SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): March 30, 2001
_________________
MindArrow Systems, Inc.
(formerly eCommercial.com, Inc.)
(Exact name of registrant as specified in its charter)
Delaware 0-28403 77-0511097
(State or other (Commission (I.R.S. Employer
jurisdiction of incorporation) File Number) Identification No.)
101 Enterprise, Suite 340, Aliso Viejo, California 92656
(Address of principal executive offices) (Zip Code)
____________________
Registrant's telephone number, including area code: (949) 916-8705
N/A
(Former name or former address, if changed since last report)
_________________
1
Item 5. OTHER EVENTS
In February 2001, the Company determined that between May 21, 1999 and
April 7, 2000 stock certificates representing 1,107,951 shares (the "Discrepant
Shares") were illegally authenticated by the Company's prior transfer agent or
others acting on its behalf. The Discrepant Shares were not recorded in the
stock ledger records kept by the former transfer agent. Following the discovery
of potential criminal activity, the Company contacted law enforcement officials,
Nasdaq and the Securities and Exchange Commission and has assisted law
enforcement in the investigation of this matter. On February 5, 2001, Nasdaq
halted trading of MindArrow's common stock on the Nasdaq SmallCap Market. The
Company has been and continues to provide information to Nasdaq in an effort to
permit trading on Nasdaq to resume. We cannot assure you when, or if, trading
in our common stock on the Nasdaq SmallCap Market will resume.
In order to offset the impact of recognizing additional shares that may be
in the hands of innocent purchasers, the Company's co-chairmen have entered into
an agreement with the Company pursuant to which they have agreed to contribute
for cancellation by the Company 1,107,951 shares owned by them. This
contribution of shares will be made concurrent with the exchange of new shares
for the wrongly authenticated certificates. The agreement provides that in the
event that any of the Discrepant Shares are recovered by the Company, an
equivalent number of shares shall be issued to the Company's co-chairmen. In the
event that the Company recovers cash or property other than the Discrepant
Shares, then the Company shall issue shares of its common stock to the Company's
co-chairmen at a rate of one share of common stock for every $4.50 in property
or cash recovered. In no event shall the Company be obligated to issue more than
1,107,951 shares pursuant to the agreement.
On March 30, 2001, the Company issued new shares in exchange for the
Discrepant Shares and the 1,107,951 shares agreed to be contributed by the co-
chairmen were contributed to the Company and cancelled. No gain or loss will be
recognized by the Company as a result of the share contribution.
The Discrepant Shares entered the public float over a period of
approximately eleven months. In connection with the exchange, the Company
determined that under generally accepted accounting principles it should record
a non-recurring, non-cash charge of $18,682,398 at the time the exchange of new
shares for the Discrepant Shares occurs. Accordingly, this non-cash charge will
be reflected in the Company's Report on Form 10-Q for the quarter ended March
31, 2001. This amount represents the estimated market value of the Discrepant
Shares at the time they entered the public float. The charge has no impact on
total stockholders' equity, as the Company will concurrently record an
$18,682,398 increase to additional paid-in capital. Any amounts recovered by the
Company from the perpetrators of the fraud will be recorded as non-operating
income at the time of the recovery. It is not known whether the Company will
achieve any recovery.
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The following is a schedule of as reported and pro forma net loss and loss
per share, illustrating the impact the Discrepant Shares would have had if the
loss of $18,682,398 associated with the Discrepant Shares had been recorded in
the periods in which the Discrepant Shares entered the public float:
Net Loss Loss Per Share
Discrepant -------- --------------
Period Shares Value As Reported Pro Forma As Reported Pro Forma
------ ---------- ------------- ------------ --------- ----------- ---------
Period from inception (March 26,
1999) to June 30, 1999 326,742 $ (3,880,061) $ (799,762) $ (4,679,823) $(0.10) $(0.57)
Quarter ended September 30, 1999 237,000 (1,925,626) (2,593,831) (4,519,457) (0.30) (0.46)
--------- ------------ ------------ ------------
Period from inception (March 26,
1999) to September 30, 1999 563,742 (5,805,687) $ (3,393,593) $ (9,199,280) (0.39) (1.02)
--------- ------------ ============ ============
Quarter ended December 31, 1999 256,414 (4,827,209) $ (2,252,585) $ (7,079,794) (0.23) (0.69)
Quarter ended March 31, 2000 274,810 (7,536,594) (17,765,937) (25,302,531) (1.82) (2.35)
Quarter ended June 30, 2000 12,985 (512,908) (3,813,814) (4,326,722) (0.38) (0.39)
Quarter ended September 30, 2000 - - (4,982,875) (4,982,875) (0.49) (0.49)
--------- ------------ ------------ ------------
Year ended September 30, 2000 544,209 (12,876,711) $(28,815,211) $(41,691,922) (2.95) (3.97)
--------- ------------ ============ ============
1,107,951 $(18,682,398)
========= ============
The pro forma charges above would have no impact on total stockholders'
equity as Company would concurrently record a corresponding increase to
additional paid-in capital.
Item 7. Financial Statements and Exhibits.
(a) Financial statements of businesses acquired.
Not applicable.
(b) Pro forma financial information.
Not applicable.
(c) Exhibits.
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
MINDARROW SYSTEMS, INC.
By: /s/ MICHAEL R. FRIEDL
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Michael R. Friedl
Date: March 30, 2001 Chief Financial Officer and Treasurer