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 March 31, 2004
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 May 12, 2004 there were 27,334,663 shares of the registrant's
Common Stock outstanding.
1
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets at March 31, 2004 and December 31, 2003................3
Statements of Operations for the Three Months ended
March 31, 2004 and 2003 and the period February 2, 1996
(inception) to March 31, 2004.........................................4
Statements of Cash Flows for the Three Months ended
March 31, 2004 and 2003 and the period February 2, 1996
(inception) to March 31, 2004.........................................5
Notes to Financial Statements.........................................6
Item 2. Management's Discussion and Analysis or Plan of Operation............19
Item 3. Controls and Procedures..............................................25
PART II. OTHER INFORMATION....................................................25
Item 1. Legal Proceedings....................................................25
Item 2. Changes in Securities................................................26
Item 6. Exhibits and Reports on Form 8-K.....................................26
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
VisiJet, Inc.
(A development stage company)
Balance Sheet
March 31, December 31,
2004 2003
(Unaudited) (Audited)
------------- -------------
ASSETS
Current assets:
Cash and cash equivalents $ -- $ 35,879
Prepaid expenses 88,016 88,749
------------- -------------
Total current assets 88,016 124,628
Property and equipment, net 97,016 104,440
Patents and trademarks, net 94,882 97,244
------------- -------------
Total assets $ 279,914 $ 326,312
============= =============
LIABILITIES AND SHAREHOLDER'S DEFICIT
Current liabilities:
Overdraft $ 9,022 $ --
Accounts payable 706,667 679,885
Compensation settlement agreement - current portion 93,748 86,708
Accrued interest 134,904 109,232
Accrued expenses 647,716 481,106
Royalty payable 15,000 60,000
Notes payable to related parties 725,516 681,442
Notes payable - current portion 14,000 14,000
Secured debenture debt, net 300,298 --
------------- -------------
Total current liabilities 2,646,871 2,112,373
Compensation settlement agreement, net of current portion -- 17,458
Notes payable to related parties, net of current portion 43,936 87,144
------------- -------------
Total liabilities 2,690,807 2,216,975
------------- -------------
Shareholders' deficit:
Common stock, 50,000,000 shares authorized, $.001 par
value, 22,689,663 shares issued and outstanding
at March 31, 2004, and 21,691,163 shares issued
and outstanding at December 31, 2003 22,690 21,691
Preferred stock, 10,000,000 shares authorized,
$.001 par value, no shares outstanding at March
31, 2004 or at December 31, 2003 -- --
Additional paid in capital 9,081,856 7,845,365
Common stock subscriptions 600,000 1,018,500
Deficit accumulated during development stage (12,115,439) (10,776,219)
------------- -------------
Shareholders' deficit (2,410,893) (1,890,663)
------------- -------------
Total liabilities and shareholders' deficit $ 279,914 $ 326,312
============= =============
The accompanying notes are an integral part of these financial statements
3
VisiJet, Inc.
(A development stage company)
Statements of Operations
(Unaudited)
For the period
Three months Three months February 2, 1996
ended ended (inception) to
March 31, 2004 March 31, 2003 March 31, 2004
------------- ------------- -------------
Operating expenses:
General and administrative expenses $ 1,035,297 $ 676,009 $ 6,604,033
Research and development expenses 246,485 104,381 5,104,494
------------- ------------- -------------
Total operating expenses 1,281,782 780,390 11,708,527
------------- ------------- -------------
Loss from operations (1,281,782) (780,390) (11,708,527)
Other income (expense):
Interest income -- 26 455
Interest expense (56,638) (48,333) (420,883)
Gain on debt restructure -- -- 90,303
Loss on judgment (21,483)
Loss on disposal of assets -- (48,104)
------------- ------------- -------------
Total other expense (56,638) (48,307) (399,712)
------------- ------------- -------------
Loss before provision for taxes (1,338,420) (828,697) (12,108,239)
Provision for Income taxes 800 -- 7,200
------------- ------------- -------------
Net loss $ (1,339,220) $ (828,697) $(12,115,439)
============= ============= =============
Net loss per common share - basic and diluted $ (0.06) $ (0.06) $ (2.07)
============= ============= =============
Basic and diluted weighted average
number of common shares outstanding 22,115,328 14,171,631 5,863,671
============= ============= =============
The accompanying notes are an integral part of these financial statements
4
VisiJet, Inc.
(A development stage company)
Statements of Cash Flows
(Unaudited)
For the period
February 2, 1996
Three months ended March 31, (inception) to
2004 2003 March, 2004
------------- ------------- -------------
Cash flows from operating activities
Net loss $ (1,339,220) $ (828,697) $(12,115,439)
Adjustment to reconcile net loss to net cash used by
operating activities:
Depreciation and amortization 9,786 3,440 322,097
Debt discount amortization 30,966 -- 30,966
Loss from disposal of fixed assets -- -- 48,104
Common stock, options, warrants issued for services 217,822 -- 673,290
Gain from debt restructure -- -- (90,303)
Changes in assets and liabilities:
Prepaid expenses 733 10,385 (88,016)
Accounts payable 35,804 (131,048) 715,689
Compensation settlement agreement (10,417) (6,826) 93,749
Royalties payable (45,000) 15,000 15,000
Foreign exchange effect on notes payable -- -- 3,121
Other accrued expenses 166,610 -- 647,716
Accrued interest 25,672 15,465 226,552
------------- ------------- -------------
Net cash used by operating activities (907,244) (922,281) (9,517,474)
------------- ------------- -------------
Cash flows from investing activities:
Acquisition of property and equipment -- (2,243) (462,099)
Acquisition of patents -- -- (100,000)
------------- ------------- -------------
Net cash used in investing activities -- (2,243) (562,099)
------------- ------------- -------------
Cash flows from financing activities:
Advance from related party 865 244,085 1,875,734
Repayment of advances from related parties -- (106,729) (212,620)
Proceeds from notes payable -- 34,000 34,000
Repayment of notes payable -- (2,000) (20,000)
Proceeds from secured debenture 447,500 -- 447,500
Proceeds from private placements-net 423,000 1,016,000 5,432,181
Proceeds from issuance and conversion of
preferred stock, net -- -- 2,458,088
Cash acquired in reverse merger -- 30,693
Interest converted to equity in connection with merger -- 33,997 33,997
------------- ------------- -------------
Net cash provided by financing activities 871,365 1,219,353 10,079,573
------------- ------------- -------------
Net increase (decrease) in cash (35,879) 294,829 --
Cash, beginning of period 35,879 960 --
------------- ------------- -------------
Cash, end of period $ (0) $ 295,789 $ --
============= ============= =============
Supplemental disclosures of cash flow information:
Interest paid $ -- $ 5,976 $ 7,705
Taxes paid $ -- $ 1,600 $ 6,400
The accompanying notes are an integral part of these financial statements
5
VISIJET, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - NATURE OF OPERATIONS
FORWARD LOOKING STATEMENTS
This Form 10-QSB, press releases and certain information provided
periodically in writing or orally by our officers or our agents contain
forward-looking statements that involve risks and uncertainties within the
meaning of Sections 27A of the Securities Act, as amended; Section 21E of the
Securities Exchange Act of 1934; and the Private Securities Litigation Reform
Act of 1995. The words, such as "may," "would," "could," "anticipate,"
"estimate," "plans," "potential," "projects," "continuing," "ongoing,"
"expects," "believe," "intend" and similar expressions and variations thereof
are intended to identify forward-looking statements. These statements appear in
a number of places in this Form 10-QSB and include all statements that are not
statements of historical fact regarding intent, belief or current expectations
of the Company, our directors or our officers, with respect to, among other
things: (i) our liquidity and capital resources; (ii) our financing
opportunities and plans; (iii) our continued development of our technology; (iv)
market and other trends affecting our future financial condition; (v) our growth
and operating strategy.
Investors and prospective investors are cautioned that any such
forward-looking statements are not guarantees of future performance and involve
risks and uncertainties, and that actual results may differ materially from
those projected in the forward-looking statements as a result of various
factors. The factors that might cause such differences include, among others,
the following: (i) we have incurred significant losses since our inception; (ii)
any material inability to successfully develop our products; (iii) any adverse
effect or limitations caused by government regulations; (iv) any adverse effect
on our ability to obtain acceptable financing; (v) competitive factors; and(vi)
other risks including those identified in our other filings with the Securities
and Exchange Commission. The Company undertakes no obligation to update or
revise the forward-looking statements made in this Form 10-QSB to reflect events
or circumstances after the date of this Form 10-QSB or to reflect the occurrence
of unanticipated events.
HISTORY AND MERGER
VisiJet, Inc. ("VisiJet", or "the Company"), a Delaware corporation, is
a development stage company engaged in the research and development of surgical
equipment for use in the field of ophthalmology based on proprietary waterjet
technology. Potential customers include physicians, surgical centers and
hospitals. The Company's efforts through March 31, 2004, have been principally
devoted to organizational activities, raising capital and research and
development efforts. To date, the Company has not received any revenues from
product sales.
The Company was incorporated in California on February 2, 1996 as a
wholly owned subsidiary of SurgiJet, Inc ("SurgiJet"). In May 1999, the
6
NOTE 1 - NATURE OF OPERATIONS (Continued)
Company was spun off from SurgiJet through a distribution of common stock to its
shareholders, after which SurgiJet had no remaining ownership interest in the
Company.
On February 11, 2003 the Company completed a merger with Ponte Nossa
Acquisition Corp., a Delaware corporation incorporated in 1997("PNAC"). Pursuant
to the merger agreement between VisiJet and PNAC (the "Merger Agreement"), the
Company became a wholly owned subsidiary of PNAC. Since this transaction
resulted in the shareholders of VisiJet acquiring a majority of the outstanding
shares of PNAC, for financial reporting purposes the business combination was
accounted for as a recapitalization of PNAC (a reverse acquisition with the
Company as the accounting acquirer). Subsequently, PNAC changed its name to
VisiJet, Inc.
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.
GOING CONCERN
The accompanying unaudited consolidated financial statements have been
prepared using the going concern basis of accounting, which contemplates the
realization of assets and the satisfaction of liabilities in the normal course
of business. As more fully discussed in the Company's 2003 Form 10-KSB, the
Company's December 31, 2003 audited financial statements included a "going
concern" qualification from its independent auditors due to the Company's losses
accumulated during the development stage and lack of working capital.
For the three months ended March 31, 2004, the Company incurred a net
loss of $1,339,220 and as of March 31, 2004, the Company's current liabilities
exceeded its current assets by approximately $2.6 million. The Company's future
capital requirements will depend on many factors, including but not limited to
the Company's ability to generate operating revenue through product sales, its
ability to finalize development and successfully market its waterjet technology,
its on-going operational expenses and overall product development costs,
including the cost of clinical trials, and competing technological and market
developments.
To address the going concern issue, the Company has continued to raise
operating capital through private placements of debt and equity securities, and,
as discussed in more detail in Note 12, in April 2004, entered into two stock
purchase agreements, that if finalized and funded, would result in aggregate
7
NOTE 1 - NATURE OF OPERATIONS (Continued)
gross proceeds to the Company of $9.5 million. Completion of the this financing,
and receipt of funding by the Company, is contingent on the effectiveness of a
Registration Statement covering the resale of the shares of common stock and the
shares of common stock underlying the warrants included in the stock purchase
agreements.
In addition, as also discussed in more detail in Note 12, in May 2004,
the Company finalized a sales, marketing and distribution agreement pursuant to
which it expects to begin generating operating revenue through product sales in
certain international markets in the second quarter of 2004.
Whereas the Company believes that the funding contemplated by the above
referenced stock purchase agreements will be obtained in a timely manner, and
that near-term operating revenues will be generated from the recently completed
license agreement, there can be no assurances that the Registration Statement
will be declared effective by the Securities and Exchange Commission, that the
anticipated proceeds will be received by the Company or that revenues generated
from product sales, if any, will be sufficient for the Company to meet its
contractual obligations and on-going operating expenses.
The accompanying consolidated financial statements do not include any
adjustments that might result from the resolution of these matters.
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.
STOCK-BASED COMPENSATION
The Company measures compensation expense related to the grant of stock
options and stock-based awards to employees in accordance with the provisions of
Accounting Principles Board ("APB") Opinion No. 25, under which compensation
expense, if any, is generally based on the difference between the exercise price
of an option, or the amount paid for the award and the market price or fair
value of the underlying common stock at the date of the award. Stock-based
compensation arrangements involving non-employees are accounted for under
Statement of Financial Accounting Standards ("SFAS") No. 123, "ACCOUNTING FOR
STOCK-BASED COMPENSATION," under which such arrangements are accounted for based
on the fair value of the option or award. The Company adopted the disclosure
requirements of SFAS No. 148, "ACCOUNTING FOR STOCK-BASED COMPENSATION -
TRANSITION AND DISCLOSURE," an amendment of SFAS No. 123 as of January 1, 2003,
which require certain disclosures about stock-based employee compensation plans
in an entity's accounting policy note. The adoption of SFAS No. 148 did not have
a material impact on these consolidated financial statements and the disclosure
requirements are included below.
8
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
On November 10, 2003, the Board of Directors adopted the VisiJet, Inc.
2003 Stock Option Plan. The Option Plan provides for the grant of incentive and
non-qualified stock options to selected employees, the grant of non-qualified
options to selected consultants and to directors and advisory board members. The
Option Plan is administered by the Compensation Committee of the Board of
Directors and authorizes the grant of options for 3,000,000 shares. The
Compensation Committee determines the individual employees and consultants who
participate under the Plan, the terms and conditions of options, the option
price, the vesting schedule of options and other terms and conditions of the
options granted pursuant thereto.
During the first quarter of 2004, no options were issued by the
Company, and as of March 31, 2004, a total of 1,165,000 options to purchase
shares of the Company's common stock were outstanding pursuant to the 2003 Plan.
The following table summarizes information about stock options
outstanding at March 31, 2004:
Weighted
Average Weighted Weighted
Remaining Average Average
Exercise Number Life in Exercise Number Exercise
Price Outstanding Years Price Exercisable Price
----- ----------- ----- ----- ----------- -----
1.10 1,165,000 9.62 1.10 390,000 1.10
SFAS No. 123 requires the Company to provide pro forma information
regarding net income (loss) and income (loss) per share as if compensation cost
for the Company's stock option issuances had been determined in accordance with
the fair value based method prescribed in SFAS No. 123. The Company estimates
the fair value of each stock option at the grant date by using the Black-Scholes
option-pricing model with the following assumptions used for grants in fiscal
2003: dividend yield of zero percent, risk-free interest rate of 3.29%, expected
life of five years, and expected volatility of 83.82%.
9
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Under the accounting provisions of SFAS No. 123, as amended by SFAS No.
148, the Company's pro forma net loss and loss per share for the three months
ended March 31, 2004, 2003 and from inception to date, would have been as
follows:
For the period
February 2, 1996
(inception) to
Net Loss: 2004 2003 March, 2004
------------ ----------- ------------
As reported (1,339,220) (828,697) (12,115,439)
SFAS No. 123 effect (84,499) -- (393,223)
------------ ----------- ------------
Pro forma net loss (1,423,719) (828,697) (12,508,662)
============ =========== ============
Loss per share:
As reported (0.06) (0.06) (2.07)
============ =========== ============
Pro forma (0.06) (0.06) (2.13)
============ =========== ============
Basic and diluted weighted
average shares outstanding 22,115,328 14,171,631 5,863,671
============ =========== ============
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.
IMPAIRMENT OF LONG-LIVED ASSETS
The Company reviews long-lived assets and certain identifiable
intangibles for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable.
Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to the future net cash flows
expected to be generated by the asset. If such assets are considered to be
impaired, the impairment to be recognized is measured by the amount by which the
carrying amount of the assets exceeds the fair value of the assets. Assets
10
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
to be disposed of are reported at the lower of the carrying amount or fair value
less costs to sell.
LOSS PER SHARE
The Company calculates loss per share in accordance with SFAS No.
128,"EARNINGS PER SHARE," and Securities and Exchange Commission ("SEC")Staff
Accounting Bulletin ("SAB") No. 98. Accordingly, basic loss per share is
computed using the weighted average number of common shares and diluted loss per
share are computed based on the weighted average number of common shares and all
common equivalent shares outstanding during the period in which they are
dilutive. Common equivalent shares consist of shares issuable upon the exercise
of stock options, using the treasury stock method, or warrants; common
equivalent shares are excluded from the calculation if their effect is
anti-dilutive.
INCOME TAXES
The Company utilizes the asset and liability method of accounting for
income taxes. Under this method, deferred tax assets and liabilities are
recognized for the estimated future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax basis and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.
RECLASSIFICATIONS
Certain reclassifications have been made to the financial statement of
the prior year and for the period February 2, 1996 (inception) to March 31, 2004
in order to conform to current year presentation.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
There are no recent accounting pronouncements that have had, or are
expected to have, a material effect on the Company's financial statements.
11
NOTE 3 - PROPERTY AND EQUIPMENT
Property and equipment consist of the following at March 31, 2004 and
December 31, 2003:
March 31, 2004 December 31, 2003
-------------- --------------
Computer and test equipment $ 82,584 $ 82,584
Furniture and fixtures 33,505 33,505
Trade show equipment 47,002 47,002
-------------- --------------
163,091 163,091
Less: Accumulated depreciation (66,075) (58,651)
-------------- --------------
$ 97,016 $ 104,440
============== ==============
Depreciation expense for the quarter ended March 31, 2004 amounted to
$7,424. Depreciation expense for the period from February 2, 1996 (inception) to
March 31, 2004 was $316,979.
NOTE 4 - LICENSE AGREEMENT
During 2003, the Company entered into a license agreement with the
inventor of a patented technology through which the Company obtained exclusive
worldwide rights for all medical applications for the technology that provides
for the sterile flow of fluid through a surgical water jet apparatus. The
purchase price of the license has been capitalized and is being amortized on a
straight-line basis over the remaining life of the patent. The license agreement
provides for royalty payments based on the sale of products utilizing licensed
technology and for minimum annual royalty payments.
License agreements consist of the following at March 31, 2004 and
December 31, 2003:
March 31, 2004 December 31, 2003
-------------- --------------
License agreements $ 100,000 $ 100,000
Less: accumulated depreciation (5,118) (2,756)
-------------- --------------
$ 94,882 $ 97,224
============== ==============
Amortization expense for the quarter ended March 31, 2004 amounted to
$2,362. Amortization expense for the period from February 2, 1996 (inception) to
March 31, 2004 was $5,118.
NOTE 5 - SECURED CONVERTIBLE DEBENTURE
In February 2004, the Company entered into bridge financing agreements
with five investors pursuant to which the Company issued a total of $500,000 of
subordinated debentures and received net proceeds of $447,500 after
12
NOTE 5 - SECURED CONVERTIBLE DEBENTURE (Continued)
subtracting related placement agent fees and legal expenses totaling $52,500.
The debentures bear interest at an annual rate of 24%, which is payable monthly
beginning April 1, 2004. In addition, the debenture holders received an
aggregate of 250,000 warrants to purchase shares of the Company's common stock,
through March 1, 2009, at an exercise price of $1.10
The principal balance of the debentures is due and payable on the
earlier of (i) thirty (30) days from the date the Company's registration
statement filed on Form SB-2 is declared effective by the Securities and
Exchange Commission, provided that SBI (as defined in the Registration
Statement) has not defaulted in its obligation to purchase shares of the
Company's common stock or (ii) twelve (12) months from the date the Registration
Statement is declared effective or (iii) eighteen (18) months from the date of
the debenture agreement.
The debenture debt was recorded net of discounts totaling $230,668
recorded in connection with the $52,500 of loan fees and expenses, and $178,168,
based on a Black-Scholes model valuation, related to the 250,000 warrants issued
to debenture holders. During the three months ended March 31, 2004, the Company
recorded total interest expense of $45,899 in connection with the debenture
debt, of which $30,966 resulted from the non-cash amortization of debt discount,
and of which $14,933 relates to interest accrued during the period on the
outstanding principal balance. As of March 31, 2004 and December 31, 2003,
debenture debt balance consists of the following:
March 31, 2004 December 31, 2003
-------------- --------------
Secured subordinated debenture $ 500,000 $ --
Secured debenture discount (199,702) --
-------------- --------------
Secured debenture Debt $ 300,298 $ --
============== ==============
NOTE 6 - NOTES PAYABLE - RELATED PARTIES
SURGIJET, INC.
On October 23, 1998, the Company 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 totaled $139,955 on February 11, 2003. In
connection with the Merger Agreement, an amendment to the note was executed on
February 11, 2003 under which the accrued interest was reduced to $49,652, and
the accrual of additional interest was halted, and scheduled principal and
interest payments were established. Under the amended note, the first payment of
$30,000 was due on February 11, 2003 with equal monthly installments of $15,000,
including interest due on the first of each month, and all outstanding principal
and interest was due and payable upon successful completion of the Company's
2002 financial statements. As a result of the amendment, the Company recorded a
$90,303 gain during the third quarter of 2003 based on the difference between
13
NOTE 6 - NOTES PAYABLE - RELATED PARTIES (Continued)
the total accrued interest expense included on the amended note and the total
interest of $139,955 previously accrued. During 2003 payments totaling $45,000
were made by the Company. As discussed more fully at Note 10, the validity of
the underlying note, as well as the amended note, is disputed by the Company,
and is a subject of on-going litigation between the Company and SurgiJet.
Pending the outcome of the litigation, the Company ceased making scheduled
payments on this note. As of March 31, 2004 and December 31, 2003 the
outstanding principal balances and accrued interest payable balances on this
note were $360,976 and $43,676, respectively. At March 31, 2004 and December 31,
2003, the respective amounts related to this note classified as long-term debt
were $43,936 and $87,144, respectively.
DENTAJET, INC.
During 2002, the Company entered into a promissory note for a principal
sum of $91,000, plus interest at the rate of 10% per annum with DentaJet, Inc.
("DentaJet"), a Company then related through common shareholders. During 2002
and 2003, the Company borrowed an additional $72,000 from, and made payments
totaling $27,482, to DentaJet, resulting in an outstanding principal balance of
$135,518 at December 31, 2003 and March 31, 2004. During the three months ended
March 31, 2004 the Company recorded $3,951 of interest expense related to this
note, and as of March 31, 2004 and December 31, 2003 accrued interest payable on
this note totaled $28,696 and $24,745, respectively.
Pursuant to the Merger Agreement, the loan was due and payable upon
successful completion of an independent audit of the Company's 2002 financial
statements. However, as discussed more fully at Note 10, the validity of this
note is being disputed by the Company, and is a subject of on-going litigation
between the Company and SurgiJet.
FINANCIAL ENTREPRENEURS, INC. ("FEI")
In connection with the Merger Agreement, the Company assumed a
promissory note during 2003 originally entered into between PNAC and FEI, a
significant shareholder of the Company, during 2002. The note bears interest at
an annual rate of 7.5%, and matures on April 3, 2009. Upon consummation of the
merger in February 2003, the outstanding principal and accrued interest payable
balances were $206,649 and $11,462, respectively. During 2003, the Company added
net borrowings of $43,476 to the note, and accrued additional interest expense
of $17,072, resulting in an outstanding principal balance and accrued interest
payable balances at December 31, 2003 of $250,125 and $28,534, respectively.
During the three months ended March 31, 2004, net activity resulted in an
increase to the outstanding principal of $865, and $5,191 of additional interest
was accrued. As of March 31, 2004 the outstanding principal and accrued interest
payable on this note were $250,990 and $33,735, respectively.
SHAREHOLDERS
During 2002, the Company entered into a promissory note with Lance
Doherty, a significant shareholder of the Company, for a principal sum of
$19,000 plus interest at the rate of 10% per annum. As of March 31, 2004 and
December 31, 2003 the outstanding principal balance of this note was $19,000,
14
NOTE 6 - NOTES PAYABLE - RELATED PARTIES (Continued)
and accrued interest payable totaled $4,485 and $3,920, respectively. Pursuant
to the Merger Agreement, this note was due and payable upon successful
completion of an independent audit of the Company's 2002 financial statements.
However, as discussed more fully at Note 10, the validity of this note is being
disputed by the Company, and is a subject of on-going litigation between the
Company and Mr. Doherty.
In addition, during 2002 the Company recorded a liability of $2,967
related to expenses paid by Rex Doherty, a significant shareholder of the
Company. Pursuant to the Merger Agreement, this liability, plus interest at the
rate of 10% per annum, was due and payable upon successful completion of an
independent audit of the Company's 2002 financial statements. However, as
discussed more fully at Note 10, the validity of this obligation is being
disputed by the Company, and is a subject of on-going litigation between the
Company and Mr. Doherty. At March 31, 2004 and December 31, 2003, the
outstanding liability related to this debt was $2,967, and the respective
accrued interest payable balances were $378 and $298, respectively.
NOTE 7 - COMMITMENTS
LICENSE AGREEMENTS
Under the terms of the technology license agreements with SurgiJet, the
Company is obligated to pay a royalty of 7% of revenues received from sales of
the products, up to $400 million of revenues over the course of the agreements,
and 5% of revenues thereafter. The license agreements with SurgiJet also provide
for a minimum royalty of $60,000 per year that may be used as a credit toward
payment of future royalties due on product sales.
Under the terms of the patent license agreement entered into during
2003, the Company is obligated to pay a royalty of 6% of net sales of products
utilizing the licensed patent technology. The license agreement also provides
for a minimum royalty of $24,000 per year that may be used as a credit toward
payment of future royalties due on product sales.
NOTE 8 - SHAREHOLDERS' EQUITY (DEFICIT)
COMMON STOCK ACTIVITY
During the three months ended March 31, 2004, the Company issued
470,000 shares of common stock in connection with private equity placements
during this period, and issued 398,500 shares of common stock from common stock
subscriptions received in 2003.In addition, during this period the Company
issued a total of 130,000 shares of its common stock to two firms providing
services to the Company. In connection with the issuance of these shares, the
Company recorded consulting expense totaling $151,970 based on the fair value of
the stock on the date of issuance.
15
NOTE 8 - SHAREHOLDERS' EQUITY (DEFICIT) (Continued)
WARRANT ACTIVITY
During the first quarter of 2004, the Company issued 5-year warrants to
purchase an aggregate of 795,000 shares of its common stock. Of this total,
470,000 warrants were issued in connection with private equity placements at an
exercise price of $2.25 per share, 250,000 warrants were issued in connection
with a secured debenture agreement at an exercise price of $1.10 per share (See
Note 5) and 75,000 warrants were issued at an exercise price of $2.25 per share
for services provided to the company. In addition, a total of 30,000 3-year
warrants were issued at an exercise price of $1.50 for services provided to the
Company. During this period, the Company recorded consulting expense in the
amount of $65,722 in connection with the warrants issued for services, based on
the fair value of the warrants issued using a Black-Scholes model valuation.
The following table summarizes the number of outstanding common stock
warrants as of March 31, 2004:
Weighted Average
Number Exercise Price
----------- ------------
Outstanding at December 31, 2003 12,102,480 $ 2.53
Granted 825,000 1.87
Forfeited -- --
Exercised -- --
----------- ------------
Outstanding at March 31, 2004 12,927,480 $ 2.49
The following table summarizes additional information with respect to
outstanding common stock warrants at March 31, 2004:
Number Weighted Average Life Number
Exercise Price Outstanding Remaining in Months Exercisable
-------------- ------------ --------------------- -----------
$1.00 4,528,480 46 3,528,480
$1.10 250,000 59 250,000
$1.23 45,000 52 45,000
$1.50 30,000 33 30,000
$2.25 4,256,000 55 4,256,000
$2.50 505,000 46 505,000
$3.00 50,000 46 50,000
$5.00 3,263,000 46 3,263,000
------------ -----------
12,927,480 11,927,480
============ ===========
16
NOTE 9 - SETTLEMENT AGREEMENTS AND LOAN PAYABLE
On November 4, 2002, the Company entered into settlement agreements
with Randal A. Bailey, its President and Chief Executive Officer, and Larry
Hood, its Director of Engineering, related to accrued, but unpaid fees for
consulting services previously rendered by them in the aggregate of $700,000.
Under the agreements a total of $450,000 was converted into 211,267 shares of
the Company's common stock, during 2003, based upon the closing price on the
effective date the Merger Agreement. Of this total, Mr. Bailey received 164,319
shares and Mr. Hood received 46,948 shares. The balance owed of $250,000 was
converted into two notes payable, one to Mr. Bailey for 150,000, with a term of
two years and one to Mr. Hood for $100,000, with a term of one year. Both notes
bear interest at an annual rate of 3.5% and provide for the principal to be paid
over equal installments for the duration of the loan. At March 31, 2004 and
December 31, 2003, the aggregate balances on these notes were $93,748 and
$104,166, respectively and the respective accrued interest payable balances were
$7,280 and $6,330.
NOTE 10 - CONTINGENCIES
During 2003, the Company initiated litigation against SurgiJet, Inc.,
its former parent company, and certain directors, officers and shareholders of
SurgiJet. The action was initially filed by the Company for a judicial
determination that a $400,000 Promissory Note issued by the Company and payable
to SurgiJet ("SurgiJet Note"), prior to the completion of the Merger Agreement,
is not enforceable, and for recovery of payments previously made on the note.
Subsequently, the Company challenged the validity of other notes payable carried
on the Company's books at the effective date of the Merger Agreement, including
notes to DentaJet, Lance Doherty (former President of VisiJet and beneficial
owner of more than 5% of its outstanding Common Stock) and Rex Doherty.
SurgiJet and its principals filed a cross-action against the Company,
and its directors and certain officers, seeking damages of approximately
$800,000, rescission of the Merger Agreement, other specified damages, interest
and attorney's fees. In the cross-complaint, SurgiJet and its principals allege
breach of the Merger Agreement between the Company and SurgiJet, breach of the
Assumption of Liabilities Agreement (including Notes Payable to DentaJet, Lance
Doherty and Rex Doherty) entered into in connection with the Merger Agreement,
and breach of the SurgiJet Note, along with fraud and unfair business practices.
The Company's management believes that the cross-complaint is merely a
diversionary effort by SurgiJet 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 is also a defendant in a breach of contract claim from an
outside provider of accounting services for work performed for the Company prior
to the effective date of the Merger Agreement, for $43,500, plus interest. The
Company has denied the allegations of the complaint and is vigorously contesting
the action.
17
NOTE 10 - CONTINGENCIES (Continued)
In December 2003, a former consultant who had performed services for
the Company prior to the effective date of the Merger Agreement obtained a award
in the amount of $40,398 from the Labor Commissioner of the State of California
in an action related to claimed unpaid wages and expenses previously filed
against the Company. Based on the action of the Labor Commissioner, the Company
recorded an accrual for the awarded amount as of December 31, 2003. In January
2004 the Company filed an appeal in the California Superior Court contesting the
action taken by the Labor Commissioner, and in May 2004 the Company entered into
a settlement agreement for the approximate amount of the award.
In January 2004, the Company was served a summons which named the
Company and certain of its officers as defendants in an action filed by a
corporation claiming it was owed fees related to professional employment
placement services in the approximate amount of $114,500. The Company denies the
allegations of the complaint and plans to vigorously contest the action.
In January 2004, the Company entered into a settlement agreement with
an individual who had previously filed an action claiming entitlement to a
finder's fee arising out of the merger between Ponte Nossa and VisiJet. Pursuant
to the settlement agreement, the Company agreed to issue 45,000 shares of the
Company's common stock to the plaintiff as full settlement of the claim. In
connection with the settlement agreement, the Company recorded an expense and
accrued liability in the amount of $57,150, based on the value of the shares on
the date of the agreement.
NOTE 11 - RELATED PARTY TRANSACTIONS
During the three months ended March 31, 2004, the Company recorded
$15,000 of consulting fees to a corporation owned by a director of the Company,
of which $12,500 was paid during the period and $2,500 was included in accounts
payable at March 31, 2004.
In January 2004, the retainer due under a consulting agreement between
the Company and a director was increased from $5,000 to $15,000 per month.
During the three months ended March 31, 2004 the Company recorded $45,000 of
consulting fees in connection with this agreement, of which $5,000 was paid
during the period and $40,000 was included in accounts payable at March 31,
2004.
During the three months ended March 31, 2004, the Company recorded
$45,000 of consulting fees in connection with an agreement with a corporation
controlled by two shareholders, each of whom own beneficially in excess of 5% of
the outstanding shares of the Company's common stock. Pursuant to this
agreement, entered into in April 2003, the Corporation is entitled to receive a
monthly fee of $15,000, provided however that payment of accrued fees is not
payable by the Company until such time as the Company has a minimum cash balance
of $2.5 million. At March 31, 2004 a total of $180,000 in fees recorded pursuant
to this agreement is included in accrued expenses.
18
NOTE 11 - RELATED PARTY TRANSACTIONS (Continued)
During the three months ended March 31, 2004, the Company recorded
finders' fee expenses in the amount of $15,000, to a corporation controlled by
an individual who beneficially owns in excess of 5% of the outstanding shares of
common stock of the Company. In addition, during this period, the Company
reimbursed the corporation for travel expenses related to business of the
Company totaling $4,337. As of March 31, 2004, $5,000 of the finders' fees were
included in accounts payable.
NOTE 12 - SUBSEQUENT EVENTS
In April 2004, the Company entered into stock purchase agreements with
two (2) private equity investment funds pursuant to which the funds agreed to
purchase an aggregate of 4,750,000 shares of the Company's common stock for a
total amount of $9,500,000. In addition, under the agreements, one of the funds
would receive 5-year warrants to purchase up to 1,900,000 shares of the
Company's common stock at a price of $2.00 per share. Completion of this
financing and related funding is contingent on the effectiveness of a
registration statement to be filed with the Securities and Exchange Commission
covering the resale of the shares of common stock and the shares of common stock
underlying the warrants.
In April and May 2004, the Company completed private equity placements
in which it raised net proceeds of $103,500 after deducting offering expenses of
$11,500.
In May 2004, the Company received $200,000 through an advance from a
related party, and received net proceeds of $1,357,188, from the issuance of
secured notes payable agreements to three institutional investors.
In May 2004, the Company entered into a Manufacturing, Supply and
Distribution Agreement with Gebauer Medizintechnik GmbH ("Gebauer"), pursuant to
which the Company acquired exclusive worldwide distribution, sales and marketing
rights for Gebauer's LASIK and Epi-Lasik products. Both products are approved
for marketing in Europe and certain other countries. Accordingly, the Company
expects to initiate product sales in certain foreign countries during the second
quarter of 2004, and anticipates filing with the U.S. Food and Drug
Administration for marketing approval in the United States in the near future.
As consideration under the agreement, the Company paid a non-refundable license
fee of $1,158,900 and issued 750,000 shares of its common stock to Gebauer. In
addition, the agreement provides for certain minimum annual purchase
requirements by the Company.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
The following is management's discussion and analysis of certain
significant factors which have affected the Company's financial position and
operating results during the periods included in the accompanying financial
statements, and should be read in conjunction with such financial statements and
notes thereto.
19
Certain information included herein contain forward-looking statements
that involve risks and uncertainties within the meaning of Sections 27A of the
Securities Act, as amended; Section 21E of the Securities Exchange Act of 1934;
and the Private Securities Litigation Reform Act of 1995. Readers are referred
to the cautionary statement at the beginning of this report, which addresses
forward-looking statements made by the Company.
CORPORATE HISTORY
VisiJet (the "Company" or "VisiJet"), formerly known as Ponte Nossa
Acquisition Corp ("PNAC")), is a Delaware corporation engaged in the research
and development of surgical equipment for use in the field of ophthalmology
based on proprietary waterjet technology.
The Company was incorporated in California on February 2, 1996 as a
wholly owned subsidiary of SurgiJet, Inc ("SurgiJet"), a developer of waterjet
technology for a variety of medical and dental applications. In May 1999, the
Company was spun off from SurgiJet through a distribution of common stock to its
shareholders, after which SurgiJet had no remaining ownership interest in the
Company.
On February 11, 2003 the Company completed a merger with PNAC, a
Delaware corporation incorporated in 1997. Pursuant to the merger agreement
between VisiJet and PNAC (the "Merger Agreement"), the Company merged into PNAC.
Since this transaction resulted in the shareholders of VisiJet acquiring a
majority of the outstanding shares of PNAC, for financial reporting purposes the
business combination was accounted for as a recapitalization of PNAC (a reverse
acquisition with the Company as the accounting acquirer). Subsequently, PNAC
changed its name to VisiJet, Inc.
CRITICAL ACCOUNTING POLICIES
The Company's critical accounting policies, including the assumptions
and judgments underlying them, are disclosed in the Notes to the Financial
Statements. At this stage of our development, these policies primarily address
matters of expense recognition. The Company has consistently applied these
policies in all material respects.
OVERVIEW
The Company is in the development stage, and to date, its efforts have
been principally devoted to organizational activities, raising capital and
research and development efforts related to its proprietary waterjet-based
ophthalmic surgery products. Based on our history of losses and negative working
capital balance, our financial statements for the year ended December 31, 2003
included a going concern opinion from our outside auditors, which stated there
"is substantial doubt" about our ability to continue operating as a going
concern.
The Company does not have any products currently on the market and, to
date, has not received any revenues from product sales. As discussed in more
detail below under "Plan of Operations", we have recently entered into a
marketing and distribution agreement pursuant to which we expect to begin
generating near-term sales and operating revenues.
20
Although we have received commitments for additional funding, as
discussed in more detail below under "Liquidity and Capital Resources", the
Company does not currently have sufficient cash or working capital available to
continue to fund operations, meet its contractual obligations, to successfully
market the licensed products or to complete its product development efforts. As
such, our ability to complete the currently proposed financing, or acceptable
alternative financing, on a timely basis, is critical to our ability to fund our
operations and stay in business.
RESULTS OF OPERATIONS
FIRST QUARTER 2004 COMPARED TO FIRST QUARTER 2003
The Company had no sales revenues to report for the periods ending
March 31, 2004 and 2003. The net loss for quarter ending March 31, 2004 was
$1,339,220 compared to $828,697 for the same period in 2003. This represents a
loss per common share of $(.06) for each of the quarters ended March 31, 2004
and March 31, 2003 on basic and diluted shares outstanding of 22,115,328 and
14,171,631, respectively.
The significantly larger loss in 2004 resulted from increased operating
expenses, as shown below:
2004 2003
------------ -----------
Operating Expenses
General and Administrative $ 1,035,297 $ 676,009
Research and Development 246,485 104,381
------------ -----------
$ 1,281,782 $ 780,390
General and administrative expenses increased to $1,035,297 in 2004
from $676,009 in 2003. The increase is due primarily to increased consulting
fees, increased salaries and wages and related benefits, increased investor
relations expenses and increased expenses incurred in connection with the
settlement of litigation during the quarter.
Research and development expenses increased to $246,485 in 2004 from
$104,381 in 2003. The increase is primarily due to an increase in R&D activities
related to the development of the Company's Hydrokeratome product, and the
initiation of development efforts related to the Pulsatome product during the
quarter.
Interest expense increased to $56,638 in 2004 from $48,333 in 2003.
The increase is primarily due to the inclusion in 2004 of approximately $31,000
of non-cash interest expense recorded in connection with the amortization of
debt discount during the period.
Subject to the availability of cash and working capital, we expect
operating expenses to continue to increase during the remainder of 2004 as we
commence sales and marketing activities related to recently licensed products
and move toward completion of product development and regulatory compliance
efforts and ultimate product introduction with respect to the Company's other
products under development. Such increases will occur primarily in the research
and development, and sales and marketing areas.
21
The Company expects to begin marketing licensed products in certain
international markets and generating revenue from sales during the second
quarter of 2004. Furthermore, the Company anticipates filing for marketing
approval of these products in the United States with the US Food and Drug
Administration in the near future. The approval and ultimate marketing of
certain other products under development by the Company in the United States is
dependent upon the timing of submission to, and approval by the United States
Food and Drug Administration. If product development and regulatory efforts are
successful, we hope to begin marketing these products and generating revenue
from product sales during the third or fourth quarter of 2004.
LIQUIDITY AND CAPITAL RESOURCES
The Company is in the development stage, and to date, has not had any
products for sale or generated any revenue from sales or other operating
activities. As such, our principal source of liquidity has been the private
placement of equity securities and the issuance of notes payable and convertible
debt. Based on our history of losses and negative working capital balance, our
financial statements for the year ended December 31, 2003 included a going
concern opinion from our outside auditors, which stated there "is substantial
doubt" about our ability to continue operating as a going concern.
During the quarter ended March 31, 2004, the Company raised an
aggregate of $871,365, of which $447,500 resulted from the issuance of secured
subordinated debenture agreements, $423,000 resulted from the net proceeds of
equity private placements and $865 resulted from the net activity from related
party notes. During this period, the Company utilized $907,245 to fund operating
activities, and as of March 31,2004, current liabilities, which include a cash
overdraft of $9,022, exceeded current assets by $2.6 million.
Our ability to satisfy the contractual obligations and our ability to
fund ongoing operating expenses are dependent on our success in raising
additional capital.
In April and May 2004, the Company raised net proceeds of $103,500,
after deducting expenses of $11,500 from private equity placements.
In May, the Company received $200,000 through an advance from a related
party, and received net proceeds of $1,357,188, from the issuance of secured
notes payable agreements to three (3) institutional investors.
In addition, in May 2004, $1,158,900 was utilized by the Company as
partial consideration paid in connection an agreement pursuant to which the
Company acquired exclusive world-wide marketing and distribution rights to
ophthalmic surgery products currently approved for sale in Europe and certain
other countries.
In April 2004, the Company entered into stock purchase agreements with
two private equity investment funds pursuant to which the funds agreed to
purchase an aggregate of 4,750,000 shares of the Company's common stock for a
total amount of $9,500,000. In addition, under the agreements, one of the funds
22
would receive 5-year warrants to purchase up to 1,900,000 shares of the
Company's common stock, at an average price of $2.00 per share. Completion of
this financing and related funding is contingent on the effectiveness of the
Registration Statement covering the resale of the shares of common stock and the
shares of common stock underlying the warrants.
Subject to availability of funding, we expect operating expenses, and
related cash requirements, to increase during 2004 in connection with
anticipated increased sales and marketing and product development activities.
The Company believes that actions presently being taken to raise
additional financing, to license products with which near-term operating
revenues can be generated and to complete the development of, and bring to
market its other ophthalmic surgical products, will ultimately generate
sufficient revenue to support its operations. However, there can be no
assurances that any such actions will be successfully completed, or that such
actions will provide sufficient capital and/or cash flow to permit the Company
to realize its plans.
PLAN OF OPERATIONS
FINANCING ACTIVITY
The Company is dependent on raising additional capital to pursue the
following planned activities. As described above under "Liquidity and Capital
Resources", the Company has recently entered into stock purchase agreements with
two private equity investment funds that, if successfully completed, will result
in initial gross proceeds to the Company of $9.5 million. Completion of this
proposed funding, or alternative financing on a timely basis, is critical to the
future of the Company, and will be a major focus of the activities of Company
management.
SALES AND MARKETING
In May 2004, the Company entered into an agreement with Gebauer
Medizintechnik GmbH ("Gebauer"), pursuant to which the Company acquired
exclusive worldwide distribution, sales and marketing rights for Gebauer's LASIK
and Epi-Lasik products. Both products are approved for marketing in Europe and
certain other countries, and the Company anticipates filing with the U.S. Food
and Drug Administration for marketing approval in the United States in the near
future.
As a result of this agreement, the Company plans to immediately
commence sales and marketing efforts in the international markets where the
products are approved for sale, and anticipates it will begin to generate
product sales and related revenue during the second quarter of 2004. Planned
expenditures for sales and marketing during this period are anticipated to be
approximately $1.7 million.
23
RESEARCH AND DEVELOPMENT
The Company plans to continue its research and development efforts on the
following ophthalmic surgery products based principally on applications of its
proprietary waterjet technology. These products are designed to result in
faster, safer and more efficacious surgery in the laser eye surgery and cataract
surgery markets.
1). HydroKeratome
- a corneal cutting device that produces a bladeless flapcut
for the LASIK procedure.
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.
3). HydroRefractor
- a potential replacement for the excimer laser, to produce
lamellar flaps and "power cuts" for vision correction using
waterjet technology.
4). New Products/Product Extensions
- the Company plans to continue research and development
efforts on other medical applications of its waterjet
technology, and to identify and license/acquire other
technology and/or products that offer complements and
extensions to its ophthalmic surgery product line.
The primary focus of our research and development activities during
this period will be on completing testing required to obtain final marketing
approval from the FDA with respect to our 510(K) application, and the subsequent
initiation of product sales, for HydroKeratome. In addition, our research and
development efforts will be focused on completing testing required for our
initial 510(K) application submission to the FDA with respect to our Pulsatome
product, any subsequent testing to obtain final marketing approval from the FDA,
and the subsequent initiation of product sales for Pulsatome. Planned research
and development expenditures during this period are estimated to be
approximately $1.8 million.
PROPERTY, PLANT AND EQUIPMENT
The planned research and development activities and the expansion of
marketing and administrative support will require additional expenditures for
property, plant and equipment during the next twelve months.
The following is a schedule of anticipated purchases of property and
equipment during this period:
1). Production, lab, test equipment $ 275,000
2). Computers and software 270,000
3). Facilities, furniture & fixtures 100,000
----------
Total anticipated capital expenditures: $ 645,000
24
EMPLOYEE ADDITIONS
The Company anticipates hiring approximately 30 additional employees
during the next twelve months, resulting in additional annual salaries and wages
of approximately $1.1 million, to support anticipated company growth and the
increased emphasis on sales, marketing, distribution and customer
training/support. This estimate includes approximately $220,000 for research and
development and $870,000 for sales and marketing that are included in the
respective research and development and sales and marketing totals above.
CAUTIONARY FACTORS THAT MAY AFFECT FUTURE PLANS AND RESULTS
All of the planned activities discussed above in our Plan of Operations
are contingent on our obtaining sufficient funding. In addition, activities
discussed above with respect to planned expenditures for sales and marketing,
additions of property, plant and equipment and new employees are contingent on
the success of our final product development and commercialization efforts.
ITEM 3. CONTROLS AND PROCEDURES
Under the supervision and with the participation of our Chief Executive
Officer and our Treasurer, 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. The design of
any such system of controls is based in part on assumptions about the likelihood
of future events, and there can be no assurance that any such system of controls
will succeed in all circumstances.
Since the date of the evaluation described above, there have been no
significant changes in our internal controls or in other factors that could
significantly affect these controls.
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
VisiJet is the plaintiff and a cross-defendant in VisiJet, Inc. v.
SurgiJet, Inc., a case pending in Orange County Superior Court, filed on August
6, 2003 (Case No. 03CC02968). The Company filed the action to declare a
purported $400,000 promissory note to its former parent company unenforceable.
The defendant filed a cross claim on behalf of itself and certain of its
officers, directors and controlling shareholders seeking to rescind the Merger
Agreement between the Company and PNAC, and seeking monetary damages in the
amount of $802,038 as well as exemplary damages. The case is currently in the
discovery phase.
25
VisiJet is the defendant in Williams v. VisiJet, Inc. et al, a case
pending in Orange County Superior Court, filed on May 3, 2003 (Case
No.C03-01173). The Plaintiff alleges he is owed $43,500 for professional
services rendered to the Company prior to the merger with PNAC. The Company has
filed a cross claim alleging, among other things, that at least some of the
services were for the benefit of others, professional negligence and aiding and
abetting a fraud committed on the Company. The case is currently in the
discovery phase.
VisiJet is a defendant in Allante Art Group, Inc. et al v. VisiJet,
Inc. et al, a case pending in Orange County Superior Court, filed on July 30,
2003 (Case No. 03CC09678). The Plaintiff, an executive search firm, is seeking
damages of $114,500 from the Company and a former employee of the plaintiff. The
complaint alleges that the former employee misappropriated customer lists and
names in connection with the placement of employees with the Company. The case
is in a preliminary stage.
To the best of the Company's knowledge and belief, there are no other
material legal proceedings pending or threatened against the Company.
ITEM 2. CHANGES IN SECURITIES
During the three months ended March 31, 2004 the Company received gross
proceeds of $470,000 from the sale of 470,000 shares and warrants to purchase
470,000 shares of Common Stock to 11 private investors. The Company believes
that the transaction was exempt from the registration requirements of the
Securities Act of 1933, as amended, by reason of Section 4(2) thereof and
Regulation D thereunder.
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
REPORTS ON FORM 8-K
Amendment No. 2 to Report on Form 8-K, dated February 11, 2003 filed on
February 9, 2004 (Item 4).
Report on Form 8-K, dated February 11, 2003 filed on February 5, 2004
(Item 7).
26
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: May 17, 2004
27