement policies and procedures to address
any material weaknesses that we identify. However, the process of designing and
implementing effective internal controls is a continuous effort that requires us
to anticipate and react to changes in our business and the economic and
regulatory environments and to expend significant resources to maintain a system
of internal controls that is adequate to satisfy our reporting obligations as a
public company. We cannot assure you that the measures we will take will
remediate any material weaknesses that we may identify or that we will implement
and maintain adequate controls over our financial process and reporting in the
future.
Any failure to complete our assessment of our internal control over
financial reporting, to remediate any material weaknesses that we may identify
or to implement new or improved controls, or difficulties encountered in their
implementation, could harm our operating results, cause us to fail to meet our
reporting obligations or result in material misstatements in our financial
statements. Any such failure could also adversely affect the results of the
periodic management evaluations of our internal controls and, in the case of a
failure to remediate any material weaknesses that we may identify, would
adversely affect the annual auditor attestation reports regarding the
effectiveness of our internal control over financial reporting that are required
under Section 404 of the Sarbanes-Oxley Act. Inadequate internal controls could
also cause investors to lose confidence in our reported financial information,
which could have a negative effect on the trading price of our common stock.
22
Our Common Stock Is Subject To Penny Stock Regulation
Our shares are subject to the provisions of Section 15(g) and Rule 15g-9 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), commonly
referred to as the "penny stock" rule. Section 15(g) sets forth certain
requirements for transactions in penny stocks and Rule 15g-9(d)(1) incorporates
the definition of penny stock as that used in Rule 3a51-1 of the Exchange Act.
The Commission generally defines penny stock to be any equity security that has
a market price less than $5.00 per share, subject to certain exceptions. Rule
3a51-1 provides that any equity security is considered to be penny stock unless
that security is: registered and traded on a national securities exchange
meeting specified criteria set by the Commission; authorized for quotation on
the NASDAQ Stock Market; issued by a registered investment company; excluded
from the definition on the basis of price (at least $5.00 per share) or the
registrant's net tangible assets; or exempted from the definition by the
Commission. Since our shares are deemed to be "penny stock", trading in the
shares will be subject to additional sales practice requirements on
broker/dealers who sell penny stock to persons other than established customers
and accredited investors.
The Liquidity Of Our Common Stock Is Seriously Limited And There Is A Limited
Market For Our Common Stock
Our stock is currently being traded on the NASDAQ Over-The-Counter Bulletin
Board, and the liquidity of our common stock is limited. The Bulletin Board is a
limited market and subject to substantial restrictions and limitations in
comparison to the NASDAQ system. Any broker/dealer that makes a market in our
stock or other person that buys or sells our stock could have a significant
influence over its price at any given time.
Item 2. Unregistered Sale of Equity Securities
We disclosed in our registration statement (SEC File number 333-132028), a
schedule of securities as part of our process in the valuation of privately held
securities issued as compensation. We continued to value stock related matters
on a going forward bases using a similar format. The following represent the
transactions that involved securities.
April 2008 Life Cycle Stage (Twenty-third Development Period)- Share value was
established at $0.0015.
Following the recent reverse stock split on or about January 2008, market
liquidity of the Company's stock was questionable due to the fact the a
significant financial indebtedness with Samir Financial remained on the books.
On or about April 2008, this obligation was reduced to $2 million in exchange
for 3 million common shares. As part of these services 10,000,000 restrictive
common shares were issued to the loan guarantor W. Russell Smith, valued at
$0.001 par for this achievement and his continuation of his personal guarantee.
Further another 238,000 restrictive common shares were issued for services
(legal and consulting) which were valued at $2,380. These shares were issued in
order to continue operations because the company did not have sufficient
operating capital run the company nor the ability to pay further compensation.
If the Company lost this vital person, the guarantor of the Samir loan, and key
man as designated by the Key Man life insurance which has been assigned as
collateral to Samir Financial all shareholders, investors and participants would
loose their entire investment by virtue of the immediate foreclosure by the
lender. In exchange for these shares Mr. Smith continued on as Chief Executive
Officer; continue to personally guarantee the Samir loan; and continue to
develop the company's business model and the successful turnaround of all
operations including the repayment of the Samir Financial debt.
The offer and sale of such shares of our common stock were effected in reliance
on the exemptions for sales of securities not involving a public offering, as
set forth in Rule 506 promulgated under the Securities Act and in Section 4(2)
of the Securities Act, based on the following: (a) the investors confirmed to us
that they were "accredited investors," as defined in Rule 501 of Regulation D
promulgated under the Securities Act and had such background, education and
experience in financial and business matters as to be able to evaluate the
merits and risks of an investment in the securities; (b) there was no public
offering or general solicitation with respect to the offering; (c) the investors
were provided with certain disclosure materials and all other information
requested with respect to our company; (d) the investors acknowledged that all
securities being purchased were "restricted securities" for purposes of the
Securities Act, and agreed to transfer such securities only in a transaction
registered under the Securities Act or exempt from registration under the
Securities Act; and (e) a legend was placed on the certificates representing
each such security stating that it was restricted and could only be transferred
if subsequent registered under the Securities Act or transferred in a
transaction exempt from registration under the Securities Act.
23
Item 3. Defaults Upon Senior Securities
The Company is in default of the loan payment due Samir Financial on July 9,
2008.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to the vote of securities holders during the
period ended June 30, 2008.
Item 5. Other Information
Concurrent with the filing of this 2nd quarter 10-Q the Company through its CEO
and Samir Financial loan guarantor is attempting to secure a crucial bridge
financing of between $100,000 and $500,000 in order to maintain operations,
which the Company hopes will lead to further capital investments in the coming
months. The proposed financing, if successful, would be a traditional loan
secured by common restricted stock at an annual interest rate of 10%. There is
no guarantee that a loan can even be secured at this time. There is no
information with respect to which information is not otherwise called for by
this form.
Item 6. Exhibits
31.1 Certification of the Chairman, President and Chief Executive Officer
pursuant to Rule 13a-14(a) promulgated under the Securities Exchange Act
of 1934, as amended.
31.2 Certification of the Executive Vice President and Chief Financial Officer
pursuant to Rule 13a-14(a) promulgated under the Securities Exchange Act
of 1934, as amended.
32.1 Certification of Chairman, President and Chief Executive Officer,
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
32.2 Certification of Executive Vice President and Chief Financial Officer,
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
|
24
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
(Date)
ENSURAPET, INC.
(Registrant)
September 16, 2008 By: /s/ W. RUSSELL SMITH, III
-----------------------------------------
W. Russell Smith, III
CEO
September 16, 2008 /s/ W. RUSSELL SMITH, III
-----------------------------------------
W. Russell Smith, III
Principal Accounting Officer
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25
ENSURAPET, INC. AND SUBSIDIARIES
INDEX TO EXHIBITS
Exhibit Description
------- -----------------------------------------------------------------------
31.1 Certification of the Chairman, President and Chief Executive Officer
pursuant to Rule 13a-14(a) promulgated under the Securities Exchange
Act of 1934, as amended.
31.2 Certification of the Executive Vice President and Chief Financial
Officer pursuant to Rule 13a-14(a) promulgated under the Securities
Exchange Act of 1934, as amended.
32.1 Certification of Chairman, President and Chief Executive Officer,
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.
32.2 Certification of Executive Vice President and Chief Financial Officer,
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.
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26
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