UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended September 30, 2003
VisiJet, Inc.
(Exact name of small business issuer as specified in its charter)
Delaware 0-256111 33-0838660
(State of Incorporation) (Commission (IRS Employer
File Number) Identification No.)
192 Technology Drive, Suite Q
Irvine, California 92618
(Address of principal executive offices)
Issuer's telephone number, including area code:
949-450-1660
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common stock, $.001 par value
(Title of class)
As of November 10, 2003 there were 21,588,745 shares of the registrant's
Common Stock outstanding.
INDEX
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited) 3
Balance Sheet at September 30, 2003 3
Statements of Operations for the Three Months and Nine
Months ended September 30, 2003 and 2002 and the period
February 2, 1996 (inception) to September 30, 2003 4
Statements of Cash Flows for the Nine Months ended
September 30, 2003 and 2002 and the period February 2, 1996
(inception) to September 30, 2003 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis or Plan of Operation 12
Item 3. Controls and Procedures 15
Item 4. Defaults Upon Senior Securities 15
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 16
Item 2. Changes in Securities 17
Item 5. Other Information 17
Item 6. Exhibits and Reports on Form 8-K 17
2
Visijet, Inc.
(formerly Ponte Nossa Acquisition Corp.)
(A development stage company)
Balance Sheet
September 30, 2003
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 119,904
Prepaid expenses 104,667
------------
Total current assets 224,571
Property and equipment, net 98,885
------------
Total assets $ 323,456
============
LIABILITIES AND SHAREHOLDER'S DEFICIT
Current liabilities:
Accounts payable $ 725,239
Compensation settlement agreement - current portion 111,043
Accrued interest 106,043
Accrued expenses 130,469
Royalty payable (see note 4) 45,000
Notes payable to related parties (see note 4) 617,265
Notes payable - current portion (see note 4) 37,061
------------
Total current liabilities 1,772,120
Compensation settlement agreement, net of current portion 36,872
Notes payable to related parties, net of current portion (see note 4) 88,384
------------
Total liabilities 1,897,376
------------
Shareholders' deficit:
Common stock, 50,000,000 shares authorized, $.001 par value,
21,087,670 shares issued and outstanding 21,088
Additional paid in capital 7,108,148
Deficit accumulated during development stage (8,703,156)
------------
Shareholders' deficit (1,573,920)
------------
Total liabilities and shareholders' deficit $ 323,456
============
The accompanying notes are an integral part of these financial statements
3
Visijet, Inc.
(formerly Ponte Nossa Acquisition Corp.)
(A development stage company)
Statements of Operations
(Unaudited)
For the period
Three months Three months Nine months Nine months February 2, 1996
ended ended ended ended (inception) to
Sept 30, 2003 Sept 30, 2002 Sept 30, 2003 Sept 30, 2002 Sept 30, 2003
Interest income $ -- $ -- $ 455 $ -- $ 455
---------------------------------------------------------------------------------
Operating expenses:
General and administrative expenses 680,639 186,551 2,054,912 452,029 3,887,044
Research & development expenses 559,098 67,022 876,878 296,896 4,478,628
---------------------------------------------------------------------------------
Total operating expenses 1,239,737 253,573 2,931,790 748,925 8,365,672
---------------------------------------------------------------------------------
Loss from operations (1,239,737) (253,573) (2,931,335) (748,925) (8,365,217)
Other expense:
Interest expense (5,944) (21,940) (45,058) (62,638) (353,055)
Gain on Debt Restructure 90,303 -- 90,303 -- 90,303
Loss on judgment -- -- -- -- (21,483)
Loss on disposal of assets -- -- -- -- (48,104)
---------------------------------------------------------------------------------
Total other expense 84,359 (21,940) 45,245 (62,638) (332,339)
---------------------------------------------------------------------------------
Loss before provision for taxes (1,155,378) (275,513) (2,886,090) (811,563) (8,697,556)
Provision for Income taxes -- -- -- -- 5,600
---------------------------------------------------------------------------------
Net loss $ (1,155,378) $ (275,513) $ (2,886,090) $ (811,563) $ (8,703,156)
=================================================================================
Net loss per common share - basic and diluted (0.056) $ (0.02) (0.154) $ (0.05)
Basic and diluted weighted average 20,468,856 15,900,691 18,707,993 15,900,691
number of common shares outstanding
The accompanying notes are an integral part of these financial statements
4
Visijet, Inc.
(formerly Ponte Nossa Acquisition Corp.)
(A development stage company)
Statements of Cash Flows
(Unaudited)
For the period
Nine months February 2, 1996
ended (inception) to
September 30, September 30,
2003 2003
Cash flows from operating activities
Net loss $(2,886,090) $(8,703,156)
Adjustment to reconcile net loss to net
cash used by operating activities:
Depreciation 13,992 219,313
Loss from disposal of fixed assets -- 48,104
Common stock issued for finders fees 1,201 103,558
Gain from Debt Restructure (90,303) (90,303)
Changes in assets and liabilities: --
Prepaid expenses (104,667) (104,667)
Accounts payable and other accrued expenses 528,254 725,239
Income taxes payable -- 800
Compensation settlement agreement (102,085) 147,915
Royalties payable (15,000) 45,000
Accrued judgment -- 129,669
Accrued interest 36,922 197,759
-----------------------------
Net cash used by operating activities (2,617,776) (7,280,769)
-----------------------------
Cash flows from investing activities
Acquisition of property and equipment (65,434) (387,944)
-----------------------------
Net cash used in investing activities (65,434) (387,944)
-----------------------------
Cash flows from financing activities
Advance from related party 231,725 1,823,022
Repayment of advances from related parties (166,156) (193,638)
Proceeds from issuance of common stock, net 2,641,881 3,606,442
Proceeds from issuance and conversion of preferred stock, net -- 2,458,088
Cash acquired in reverse merger 30,693 30,693
Interest converted to equity 33,997 33,997
Merger adjustments to notes payable 30,013 30,013
-----------------------------
Net cash provided by financing activities 2,802,153 7,788,617
-----------------------------
Net increase in cash 118,944 119,904
Cash, beginning of period 960 --
-----------------------------
Cash, end of period $ 119,904 $ 119,904
=============================
Supplemental disclosures of cash flow information
Conversion of Debt to Equity 1,398,677
Conversion of Series A preferred stock to common stock 550,000
Conversion of Series B preferred stock to common stock 1,908,088
Fair value of net liabilities assumed at date of reverse merger 189,458
The accompanying notes are an integral part of these financial statements
5
VisiJet, Inc.
(A development stage company)
(formerly Ponte Nossa Acquisition Corp.)
Notes to financial statements
NOTE 1 - NATURE OF OPERATIONS
FORWARD LOOKING STATEMENTS
This report contains forward-looking statements that are based on our
beliefs as well as assumptions made by and information currently available to
us. When used in this report, the words "believe," "plan," "expect,"
"anticipate," "estimate," "intends," and similar expressions are intended to
identify forward-looking statements. Such statements are subject to certain
risks, uncertainties and assumptions. Should one or more of those risks or
uncertainties materialize, or should underlying assumptions prove incorrect,
actual results may vary materially from those anticipated, estimated, or
projected. We caution potential investors not to place undue reliance on any
such forward-looking statements, all of which speak only as of the date made.
BASIS OF PRESENTATION
The accompanying financial statements are unaudited and do not include
certain information and disclosures required by accounting principles generally
accepted in the United States of America for complete financial statements.
However, in the opinion of management, all adjustments, consisting only of
normal recurring adjustments considered necessary to present fairly VisiJet,
Inc.'s ("the Company") financial position and results of operations, have been
included. These interim financial statements should be read in conjunction with
the financial statements and related notes included in the Company's Annual
Report on Form 10-KSB for the year ended December 31, 2003. Results for interim
periods are not necessarily indicative of trends or of results for a full year.
BACKGROUND
VisiJet, Inc. develops and markets surgical devices for the field of
ophthalmology. Its initial products are based on the application of waterjet
technology to LASIK and cataract surgery. Potential customers include
physicians, surgical centers and hospitals.
VisiJet's predecessor ("Old VisiJet") was incorporated on February 2,
1996, to develop and distribute medical products.
In 1998, Old VisiJet, then a wholly owned subsidiary of SurgiJet, Inc.
was spun off from SurgiJet, Inc. and SurgiJet, Inc. distributed the shares of
Old Visijet common stock to its shareholders. Upon the completion of this
distribution, SurgiJet, Inc. had no further ownership interest in Old Visijet.
Certain operating assets and liabilities were assumed by Old Visijet in
connection with this spin-off.
In December 2002 Old VisiJet entered into a merger agreement with Ponte
Nossa Acquisition Corp., a Delaware corporation that had been incorporated as a
blank check company in 1997. The agreement called for the merger of the two
companies into a single company through the merger of an acquisition subsidiary,
6
VisiJet Acquisition Corporation, into Old VisiJet. The merger was consummated on
February 11, 2003, and immediately thereafter, Old VisiJet was merged into Ponte
Nossa Acquisition Corp., and the surviving company's name was changed to
"VisiJet, Inc."
Under the terms of the Merger Agreement, 8,600,000 shares of the
Company's Common Stock were issued to the shareholders of Old Visijet. Also,
3,528,481 shares of Common Stock, and warrants to purchase an additional
4,528,481 shares of Common Stock, were issued to certain investors for cash
concurrently with the consummation of the merger. Since this transaction
resulted in the shareholders of Old VisiJet acquiring a majority of the
outstanding shares of the Company, for financial reporting purposes the business
combination was accounted for as a reverse acquisition (i.e. a recapitalization
in which Old VisiJet is treated as the acquiror for financial accounting
purposes). As a result of the merger, the Company is continuing the business of
Old Visijet. Reference is made to the Company's Report on Form 8-K dated
February 11, 2003, as amended on April 23, 2003, and the Exhibits thereto.
The amounts reflected in the statement of operations and statement of
cash flows for the period ended September 30, 2003 have been restated to account
for the merger transactions between Ponte Nossa and VisiJet, Inc. that occurred
on February 11, 2003, as a reverse acquisition. The restated amounts, accounting
for the transaction as a reverse merger, reflect the operations and cash flows
of Old VisiJet and those of Ponte Nossa as if the acquisition had occurred
during the first business day of the operating period reported.
GOING CONCERN
The Company has incurred net operating losses since inception, has
generated no revenue, and has working capital and shareholders' equity deficits.
The Company is likely to incur substantial operating losses as it continues its
research and development efforts until such time, if ever, as product sales,
royalties, license and other fees can generate sufficient revenue to fund its
continuing operations. The ability of the Company to continue as a going concern
is dependent on obtaining additional capital and financing until it is operating
at a profitable level. The Company intends to seek additional capital through
debt or equity offerings. There can be no assurance that any of these fundings
will be consummated in the necessary time frames needed for continuing
operations on terms favorable to the Company. If adequate funds are not
available in the future, the Company will be required to significantly curtail
its operating plans. The financial statements do not include any adjustments
that might be necessary if the Company is unable to continue as a going concern.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
RESEARCH AND DEVELOPMENT COSTS
Research and development costs are charged to expense as incurred.
Certain corporate overhead expenses, such as professional fees, salaries, rent
and travel are allocated to research and development based on estimates made by
management.
7
DEPRECIATION
Depreciation of property and equipment is computed using the
straight-line method over estimated useful lives ranging from three to five
years.
USE OF ESTIMATES
The preparation of the 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 amounts
reported in the financial statements and accompanying notes. Actual results
could differ from those estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments consist primarily of cash, prepaid
expenses, accounts payable, and notes payable. The Company believes the fair
value of financial instruments approximate book value as of September 30, 2003.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In December 2002, FASB issued SFAS No. 148 "Accounting for Stock-Based
Compensation, Transition and Disclosure" ("SFAS 148"). SFAS 148 amends the
disclosure requirements of SFAS No. 123 "Accounting for Stock-Based
Compensation" ("SFAS 123") to require prominent disclosures in both interim and
annual financial statements about the method of accounting for stock-based
employee compensation and the effect of the method used on reported results.
SFAS 148 also amends SFAS 123 to provide alternative methods of transition for a
voluntary change to the fair value based method of accounting for stock-based
employee compensation. The Company will commence quarterly footnote disclosure
of the fair value based method of accounting for stock-based employee
compensation beginning at such time that a plan for such compensation is
implemented. As the Company has decided not to voluntarily adopt the SFAS 123
fair value method of accounting for stock-based employee compensation, the new
transition alternatives of SFAS 148 will not have a material impact on its
financial position or results of operations.
NOTE 3 - PROPERTY AND EQUIPMENT
At September 30, 2003, property and equipment consist of:
Computer and test equipment $ 47,651
Furniture and fixtures 48,744
Trade show equipment 47,002
Assets under construction 6,938
------------
150,335
Less: Accumulated depreciation (51,450)
------------
$ 98,885
============
Depreciation expense for the nine months ended September 30, 2003
amounted to $13,992 and amounted to $219,313 between inception and September 30,
2003. Assets under construction are comprised of tooling equipment for
Hydrokeratome production.
8
NOTE 4 - NOTES PAYABLE
OTHER
Three individuals who performed services for the Company accepted
promissory notes for those services. As of September 30, 2003, the aggregate
principal amount outstanding for these notes was $37,061. Accrued interest on
these notes totaled $1,712 at September 30, 2003.
ROYALTY PAYABLE
During October 1998, the Company entered into certain Trademark,
Technology and Patent License Agreements with SurgiJet, Inc. for the exclusive
rights to pursue development, regulatory approval, and manufacture of waterjet
technologies in the ocular filed. These agreements require minimum payments of
$60,000 and royalties earned on Net Sales as follows: 7% of the Net Sales until
such time as cumulative Net Sales have equaled $400 million over the term of
this Agreement and 5% of Net Sales thereafter, all for such period of time equal
to the duration of the license contemplated under this Agreement. All Running
Royalties shall be paid by the Company on or before 45 days after March 31st,
June 30th, September 30th and December 31st of each calendar year.
The Company incurred $60,000 in royalty expenses for the year ended
December 31, 2002 and has accrued $45,000 as of September 30, 2003.
SHAREHOLDERS
During 2002, Old Visijet entered into a promissory note with Lance
Doherty, a shareholder of Old Visijet, for a principal sum of $19,000, plus
interest to accrue at a rate of 10% per annum. Total accrued interest on the
note is $5,253 at September 30, 2003. Pursuant to the merger agreement, the loan
is due and payable upon successful completion of an independent audit of Old
VisiJet's 2002 financial statements, verifying the amount due. The actual amount
due to Mr. Doherty is currently the subject of negotiation with the involved
parties.
In addition, the Company recorded as a liability certain expenses paid
by Rex Doherty in the amount of $2,967 plus interest accrued at a rate of 10%
per annum. Total accrued interest as of September 30, 2003 was $218. The actual
amount due to Mr. Doherty is currently the subject of negotiation with the
involved parties.
FINANCIAL ENTREPRENEURS, INC. ("FEI")
Pursuant to an agreement entered into in connection with the merger,
the Company entered into a note agreement with FEI, a significant shareholder of
the Company. The note is due on demand and bears no interest. The total amount
due at December 31, 2002 was $345,000. At the time of the merger, FEI converted
the promissory note held by it into 378,997 shares of the Company's common stock
at a conversion rate of $1.00 per share. There was no beneficial conversion
feature on this note.
9
FEI also funded certain expenditures of the Company prior to the
acquisition period. The Company entered into a promissory note agreement with
FEI on April 14, 2002 for such loan amounts, bearing an interest rate of 7.5%
per annum. As of September 30, 2003, the aggregate loan amount was $193,163 and
accrued interest was $23,365.
SURGIJET, INC.
On October 23, 1998, Old Visijet issued a demand promissory note in the
amount of $400,000 in favor of SurgiJet, Inc., a company then related through
common shareholders. Interest accrued on the unpaid principal at a variable
interest rate based on the prime rate totaling $139,955 on February 11, 2003. A
replacement note was executed on February 11, 2003 to establish payment
requirements and to increase the interest rate to 10% per annum. Under the new
note, both the payment schedule and interest rate were modified which resulted
in $449,652 of combined debt and interest payable. The first payment of $30,000
was due on February 11, 2003 with equal monthly installments of %15,000,
including interest on the first of each month, until paid in full. As a result
of the modifications from the replacement note, the Company recorded a $90,303
gain on the difference between the total interest expense on the new note of
$49,652 and the total accrued interest of $139,955 from the old note. The
Company will continue to amortize the remaining $49,652 of accrued interest
expense as payments are made on the note. At September 30, 2003 the principal on
this note was $355,000 as a result of payments made as described above. A
portion of these notes, $88,384, is classified as long-term debt.
The validity of the underlying note, as well as the replacement note,
is disputed by the Company, which has commenced negotiations with SurgiJet, Inc.
on the disposition of the matter.
DENTAJET, INC.
During 2002, Old Visijet entered into a promissory note for a principal
sum of $91,000, plus interest at the rate of 10% per annum with DentaJet Inc., a
Nevada corporation ("DentaJet"), then related through common shareholders.
DentaJet continued to provide funding in 2003 and 2002 of $2,000 and
$70,000, respectively, totaling an aggregate loan amount of $163,000. Loan
payments were made against this note in 2002 totaling $27,482 leaving an
outstanding principal balance at September 30, 2003 of $135,518. Accrued
interest on this note totaled $20,710 at September 30, 2003. Pursuant to the
merger agreement, the loan is due and payable upon successful completion of an
independent audit of Old VisiJet's 2002 financial statements, verifying the
amount due. The actual amount due to DentaJet is currently the subject of
negotiation with the involved parties.
NOTE 5 - COMMITMENTS
OPERATING LEASES
The Company's primary facility is leased through a property management
group. Rent expense was $59,597 for the nine months ended September 30, 2003.
10
On April 20, 2003, the Company expanded its facility to include an area
in the proximity to the rear of the building, increasing the leased area to
approximately 5,127 square feet. The Company moved its administrative staff to
this area, freeing up space in its existing facility to house R&D and
operations. Monthly rent increased by $2,420, for a total of $7,600 per month.
Rent amounts include common area charges.
On May 12, 2003 the Company entered into a 5 year lease agreement for a
copy machine with monthly payments of $264.
NOTE 6 - SHAREHOLDERS' EQUITY
On February 11, 2003, as a result of the merger with Old Visijet,
12,128,481 shares of the Company's common stock were issued in exchange for all
the shares of Old VisiJet's common stock, including shares of Series A and B
Preferred Stock that were converted into common stock immediately prior to the
merger. In addition, warrants to purchase an additional 4,528,481 shares of
common stock were issued to certain investors concurrently with the consummation
of the merger.
Pursuant to an agreement entered into in connection with the merger,
FEI converted a promissory note held by it into 378,997 shares of common stock
at a conversion rate of $1.00 per share. Also, FEI agreed to cancel 7,957,000
shares of the Company's common stock owned by it, and the Company issued FEI a
five year warrant to purchase 1,500,000 shares of common stock at an initial
exercise price of $5.00 per share. Also, pursuant to the same agreement, the
Company issued to Laurence M. Schreiber, its Secretary, Treasurer and Chief
Operating Officer, a five-year warrant to purchase 25,000 shares of its common
stock at an exercise price of $3.00 per share, and issued to Thomas F. DiMele,
its former President, a five year warrant to purchase 25,000 shares of its
common stock at an exercise price of $3.00 per share.
In February 2003, the Company issued 211,267 shares of common stock to
Randal A. Bailey, its President and Chief Executive Officer, and Larry L. Hood,
its Chief Engineer, in satisfaction of unpaid salary. See Note 7 below for
further details.
During the post-merger period of the quarter ending March 31, 2003,
private placements by the Company raised $1,016,000 net of offering expenses and
the investors received 2,104,511 shares of common stock and five year warrants
to purchase 2,104,511 shares of common stock at varying prices ranging from
$2.50 to $3.25 per share depending upon date of issuance. The number of shares
issuable and the exercise price of the warrants may be subject to adjustment to
reflect changes in the market price of the common stock during the offering
period.
During the quarter ended June 30, 2003 the Company completed private
placement offerings with several investors. The private placements raised
$725,000 net of offering expenses, and the investors received 758,333 shares of
common stock and five year warrants to purchase 758,333 shares of common stock
at varying prices ranging from $2.25 to $3.25 per share, depending upon date of
issuance. The number of shares issuable and the exercise price of the warrants
may be subject to adjustment to reflect changes in the market price of the
common stock during the offering period.
11
On June 1, 2003, the Company adjusted prior private placements that
were placed at rates higher than $1.00 per share for common stock and greater
than $2.25 per warrant based on the average market price preceding those
placements. This adjustment affected seven investors, resulting in an additional
182,500 shares purchased through private placements during 2003 and an
additional 182,500 warrants priced at $2.25. If this change had occurred during
the quarter ended March 31, 2003, the basic and diluted weighted average shares
would have increased to 14,236,714 from 14,171,631 or an increase of 65,083
shares. This change in stock ownership did not materially impact the earnings
per share for first quarter 2003.
During the quarter ended September 30, 2003, the Company completed
private placement offerings with several investors netting $900,880 for 932,500
shares of common stock and five year warrants to purchase 932,500 shares of
common stock at an exercise price of $2.25 per share. The number of shares
issuable and the exercise price of the warrants may be subject to adjustment to
reflect changes in the market price of the common stock during the offering
period.
For the nine months ended September 30, 2003, private placements raised
$2,641,881 net of offering expenses, which includes $564,000 provided by private
venture capital investors completing their initial round of financing of
$1,125,000. The private placements received 2,205,000 shares of common stock and
five year warrants to purchase 2,205,000 shares of common stock at an exercise
price of $2.25. The investors received 3,528,480 shares of common stock and five
year warrants to purchase 4,528,480 shares of common stock at an exercise price
$1.00 per share increasing by $0.50 per year. The number of shares issuable and
the exercise price of the warrants may be subject to adjustment to reflect
changes in the market price of the common stock during the offering period.
NOTE 7 - COMPENSATION SETTLEMENT AGREEMENTS
On November 4, 2002, Old Visijet entered into agreements with Randal A.
Bailey, its President and Chief Executive Officer, and Larry Hood, its Director
of Engineering, to pay for consulting services previously rendered by them. The
total amount due related to these agreements at November 4, 2002 was $700,000,
and is to be paid as follows: $250,000 is payable over one to two years in
installments, at a 3.5% annual interest rate, and the remaining $450,000 was
converted into 211,267 shares of common stock of the Company, effective on the
date of the merger. At September 30, 2003, the balance on these notes was
$147,915, including $5,132 of accrued interest. A portion of these notes,
$36,872, is classified as long-term debt.
ITEM 2. Management's Discussion and Analysis or Plan of Operation.
VisiJet, Inc., formerly known as Ponte Nossa Acquisition Corp. (the
"Company" or "VisiJet"), is a Delaware corporation originally incorporated as a
blank check company on April 21, 1997. It is the result of a merger with
VisiJet, Inc., a California corporation ("Old VisiJet"), which was consummated
in 2003. Immediately following the merger, Old VisiJet was merged into Ponte
Nossa Acquisition Corp., and the surviving company's name was changed to
"VisiJet, Inc.". The Company resumed regular operations after the merger.
12
THREE MONTHS ENDED SEPTEMBER 30, 2003 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 2002
The Company had no sales revenues to report for the quarters ended
September 30, 2003 and 2002. The net loss for the second quarter of 2003 was
$1,155,378, compared to $275,513 in the third quarter of 2002. The significantly
larger loss in 2003 resulted principally from higher than expected legal and
consulting expenses incurred in completing the merger, increased general and
administrative expense and salaries, and research and development expenses as
the Company moves to commercialize its products following the merger.
General and administrative expenses increased to $680,639 in the third
quarter of 2003 from $186,551 in the third quarter of 2002. The increase is due
principally to administrative and salary expenses, legal and accounting fees,
and other costs associated with the acquisition and merger with Old VisiJet.
Research and development expenses totaled $559,098 in the third quarter
of 2003, compared to $67,022 in the third quarter of 2002. The increase is
primarily due to additional research and development activity that had been
deferred for lack of funding, but has resumed with the funding available
immediately after the merger and associated financing.
The Company reported a gain on Debt Restructure of $90,303 as a result
of the modification of terms for the interest on the old SurgiJet note. The
accrued interest on the old note at February 11, 2003 was $139,955. As a result
of the replacement note, the Company recorded a $90,303 gain on the difference
between total interest expense of $49,652 on the new note and total accrued
interest of $139,955 from the old note. The Company will continue to amortize
the remaining $49,652 of the accrued expense as the note is paid down according
to the new terms.
NINE MONTHS ENDED SEPTEMBER 30, 2003 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
2002
The Company had no sales revenues to report for the nine months ended
September 30, 2003 and 2002. The net loss year to date for 2003 was $2,886,090
compared to $811,563 during the same period for 2002. The significantly larger
loss in 2003 resulted principally from increased general and administrative and
salary expenses associated with operating the Company immediately after the
merger, higher legal and consulting expenses incurred in completing the merger,
and increased research and development expenses as the Company moves to
commercialize its products following the merger.
General and administrative expenses increased to $2,054,912 for the
nine months of 2003 compared to $452,029 during the same period for 2002. The
increase is due principally to administrative and salary expenses, legal and
accounting fees, and costs associated with the acquisition and merger with Old
VisiJet.
Research and development expenses totaled $876,878 for the first nine
months of 2003, compared to $296,896 for the same period last year. The increase
is primarily due to additional research and development activity that had been
13
deferred for lack of funding, but has resumed with the funding available
immediately after the merger and associated financing.
The Company reported other revenue from Debt Restructure of $90,303 as
described above in the three months results.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 2003, the Company had cash and cash equivalents of
$119,904. The principal source of liquidity has been sales of securities.
Management anticipates that additional capital will be required to finance the
Company's operations. The Company funded its operations during the nine months
of 2003 through a series of private placement raising $2,641,881 net of offering
expenses, which includes $564,000 provided by private venture capital investors
completing their initial round of financing of $1,125,000.
The Company funded its operations during the third quarter of 2003
through a series of private placements, raising $900,880, net of offering
expenses.
The Company believes that available proceeds from private placements,
will be sufficient to finance the Company's operations. However, the Company has
no other commitments for financing, and there can be no assurance that such
financing will be available or that the Company will not encounter unforeseen
difficulties that may deplete its capital resources more rapidly than
anticipated. Also, the Company may not be able to generate revenues from
operations during the next quarter.
As of September 30, 2003, the Company had an accumulated deficit of
$8,703,156. It can be expected that the future operating results will continue
to be subject to many of the problems, expenses, delays and risks inherent in
the establishment of a developmental business enterprise, many of which the
Company cannot control.
PLAN OF OPERATION
The Company plans to continue in the development and marketing of
ophthalmic surgery products based on applications of the waterjet technology,
designed to result in faster, safer and more efficacious surgery in the two
largest surgical markets in the world, laser eye surgery and cataract surgery.
Over the next two years, the Company plans to conduct the following product
research and development activities:
1). HydroKeratome
- a corneal cutting device that produces a bladeless
flap cut for the LASIK procedure resulting in a safer
more accurate cut.
2). Pulsatome
- an emulsification device for the quick and safe
removal of a full range of cataract hardnesses, with
a lower cost per procedure and requiring minimal
technical expertise.
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3). HydroRefractor
- a potential replacement for the excimer laser, to
produce lamellar flaps and "power cuts" for vision
correction using waterjet technology.
4). Continuing patent development and research on other companies
that offer complements and extensions of ophthalmic surgery
product line.
CAUTIONARY FACTORS THAT MAY AFFECT FUTURE RESULTS
Additional Financing
The Company will require additional financing to achieve growth in
operations. The company is in the process of seeking additional capital through
the private placement of common stock to accredited investors. The purpose of
the offering is to fund continuing research and development, purchase new
equipment, and provide working capital.
Technological Change
If the Company fails to keep pace with technological advances in our
industry or if the Company pursues technologies that do not become commercially
acceptable, it could result in the need to change the focus of our research and
development and product strategies and could disrupt our business.
Item 3. Controls and Procedures.
Under the supervision and with the participation of our Chief Executive
Officer and Principal Accounting Officer, the Company conducted an evaluation of
our disclosure controls and procedures, as such term is defined under Rule
13a-14(c) promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), within 90 days of the filing date of this report. Based on this
evaluation, our Chief Executive Officer and the Principal Accounting Officer
concluded that the Company's disclosure controls and procedures are effective.
Disclosure controls and procedures are designed to ensure that information
required to be disclosed in reports under the Exchange Act are processed and
reported within the time periods specified by law.
Other than as described above, there have been no significant changes
in our internal controls or in other factors that could significantly affect
these controls.
Item 4. Defaults upon Senior Securities
See Part II. Other Information, Item 1. Legal Proceedings
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
On February 5, 2003, an action was filed against the Company by an
individual claiming entitlement to a finder's fee arising out of the merger
between the Company and Old Visijet. The complaint alleges that the plaintiff is
entitled to 105,000 shares of the Company's common stock. The Company denies the
material allegations of the complaint and plans to vigorously contest the
action.
On May 13, 2003, the Company was named as a defendant in a breach of
contract claim from an outside consultant for accounting services performed for
the Company through February 2003 totaling $43,500 plus interest. The Company
denies the allegations of the complaint and plans to vigorously contest the
action.
In August 2003, the Company filed an action against SurgiJet, Inc.
("SurgiJet") for (i) a judicial determination that a $400,000 Promissory Note
issued by the Company and payable to SurgiJet, (the "SurgiJet Note") is not
enforceable, due to a failure of consideration and the effect of the statute of
limitations, and (ii) the recovery of payments previously made on the SurgiJet
Note, based on claims of fraud and unjust enrichment.
Following the merger in February 2003, management of the Company
investigated the status of several obligations on its books and records payable
to affiliates of Rex Doherty, its former President, including SurgiJet, Inc. The
investigation called into questions the validity of the SurgiJet Note, as well
as the validity of other amounts allegedly due to members of the Doherty family.
Accordingly, the Company filed the action against SurgiJet.
Thereafter, on September 23, 2003, SurgiJet filed a cross-action
against the Company, its directors and certain officers. In the cross-complaint,
SurgiJet and members of the Doherty family allege breach of the Merger Agreement
between the Company and SurgiJet, an Assumption Agreement entered into in
connection with the Merger Agreement, and the SurgiJet Note, along with fraud
and unfair business practices. The plaintiffs seek damages of approximately
$1,032,000, rescission of the Merger Agreement, other specified damages,
interest and attorney's fees.
The Company's management believes that the cross-complaint is merely a
diversionary effort by SurgiJet and the Doherty family to draw attention away
from the main action. The Company believes the allegations to the
cross-complaint are wholly without merit and plans to vigorously pursue its
claims and contest the cross-complaint.
The Company believes that Lance Doherty, beneficial owner of more than
5% of the Company's Common Stock, is a principal of SurgiJet, Inc.
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Item 2. Changes in Securities
During the three months ended September 30, 2003 the Company completed
private placement offerings with several investors. The private placements
raised $900,880, net of offering expenses, and the investors received 932,500
shares of common stock and five year warrants to purchase 932,500 shares of
common stock at $2.25 per share. The number of shares issuable and the exercise
price of the warrants may be subject to adjustment to reflect changes in the
market price of the common stock during the offering period.
On June 1, 2003, the Company adjusted prior private placements that
were completed at rates higher than $1.00 per share for Common Stock, and
greater than $2.25 per warrant, based on the average market price preceding
those placements. This adjustment affected seven investors, causing the issuance
of an additional 182,500 shares purchased through private placements during 2003
and an additional 182,500 warrants priced at $2.25. If this change had occurred
during the quarter ended March 31, 2003, the basic and diluted weighted average
shares would have increased to 14,236,714 from 14,171,631 or an increase of
65,083 shares. This change in stock ownership did not materially impact the
earnings per share for first quarter 2003.
The Company believes all of the issuances were exempt from the
registration provisions of the Securities Act of 1933, as amended, by reason of
section 4(2) thereof and Regulation D there under.
Item 5. Other
On October 23, 2003, the Company's Board of Directors met to discuss expansion
of the number of directors pursuant to Section 2.1 of the Bylaws that provides
for between three to nine directors, with the exact number to be fixed from time
to time by the Board. The Board voted and agreed to expand and fix the number of
directors at seven. The Board also voted and appointed Randal Bailey, President
and CEO of the Company and Laurence Schreiber, COO, Secretary, and Treasurer of
the Company to the Board of Directors, effective immediately. It is contemplated
that the two remaining vacancies will be filled at a later date.
Item 6. Exhibits and Reports on Form 8-K
31.1 Certificate of Chief Executive Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
31.2 Certificate of Treasurer (principal financial officer) pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
32.1 Certificate of Chief Executive Officer pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002
32.2 Certificate of Treasurer (principal financial officer) pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
(b) Reports on Form 8-K
(i) Item 5. Other Events and Regulation FD
Disclosure filed on October 10, 2003
(ii) Item 5. Other Events and Regulation FD
Disclosure filed on October 23, 2003
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Signatures
In accordance with the requirements of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
VisiJet, Inc.,
a Delaware corporation
By: /s/ Laurence Schreiber
-------------------------------
Laurence Schreiber, Secretary,
Treasurer, Chief Operating Officer
Date: November 13, 2003
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