SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: December 31, 2003
Commission file number 000-33151
VOYAGER ENTERTAINMENT INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Nevada 45-0420093
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4483 West Reno Avenue
Las Vegas, Nevada 89118
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(Address of principal executive offices) (zip code)
Issuer's Telephone Number: (702) 221-8070
Securities registered under Section 12(b) of the Exchange Act:
None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $.001 par value
(Title if Class)
Indicate by check mark whether the registrant (a) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (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 if disclosure of delinquent filers pursuant to Item
405 of Regulation S-B is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The number of shares of Common Stock, $0.001 par value, outstanding on
December 31, 2003, was 48,603,258 shares, held by approximately 67 stockholders.
There are also 4,000,000 Series B preferred shares and 1,500,000 Series A
preferred shares outstanding. There are 70,603,258 shares outstanding on a fully
diluted basis.
The issuer had no revenues for the most recent fiscal year ended
December 31, 2003.
The aggregate market value of the voting and non-voting common equity
held by non-affiliates computed by reference to the price at which the common
equity was the average bid and asked price of such common equity, as of the last
business day of our most recently completed fiscal year was $33,050,215 based on
a share value of $0.68 as of December 31, 2003.
Transitional Small Business Disclosure Format (check one): Yes No X
--- ---
VOYAGER ENTERTAINMENT INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
FOR THE FISCAL YEAR ENDED
December 31, 2002
Index to Report
on Form 10-KSB
PART I Page
----
Item 1. Description of Business........................................................4-8
Item 2. Description of Property..........................................................8
Item 3. Legal Proceedings................................................................8
Item 4. Submission of Matters to a Vote of Security Holders............................8-9
PART II
Item 5. Market for Common Equity and Related Stockholder Matters......................9-14
Item 6. Managements' Discussion and Analysis or Plan of Operation....................14-19
Item 7 Financial Statements............................................................19
Item 8 Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure............................................................19
Item 8A Controls and Procedures.........................................................19
PART III
Item 9 Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act............................20-23
Item 10 Executive Compensation.......................................................23-24
Item 11 Security Ownership of Certain Beneficial Owners and Management...............24-25
Item 12 Certain Relationships and Related Transactions..................................25
Item 13 Exhibits, Financial Statement Schedules and Reports on Form 8-K.................26
Item 14 Principal Accounting Fees and Services.......................................27-28
Signatures ................................................................................28
Certification .............................................................................29-30
Consolidated Financial Statements.........................................................F-1 - F-15
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This Form 10-KSB contains forward-looking statements within the meaning
of the federal securities laws. These forward-looking statements are necessarily
based on certain assumptions and are subject to significant risks and
uncertainties. These forward-looking statements are based on management's
expectations as of the date hereof, and the Company does not undertake any
responsibility to update any of these statements in the future. Actual future
performance and results could differ from that contained in or suggested by
these forward-looking statements as a result of factors set forth in this Form
10-KSB (including those sections hereof incorporated by reference from other
filings with the Securities and Exchange Commission), in particular as set forth
in the "Plan of Operation" under Item 6.
In this filing references to "Company," "we," "our," and/or "us," refers to
Voyager Entertainment International, Inc.
PART I
ITEM 1. DESCRIPTION OF BUSINESS
(a) General Business Development
Voyager Entertainment International, Inc. formerly named Dakota
Imaging, Inc. was incorporated in North Dakota on January 31, 1991. Effective
February 8, 2002, the Company completed a reverse triangular merger between
Dakota Subsidiary Corp. ("DSC"), a wholly owned subsidiary of the Company, and
Voyager Ventures, Inc., a Nevada corporation ("Ventures"), whereby the Company
issued 3,660,000 shares of its Series A preferred stock in exchange for 100% of
Ventures outstanding common stock. Pursuant to the terms of the merger, Ventures
merged with DSC wherein DSC ceased to exist and Ventures became a wholly owned
subsidiary of the Company.
The Series A preferred stock carries the following rights and
preferences:
o 10 to 1 voting rights per share
o Each share has 10 to 1 conversion rights to shares of common
stock (every 1 share of series A preferred stock has the right
to convert into 10 shares of common stock)
o No redemption rights
o No face value
Concurrent with the closing of the Merger, 2,160,000 shares of the
Series A preferred stock were immediately converted into 21,600,000 shares of
common stock.
Pursuant to current North Dakota law the Company did not need the
approval of its shareholders to consummate the Merger as the constituent
corporations in the merger were Dakota Subsidiary Corp. and Voyager Ventures,
Inc. The Company was not a constituent corporation in the merger.
Further, pursuant to the terms of the Merger Agreement, the board of
directors of Dakota Imaging, Inc., appointed Gregg Guffria, Veldon Simpson, and
Richard Hannigan as new
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directors of the Company to serve until the next annual meeting of shareholders;
or until their successors have been elected. Following their appointment of new
directors, the former directors of Dakota Imaging, Inc. resigned their positions
as directors.
On April 2, 2002, we held our annual stockholders meeting and the
stockholders voted on and approved changing the Company's name from Dakota
Imaging, Inc. to Voyager Entertainment International, Inc.
On November 15, 2002, we entered into a loan and security agreement with Mr. Dan
Fugal an unaffiliated individual, whereby Mr. Fugal was to provide us with a
credit facility in the form of a secured line of credit not to exceed $2.5
million.
On February 15, 2003, we executed an amendment to the Loan and Security
Agreement to amend the term date from February 15, 2003 to April 15, 2003. As of
the year ending December 31, 2003 Mr. Fugal has loaned $605,000 to the company.
The loan and security agreement with Mr. Fugal has expired and requires the
company to repay $605,000 to Mr. Fugal as well as a one time interest payment of
$605,000. Any agreements or amendments for Mr. Fugal to provide additional funds
have been canceled and the company is obligated to repay a total of $1,210,000.
On February 5, 2003, the Clark County Commission approved our plan to
build a 50-story hotel and a 12-story Ferris wheel around a man-made lake with
20 yachts at a location on the Las Vegas Strip. Since that time the company has
vacated plans to build the Voyager Wheel at that location. It was not possible
to negotiate a lease agreement with the proposed partner that was in the best
interest of the company and its shareholders.
On December 23, 2003, the company along with Rio Properties, Inc. owned
by Harrah's Entertainment Group jointly announced that the Voyager Project will
be located at the Rio All-Suite Hotel and Casino in Las Vegas, Nevada. The
company and Rio Properties, Inc. are currently operating on a signed letter of
intent where Voyager will enter into a long term lease agreement with Rio
Properties, Inc. The Rio Hotel and Casino is owned by Harrah's Entertainment,
Inc. The securities of Harrah's Entertainment, Inc. are currently traded on the
New York Stock Exchange (NYSE) under the symbol HET. Currently management of
both Voyager and the Rio are constructing a definitive agreement. All agreements
with Rio Properties, Inc. are pending due diligence
The accompanying consolidated financial statements have been prepared
in conformity with accounting principles generally accepted in the United States
of America that contemplate the continuance of the Company as a going concern.
The Company's cash position may be inadequate to pay all of the costs associated
with testing, production and marketing of products. Management intends to use
borrowings and security sales to mitigate the effects of its cash position,
however no assurance can be given that debt or equity financing, if and when
required will be available. The financial statements do not include any
adjustments relating to the recoverability and classification of recorded assets
and classification of liabilities that might be necessary should the Company be
unable to continue existence.
5
(b) Our Business
Our current business plan is to build multiple Observation Wheels.
Currently proposed are Las Vegas, Nevada; Dallas, Texas and Shanghai, China.
Las Vegas "Voyager" Wheel
-------------------------
The company, through its subsidiaries, for the past 5 years has
extensively planned and/or evaluated the available locations at both the North
and South ends of the Las Vegas Strip as well as other off-strip locations in
Las Vegas. On December 23, 2003, the company along with Rio Properties, Inc.
owned by Harrah's Entertainment Group jointly announced that the Voyager Project
will be located at the Rio All-Suite Hotel and Casino in Las Vegas, Nevada.
"VOYAGER" is intended to be designed as a visual ICON and experience
overlooking the "Las Vegas Strip". With 30 vehicles called Orbiters, the
vertical revolving vehicle will overlook the Las Vegas Strip as it revolves
higher than a 60-story building at 600 (+/-) feet. One rotation in a Orbiter
will last 27 minutes.The Orbiter will be controlled by an on-board Navigator,
part entertainer, and part steward, an individual also skilled in life-safety
and security.
Organization
The project will be owned by the parent company, however, will be
designed, developed, built and operated by Voyager Entertainment Holdings, Inc.,
VEHI), a wholly owned subsidiary of the Company. VEHI will manage the project
via a performance-based contract with extensions. All covenants, restrictions
and protocol will be detailed in its operating agreement.
As the management company VEHI will be responsible for the design,
development, construction, and operation of VOYAGER, and provide the following:
concept development, project design, location assessment and acquisition,
strategic alliances in both entertainment and gaming, business plans and
budgets, financial oversight and management during both construction and
operation, marketing plans, insurance procurement and risk management, senior
operational management including development of policies and procedures, and
overall strategic focus for VOYAGER.
VOYAGER is fundamentally an entertainment attraction, and its
operational and maintenance requirements are very similar to those found in the
theme park industry. In addition, Las Vegas is a unique marketplace, and the
visitor when placed in the environment is also unique. The ability to understand
the visitor, and successfully attract customers to VOYAGER will come as a result
of clearly understanding the marketing strategies of the gaming industry. VEHI
intends to employ highly skilled individuals from the theme park industry and
combine their specialized skills with those from the gaming industry.
The initial management team at VEHI is anticipated to consist of:
Richard Hannigan President, CEO and a Director, Tracy Jones COO and a Director;
Myong Hannigan as Secretary Treasurer; Michael Schaunessy, as CFO; and Sig
Rogich, as Director of Public Relations & Communications.
6
Voyager Dallas
--------------
Voyager is operating through a signed a Memorandum of Understanding
with Bennett Realty Group where Bennett Realty Group and Voyager are seeking to
be joint venture partners to build a Voyager Project in Dallas Texas. As of the
period ending December 31, 2003 financing has not been secured for this project.
Shanghai, China "Star of Shanghai"
----------------------------------
Anticipated to be located on the western bank (Puxi) of the Huangpu
River, the Bund, is the chosen location for a master planned development with
the Star of Shanghai as the dominant feature. Star of Shanghai is to be designed
as a special tribute to the legendary figure Huang Daopo who invented the
"spinning wheel" that reformed the technique of cotton weaving, and gained fame
for its production of clothing.
Voyager will require substantial additional funds to fulfill its
business plan and successfully develop its two projects. Voyager intends to
raise these needed funds from private placements of its securities, debt
financing or internally generated funds from the licensing of its intellectual
property or service fees. As of the date of this filing the Company has not
received a firm commitment for financing of any of the projects. The company
continues to receive and evaluate opportunities throughout Asia as well as
Shanghai, China.
Other "Observation Wheels"
--------------------------
Currently, the Company is primarily focusing on the project in Las
Vegas, Nevada.. The Company has plans to build additional Observation Wheels.
Market Overview
Management believes that, in the foreseeable future, cash generated
from operations will be inadequate to support full marketing roll out and
ongoing product development, and that we will thus be forced to rely on
additional debt and/or equity financing. Management is reasonably confident that
it can identify sources and obtain adequate amounts of such financing. We intend
to enter into a cooperative arrangement with distributors, whereby we will
receive marketing and sales benefits from the professional staff of such
distributors. To date, we have not established any such arrangements. In the
event we are unsuccessful in generating equity capital, then the Company will be
unable to continue with product development and/or marketing. The lack of equity
capital may in turn cause the Company to become insolvent.
Competition
We compare with numerous other hospitality and entertainment companies.
Many of these competitors have substantially greater resources than we do.
Should a larger and better financed
7
company decide to directly compete with us, and be successful in its competitive
efforts, our business could be adversely affected.
Research and Development
From inception in March of 1997 through present, we have devoted a
majority of our time on research and development. During our development stage
period from March 1, 1997 through December 31, 2003, we incurred operating
expenses of $6,697,527 and interest expense of $1,189,230 against no revenues ,
which resulted in accumulated losses of $7,886,847.
Employees
As of December 31, 2003, we only had unpaid Officers and Directors. We
are dependent upon Richard Hannigan, President, CEO and a Director of the
Company; Tracy Jones, COO and Director and Myong Hannigan Secretary/Treasurer
and a Director. We do not have any employees at this time and do not anticipate
the need to hire any employees until such time as we have been sufficiently
capitalized.
Our future success also depends on our ability to attract and retain
other qualified personnel, for which competition is intense. The loss of Mr.
Hannigan, Mr. Jones or our inability to attract and retain other qualified
employees could have material adverse effect on us.
ITEM 2. DESCRIPTION OF PROPERTY
We currently lease 2,100 square feet of office space from Synthetic
Systems LLC of which our president is the owner. We lease the office space at
cost for the amount of $2,325 per month on a month-to-month basis.
ITEM 3. LEGAL PROCEEDINGS
The company had been in a dispute with a creditor concerning the amount owed.
The dispute was completely resolved during the period ending September 30, 2003.
The dispute was resolved to both the satisfaction of the company and the
creditor.
The company is unaware of any other legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The information required by this Item 4 is incorporated by reference to the
Company's definitive Information Statement as amended filed with the Securities
and Exchange Commission on May 6, 2003, which was mailed to shareholders of
record at April 23, 2003.
As set forth in the Information Statement, the Company received written consents
in lieu of Annual Meeting from shareholders representing more than 50% of the
total voting shares of the Company, approving the following actions:
8
1. The removal of Veldon Simpson as a director of the Company.
2. The election of Richard L. Hannigan, Sr., Myong Hannigan and Tracy Jones to
the board of directors to serve until the next annual meeting of shareholders or
until their successors are elected and qualified.
3. Ratification of the appointment of officers:
Richard L. Hannigan, Sr. CEO and President
Myong Hannigan Secretary/Treasurer
Tracy Jones COO
4. The reincorporation of the Company in the State of Nevada.
5. Increasing the authorized capital stock of the Company as a result of the
reincorporation. The Company's North Dakota Articles of Incorporation, as
currently in effect, authorizes the Company to issue up to 100,000,000 shares of
common stock, $0.001 par value, and 25,000,000 shares of preferred stock, $0.001
par value. The Board of Directors and Majority Shareholders approved an increase
in the number of authorized shares of both the common and preferred stock of the
Company to be effected as a result of the reincorporation. Upon completion of
the reincorporation in the State of Nevada, the Company will be authorized to
issue 200,000,000 shares of common stock, $0.001 par value, and 50,000,000
shares of preferred stock, $0.001 par value per share.
6. Ratification of the selection of Stonefield Josephson, Inc., as independent
public accountants of the Company for the 2003 fiscal year.
The reincorporation became effective in the States of North Dakota and Nevada on
June 23, 2003, the date the Certificate of Merger was issued by the Secretary of
State of North Dakota.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
(a) Market Information
Our Common Stock is traded in the over-the-counter securities market
through the National Association of Securities Dealers Automated Quotation
Bulletin Board System, under
9
the symbol "VEII". The following table sets forth the quarterly high and low bid
prices for our Common Stock during our last fiscal year, as reported by the
National Quotations Bureau. The quotations reflect inter-dealer prices, without
retail mark-up, markdown or commission, and may not necessarily represent actual
transactions.
2003 2002
--------------------------------------------
Low High Low High
--------------------------------------------
1st Quarter $0.17 $0.31 Not Trading Not Trading
2nd Quarter $0.09 $0.30 $4.00 $8.25
3rd Quarter $0.08 $0.29 $5.45 $0.19
4th Quarter $0.16 $1.18 $0.17 $0.40
* The Company was eligible for trading on the OTC:BB in December of 2001 under
the symbol "DAKI", however no trades occurred. The Company's symbol was changed
to "VEII" in April of 2002.
(b) Holders of Common Stock
As of December 31, 2003, we had approximately 67 shareholders of
record, of the 48,603,258 shares outstanding. The closing bid stock price on
December 31, 2003 was $.68.
(c) Dividends
We have never declared or paid dividends on our Common Stock. We intend
to follow a policy of retaining earnings, if any, to finance the growth of the
business and do not anticipate paying any cash dividends in the foreseeable
future. The declaration and payment of future dividends on the Common Stock will
be the sole discretion of the Board of Directors and will depend on our
profitability and financial condition, capital requirements, statutory and
contractual restrictions, future prospects and other factors deemed relevant.
Recent Sales of Unregistered Securities
In the year ended December 31, 2003 we issued and sold the following
unregistered securities:
In July 2003, in connection with the Reincorporation of the Company into the
State of Nevada, the Company filed a Certificate of Designation of its Series A
Convertible Preferred Stock with the Nevada Secretary of State. Under Section
78.195 of the Nevada Revised Statutes, a certificate of designation signed and
filed pursuant to this section must become effective before the issuance of any
shares of the class or series. In order to complete the Reincorporation by
exchanging the outstanding North Dakota Series A Convertible Preferred Stock
with Nevada Series A Convertible Preferred Stock pursuant to terms of the Plan
of Merger, the Company filed its Designation in the State of Nevada containing
identical terms as designated in North Dakota.
10
In July 2003, the Company created a new series of preferred stock designated as
Series B Convertible Preferred stock. Of the 50,000,000 shares of preferred
stock authorized to be issued by the Company, 1,500,000 are designated Series A
Convertible Preferred Stock and 10,000,000 are designated Series B Convertible
Preferred Stock. The face value of the Series B Convertible Preferred Stock is
$0.10. Each one share of Series B Convertible Preferred is convertible at any
time into two (2) shares of common stock. Each share of Series B Preferred Stock
is entitled to two (2) votes per share on matters properly brought before the
common stockholders of the Company.
In July, 2003, the Company commenced its offering of up to 10,000,000 Shares of
Series B Convertible Preferred Stock at the purchase price of $0.10 per share.
The Series B Preferred Shares are being offered in reliance upon the private
offering exemptions contained in Sections 3(b) and 4(2) of the Securities Act of
1933, as amended, and Rule 506 of Regulation D promulgated thereunder.
Investment in the Series B Preferred Shares is limited to "accredited" investors
within the meaning of Rule 501(a) of Regulation D. On July 14, 2003, the Company
sold 1,000,000 of the Series B Preferred Shares for the purchase price of
$100,000 to one investor who represented that he was acquiring the Series B
Preferred Shares and the common shares issuable upon conversion for investment
purposes only and not with a view to distribute. He further represented that he
(a) has such knowledge and experience in financial and business matters and is
capable of evaluating the merits and risks of the investment, (b) is able to
bear the complete loss of the investment, (c) has had the opportunity to ask
questions of, and receive answers from, the Company and its management
concerning the terms and conditions of the offering and to obtain additional
information, and (d) is an "accredited investor" as such term is defined in Rule
501(a) of Regulation D.
On August 12, 2003, the Company sold 500,000 of the Series B Preferred Shares
for the purchase price of $50,000 to one investor who represented that he was
acquiring the Series B Preferred Shares and the common shares issuable upon
conversion for investment purposes only and not with a view to distribute. He
further represented that he (a) has such knowledge and experience in financial
and business matters and is capable of evaluating the merits and risks of the
investment, (b) is able to bear the complete loss of the investment, (c) has had
the opportunity to ask questions of, and receive answers from, the Company and
its management concerning the terms and conditions of the offering and to obtain
additional information, and (d) is an "accredited investor" as such term is
defined in Rule 501(a) of Regulation D.
In September, 2003, the Company sold 769,222 shares of par value $.001 common
stock to an individual for $100,000 in cash. The common stock was offered in
reliance upon the private offering exemptions contained in Sections 3(b) and
4(2) of the Securities Act of 1933, as amended, and Rule 506 of Regulation D
promulgated thereunder. Investment in the common stock was limited to
"accredited" investors within the meaning of Rule 501(a) of Regulation D. The
investor represented that he was acquiring the common shares for investment
purposes only and not with a view to distribute. He further represented that he
(a) has such knowledge and experience in financial and business matters and is
capable of evaluating the merits and risks of the investment, (b) is able to
bear the complete loss of the investment, (c) has had the opportunity to ask
questions of, and receive answers from, the Company and its management
11
concerning the terms and conditions of the offering and to obtain additional
information, and (d) is an "accredited investor" as such term is defined in Rule
501(a) of Regulation D.
In December, 2003, the Company sold 5,961,538 shares of par value $.001 common
stock for $774,999.96. The common stock was offered in reliance upon the private
offering exemptions contained in Sections 3(b) and 4(2) of the Securities Act of
1933, as amended, and Rule 506 of Regulation D promulgated thereunder. All
purchasers were "accredited" investors within the meaning of Rule 501(a) of
Regulation D. We received net proceeds in the offering of $774,999.96. All
purchasers represented that they were acquiring the common shares for investment
purposes only and not with a view to distribute. The purchasers further
represented that they (a) have such knowledge and experience in financial and
business matters and are capable of evaluating the merits and risks of the
investment, (b) are able to bear the complete loss of the investment, (c) have
had the opportunity to ask questions of, and receive answers from, the Company
and its management concerning the terms and conditions of the offering and to
obtain additional information, and (d) is are classified as "accredited
investos" as such term is defined in Rule 501(a) of Regulation D.
Securities Issued for Services
------------------------------
On June 9, 2003, the Company issued 1,400,000 shares of restricted common stock
for services as a finder and assisting the Company in furthering its business
plan. The Company believes that the issuance of the shares was exempt from the
registration and prospectus delivery requirements of the Securities Act of 1933
by virtue of Section 4(2). The shares were issued directly by the Company and
did not involve a public offering or general solicitation. The recipient of the
shares had a preexisting relationship with our management, had performed
services for the Company and had full and complete access to the Company and had
the opportunity to speak with management with regards to their investment
decision.
On June 9, 2003, the Company also issued 1,200,000 shares of restricted common
stock in accordance with the agreement dated November 14, 2002 as amended on
February 15, 2003 and April 25, 2003. The Company believes that the issuance of
the shares was exempt from the registration and prospectus delivery requirements
of the Securities Act of 1933 by virtue of Section 4(2). The shares were issued
directly by the Company and did not involve a public offering or general
solicitation. The recipient of the shares had a preexisting relationship with
our management, had performed services for the Company and had full and complete
access to the Company and had the opportunity to speak with management with
regards to their investment decision.
In October 2003, the Company also issued 625,000 shares of restricted common
stock to two individuals for consulting services. The Company believes that the
issuance of the shares was exempt from the registration and prospectus delivery
requirements of the Securities Act of 1933 by virtue of Section 4(2). The shares
were issued directly by the Company and did not involve a public offering or
general solicitation. The recipient of the shares had a preexisting relationship
with our management, had performed services for the Company and had full and
complete access to the Company and had the opportunity to speak with management
with regards to their investment decision.
12
In December 2003, the Company also issued 2,500,,000 shares of Series B
Preferred Shares for services to our officers and directors. The Company
believes that the issuance of the shares was exempt from the registration and
prospectus delivery requirements of the Securities Act of 1933 by virtue of
Section 4(2). The shares were issued directly by the Company and did not involve
a public offering or general solicitation. The recipient of the shares had a
preexisting relationship with our management, had performed services for the
Company and had full and complete access to the Company and had the opportunity
to speak with management with regards to their investment decision.
SUBSEQUENT EVENT
----------------
In January 2004, the Company also issued 1,163,000 shares of restricted common
stock to five individuals for consulting services that were performed during the
quarter ending December 31, 2003. The Company believes that the issuance of the
shares was exempt from the registration and prospectus delivery requirements of
the Securities Act of 1933 by virtue of Section 4(2). The shares were issued
directly by the Company and did not involve a public offering or general
solicitation. The recipient of the shares had a preexisting relationship with
our management, had performed services for the Company and had full and complete
access to the Company and had the opportunity to speak with management with
regards to their investment decision.
In February, 2004, the Company sold 750,000 shares of par value $.001 common
stock for $300,000. The common stock was offered in reliance upon the private
offering exemptions contained in Sections 3(b) and 4(2) of the Securities Act of
1933, as amended, and Rule 506 of Regulation D promulgated thereunder. All
purchasers were "accredited" investors within the meaning of Rule 501(a) of
Regulation D. We received net proceeds in the offering of $300,000. All
purchasers represented that they were acquiring the common shares for investment
purposes only and not with a view to distribute. The purchasers further
represented that they (a) have such knowledge and experience in financial and
business matters and are capable of evaluating the merits and risks of the
investment, (b) are able to bear the complete loss of the investment, (c) have
had the opportunity to ask questions of, and receive answers from, the Company
and its management concerning the terms and conditions of the offering and to
obtain additional information, and (d) is are classified as "accredited
investors" as such term is defined in Rule 501(a) of Regulation D.
In February 2004, the Company also issued 150,000 shares of restricted common
stock to one individual for consulting services. The Company believes that the
issuance of the shares was exempt from the registration and prospectus delivery
requirements of the Securities Act of 1933 by virtue of Section 4(2). The shares
were issued directly by the Company and did not involve a public offering or
general solicitation. The recipient of the shares had a preexisting relationship
with our management, had performed services for the Company and had full and
complete access to the Company and had the opportunity to speak with management
with regards to their investment decision.
In March 2004, the Company also issued 150,000 shares of restricted common stock
to two individuals for consulting services. The Company believes that the
issuance of the shares was
13
exempt from the registration and prospectus delivery requirements of the
Securities Act of 1933 by virtue of Section 4(2). The shares were issued
directly by the Company and did not involve a public offering or general
solicitation. The recipient of the shares had a preexisting relationship with
our management, had performed services for the Company and had full and complete
access to the Company and had the opportunity to speak with management with
regards to their investment decision.
In March 2004, the Company also issued 5,000,000 shares to an officer and
director of the corporation as a result of the officer converting 500,000 shares
of Series A Preferred Stock that converted at the rate of ten common shares for
every one share of Preferred Series A Stock owned. The Company believes that the
issuance of the shares was exempt from the registration and prospectus delivery
requirements of the Securities Act of 1933 by virtue of Section 4(2). The shares
were issued directly by the Company and did not involve a public offering or
general solicitation. The recipient of the shares had a preexisting relationship
with our management, had performed services for the Company and had full and
complete access to the Company and had the opportunity to speak with management
with regards to their investment decision.
ITEM 6. MANAGEMENTS' DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
This report contains forward-looking statements. Actual results and
events could differ materially from those projected, anticipated, or implicit,
in the forward-looking statements as a result of the risk factors set forth
below and elsewhere in this report.
With the exception of historical matters, the matters discussed herein
are forward looking statements that involve risks and uncertainties. Forward
looking statements include, but are not limited to, statements concerning
anticipated trends in revenues and net income, the date of introduction or
completion of our products, projections concerning operations and available cash
flow. Our actual results could differ materially from the results discussed in
such forward-looking statements primarily as the result of insufficient cash to
pursue production and marketing efforts. The following discussion of our
financial condition and results of operations should be read in conjunction with
our financial statements and the related notes thereto appearing elsewhere
herein.
Overview
Voyager Entertainment International, Inc., formerly named Dakota
Imaging, Inc., was incorporated in North Dakota on January 31, 1991. Effective
February 8, 2002 the Company completed a reverse triangular merger between
Dakota Subsidiary Corp. ("DSC"), a wholly
14
owned subsidiary of the Company, and Voyager Ventures, Inc., a Nevada
Corporation ("Ventures"), whereby the Company issued 3,660,000 shares of its
Series A preferred stock in exchange for 100% of Ventures outstanding common
stock. Pursuant to the terms of the merger, Ventures merged with DSC ceased to
exist and Ventures became a wholly owned subsidiary of the Company.
On April 2, 2002 we amended our Certificate of Incorporation to change our name
from Dakota Imaging, Inc. to Voyager Entertainment International, Inc.
In June 2003 the company reincorporated in the State of Nevada. The
reincorporation became effective in the States of North Dakota and Nevada on
June 23, 2003, the date the Certificate of Merger was issued by the Secretary of
State of North Dakota.
Critical Accounting Policies
Our discussion and analysis of our financial condition and results of operations
are based upon our condensed consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States of America. The preparation of these financial statements requires
us to make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses, and related disclosures of contingent assets
and liabilities. On an ongoing basis, we evaluate our estimates, including those
related to impairment of deferred tax assets. We base our estimates on
historical experience and on various other assumptions, such as the trading
value of our common stock, that we believe to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying value of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates under different
assumptions or conditions; however, we believe that our estimates, including
those for the above-described items, are reasonable.
Plan of Operation
During the next 12 months, we plan to focus our efforts on our
development of the Observation Wheels; however actual production will not
commence until we have sufficient capital for production and marketing.
Currently, our monthly cash need is approximately $60,000 per month. These costs
consist primarily of professional and consulting fees including related party,
rent expenses and printing expenses.
We will face considerable risk in each of our business plan steps, such
as difficulty of hiring competent personnel within our budget and a shortfall of
funding due to our inability to raise capital in the equity securities market.
If no funding is received during the next twelve months, we will be forced to
rely on existing cash in the bank.
We have no operating history, no significant current operations,
minimum cash on hand, and no profit. Because of these factors, our auditors have
issued an audit opinion for us which includes a statement describing our going
concern status. This means there is substantial doubt
15
about our ability to continue as a going concern. While we believe we have made
good faith estimates of our ability to secure additional capital in the future
to reach our goals, there is no guarantee that we will receive sufficient
funding to implement any future business plan steps. In the event that we do not
receive additional financing, we will not be able to continue our operations.
The timing of most of our capital expenditures is discretionary.
Currently there are no material long-term commitments associated with our
capital expenditure plans. Consequently, we have a significant degree of
flexibility to adjust the level of such expenditures as circumstances warrant.
The level of our capital expenditures will vary in future periods depending on
market conditions and other related economic factors.
Risks that could cause actual performance to differ from expected
performance are detailed in the remainder of this section, and under the section
titled "Factors That May Affect the Company's Future Operating Results."
Results of Operations
Years Ended December 31, 2003 and December 31, 2002
Revenues. We did not have any revenues for the fiscal year ending
December 31, 2003 and 2002. There was no change in revenues from the year ending
2003 versus 2002 because we are still in a development stage and revenues will
not be generated until operations of a ride begin.
Project Costs
Project Costs for the year ended December 31, 2003 were $13,354, a
decrease of $16,034 less than the $29,388 of project costs incurred in the year
ended December 31, 2002. These expenses consisted primarily of presentation and
development materials provided to prospective funding sources. Our total project
costs since inception are $77,124.
Operating Expenses. We had operating expenses of $4,814,360 for the
year ended December 31, 2003 verses operating expenses of $1,694,542 for the
year ended December 31, 2002 which primarily consisted of office rental
expenses, legal and accounting fees and professional expenses. There was an
increase in our operating expenses for the year ending December 31, 2003 of
$3,119,818. The significant increase in operating expenses for the year ending
December 31, 2003 was primarily due to the issuance of common stock for services
to consultants. If the company receives funding we expect these fees to increase
substantially including support for employees that will be required.
Net Losses from Operations. As a result of the increases, primarily in
research and development and professional and consulting fees where our common
stock was issued for services, loss from operations for the period ended
December 31, 2003 were $4,814,360 an increase of $3,119,818, over the loss from
operations of $1,694,542 for the year ended December 31, 2002.
16
Liquidity and Capital Resources
A critical component of our operating plan impacting our continued
existence is the ability to obtain additional capital through additional equity
and/or debt financing. We do not anticipate enough positive internal operating
cash flow until such time as we can generate substantial revenues, which may
take the next few years to fully realize. In the event we cannot obtain the
necessary capital to pursue our strategic plan, we may have to cease or
significantly curtail our operations. This would materially impact our ability
to continue operations.
Our near term cash requirements are anticipated to be offset through
the receipt of funds from private placement offerings and loans obtained through
private sources. Since inception, we have financed cash flow requirements
through debt financing and issuance of common stock for cash and services. As we
initiate operational activities, we may continue to experience net negative cash
flows from operations, pending receipt of servicing or licensing fees, and will
be required to obtain additional financing to fund operations through stock
offerings and bank borrowings to the extent necessary to provide working
capital.
Over the next twelve months, we believe that existing capital and
anticipated funds from operations will not be sufficient to sustain operations
and planned development. Consequently, we will be required to seek additional
capital in the future to fund growth and expansion through additional equity or
debt financing or credit facilities. No assurance can be made that such
financing would be available, and if available it may take either the form of
debt or equity. In either case, the financing could have a negative impact on
our financial condition and our stockholders.
We anticipate incurring operating losses over the next twelve months.
Our lack of operating history makes predictions of future operating results
difficult to ascertain. Our prospects must be considered in light of the risks,
expenses and difficulties frequently encountered by companies in their early
stage of development, particularly companies in new and rapidly evolving markets
such as development related companies. Such risks include, but are not limited
to, an evolving and unpredictable business model and the management of growth.
To address these risks we must, among other things, implement and successfully
execute our business and marketing strategy, continue to develop and upgrade
technology and products, respond to competitive developments, and attract,
retain and motivate qualified personnel. There can be no assurance that we will
be successful in addressing such risks, and the failure to do so can have a
material adverse effect on our business prospects, financial condition and
results of operations.
As of December 31, 2003, we had current assets of $489,104, which
consisted primarily of cash on hand and current liabilities of $2,498,895,
resulting in working capital deficit of $2,009,791.
17
FACTORS THAT MAY AFFECT THE COMPANY'S FUTURE OPERATING RESULTS
We are a development stage company, recently reorganized and have minimal
operating history, which makes an evaluation of us extremely difficult. At this
stage of our business operations, even with our good faith efforts, potential
investors have a high probability of losing their investment.
As a result of our reorganization in 2002, we have yet to generate
revenues from operations and have been focused on organizational, start-up,
market analysis and fund raising activities. Although we have a project to
market, there is nothing at this time on which to base an assumption that our
business operations will prove to be successful or that we will ever be able to
operate profitably. Our future operating results will depend on many factors,
including our ability to raise adequate working capital, demand and acceptance
of our project, the level of our competition and our ability to attract and
maintain key management and employees.
While Management believes its estimates of projected occurrences and
events are within the timetable of its business plan, there can be no guarantees
or assurances that the results anticipated will occur.
Our auditor's report reflects the fact that without realization of additional
capital, it would be unlikely for us to continue as a going concern. If we are
unable to continue as a going concern, it is unlikely that we will continue in
business.
As a result of our deficiency in working capital and other factors, our
auditors have included a paragraph in their report regarding substantial doubt
about our ability to continue as a going concern. Our plans in this regard are
to seek additional funding through future equity private placements or debt
facilities. Without funding for one of our projects the company would have to
rely primarily on raising capital through investors. There can be no guarantee
that we are capable of continuing to raise additional capital.
There is a limited current public market for our common stock.
Although our common stock is listed on the Over-the-Counter Bulletin
Board, there is a limited volume of sales, thus providing a limited liquidity
into the market for our shares. As a result of the foregoing, stockholders may
be unable to liquidate their shares for any reason.
Personnel
As of December 31, 2003, we had only unpaid Officers and Directors. The
Company pays $20,000 a month in consulting fees to Synthetic Systems LLC, an
entity wholly owned by Richard Hannigan. We are dependent upon Richard Hannigan,
President, CEO and Director and Tracy Jones, COO and Director and Myong Hannigan
Secretary Treasurer. We do not have any employees at this time and do not
anticipate the need to hire any employees until such time as we have been
sufficiently capitalized.
Going Concern
The consolidated financial statements included in this filing have been
prepared in conformity with generally accepted accounting principles that
contemplate the continuance of
18
the Company as a going concern because we have accumulated net losses of
$7,886,847 . The Company's cash position may be inadequate to pay all of the
costs associated with production and marketing. Management intends to use
borrowings and security sales to mitigate the effects of its cash position,
however no assurance can be given that debt or equity financing, if and when
required will be available. The financial statements do not include any
adjustments relating to the recoverability and classification of recorded assets
and classification of liabilities that might be necessary should the Company be
unable to continue existence.
ITEM 7. FINANCIAL STATEMENTS
See Index to Financial Statements and Financial Statement Schedules
appearing on page F-1 through F-19 of this Form 10-KSB.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
At our annual stockholders' meeting held April 23, 2003, our
stockholders reaffirmed the appointment of Stonefield Josephson, Inc. as our
independent accountants for the fiscal year ending December 31, 2003. This is a
change in accountants recommended by our Executive Management and approved by
our Board of Directors.
Stonefield Josephson, Inc. was engaged by us on August 8, 2002
ITEM 8A. CONTROLS AND PROCEDURES
We maintain disclosure controls and procedures that are designed to
ensure that information required to be disclosed in the Company's Exchange Act
reports is recorded, processed, summarized and reported within the time periods
specified in the SEC's rules and forms, and that such information is accumulated
and communicated to our management, including our Chief Executive Officer and
Chief Financial Officer, as appropriate, to allow timely decisions regarding
required disclosure controls and procedures, management recognized that any
controls and procedures, no matter how well designed and operated, can provide
only reasonable assurance of achieving the desired control objectives, and
management necessarily was required to apply its judgment in evaluating the
cost-benefit relationship of possible controls and procedures.
As of December 31, 2003, we carried out an evaluation, under the supervision and
with the participation of our management, including our Chief Executive Officer
and our Chief Financial Officer, of the effectiveness of the design and
operation of the Company's disclosure controls and procedures. Based on the
foregoing, our Chief Executive Officer and Chief Financial Officer concluded
that the Company's disclosure controls and procedures were effective.
There has been no significant changes in our internal controls or in
other factors that could significantly affect the internal controls subsequent
to the date we completed our evaluation.
19
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
The following table sets forth the names and positions of our executive
officers and directors. Directors will be elected at our annual meeting of
stockholders and serve for one year or until their successors are elected and
qualify. Officers are elected by the Board and their terms of office are, except
to the extent governed by employment contract, at the discretion of the Board.
========================================================================
Name Age Positions and Offices held
------------------------------------------------------------------------
Richard Hannigan 54 President, CEO and Director
------------------------------------------------------------------------
Tracy Jones 51 Chief Operating Officer and Director
------------------------------------------------------------------------
Myong Hannigan 55 Secretary, Treasurer and Director
========================================================================
Duties, Responsibilities and Experience
Richard L. Hannigan, Sr., age 54, is President/Treasurer and Director
of Voyager Entertainment International, Inc. Mr. Hannigan has been President of
a design/construction company, Synthetic Systems, Inc. since 1991. This company
specializes in custom designs for interior and exterior casino construction.
Under Mr. Hannigan's control Synthetic Systems, Inc. has been involved in
several casino projects in Las Vegas, including the Luxor Hotel Casino, interior
themed areas and exterior main entry Sphinx. Prior to Synthetic Systems, Inc.,
Mr. Hannigan owned and operated two consulting and construction companies from
1983-1991. These companies, Architectural Services, Inc. and Architectural
Systems, Inc., respectively have been responsible for construction projects
located in Las Vegas, Palm Springs, Los Angeles and Salt Lake City. Mr.
Hannigan, consulted for exterior glazing and exotic fenestrations on commercial
as well as casino companies, in Las Vegas.
Tracy Jones, age 51, Mr. Jones formed Western Architectural Services,
LLC in 1982, as an architectural design, and fabrication company. Over the past
20 years Mr. Jones has been instrumental in the development of "themed"
environments for the Hotel/Casino, Restaurant, and Theme Park industry. At
Western, Mr. Jones has revolutionized the use of digitized computer enhancement
for the replication of historical features.
Mr. Jones created methods that reduced the time to produce large-scale
projects such as the Statue of Liberty at New York - New York Hotel and Casino.
Before this project would have taken almost 1-1/2 years to recreate. However
with methods developed at Western this project was fabricated in just over 6
months.
20
Mr. Jones has a history of producing the most difficult projects on
time, and on budget. With his new position at Voyager Entertainment
International, Inc., Mr. Jones can take this same approach to developing the
Voyager Project. Through many years of difficult construction projects and
budgetary restraints, Mr. Jones has developed creative and effective means of
manufacturing and construction that will revolutionize this industry.
Mr. Jones will bring his expertise of manufacturing to this world class
project. Mr. Jones will focus on product development, quality control, safety,
state and federal regulations, freight issues, and on-time production and
overall construction review. Blending his 20 years of experience in the
construction industry; Mr. Jones will bring a team of talented professionals
together to form an unbeatable group for the Voyager Project.
Myong Hannigan, age 55, is Secretary of Voyager Entertainment
International, Inc. Ms. Hannigan attended college at Seoul University in Seoul,
South Korea for general studies and business management. Ms. Hannigan is also
currently a managing partner of a design/construction company, Synthetic
Systems, Inc. since 1991. This company specializes in custom design for interior
and exterior casino construction. Prior to Synthetic Systems, Inc., Ms. Hannigan
was a managing partner for Architectural Services, Inc. and Architectural
Systems, Inc., from 1983-1991. This company specialized in design and
installation of Custom Glass and Glazing Systems. Prior to Architectural
Services, Inc. and Architectural Systems, Ms. Hannigan owned and managed Antiqua
Stain Glass Company in Honolulu, Hawaii from 1979-1981, which was relocated from
Bloomington, Illinois (1976-1979). The company specialized in design,
manufacturing, installation and retail/wholesale products. Ms. Hannigan is the
wife of Richard Hannigan, President, Treasurer and Director of the Company.
Directors are elected to serve until the next annual meeting of
stockholders and until their successors have been elected and qualified.
Officers are appointed to serve until the meeting of the Board of Directors
following the next annual meeting of stockholders and until their successors
have been elected and qualified.
No Executive Officer or Director of the Corporation has been the
subject of any Order, Judgment, or Decree of any Court of competent
jurisdiction, or any regulatory agency permanently or temporarily enjoining,
barring suspending or otherwise limiting him from acting as an investment
advisor, underwriter, broker or dealer in the securities industry, or as an
affiliated person, director or employee of an investment company, bank, savings
and loan association, or insurance company or from engaging in or continuing any
conduct or practice in connection with any such activity or in connection with
the purchase or sale of any securities.
No Executive Officer or Director of the Corporation has been convicted
in any criminal proceeding (excluding traffic violations) or is the subject of a
criminal proceeding which is currently pending.
No Executive Officer or Director of the Corporation is the subject of
any pending legal proceedings.
21
Board of Directors Committees and Compensation
Compensation Committee Interlocks and Insider Participation
The Board of Directors does not have a Compensation Committee. Richard
Hannigan, President, oversaw the compensation of our executive officers.
Board of Director's Report on Executive Compensation
General. As noted above, our Board of Directors does not have a
Compensation Committee and, accordingly, during the year ended December 31,
2003, the Board of Directors, through the President, reviewed and approved the
compensation of our executive officers.
Overall Policy; Significant Factors. The compensation decisions made by
the Board of Directors in respect of our executive officers were influenced by
two major factors. First, our start-up nature brings with it all of the normal
capital requirements to sustain growth, therefore certain stock compensation was
granted in lieu of salaries, commissions and for services rendered. This
practice may be extended into the future on a case-by-case basis and accordingly
filed with the Securities and Exchange Commission. Finally, as we continue to
mature, certain additions to the executive staff will be required. As we are
required to seek talent in outside market, we will be required to provide a
competitive compensation package.
As overall policy, however, the Board continues to believe that
long-term compensation tied to the creation of stockholder value should
constitute a significant component of the compensation to be earned by our
executive officers. In this respect, it will be the Board's policy to attempt to
restrain base cash compensation (subject to competitive pressures), while
providing the incentive for Management to increase stockholder value by
providing such officers with significant numbers of market-price stock that will
not confer value upon the officers unless and until the Company's share price
rises. The Board of Directors expects that stock options will constitute a
significant component of the compensation package provided to executive
officers.
The Board believes that cash bonuses are, at times, appropriate based
upon the performance of our business compared to our internal expectations and
general business conditions.
Stock Option Plan
Our shareholders approved a 2002 Stock Option Plan on April 2, 2002 at
our annual meeting. The plan authorizes the Company to issue 5,000,000 shares of
common stock for issuance upon exercise of options.
The plan is intended to encourage directors, officers, employees and
consultants of the Company to acquire ownership of Common Stock. Officers
(including officers who are members of the Board of Directors), directors (other
than members of the Stock Option Committee (the "Committee") to be established
to administer the Stock Option Plan) and other employees and consultants of the
Company and its subsidiaries (if established) will be eligible to
22
receive options under the planned Stock Option Plan. The Committee will
administer the Stock Option Plan and will determine those persons to whom
options will be granted, the number of options to be granted, the provisions
applicable to each grant and the time periods during which the options may be
exercised. No options may be granted more than ten years after the date of the
adoption of the Stock Option Plan.
Unless the Committee, in its discretion otherwise, non-qualified stock
options will be granted with an option price equal to the fair market value of
the shares of Common Stock to which the non-qualified stock option relates on
the date of grant. In no event may the option price with respect to an incentive
stock option granted under the Stock Option Plan be less than the date the
incentive stock option is granted. Each option granted under the Stock Option
Plan will be exercisable for a term of not more than ten years after the date of
grant. Certain other restrictions will apply in connection with this Plan when
some awards may be exercised.
In the event of a change of control (as defined in the Stock Option
Plan), the date on which all options outstanding under the Stock Option Plan may
first be exercised will be accelerated. Generally, all options terminate 90 days
after a change of control. As of December 31, 2003, no options have been issued
under this plan.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires our executive officers and directors, and persons who
beneficially own more than ten percent of our common stock, to file initial
reports of ownership and reports of changes in ownership with the SEC. Executive
officers, directors and greater than ten percent beneficial owners are required
by SEC regulations to furnish us with copies of all Section 16(a) forms they
file. Based upon a review of the copies of such forms furnished to us and
written representations from our executive officers and directors, our belief is
that during the year ended 2003, Richard Hannigan, Tracy Jones and Myong
Hannigan filed there reports on a timely basis except for (1) On December 19,
2003, 1,000,000 shares of Series B Preferred Stock were issued to Richard
Hannigan, (2) On December 19, 2003, 1,000,000 shares of Series B Preferred Stock
were issued to Myong Hannigan, (3) On December 19, 2003, 500,000 shares of
Series B Preferred Stock was issued to Tracy Jones.
ITEM 10. EXECUTIVE COMPENSATION
The following table sets forth the cash compensation of our executive
officers and directors for the fiscal year.
23
Summary Compensation Table
Long Term
Annual Compensation Compensation
-----------------------------------------------------------------------------------------------------------
Name and Other Annual Restricted
Principal Position Year Salary Bonus Compensation Stock Options Others
-----------------------------------------------------------------------------------------------------------
Richard Hannigan (1)
President/CEO/
Director 2003 $-0- $189,000 $240,000 1,000,000 -0- -0-
Tracy Jones
COO/Director 2003 $-0- -0- -0- 500,000 -0- -0-
Myong Hannigan (1)(2)
Secretary 2003 $-0- $189,000 $240,000 1,000,000 -0- -0-
Stock awarded to our officers and directors was in the form of Series B
Preferred Stock which is convertible into 2 shares of common stock for
every one share of Series B Preferred Stock owned.
(1) A total of $240,000 was paid to Synthetic Systems, an entity
owned by Richard Hannigan and Myong Hannigan, for
professional/consulting fees. The Company also accrued a bonus
of $189,000 payable to Synthetic Systems, of which, $10,000
has been paid. Also see the Related Party Transactions section
in the financial statements.
(2) Myong Hannigan is the wife of the CEO Richard Hannigan, Sr.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of December 31, 2003 with
respect to the beneficial ownership of common stock by (i) each person who to
the knowledge of the Company, beneficially owned or had the right to acquire
more than 5% of the outstanding common stock, (ii) each director of the Company
and (iii) all executive officers and directors of the Company as a group.
-------------------------------------------------------------------------------------------
Number Percent
Name of Beneficial Owner (1) of Shares Of Class
-------------------------------------------------------------------------------------------
Richard Hannigan 14,585,000 (3) (4) (2) 20.6%
-------------------------------------------------------------------------------------------
Veldon Simpson 11,000,000 (3) (2) 15.5%
-------------------------------------------------------------------------------------------
Myong Hannigan 14,585,000 (4) 20.6%
-------------------------------------------------------------------------------------------
Gregg Giuffria 10,000,000 (3) (2) 14.1%
-------------------------------------------------------------------------------------------
Tracy Jones 4,217,500 (6) 5.9%
-------------------------------------------------------------------------------------------
Dan and Jill Fugal 4,500,000 (7) 6.3%
-------------------------------------------------------------------------------------------
Don and Nancy Tyner 7,359,807 10.4%
-------------------------------------------------------------------------------------------
All Directors & Officers as a Group 18,802,500 26.6%
-------------------------------------------------------------------------------------------
========== ===========
-------------------------------------------------------------------------------------------
(1) As used in this table, "beneficial ownership" means the sole or shared
power to vote, or to direct the voting of, a security, or the sole or
shared investment power
24
with respect to Common Stock (i.e., the power to dispose of, or to
direct the disposition of, a security). The address of each person is
care of the Company.
(2) Calculations are based on 70,603,258 common shares outstanding, on a
fully diluted basis assuming conversion of both Series A and Series B
convertible preferred stock.
(3) Assumes conversion of Series A Convertible Preferred Stock ("Series A
Stock") into common stock. Each share of Series A Stock is convertible
into 10 shares of common stock. Each share of Series A Stock is
entitled to 10 votes on mattes properly brought before common
stockholders of the Company. Each person owns 500,000 shares of Series
A Stock.
(4) Richard Hannigan and Myong Hannigan are husband and wife, Richard
Hannigan directly owns 2,585,000 shares of common stock, 500,000 shares
of Series A Stock, convertible into 5,000,000 shares of common stock
and 1,000,000 shares of Series B Stock, convertible into 2,000,000
shares of common stock. Myong Hannigan is the direct owner of 3,000,000
shares of common stock and 1,000,000 shares of Series B Stock,
convertible into 2,000,000 shares of common stock.
(5) Assumes conversion of Series B Convertible Preferred Stock ("Series B
Stock") into common stock. Each share of Series B Stock is convertible
into 2 shares of common stock. Each share of Series B Stock is entitled
to 2 votes on matters properly brought before the stockholders of the
Company.
(6) Mr. Jones is the direct owner of 70,000 shares of common stock and
335,000 shares of common stock owned by the Tracy Jones Charitable
Remainder Trust. In addition, Mr. Jones (i) is the sole owner of
Western Architectural LLC and deemed to beneficially own the 2,812,500
shares of common stock owned by the LLC, (ii) is the majority owner of
Varna Holdings LC and deemed to beneficially own the 500,000 shares of
Series B Stock owned by Varna Holdings, LC, which are convertible into
1,000,000 shares of common stock.
(7) Mr. and Mrs. Fugal jointly own 1,500,000 shares of common stock and
1,000,000 shares of Series B Stock which are convertible into 2,000,000
shares of common stock.
(8) Richard Hannigan and Myong Hannigan are husband and wife and are deemed
to directly control the same amount of shares.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
We have numerous related party transactions with Synthetic Systems,
Inc. ("Synthetic"). Synthetic is a company owned 100% by Richard Hannigan, Sr.,
our President and CEO of the Company. As of the year ended December 31, 2003 the
company had paid approximately $240,000 to Synthetic Systems for professional
and consulting fees.
25
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Documents filed as part of this Report
1. Financial Statements:
A. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
1. Independent Auditors Report F-1
2. Consolidated Financial Statements:
Consolidated Balance Sheet F-2
Consolidated Statements of Operation F-3
Consolidated Statement of Stockholders' Deficit F-4
Consolidated Statements of Cash Flows F-5
Notes to Consolidated Financial Statements F-6 - F-15
2. During the fiscal year December 31, 2003 the Company filed
the following 8-Ks.
NONE
3. Subsequent to the end of the fiscal year, the Company filed
the following reports on Form 8-K
NONE
4. Exhibits
Number Description
------ -----------
3.1 Nevada Articles of Incorporation (incorporated by reference to
Exhibit 3.1 to the Company's Quarterly Report on Form 10-QSB for the
period ended September 30, 2003 filed on November 14, 2003)
3.2 Amended and Restated Bylaws (incorporated by reference to Exhibit
3.2 to the Company's Quarterly Report on Form 10-QSB for the period
ended September 30, 2003 filed on November 14, 2003)
3.3 Plan and Agreement of Merger of Voyager Entertainment
International, Inc. (North Dakota) into Voyager Entertainment
International, Inc. (Nevada) (incorporated by reference to
Exhibit 3.3 to the Company's Quarterly Report on Form 10-QSB for
the period ended September 30, 2003 filed on November 14, 2003)
26
3.4 Nevada Articles of Merger (incorporated by reference to Exhibit 3.4
to the Company's Quarterly Report on Form 10-QSB for the period
ended September 30, 2003 filed on November 14, 2003)
3.5 North Dakota Certificate of Merger (incorporated by reference to
Exhibit 3.5 to the Company's Quarterly Report on Form 10-QSB for the
period ended September 30, 2003 filed on November 14, 2003)
4.1 Certificate of Designation of Series A Convertible Preferred Stock
(incorporated by reference to Exhibit 4.1 to the Company's Quarterly
Report on Form 10-QSB for the period ended September 30, 2003 filed
on November 14, 2003)
4.2 Certificate of Designation of Series B Convertible Preferred Stock
(incorporated by reference to Exhibit 10.3 to the Company's
Quarterly Report on Form 10-QSB for the period ended September 30,
2003 filed on November 14, 2003)
10.1 Loan and Security Agreement (incorporated by reference to Exhibit
10.1 to the Company's Current Report on Form 8-K filed on November
22, 2002)
10.2 Amendment No. 1 to Loan and Security Agreement (incorporated by
reference to Exhibit 10(k) to the Company's Form 10-KSB filed on
April 16, 2003)
10.3 Amendment No. 2 to Loan and Security Agreement (incorporated by
reference to Exhibit 10.3 to the Company's Quarterly Report on
Form 10-QSB for the period ended March 31, 2003 filed on May 20,
2003)
31.1* Certification of Chief Executive Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.
31.2* Certification of Chief Financial Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.
* Exhibits are filed with this report
ITEM 14. Principal Accounting Fees and Services
Audit Fees. The audit fees billed to the Company by Stonefield Josephson, Inc.
for fiscal years ended December 31, 2002 were approximately $34,000 . These fees
pertain to the audit of the Company's annual financial statements and quarterly
Form 10-QSBs in 2003 along with audits associated with Outland Development. The
audit fee for the 2003 audit by Stonefield Josephson,Inc., is expected to be
approximately $30,000 Audit-Related Fees, Tax Fees and All Other Fees. No
"audit-related fees," "tax fees" or "all other fees," as those terms are defined
by the Securities and Exchange Commission, were paid to Stonefield Josephson,
Inc. for the fiscal years ended December 31, 2003 and 2002.
27
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.
VOYAGER ENTERTAINMENT INTERNATIONAL, INC.
By: /s/ Richard Hannigan
------------------------------------
Richard Hannigan, President/Director
Dated: March 30, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
NAME OFFICE DATE
By:/s/ Richard Hannigan, Sr.
----------------------------------
Richard Hannigan, Sr. President/CEO/Director March 30, 2004
By:/s/ Myong Hannigan
----------------------------------
Myong Hannigan Secretary/Treasurer/Director March 30, 2004
28
CERTIFICATION PURSUANT TO
18 USC, SECTION 1350, AS ADOPTED PURSUANT TO
SECTIONS 302 AND 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Voyager Entertainment
International, Inc. (the "Company") on Form 10-KSB for the period ending
December 31, 2003, as filed with the Securities and Exchange Commission on the
date hereof (the "Report"), I, Richard Hannigan, President and Chief Financial
Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002, that:
(1) I have reviewed the report;
(2) To the best of my knowledge, the Report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
in order to make the statements made, in light of the circumstances
under which such statements were made, not misleading:
(3) To the best of my knowledge, the financial statements, and other
financial information included in the Report, fairly present in all
material respects the financial condition and results of operations of
the Company as of, and for, the periods presented in the Report;
(4) I:
(a) am responsible for establishing internal controls;
(b) have designed such internal controls to ensure that material
information relating to the Company and its consolidated
subsidiaries is made known to me by others within the Company,
particularly during the period of January 1, 2002 through
December, 2003;
(c) have evaluated the effectiveness of the Company's internal
controls as of a date within 90 days prior to the Report; and
(d) have presented in the Report my conclusions about the
effectiveness of my internal controls based on my evaluation
of that date;
(5) I have disclosed to the Company's auditors and the board of directors:
(a) all significant deficiencies in the design or operation of
internal control which could adversely affect the Company's
ability to record, process, summarize, and report financial
data and have identified for the Company's auditors any
material weaknesses in internal controls; and
(b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
Company's internal controls;
(6) I have indicated in the Report whether or not there were significant
changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date of my
evaluation, including any corrective actions with regard to significant
deficiencies and material weaknesses; and
(7) The Report fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
Date: March 30, 2004
By: /s/ Richard L. Hannigan, Sr.
---------------------------------------------------
Richard Hannigan, President/Chief Financial Officer
29
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Richard L. Hannigan, Sr., Chief Executive and Accounting Officer of Voyager
Entertainment International, Inc. (the "Company"), certify to the best of my
knowledge, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002, that:
(1) the Company's Annual Report on Form 10-KSB for the year ended December 31,
2004, as filed with the Securities and Exchange Commission on the date hereof
(the "Report") fully complies with the requirements of Section 13(a) or 15(d) of
the Securities Exchange Act of 1934; and
(2) the information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
Date: March 30, 2004 By: /s/ Richard L. Hannigan, Sr.
--------------------------------------
Chief Executive and Accounting Officer
30
VOYAGER ENTERTAINMENT INTERNATIONAL, INC.
AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2003 AND 2002
CONTENTS
Page
----
Independent Auditors' Report F-1
Consolidated Financial Statements:
Consolidated Balance Sheet F-2
Consolidated Statements of Operations F-3
Consolidated Statement of Stockholders Deficit F-4
Consolidated Statements of Cash Flows F-5
Notes to Consolidated Financial Statements F-6-F-15
INDEPENDENT AUDITORS' REPORT
Board of Directors
Voyager Entertainment International, Inc.
Las Vegas, Nevada
We have audited the accompanying consolidated balance sheet of Voyager
Entertainment International, Inc. and Subsidiaries as of December 31, 2003 and
the related consolidated statements of operations, stockholders' deficit and
cash flows for the years ended December 31, 2003 and 2002 and for the period
from inception to December 31, 2003. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the consolidated
financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall consolidated financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Voyager
Entertainment International, Inc. and Subsidiaries as of December 31, 2003, and
the consolidated results of its operations and its cash flows for the years
ended December 31, 2003 and 2002 and for the period from inception to December
31, 2003 in conformity with accounting principles generally accepted in the
United States of America.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1 to the
accompanying consolidated financial statements, the Company has no established
source of revenue, incurred significant losses since inception of $7,886,847 and
used cash for operations of $744,562 during the year ended December 31, 2003.
The Company also has a working capital deficit of $2,009,791 and a stockholders'
deficit of $1,999,632 as of December 31, 2003. These factors raise substantial
doubt about the Company's ability to continue as a going concern. Management's
plan in regard to these matters is also discussed in Note 1. These consolidated
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
/s/ Stonefield Josephson, Inc.
CERTIFIED PUBLIC ACCOUNTANTS
Santa Monica, California
February 18, 2004
F-1
VOYAGER ENTERTAINMENT INTERNATIONAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEET - DECEMBER 31, 2003
ASSETS
Current assets -
cash and cash equivalents $ 489,104
Property and equipment, net of
accumulated depreciation 10,159
------------
Total assets $ 499,263
============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable and accrued expenses $ 122,499
Accrued expenses - related party 179,000
Loans and settlement payable and accrued interest of $109,157 987,396
Line of credit and accrued interest of $605,000 1,210,000
------------
Total current liabilities $ 2,498,895
Commitments and contingencies (see Note 7) --
Stockholders' deficit:
Preferred stock - Series A; $.001 par value; 1,500,000 shares
authorized, 1,500,000 shares outstanding 1,500
Preferred stock - Series B; $.001 par value; 10,000,000 shares
authorized, 4,000,000 shares outstanding 4,000
Common stock; $.001 par value; 200,000,000 shares
authorized, 49,771,260 shares issued and outstanding 49,771
Additional paid-in capital 24,136,079
Deferred construction cost (18,304,135)
Deficit accumulated during development stage (7,886,847)
------------
Total stockholders' deficit (1,999,632)
------------
Total liabilities and stockholders' deficit $ 499,263
============
The accompanying notes form an integral part of these consolidated financial
statements.
F-2
VOYAGER ENTERTAINMENT INTERNATIONAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
For the period
since inception on
For the year ended For the year ended March 1, 1997 to
December 31, 2003 December 31, 2002 December 31, 2003
----------------- ----------------- -----------------
Net revenue $ -- $ -- $ --
Operating expenses:
Professional and consulting fees 3,967,918 1,515,193 5,600,462
Rent expense 28,045 30,440 60,810
Settlement expense, excluding interest 650,000 -- 650,000
Project costs 13,354 29,388 77,124
Other operating expenses 155,043 119,521 309,131
4,814,360 1,694,542 6,697,527
Loss from operations (4,814,360) (1,694,542) (6,697,527)
Interest expense 1,129,535 59,785 1,189,320
Loss before income taxes (5,943,895) (1,754,327) (7,886,847)
Income taxes -- -- --
Net loss $(5,943,895) $(1,754,327) $(7,886,847)
Preferred stock dividends from amortization
of beneficial conversion feature (130,000) -- (130,000)
Net loss attributed to common stockholders $(6,073,895) $(1,754,327) $(8,016,847)
=========== =========== ===========
Net loss per share - basic and diluted $ (0.15) $ (0.05)
=========== ===========
Net loss per share attributed to common
shareholders- basic and diluted $ (0.15) $ (0.05)
=========== ===========
Weighted average common stock
shares outstanding - basic and diluted 40,792,000 34,066,110
=========== ===========
The accompanying notes form an integral part of these consolidated financial
statements.
F-3
VOYAGER ENTERTAINMENT INTERNATIONAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
Preferred Stock Series A Preferred Stock Series B Common Stock
------------------------ ------------------------ -------------------
Shares Amount Shares Amount Shares Amount
------ ------ ------ ------ ------ ------
For the period since inception on March 1, 1997
to December 31, 2000 (as restated
for reorganization) -- $ -- -- $ -- 15,000,000 $ 15,000
Net loss for the year ended
December 31, 2001 -- -- -- -- -- --
--------- ------- --------- ------ ---------- -----------
Balance at December 31, 2001 -- -- -- -- 15,000,000 15,000
Issuance of stock for cash and
services (pre-merger) 2,160,000 2,160 -- -- -- --
Conversion of preferred stock
to common stock (660,000) (660) -- -- 6,600,000 6,600
Acquisition of net assets of Dakota -- -- -- -- 11,615,000 11,615
Issuance of common stock for cash -
February 15, 2002 -- -- -- -- 800,000 800
Issuance of common stock for services -
April 2002 -- -- -- -- 200,000 200
Issuance of common stock for
Architectural agreement - May 2002 -- -- -- -- 2,812,500 2,813
Issuance of common stock for cash -
June 2002 -- -- -- -- 50,000 50
Issuance of common stock for
Architectural agreement - October 2002 -- -- -- -- 600,000 600
Issuance of common stock for
financing costs - November 2002 -- -- -- -- 650,000 650
Issuance of stock for services - October 2002 -- -- -- -- 325,000 325
Net loss for the year ended December 31, 2002 -- -- -- -- -- --
--------- ------- --------- ------ ---------- -----------
Balance at December 31, 2002 1,500,000 1,500 -- -- 38,652,500 38,653
Issuance of common stock for
financing costs - June 2003 -- -- -- -- 2,600,000 2,600
Issuance of preferred stock for cash -
June 2003 -- -- 1,000,000 1,000 -- --
Issuance of preferred stock for cash -
August 2003 -- -- 500,000 500 -- --
Beneficial conversion feature
associated with preferred stock -- -- -- -- -- --
Amortization of beneficial conversion feature
in a manner similar to preferred stock dividends -- -- -- -- -- --
Issuance of common stock for cash
September 2003 -- -- -- -- 769,222 769
Issuance of common stock for services
September 2003 -- -- -- -- 625,000 625
Issuance of common stock for cash -
December 2003, net of offering costs -- -- -- -- 5,961,538 5,961
Issuance of preferred stock for services -
December 2003 to related parties -- -- 2,500,000 2,500 -- --
Issuance of common stock for services -
December 2003 -- -- -- -- 1,163,000 1,163
Net loss for the year ended December 31, 2003 -- -- -- -- -- --
--------- ------- --------- ------ ---------- -----------
Balance at December 31, 2003 1,500,000 $ 1,500 4,000,000 $4,000 49,771,260 $ 49,771
========= ======= ========= ====== ========== ===========
Deficit
accumulated
Deferred during the Total
Additional construction development stockholders'
paid-in capital costs stage deficit
--------------- ----- ----- -------
For the period since inception on March 1, 1997
to December 31, 2000 (as restated
for reorganization) $ 20,000 $ -- $ (87,193) $ (52,193)
Net loss for the year ended
December 31, 2001 -- -- (101,432) (101,432)
------------ ------------ ----------- -----------
Balance at December 31, 2001 20,000 -- (188,625) (153,625)
Issuance of stock for cash and
services (pre-merger) 25,840 -- -- 28,000
Conversion of preferred stock
to common stock (5,940) -- -- --
Acquisition of net assets of Dakota (11,615) -- -- --
Issuance of common stock for cash -
February 15, 2002 399,200 -- -- 400,000
Issuance of common stock for services -
April 2002 399,800 -- -- 400,000
Issuance of common stock for
Architectural agreement - May 2002 18,138,722 (18,141,535) -- --
Issuance of common stock for cash -
June 2002 149,950 -- -- 150,000
Issuance of common stock for
Architectural agreement - October 2002 162,000 (162,600) -- --
Issuance of common stock for
financing costs - November 2002 162,500 -- -- 163,150
Issuance of stock for services - October 2002 74,750 -- -- 75,075
Net loss for the year ended December 31, 2002 -- -- (1,754,327) (1,754,327)
------------ ------------ ----------- -----------
Balance at December 31, 2002 19,515,207 (18,304,135) (1,942,952) (691,727)
Issuance of common stock for
financing costs - June 2003 309,400 -- -- 312,000
Issuance of preferred stock for cash -
June 2003 99,000 -- -- 100,000
Issuance of preferred stock for cash -
August 2003 49,500 -- -- 50,000
Beneficial conversion feature
associated with preferred stock 130,000 -- -- 130,000
Amortization of beneficial conversion feature
in a manner similar to preferred stock dividen (130,000) -- -- (130,000)
Issuance of common stock for cash
September 2003 99,231 -- -- 100,000
Issuance of common stock for services
September 2003 99,375 -- -- 100,000
Issuance of common stock for cash -
December 2003, net of offering costs 769,039 -- -- 775,000
Issuance of preferred stock for services -
December 2003 to related parties 2,347,500 -- -- 2,350,000
Issuance of common stock for services -
December 2003 847,827 -- -- 848,990
Net loss for the year ended December 31, 2003 -- -- (5,943,895) (5,943,895)
------------ ------------ ----------- -----------
Balance at December 31, 2003 $ 24,136,079 $(18,304,135) $(7,886,847) $(1,999,632)
============ ============ =========== ===========
The accompanying notes form an integral part of these consolidated financial
statements.
F-4
VOYAGER ENTERTAINMENT INTERNATIONAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the period
since inception on
For the year ended For the year ended March 1, 1997 to
December 31, 2003 December 31, 2002 December 31, 2003
----------------- ----------------- -----------------
Cash flows provided by (used for) operating activities:
Net loss $(5,943,895) $ (1,754,327) $ (7,886,847)
Adjustments to reconcile net loss to net cash
provided by (used for)
operating activities:
Depreciation 3,403 678 4,081
Issuance of stock for services including related parties 3,298,990 493,075 3,792,065
Interest expense from the issuance of common stock 425,150 50,000 475,150
Changes in assets and liabilities:
(Increase) decrease in assets:
Prepaid expenses -- 267 --
Other current assets 4,268 (4,268) --
Increase in liabilities:
Accounts payable and accrued expenses 638,522 88,133 836,655
Accrued expenses - related party 179,000 -- 179,000
Accrued settlement obligation 650,000 -- 650,000
----------- ------------ ------------
Net cash used for operating activities (744,562) (1,126,442) (1,949,896)
----------- ------------ ------------
Cash flows used for investing activities -
payments to acquire property and equipment (8,520) (5,719) (14,239)
----------- ------------ ------------
Cash flows provided by (used for) financing activities:
Due to related party -- (44,148) --
Proceeds from notes and loans payable 105,000 728,239 833,239
Proceeds from sale of preferred stock 150,000 -- 150,000
Proceeds from issuance of common stock 875,000 560,000 1,470,000
----------- ------------ ------------
Net cash provided by financing activities 1,130,000 1,244,091 2,453,239
----------- ------------ ------------
Net increase in cash 376,918 111,930 489,104
Cash and cash equivalents, beginning 112,186 256 --
----------- ------------ ------------
Cash and cash equivalents, end $ 489,104 $ 112,186 $ 489,104
=========== ============ ============
Cash paid during the year for:
Interest expense $ -- $ -- $ --
=========== ============ ============
Income taxes $ -- $ -- $ --
=========== ============ ============
Non cash financing activity:
Stock issued for services $ 3,298,990 $ 493,075 $ 3,792,065
=========== ============ ============
Common stock issued for financing costs and services $ 425,150 $ 163,150 $ 588,300
=========== ============ ============
Common stock issued for Architectural Agreement $ -- $ 18,304,135 $ 18,304,135
=========== ============ ============
Conversion of preferred stock to common stock $ -- $ 6,600 $ 6,600
=========== ============ ============
The accompanying notes form an integral part of these consolidated financial
statements.
F-5
VOYAGER ENTERTAINMENT INTERNATIONAL, INC.
AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002 AND
FOR THE PERIOD FROM INCEPTION (MARCH 1, 1997) TO DECEMBER 31, 2003
(1) Summary of Significant Accounting Policies:
Business Activity:
The Company is in the entertainment development business and is planning the
development of the world's tallest Ferris wheel on the Las Vegas Strip area. The
Company's corporate offices are located in Las Vegas, Nevada.
(1) Summary of Significant Accounting Policies, Continued:
Basis of Presentation:
The accompanying consolidated financial statements include the accounts of
Voyager Entertainment International, Inc. (the "Company"), formerly known as
Dakota Imaging, Inc., ("Dakota"), incorporated under the laws of the state of
North Dakota on January 31, 1991, and its subsidiaries:
a) Voyager Ventures, Inc. ("Ventures"), incorporated under the laws of the State
of Nevada on January 15, 2002 (owned 100% by the Company); b) Outland
Development, LLC ("Outland"), a limited liability company formed under the laws
of the State of Nevada on March 1, 1997(owned 100% by Ventures); and c) Voyager
Entertainment Holdings, Inc. ("Holdings"), incorporated under the laws of the
State of Nevada on May 2, 2002 (owned 100% by the Company).
The Company is currently a development stage enterprise reporting under the
provisions of Statement of Financial Accounting Standards ("SFAS") No. 7.
During April 2002, the Company changed its name from Dakota Imaging, Inc. to
Voyager Entertainment International, Inc. and adopted a new fiscal year-end of
December 31.
Going Concern:
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern, which contemplates the
realization of assets and the satisfaction of liabilities in the normal course
of business. The Company has no established source of revenue, incurred
significant losses since inception of $7,886,847 and used cash for operations of
$744,562 during the year ended December 31, 2003. The Company also has a working
capital deficit of $2,009,791 and a stockholders' deficit of $1,999,632 as of
December 31, 2003. These factors raise substantial doubt about the Company's
ability to continue as a going concern.
F-6
The Company has limited operations and is still in the development stage. The
Company will need to raise a substantial amount of capital in order to continue
its business plan. This situation raises substantial doubt about its ability to
continue as a going concern. The accompanying consolidated financial statements
do not include any adjustments relative to the recoverability and classification
of asset carrying amounts or the amount and classification of liabilities that
might result from the outcome of this uncertainty. Management is currently
initiating their business plan and is in the process of raising additional
capital (see Subsequent Events). Use of Estimates:
The preparation of consolidated financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
Fair Value:
Unless otherwise indicated, the fair values of all reported assets and
liabilities which represent financial instruments, none of which are held for
trading purposes, approximate carrying values of such amounts.
Reclassification:
Certain reclassifications have been made to the balances as of December 31, 2002
to conform to the December 31, 2003 presentation.
Comprehensive Income:
SFAS No. 130, "Reporting Comprehensive Income," establishes standards for the
reporting and display of comprehensive income and its components in the
financial statements. For the years ended December 31, 2003 and 2002, the
Company has no items that represent other comprehensive income and, accordingly,
has not included a Statement of Comprehensive Income in the financial
statements.
Financing Costs:
Financing costs consist of costs incurred to raise debt to finance its Voyager
project. These costs are amortized over the weighted term of the debt securities
using the interest method. Capitalized financing costs are evaluated on a
periodic basis to test for any impairment losses and charged to interest expense
during the period of evaluation.
Stock Based Compensation:
SFAS No. 123, "Accounting for Stock-Based Compensation," establishes and
encourages the use of the fair value based method of accounting for stock-based
compensation arrangements under which compensation cost is determined using the
fair value of stock-based compensation determined as of the date of grant and is
recognized over the periods in which the related services are rendered. The
statement also permits companies to elect to continue using the current
intrinsic value accounting method specified in Accounting Principles Board
("APB") Opinion No. 25, "Accounting for Stock Issued to Employees," to account
for stock-based compensation. The Company has elected to use the intrinsic value
based method and has disclosed the pro forma effect of using the fair value
based method to account for its stock-based compensation issued to employees.
For options granted to employees where the exercise price is less than the fair
value of the stock at the date of grant, the Company recognizes an expense in
accordance with APB 25.
For non-employee stock based compensation the Company recognizes an expense in
accordance with SFAS No. 123 and values the equity securities based on the fair
value of the security on the date of grant. For stock-based awards the value is
based on the market value for the stock on the date of grant and if the stock
has restrictions as to transferability a discount is provided for lack of
tradability.
F-7
Stock option awards are valued using the Black-Scholes option-pricing model. The
Company did not issue any Stock option rewards during the years ended December
31, 2003 and 2002.
Net Loss Per Share:
In accordance with SFAS No. 128, "Earnings Per Share," the basic loss per common
share is computed by dividing net loss available to common stockholders by the
weighted average number of common shares outstanding. Diluted loss per common
share is computed similar to basic loss per common share except that the
denominator is increased to include the number of additional common shares that
would have been outstanding if the potential common shares had been issued and
if the additional common shares were dilutive. There are 23,000,000 and
15,000,000 common stock equivalents outstanding which have not been included in
diluted earnings per share as their effect would be anti-dilutive for the years
ended December 31, 2003 and 2002, respectively. The common stock equivalent
shares outstanding are computed assuming full conversion of all preferred stock
during the respective periods.
Cash and Cash Equivalents:
Equivalents - For purposes of the statement of cash flows, cash equivalents
include all highly liquid debt instruments with original maturities of three
months or less which are not securing any corporate obligations.
Concentration - The Company maintains its cash in bank deposit accounts which,
at times, may exceed federally insured limits. The Company has not experienced
any losses in such accounts.
Property and Equipment:
Property and equipment are stated at cost. Depreciation is computed using the
straight-line method based on estimated useful lives from 5 to 7 years.
Expenditures for maintenance and repairs are charged to operations as incurred
while renewals and betterments are capitalized. Gains and losses on disposals
are included in the results of operations.
Advertising and Marketing Costs
The Company expenses costs of advertising and marketing as incurred. Advertising
and marketing expense for the years ended December 31, 2003 and 2002 was $6,061
and $4,223, respectively.
Segment Information:
The Company's management believes it operates in a single business segment; all
operations for the year ended December 31, 2003 and 2002 are domestic.
Income Taxes:
Prior to December 31, 2001, the Company reported its income taxes as a limited
liability company and, as such, reported its income as a partnership whereby
liability or taxes was that of the individual members rather than that of the
Company.
The Company now accounts for income taxes in accordance with SFAS No. 109,
"Accounting for Income Taxes." Deferred taxes are provided on the liability
method whereby deferred tax assets are recognized for deductible temporary
differences, and deferred tax liabilities are recognized for taxable temporary
differences.
Temporary differences are the differences between the reported amounts of assets
and liabilities and their tax bases. Deferred tax assets are reduced by a
valuation allowance when, in the opinion of management, it is more likely than
not that some portion or all of the deferred tax assets will be
F-8
realized. Deferred tax assets and liabilities are adjusted for the effects of
changes in tax laws and rates on the date of enactment.
Recent Accounting Pronouncements:
During April 2003, the FASB issued SFAS 149 - "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities", effective for contracts entered
into or modified after June 30, 2003, except as stated below and for hedging
relationships designated after June 30, 2003. In addition, except as stated
below, all provisions of this Statement should be applied prospectively. The
provisions of this Statement that relate to Statement 133 Implementation Issues
that have been effective for fiscal quarters that began prior to June 15, 2003,
should continue to be applied in accordance with their respective effective
dates. In addition, paragraphs 7(a) and 23(a), which relate to forward purchases
or sales of when-issued securities or other securities that do not yet exist,
should be applied to both existing contracts and new contracts entered into
after June 30, 2003. The Company does not participate in such transactions and
accordingly, did not have any effect of this new pronouncement on its financial
statements or results of operations.
During May 2003, the FASB issued SFAS 150 - "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity", effective for
financial instruments entered into or modified after May 31, 2003, and otherwise
is effective at the beginning of the first interim period beginning after June
15, 2003. This Statement establishes standards for how an issuer classifies and
measures certain financial instruments with characteristics of both liabilities
and equity. It requires that an issuer classify a freestanding financial
instrument that is within its scope as a liability (or an asset in some
circumstances). Many of those instruments were previously classified as equity.
Some of the provisions of this Statement are consistent with the current
definition of liabilities in FASB Concepts Statement No. 6, Elements of
Financial Statements. The Company did not participate in such transactions in
2003 and accordingly, did not have any effect of this new pronouncement on its
financial statements or results of operations.
In January 2003, the Financial Accounting Standards Board issued Interpretation
No. 46 (FIN-46), Consolidation of Variable Interest Entities, which was amended
in December 2003. FIN-46 clarifies the application of Accounting Research
Bulletin No. 51, Consolidated Financial Statements, to certain entities in which
equity investors do not have the characteristics of a controlling financial
interest or do not have sufficient equity at risk for the entity to finance its
activities without additional subordinated financial support from other parties.
It separates entities into two groups: (1) those for which voting interests are
used to determine consolidation and (2) those for which variable interests are
used to determine consolidation (the subject of FIN-46). FIN-46 requires an
investor with a majority of the variable interests (primary beneficiary) in a
variable interest entity (VIE) to consolidate the entity and also requires
majority and significant variable interest investors to provide certain
disclosures. The provisions of FIN-46 were effective immediately for all
arrangements entered into with new VIEs created after January 31, 2003. For
arrangements entered into with VIEs created before January 31, 2003, the
provisions of FIN-46 are effective at the end of the first reporting period
ending after March 15, 2004. The Company has reviewed and considered the
provisions of FIN-46 to determine whether it is the primary beneficiary of any
VIEs. The review did not identify any VIEs.
In December 2003, the FASB issued a revised SFAS No. 132, "Employers'
Disclosures about Pensions and Other Postretirement Benefits" which replaces the
previously issued Statement. The revised Statement increases the existing
disclosures for defined benefit pension plans and other defined benefit
postretirement plans. However, it does not change the measurement or recognition
of those plans as required under SFAS No. 87, "Employers' Accounting for
Pensions," SFAS No. 88, "Employers' Accounting for Settlements and Curtailments
of Defined Benefit Pension Plans and for Termination Benefits," and SFAS No.
106, "Employers' Accounting for Postretirement Benefits Other Than Pensions."
Specifically, the revised Statement requires companies to provide additional
disclosures about pension plan assets, benefit obligations, cash flows, and
benefit costs of defined benefit pension plans and other defined benefit
postretirement plans. Also, companies are required to provide a breakdown of
plan assets by category, such as debt, equity and real estate, and to provide
F-9
certain expected rates of return and target allocation percentages for these
asset categories. The Company has implemented this pronouncement and has
concluded that the adoption has no material impact to the financial statements.
(2) Property and equipment:
The cost of property and equipment at December 31, 2003 consisted of the
following:
Computer equipment $ 14,240
Less accumulated depreciation (4,081)
----------
$ 10,158
==========
Depreciation expense for the years ended December 31, 2003 and 2002 was
$3,403 and $678, respectively.
(3) Loans Payable:
Loans payable had no stated interest rate, were due on demand and
unsecured. Interest of approximately $109,157 has been accrued at an
estimated market interest rate of 8% and is included with the principal
balance. The original balance was $228,239 and the proceeds were received
and used for operating capital during the year ended December 31, 2002.
In March 2003, a claim of $1,460,000 was asserted by the lender. Although
management believed the claims were frivolous, due to the additional
resources needed by management to defend these claims and how it would
distract management's efforts from moving forward with the business plan,
a settlement agreement was consummated with the lender in August 2003..
The Company has agreed to pay a settlement amount of an additional
$650,000, without claiming any fault or wrong doing. As of December 31,
2003, the total obligation including loans of $228,239, settlement
obligation of $650,000 and accrued interest, of $109,157, amounted to
$987,396.The first half of this balance is payable at the closing of the
first round of project funding and the remaining balance is due at the
closing of any subsequent project funding.
(4) Line of Credit:
On November 19, 2002, the Company entered into a line of credit financing
agreement in the amount of $2,500,000. Advances under this line of credit
are based on achievement of certain milestones pursuant to the agreement.
Upon the receipt of funds, the Company was required to issue up to
1,500,000 shares of its common stock on a pro rata basis. The Company has
borrowed $605,000 against this line of credit and issued 1,500,000 shares
(300,000 shares were issued and accounted for during the year ended
December 31, 2002 and 1,200,000 common shares were issued and accounted
for in the current year) of its common shares as of December 31, 2003.
The balance payable under this line of credit was due on April 15, 2003
and is secured by all of the Company's assets. The line of credit bore
interest at the rate of 12% per annum (effective interest rate of 100%).
This line of credit has expired and no principal has been paid back.
Consequently, during the year ended December 31, 2003, the Company agreed
to pay 100% interest related to this line of credit. Interest of $605,000
has been accrued and included with the principal balance in the
accompanying consolidated financial statements. As of December 31, 2003,
the total obligation including loans of $605,000, and accrued interest of
$605,000, amounted to $1,210,000.
In addition, the Company also issued 350,000 shares of common shares as
finder's fees in 2002. Upon the receipt of additional funds, the Company
was required to issue up to 1,400,000 shares of its common stock. During
2003, the Company issued 1,400,000 shares of common stock under this
agreement. The fair market value of the 2,600,000 common stock shares
issued totaled $312,000, all of which has been accounted for as interest
expense in the accompanying
F-10
consolidated statement of operations. For consideration given in 2002
valued at $163,150, $50,000 was expensed as interest expense and the
unamortized balance of $113,150 was netted against the face amount of
the debt as of December 31, 2002. During 2003, $113,150 was amortized
and expensed as interest in the accompanying statement of operations.
(5) Related Party Transactions:
The Company leases office furniture and equipment from an entity under
the control of its officer-stockholders, Synthetic Systems, LLC, for a
monthly rate of $1,150 on a month to month basis. During the years ended
December 31, 2003 and 2002, the Company recognized an expense of $15,205
and $13,800 respectively, related to this lease.
During the year ended December 31, 2003, the Company issued 2,500,000 of
the Series B Preferred Stock Shares for total consideration valued at
$2,350,000, or $0.94 per share, to its officer-stockholders. The fair
value of the services received was determined based on the fair value of
the underlying trading common stock. Series B has a par value of $0.001,
each share of Series B preferred share may be converted at the request of
the holder into 2 shares of common stock, has preferential liquidation
privileges above Series A and common stock holders and has an
anti-dilution clause in the event of a reverse split. Each Series B
preferred share has 2 votes per common share.
During the year ended December 31, 2003, the Company and its board of
directors approved a bonus of $189,000 payable to Synthetic Systems, LLC,
an entity wholly owned by its Chief Executive Officer. In addition, the
Company also incurred an expense of $240,000 or $20,000 per month of
consulting fees, all of which has been paid to Synthetic Systems, LLC
throughout 2003. At December 31, 2003, accounts payable and accrued
expenses, related party consists of the $179,000 unpaid bonus
balance.
During February 2004, the Company advanced $300,000 in cash to Western
Architectural Services, LLC, an entity owned by an officer-stockholder
and director of the Company pursuant to an existing contract to design
and build a car for the Voyager project and conduct a feasibility study.
(6) Stockholders' Deficit:
Convertible Preferred Stock - Series A
--------------------------------------
The Series A convertible preferred stock carries the following rights
and preferences:
o 10 to 1 voting rights per share
o Each share has 10 for 1 conversion rights to shares of common
stock
o No redemption rights
During 2002, prior to the date of the Merger discussed in Note 1, the
Company issued 2,160,000 shares of convertible preferred stock as
consideration for cash and services, of which 660,000 shares were
immediately converted to shares of common stock, resulting in the
Company having 3,660,000 shares of common stock outstanding.
Effective February 8, 2002 the Company, as consideration for the
Merger, issued 3,660,000 shares of its Series A convertible preferred
stock in exchange for 100% of Voyager's outstanding common stock.
Additionally, simultaneously upon closing of the Merger 2,160,000
shares of the Series A convertible preferred stock immediately
converted into 21,600,000 shares of common stock, resulting in a
balance of 1,500,000 shares of convertible preferred stock remaining
outstanding. These amounts have been adjusted pursuant to reverse
merger accounting in the accompanying financial statements.
Immediately preceding the Merger, Dakota, the legal acquirer, had
11,615,000 shares of common stock outstanding.
F-11
Convertible Preferred Stock - Series B
The Series B convertible preferred stock carries the following rights
and preferences:
o 2 to 1 voting rights per share
o Par value of $0.001
o Each share has 2 for 1 conversion rights to shares of
common stock
o No redemption rights
o Preferential liquidation rights to Series A preferred
stock and common stock
o Anti-dilution clauses in the event of a reverse split
In June 2003, the Company sold 1,000,000 of the Series B Preferred
Stock Shares for total cash consideration of $100,000 to one investor
at $0.10 per share. The Company recognized a beneficial conversion
feature of $80,000 accounted for as a preferred stock dividend during
the year. Since these shares are immediately convertible into common
stock of the Company, pursuant to EITF 00-27 and EITF 98-5, the Company
recognized the dividend immediately.
In August 2003, the Company sold 500,000 of the Series B Preferred
Stock Shares for total cash consideration of $50,000 to one investor at
$0.10 per share. The Company recognized a beneficial conversion feature
of $50,000 accounted for as a preferred stock dividend during the year.
Since these shares are immediately convertible into common stock of the
Company, pursuant to EITF 00-27 and EITF 98-5, the Company recognized
the dividend immediately.
In December 2003, the Company issued 2,500,000 of the Series B
Preferred Stock Shares for total consideration valued at $2,350,000, or
$0.94 per share, to its officer-stockholders. The fair value of the
services received was determined based on the fair value of the
underlying trading common stock.
Common Stock Issuances
----------------------
On February 15, 2002 the Company sold 800,000 restricted shares of
common stock at a price of $0.50 per share for $400,000, which
represented the fair market value of the common stock on date of
issuance.
On April 5, 2002, the Company issued 200,000 restricted shares of
common stock in exchange for services performed totaling $200,000. The
fair market value of the common stock on the date of issuance totaled
$400,000. Therefore, the Company has recognized stock discount expense
of $200,000.
On April 5, 2002, the Company issued 125,000 restricted common shares
for Investor Relations Services. The shares were being held by the
Company in anticipation of executing a formal definitive agreement with
the service provider. On June 6, 2002 the Company cancelled the shares
due to an inability to reach an agreement with the service provider.
On May 30, 2002, the Company executed a Contractor Agreement with
Western Architectural Services, LLC ("WAL") whereby Western
Architectural will provide to be determined architectural services to
the Company for its Voyager Project to be located on the Las Vegas
Strip.
The Company issued 2,812,500 shares of restricted common stock to
Western Architectural in consideration for Western Architecture's
contract sum of $18,304,135 classified as deferred financing costs, to
be expensed as earned. As of December 31, 2003, no amounts have been
earned by WAL and accordingly, no amounts have been expensed. Although
he is now a related party, at the time of this transaction this
principal of WAL as not a related party.
F-12
During June 2002, the Company sold 50,000 restricted shares of common
stock at a price of $3.00 per share solely to accredited investors for
cash consideration totaling $150,000, which represents the fair market
value of the common stock on date of issuance.
On October 28, 2002, the Company entered into a professional
architectural services agreement with A.C.E Architect, Inc. in exchange
for 600,000 shares of preferred stock. The Company's stock must be
issued within 10 days of the agreement. In addition, the Company is
responsible for reimburse of expenses.
On November 19, 2002, the Company entered into a line of credit
financing in the amount of $100,000,000 in exchange for 650,000 shares
of common stock. The fair market value of the common stock on the date
of issuance totaled $163,150.
On December 9, 2002, the Company entered into a consulting agreement in
exchange for 325,000 shares of common stock. The fair market value of
the common stock on the date of issuance totaled $75,075.
In September 2003, the Company sold 769,222 shares of par value $.001
common stock for total cash consideration of $100,000 to one investor,
which represents the fair market value of the common stock on date of
issuance. Since the cash consideration received was from unrelated
parties, it was determined to best represent the fair market value of
the shares on the transaction date. The common stock was offered in
reliance upon the private offering exemptions contained in Sections
3(b) and 4(2) of the Securities Act of 1933, as amended, and Rule 506
of Regulation D promulgated thereunder.
In September 2003, the Company also issued 625,000 shares of restricted
common stock to two individuals for consulting services rendered. These
shares were valued at the fair market value of $0.16 per share or total
compensation cost of $100,000.
In December 2003, the Company sold 5,961,538 shares of its $.001 par
value common stock for total cash consideration of $775,000 to five
investors. One investor also entered into an agreement to purchase
1,346,154 additional shares of common stock for cash proceeds of
$175,000. Subsequent to December 31, 2003, this investor had acquired
961,540 common shares for total proceeds of $125,000. Since the cash
consideration received was from unrelated parties, it was determined to
best represent the fair market of the shares on the transaction date.
The common stock was offered in reliance upon the private offering
exemptions contained in Sections 3(b) and 4(2) of the Securities Act of
1933, as amended, and Rule 506 of Regulation D promulgated thereunder.
In December 2003, the Company also issued 1,163,000 shares of
restricted common stock to two individuals for consulting services
rendered. These shares were valued at the fair market value of $0.73
per share for total compensation of $848,990.
Stock Option Plan
-----------------
The Company's shareholders approved the 2002 Stock Option Plan on April
2, 2002 at the Company's annual meeting. The plan authorizes the
Company to issue 5,000,000 shares of common stock for issuance upon
exercise of options.
The plan is intended to encourage directors, officers, employees and
consultants of the Company to acquire ownership of Common Stock.
Officers (including officers who are members of the Board of
Directors), directors (other than members of the Stock Option Committee
(the "Committee") to be established to administer the Stock Option
Plan) and other employees and consultants of the Company and its
subsidiaries (if established) will be eligible to receive options under
the planned Stock Option Plan. The Committee will administer the Stock
Option Plan and will determine those persons to whom options will be
granted, the number of options to be granted, the provisions applicable
to each grant and the time periods during which the options may be
exercised. No options may be granted more than ten years after the date
of the adoption of the Stock Option Plan.
F-13
Unless the Committee, in its discretion, determines otherwise,
non-qualified stock options will be granted with an option price equal
to the fair market value of the shares of Common Stock to which the
non-qualified stock option relates on the date of grant. In no event
may the option price with respect to an incentive stock option granted
under the Stock Option Plan be less than the fair market value of such
Common Stock to which the incentive stock option relates on the date
the incentive stock option is granted. Each option granted under the
Stock Option Plan will be exercisable for a term of not more than ten
years after the date of grant. Certain other restrictions will apply in
connection with this Plan when some awards may be exercised.
In the event of a change of control (as defined in the Stock Option
Plan), the date on which all options outstanding under the Stock Option
Plan may first be exercised will be accelerated. Generally, all options
terminate 90 days after a change of control. As of December 31, 2003,
no options have been issued under this plan.
(7) Commitments and Contingencies:
During January 2002, the Company entered into a month-to- month office
lease totaling $2,350 per month.
On June 18, 2003, the Company signed a joint venture Memorandum of
Understanding with Bennett Realty Group where Bennett Realty will
supply up to 15 acres of land located in Euless, Texas, also known as
the Dallas Fort Worth Metroplex. The land is located adjacent to the
Dallas Fort Worth Airport. A Voyager Wheel will be part of a 200 acre
master planned community that will feature a lake, housing and retail.
Voyager Dallas will be the featured attraction geared to draw guests to
the community. As of February 18, 2004, no definitive agreements have
been signed.
Contingent Liability
--------------------
During the year ended December 31, 2002, an officer of the Company who
lacked appropriate authority offered approximately 16.4 million options
to investors at an exercise price of $0.001. There were no written
agreements and Board approval was required for such transactions, and
hence, the officer did not have the authority to grant the options.
These options were contingently issuable upon the successful completion
of debt financing of amounts ranging from $100 million to $300 million,
unrelated to the above. The Company and its Board of Directors have
denied any liability for the issuance of these options, plans to
vigorously defend its position and accordingly, no amount has been
accrued for this contingency in the accompanying consolidated financial
statements. These disputed options expired in August 2003.
(8) Income Taxes:
The reconciliation of the effective income tax rate to the federal
statutory rate for the years ended December 31, 2003 and 2002 is as
follows:
2003 2002
Federal income tax rate 35.0% 35.0%
Accrued expenses (7.0) -
Effect of net operating loss (28.0)% (35.0)%
----- -----
Effective income tax rate 0.0% 0.0%
----- -----
F-14
Deferred tax assets and liabilities reflect the net effect of temporary
differences between the carrying amount of assets and liabilities for
financial reporting purposes and amounts used for income tax purposes.
Significant components of the Company's deferred tax assets and
liabilities at December 31, 2003 are as follows:
Loss carry forwards $ 2,125,000
Accrued expenses 575,000
Less valuation allowance (2,700,000)
------------
$ -
------------
At December 31, 2003, the Company has provided a valuation allowance
for the deferred tax asset since management has not been able to
determine that the realization of that asset is more likely than not.
The net change in the valuation allowance for the years ended December
31, 2003 and 2002 were an increase of approximately $2,100,000 and
$600,000, respectively. Net operating loss carry forwards start to
expire in 2021.
(9) Subsequent Events:
Subsequent to December 31, 2003, the Company sold 961,540 shares of par
value $.001 common stock for total cash consideration of $125,000 to
one investor pursuant to a stock purchase agreement from December 2003.
The common stock was offered in reliance upon the private offering
exemptions contained in Sections 3(b) and 4(2) of the Securities Act of
1933, as amended, and Rule 506 of Regulation D promulgated thereunder.
During February 2004, the Company sold 750,000 shares of par value
$.001 common stock for total cash consideration of $300,000 to two
investors. The common stock was offered in reliance upon the private
offering exemptions contained in Sections 3(b) and 4(2) of the
Securities Act of 1933, as amended, and Rule 506 of Regulation D
promulgated thereunder.
During February 2004, an officer-stockholder converted 500,000 Series A
Preferred shares into 5,000,000 common shares of the Company. Series A
has a par value of $0.001, each share of Series A preferred share maybe
converted at the request of the holder into 10 shares of common stock.
During February 2004, the Company also issued 725,000 shares of
restricted common stock to three consultants for services rendered.
These shares were valued at the fair market value ranging from $0.75 to
$0.80 per share for total consideration of $558,750.
During February 2004, the Company advanced $300,000 in cash to Western
Architectural Services, LLC, an entity owned by an officer-stockholder
and director of the Company pursuant to an existing contract to design
and build a car for the Voyager project and conduct a feasibility
study.
F-15