UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED September 30, 2007.
OR
/ / TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE TRANSITION FROM _______ TO ________.
COMMISSION FILE NUMBER 000-33151
VOYAGER ENTERTAINMENT INTERNATIONAL, INC.
(Exact Name of Small Business Issuer as Specified in its Charter)
Nevada 54-2110681
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4483 West Reno Avenue, Las Vegas, Nevada 89119
---------------------------------------- ----------
(Address of principal executive offices) (Zip code)
Issuer's telephone number: (702) 221-8070
--------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. Yes /X/ No / /
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act.) Yes / / No /X/
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes / / No / /
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
There were outstanding 121,816,512 shares Common Stock issued and outstanding as
of November 6, 2007.
Transitional Small Business Disclosure Format: Yes / / No /X/
TABLE OF CONTENTS
Page
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements 3
Item 2. Management's Discussion and Analysis 13
Item 3. Controls and Procedures 15
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 16
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 16
Item 3. Defaults Upon Senior Securities 16
Item 4. Submission of Matters to a Vote of Security Holders 16
Item 5. Other Information 16
Item 6. Exhibits 17
SIGNATURES 18
2
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
VOYAGER ENTERTAINMENT INTERNATIONAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
SEPTEMBER 30, 2007
3
VOYAGER ENTERTAINMENT INTERNATIONAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
SEPTEMBER 30, 2007
------------------
ASSETS
CURRENT ASSETS
Cash $ 33,498
Prepaids 446
Deferred financing costs 50,000
------------
Total current assets 83,944
NOTE RECEIVABLE 500,000
FIXED ASSETS, net of accumulated depreciation of $33,816 13,031
Total assets $ 596,975
============
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 1,115,437
Accrued expenses - related party 800,000
Note payable 2,833,239
------------
Total current liabilities 4,748,676
------------
Total liabilities 4,748,676
COMMITMENTS & CONTINGENCIES --
STOCKHOLDERS' DEFICIT
Preferred stock: $.001 par value; authorized 50,000,000 shares
Series A - 1,500,000 designated, none outstanding --
Series B - 10,000,000 designated, 1,000,000 outstanding 1,000
Common stock: $.001 par value; authorized 200,000,000 shares;
issued and outstanding: 121,221,512 121,221
Additional paid-in capital 13,049,865
Deferred construction costs paid with common stock (393,750)
Receivable for return of stock related to canceled acquisition (375,000)
Loan collateral paid with common stock (750,000)
Accumulated deficit during the development stage (15,805,037)
------------
Total stockholders' deficit (4,151,701)
------------
Total liabilities and
stockholders' deficit $ 596,975
============
See accompanying notes to these financial statements.
4
VOYAGER ENTERTAINMENT INTERNATIONAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
From inception
Three Months Ended Nine Months Ended March 1, 1997 to
September 30 September 30 September 30 September 30 September 30,
2007 2006 2007 2006 2007
------------ ------------ ------------ ------------- ----------------
Revenues $ -- $ -- $ -- $ -- $ --
Operating Expenses:
Professional and consulting
fees 324,617 308,520 1,238,434 768,520 11,898,155
Project costs 14,406 8,288 20,798 32,993 159,096
Depreciation 2,259 2,715 7,311 7,428 33,816
Settlement expense -- -- -- -- 650,000
Other expense 66,752 38,796 138,379 109,232 993,907
----------- ----------- ----------- ------------ ------------
408,034 358,319 1,404,922 918,173 13,734,974
Operating loss (408,034) (358,319) (1,404,922) (918,173) (13,734,974)
Other income (expense):
Interest income 43,792 492 87,635 492 88,776
Interest expense (167,851) (90,853) (521,664) (125,797) (2,158,839)
----------- ----------- ----------- ------------ ------------
(124,059) (90,361) (434,029) (125,305) (2,070,063)
Net Loss (532,093) (448,680) (1,838,951) (1,043,478) (15,805,037)
Preferred stock dividends -- -- -- -- (130,000)
Net loss allocable to ----------- ----------- ----------- ------------ ------------
common stockholders $ (532,093) $ (448,680) $(1,838,951) $ (1,043,478) $(15,935,037)
=========== =========== =========== ============ ============
Net loss per common share -
basic and diluted $ (0.00) $ (0.00) $ (0.02) $ (0.01)
=========== =========== =========== ============
Weighted average number of
common shares outstanding 119,344,095 90,761,417 116,399,438 83,593,599
=========== =========== =========== ============
See accompanying notes to these financial statements.
5
VOYAGER ENTERTAINMENT INTERNATIONAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
FROM JANUARY 1, 2007 THROUGH SEPTEMBER 30, 2007
(UNAUDITED)
Additional
Preferred Stock Series A Preferred Stock Series B Common stock paid-in capital
------------------------ ------------------------ ------------ ---------------
Shares Amount Shares Amount Shares Amount
------ ------ ------ ------ ------ ------
Balance at December 31, 2006 -- -- 1,000,000 $1,000 113,842,905 $113,844 $12,043,353
====== ====== ========= ====== =========== ======== ===========
Issuance of common stock for services
March 2007 -- -- -- -- 1,000,000 1,000 97,000
Expense of Acquisition Deposit as Fee -- -- -- -- -- -- --
Issuance of common stock for services
April 2007 -- -- -- -- 500,000 500 59,500
Issuance of common stock for services
May 2007 -- -- -- -- 1,100,000 1,100 114,400
Issuance of common stock for interest -- -- -- -- 89,438 89 6,171
Fair market adjustment to stock for
Deferred Construction Costs,
September 2007 -- -- -- -- -- -- 225,000
Accretion of loan costs to interest expense
June 2007 -- -- -- -- -- -- --
Issuance of common stock for Cash July 2007 2,000,000 2,000 198,000
Issuance of common stock for interest 39,800 40 7,124
July 2007
Issuance of common stock for services
August 2007 1,300,000 1,300 187,200
Issuance of common stock for cash August 2007 1,200,000 1,200 118,800
Issuance of common stock for interest 149,369 149 21,438
August 2007
Fair market value adjustment to stock for
Deferred Construction Costs
September 2007 (28,125)
Accretion of loan costs to interest expense
September 2007
Net loss as of September 30, 2007 -- -- -- -- -- -- --
------ ------ --------- ------ ----------- -------- -----------
Balance at September 30, 2007 -- -- 1,000,000 $1,000 121,221,512 $121,222 $13,049,865
====== ====== ========= ====== =========== ======== ===========
Deficit
accumulated
Deferred during the Total
construction Acquisition Loan Loan development stockholders'
costs Deposit collateral Fee stage deficit
------------ ----------- ---------- ------ ----------- ------------
Balance at December 31, 2006 $ (196,875) $ (750,000) $(750,000) $(270,000) $(13,966,083) $(3,774,761)
=========== ========== ========= ========= ============ ===========
Issuance of common stock for services
March 2007 -- -- -- -- -- 98,000
Expense of Acquisition Deposit as Fee -- 375,000 -- -- -- 375,000
Issuance of common stock for services
April 2007 -- -- -- -- -- 60,000
Issuance of common stock for services
May 2007 -- -- -- -- -- 115,500
Issuance of common stock for interest -- -- -- -- -- 6,260
Fair market adjustment to stock for
Deferred Construction Costs,
September 2007 (225,000) -- -- -- --
Accretion of loan costs to interest expense
June 2007 -- -- -- 200,000 -- 200,000
Issuance of common stock for Cash July 2007 200,000
Issuance of common stock for interest 7,164
July 2007
Issuance of common stock for services
August 2007 188,500
Issuance of common stock for cash August 2007 120,000
Issuance of common stock for interest 21,587
August 2007
Fair market value adjustment to stock for
Deferred Construction Costs
September 2007 28,125
Accretion of loan costs to interest expense
September 2007 70,000 70,000
Net loss as of September 30, 2007 -- -- -- -- (1,838,951) (1,838,951)
----------- ---------- --------- --------- ------------ -----------
Balance at September 30, 2007 $ (393,750) $ (375,000) $(750,000) -- $(15,805,037) $(4,151,701)
=========== ========== ========= ========= ============ ===========
See accompanying notes to these financial statements.
6
VOYAGER ENTERTAINMENT INTERNATIONAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
From inception
March 1, 1997 to
September 30, 2007 September 30, 2006 September 30, 2007
------------------ ------------------ ------------------
Cash Flows from Operating Activities:
Net Loss $ (1,838,951) $ (1,043,478) $ (15,805,037)
Adjustments to reconcile net loss to
net cash used by operating activities:
Depreciation 7,311 7,428 33,816
Issuance of common stock for services 837,000 193,500 6,355,315
Issuance of common stock for accrued
bonus -- -- 750,000
Interest expense from the issuance of
common stock 35,012 27,392 544,280
Accretion of debt issuance costs 303,750 31,250 450,000
Changes in assets and liabilities:
Prepaid Expense (446) -- (446)
Accounts payable and accrued expenses 72,779 34,262 1,109,700
Accrued expenses - related party 175,000 210,000 800,000
Accrued settlement obligation -- - 650,000
Net cash used in operating ------------------ ------------------ ------------------
activities (408,548) (539,646) (5,112,372)
Cash flows used in Investing Activities:
Payments to acquire fixed assets (4,195) (10,504) (47,369)
Proceeds from Note Receivable -- (500,000) (500,000)
------------------ ------------------ ------------------
Net cash used in investing activities (4,195) (510,504) (547,369)
Cash flows provided by Financing Activities:
Proceeds from notes payable, short term debt 120,000 1,250,000 2,163,239
Payment on notes payable, short term debt (20,000) (20,000)
Proceeds from the sale of preferred stock -- -- 150,000
Proceeds from the sale of common stock 320,000 25,000 3,460,000
Payments for loan fees -- (50,000) (50,000)
Payments for financing costs (50,000) -- (50,000)
Net cash provided by financing ------------------ ------------------ ------------------
activities 370,000 1,225,000 5,653,239
Net increase (decrease) in cash (42,743) 174,850 33,498
Cash, beginning of year 76,241 108,552 --
------------------ ------------------ ------------------
Cash, end of year $ 33,498 $ 283,402 $ 33,498
================== ================== ==================
Cash paid for:
Interest $ 43,750 $ (3,472) $ 103,750
Income Taxes $ -- $ -- $ --
7
VOYAGER ENTERTAINMENT INTERNATIONAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(CONTINUED)
From inception
March 1, 1997 to
September 30, 2007 September 30, 2006 September 30, 2007
------------------ ------------------ ------------------
Supplemental schedule of non-cash Investing
and Financing Activities:
Common stock issued for financing costs $ -- $ 400,000 $ 988,300
Common stock issued for loan collateral $ -- $ 750,000 $ 750,000
Deferred construction costs, adjusted
to fair value $ 196,875 $ $ 393,750
Conversion of preferred shares $ -- $ 1,000 $ 12,600
Common stock issued as acquisition deposit $ -- $ 450,000 $ 750,000
Common stock issued for services $ 837,000 $ -- $ 837,000
8
VOYAGER ENTERTAINMENT INTERNATIONAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1. Basis of Presentation and Organization and
Significant Accounting Policies
Basis of Presentation and Organization
--------------------------------------
The accompanying Condensed Consolidated Financial Statements of Voyager
Entertainment International, Inc. and subsidiaries (the "Company") should be
read in conjunction with the Company's Annual Report on Form 10-KSB for the year
ended December 31, 2006. Significant accounting policies disclosed therein have
not changed except as noted below.
The accompanying Condensed Consolidated Financial Statements and the related
footnote information are unaudited. In the opinion of management, they include
all normal recurring adjustments necessary for a fair presentation of the
condensed consolidated balance sheet of the Company at September 30, 2007, and
the condensed consolidated results of its operations and cash flows for the
three and nine months ended September 30, 2007 and 2006. Results of operations
reported for interim periods are not necessarily indicative of results for the
entire year.
Voyager Entertainment International, Inc. (the "Company"), a North Dakota
corporation formerly known as Dakota Imaging, Inc. formed on January 31, 1991,
is in the entertainment development business with plans to develop the world's
tallest Observation Wheel on the Las Vegas strip area. During April 2002, the
Company changed its name from Dakota Imaging, Inc. to Voyager Entertainment
International, Inc. and adopted a new fiscal year.
As used in these Notes to the Condensed Consolidated Financial Statements, the
terms the "Company", "we", "us", "our" and similar terms refer to Voyager
Entertainment International, Inc. and, unless the context indicates otherwise,
its consolidated subsidiaries. The Company's wholly owned subsidiaries include
Voyager Ventures, Inc. ("Ventures"), a Nevada corporation, Outland Development,
LLC ("Outland"), a Nevada Limited Liability Corporation, and Voyager
Entertainment Holdings, Inc. ("Holdings"), a Nevada corporation.
These Condensed Consolidated financial statements include the accounts of the
Company and its subsidiaries. All significant intercompany transactions and
accounts have been eliminated in consolidation.
Going Concern
-------------
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, which contemplate continuation of the
Company as a going concern. However, the Company has not begun generating
revenue, is considered a development stage company, has experienced recurring
net operating losses, had a net loss of $1,838,951 and $1,043,478 for the nine
months ended September 30, 2007 and 2006, and a working capital deficiency of
$4,664,732 at September 30, 2007. These factors raise substantial doubt about
the Company's ability to continue as a going concern. These financial statements
do not include any adjustments relating to the recoverability and classification
of recorded asset amounts, or amounts and classification of liabilities that
might result from this uncertainty.
RECLASSIFICATION
Certain reclassifications, which have no effect on net income (loss), have been
made in the prior period financial statements to conform to the current
presentation. Specifically, we have presented accrued interest relating to the
debt on our balance sheet in accrued expenses.
NEW ACCOUNTING PROUNCEMENTS
In July 2006, the Financial Accounting Standards Board (FASB) issued
Interpretation No. 48 (FIN 48), "Accounting for Uncertainty in Income Taxes," an
interpretation of FASB Statement No. 109, "Accounting for Income Taxes." FIN 48
prescribes a minimum recognition threshold and measurement attribute for the
financial statement recognition of a tax position taken or expected to be taken
in a tax return. FIN 48 also provides guidance on derecognition, classification,
interest and penalties, accounting in interim periods, disclosure, and
transition for tax related positions. FIN 48 becomes effective for the Company
on January 1, 2007. The Company is currently in the process of determining the
effect, if any, the adoption of FIN 48 will have on the consolidated financial
statements.
9
VOYAGER ENTERTAINMENT INTERNATIONAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 2. Stockholder's Equity
The authorized common stock of the Company consists of 200,000,000 shares of
common stock with par value of $0.001, 50,000,000 shares of series A preferred
stock with a par value of $0.001 and 10,000,000 shares of Series B Preferred
Stock.
In March 2007, the Company issued 1,000,000 shares of common stock for
consulting services rendered. These shares were valued at the fair value on the
date of grant for total compensation of $98,000 or $0.098.
In April 2007, the Company issued 500,000 shares of common stock for consulting
services rendered. These shares were valued at the fair value on the date of
grant for total compensation of $60,000 or $0.12.
In May 2007, the Company issued 1,100,000 shares of common stock for consulting
services rendered. These shares were valued at the fair value on the date of
grant for total compensation of $115,500 or $0.105.
In August 2007, the Company issued 1,300,000 shares of common stock for
consulting services rendered. These shares were valued at the fair value on the
date of grant for total compensation of $188,500 or $0.145.
In April 2007, the Company issued 89,438 shares of common stock for interest
which was accrued at December 31, 2006 for $6,261 relating to our Diversified
Lending Group, Inc. note.
In July 2007, the Company issued 2,000,000 shares of common stock as a result of
shares purchased through a private placement offering for $200,000 or $0.10.
In July 2007, the Company issued 39,800 shares of common stock for the accrued
$7,164 in interest accrued at June 30, 2007 for charges relating to the
Diversified Lending Group, Inc. note.
In August 2007, the Company issued 1,200,000 shares of common stock as a result
of shares purchased through a private placement offering for $120,000 or $0.01.
In August 2007, the Company issued 149,369 shares of common stock for interest
which was for the accrued interest at September 30, 2007 for $21,587 relating to
our Diversified Lending Group, Inc. note.
No preferred share transactions occurred as of September 30, 2007.
Note 3. Related Party Transactions and Acquisitions
Related Party Transactions
--------------------------
During the quarters ended September 30, 2007 and 2006, the Company paid
consulting fees of approximately $35,000 per month to Synthetic Systems, LLC,
for a total of $315,000 in each year. Synthetic Systems is jointly owned by
their Chief Executive Officer and Secretary. The Company also paid to Synthetic
Systems LLC., office rent expenses of approximately $26,800 and $25,500 and
furniture and equipment lease of $10,350 or $1,150 per month as of September 30,
2007 and 2006, respectively.
As previously disclosed in our 2006 Form 10-KSB, on May 30, 2002, the Company
executed a Contractor Agreement with Western Architectural Services, LLC
("Western") where Western would provide to the Company certain architectural
services for the Las Vegas Observation Wheel Project in exchange for which the
Company issued 2,812,500 shares of restricted common stock to Western. Although
he was not an affiliate of the Company upon execution of the Contractor
Agreement, Western's Chief Executive Officer is currently an executive officer,
director and significant stockholder of the Company. We have accounted for these
shares as Deferred Construction Costs in these financial statements.
Western plans to sell the amount of common stock at the time before and during
the contract to purchase supplies and pay subcontractors. At the time the
contract was issued the shares of the Company were trading at $6.50 per share.
The current stock price of the Company has a trading range of $0.09 to $0.18. If
at the time Western performs the services contracted and
10
VOYAGER ENTERTAINMENT INTERNATIONAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
the share price is below $6.50 per share, the Company will be required to issue
new shares to Western in order for the contract to be fulfilled. Western's Chief
Executive Officer is currently an affiliate of the Company which will also limit
the amount of shares that can be sold based on the trading volume and shares
outstanding in accordance with Rule 144 of the Securities Act of 1933. As of
September 30, 2007, we have marked these shares to market in accordance with
EITF No. 96-18 "Accounting for Equity Instruments That Are Issued to Other Than
Employees for Acquiring, or in Conjunction with Selling, Goods or Services",
Issue 3, using the period end closing price of our stock. The change in
valuation was credited to additional-paid in capital due to the deferred
construction cost nature of these shares.
As of September 30, 2007, we have borrowed $100,000 from Western. The amount is
unsecured, carries no interest and is due upon the demand of Western.
Acquisitions
------------
On April 10, 2006, we entered into a Unit Purchase (Buy-Sell) Agreement
("Agreement") to acquire all the outstanding units of Western Architectural
Services, LLC ("Western") in exchange for a total of 5,000,000 shares of
Voyager's common stock ("Shares"). On September 11, 2006, Voyager believed it
had fully completed the necessary due diligence pursuant to the Agreement and
consequently delivered the Shares consideration as required for the
final closing. Upon further evaluation of Voyager's due diligence of Western
pursuant to Section 2.02 of the Agreement, it has been determined that the
existing limited liability company ("LLC") operating agreement of Western would
need to be modified in order for Voyager to continue the existing operations of
Western.
On March 30 2007, Voyager and Western were not able to come to acceptable terms
with regards to the needed changes to the LLC operating agreement. The Agreement
was cancelled since the transaction did not meet all the requirements of Section
2.02 of the Agreement and was deemed as if the acquisition transaction was never
closed.
As a result, the acquisition was nullified effective March 30, 2007. As a result
of the nullification of the acquisition transaction 2,500,000 shares of common
stock will be returned to the Company for cancellation and returned to the
treasury. The remaining 2,500,000 shares is accounted for as a fee for the
nullification. The shares were valued at fair value of $0.15 per share for a
total value of $375,000. As of the date of these financial statements, the
Company and Western are in the process of cancelling the necessary shares under
the March 30, 2007 agreement. At the date of this filing the shares have not
been cancelled. We have expensed $375,000 as of September 30, 2007.
Note 4. Deferred Financing Costs
In March 2007, the Company began discussions with an external third party for
financing arrangements. We have paid $50,000 toward services provided by the
external third party and have accounted for this as short term deferred
financing costs. We will net this expense against any financing proceeds
received.
Note 5. Notes Payable
On May 10, 2007, the Company received a loan from CLC/Las Vegas, LLC, in the
amount of $20,000. The terms of the loan called for one payment of all principal
funded to date, interest and other amounts unpaid due and payable in full one
month from the date of funds received by the Company. The loan bears interest at
a rate of 10% per annum, calculated daily on the basis of a 360-day year. The
loan was paid in full on August 10, 2007.
On September 5, 2006 the Company received a loan from Diversified Lending Group,
Inc. ("DLG") a California registered mortgage banker, in the amount of
$1,250,000. The Company is a joint tenant with Western Architectural in this
debt which bears interest of 14% and is due within one year from the date of the
note. As of September 30, 2007, Western Architectural paid directly to
Diversified Lending Group, Inc. six months of interest for the original loan. We
have accounted for this as both interest income and interest expense of $87,500.
As stated in the agreement, the Company could extend the Maturity Date of the
loan one time for a period of six months. The company exercised the option to
extend the loan term six months for a fee of 3% of the loan amount or $37,500
(Western Architecture paid to the Company $18,750 as their part of the loan
extension).
11
VOYAGER ENTERTAINMENT INTERNATIONAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 6. Subsequent Events
In October 2007, the Company issued 100,000 shares of common stock as a result
of shares purchased through a private placement offering for $10,000 or $0.10.
In November 2007, the Company issued 500,000 shares of common stock for services
rendered. These shares were valued at the fair value on the date of grant for
total compensation of $50,000 or $0.1.
12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
The following discussion and analysis of our financial condition should be read
in conjunction with our consolidated financial statements and related notes
included elsewhere in this report. References in this section to "Voyager
Entertainment International, Inc.," the "Company," "we," "us," and "our" refer
to Voyager Entertainment International, Inc. and our direct and indirect
subsidiaries on a consolidated basis unless the context indicates otherwise.
This interim report contains forward looking statements relating to our
Company's future economic performance, plans and objectives of management for
future operations, projections of revenue mix and other financial items that are
based on the beliefs of, as well as assumptions made by and information
currently known to, our management. The words "expects, intends, believes,
anticipates, may, could, should" and similar expressions and variations thereof
are intended to identify forward-looking statements. The cautionary statements
set forth in this section are intended to emphasize that actual results may
differ materially from those contained in any forward looking statement.
EXECUTIVE SUMMARY AND OVERVIEW
Our current business plan is to build multiple observation Ferris wheels
("Observation Wheels"). Proposed sites for the construction of Observation
Wheels include Las Vegas, Nevada, United Arab Emirates ("UAE"), and Shanghai,
China.
We plan to focus primarily on the development of the Observation Wheel in Las
Vegas and the UAE over the next 6 and 18 months respectively. However, we will
also actively seek partnerships and locations for other Observation Wheels
throughout the United States and other foreign countries.
For additional detailed discussion regarding the Company's business and business
trends affecting the Company and certain risks inherent in the Company's
business, see "Item 6: Management's Discussion and Analysis or Plan of
Operations" in the Company's Annual Report on Form 10-KSB for the year ended
December 31, 2006.
DEVELOPMENT OF OUR BUSINESS
Voyager Entertainment International, Inc., formerly named Dakota Imaging, Inc.,
was incorporated in North Dakota on January 31, 1991. Effective February 8,
2002, the Company completed a reverse triangular merger between Dakota
Subsidiary Corp. ("DSC"), a wholly owned subsidiary of the Company, and Voyager
Ventures, Inc., a Nevada Corporation ("Ventures"), whereby the Company issued
3,660,000 shares of its Series A preferred stock in exchange for 100% of
Ventures outstanding common stock. Pursuant to the terms of the merger, DSC
merged with and into Ventures and ceased to exist, and Ventures became a wholly
owned subsidiary of the Company.
On April 2, 2002, we amended our Certificate of Incorporation to change our name
from Dakota Imaging, Inc. to Voyager Entertainment International, Inc.
In June 2003, the Company reincorporated in the State of Nevada. The
reincorporation became effective in the states of North Dakota and Nevada on
June 23, 2003, the date the Certificate of Merger was issued by the Secretary of
State of North Dakota.
CRITICAL ACCOUNTING POLICIES
The methods, estimates and judgments we use in applying our accounting policies
have a significant impact on the results we report in our financial statements.
Some of our accounting policies require us to make difficult and subjective
judgments, often as a result of the need to make estimates of matters that are
inherently uncertain. Our most critical accounting estimates include the
assessment of value of our deferred construction costs.
We believe the following critical accounting policy reflects our most
significant estimates and assumptions used in the preparation of our
consolidated financial statements:
STOCK BASED COMPENSATION
On January 1, 2006, we adopted the fair value recognition provisions of SFAS No.
123(R), "Accounting for Stock-Based Compensation", to account for compensation
costs under our stock option plans. We previously utilized the intrinsic value
method under Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees" (as amended).
We use the fair value method for equity instruments granted to non-employees and
will use the Black Scholes model for measuring the fair value of options, if
issued. The stock based fair value compensation is determined as of the date of
the grant or the date at which the performance of the services is completed
(measurement date) and is recognized over the vesting periods.
We do not have any of the following:
* Off-balance sheet arrangements.
* Certain trading activities that include non-exchange traded contracts
accounted for at fair value.
13
* Relationships and transactions with persons or entities that derive benefits
from any non-independent relationships other than related party transactions
discussed herein.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2007 COMPARED TO
THE THREE MONTHS ENDED SEPTEMBER 30, 2006
Results of operations consist of the following:
September 30, 2007 September 30, 2006 $ Change % Change
Revenue $ -- $ -- $ -- 0%
General and administrative expenses 408,034 358,319 49,715 14%
-----------------------------------------------------------------------
Operating loss $ (408,034) $ (358,319) $ (49,715) 14%
As of September 30, 2007, we have not constructed an Observation Wheel and
therefore have not generated revenues. All costs for the three months of the
third quarter of 2007 remained relatively consistent when compared to the three
months ended September 30, 2006.
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2007 COMPARED TO
THE NINE MONTHS ENDED SEPTEMBER 30, 2006
Results of operations consisted of the following:
September 30, 2007 September 30, 2006 $ Change % Change
Revenue $ -- $ -- $ -- 0%
General and administrative expenses 1,404,922 918,173 486,749 53%
-----------------------------------------------------------------------
Operating loss $ (1,404,922) $ (918,173) $ (486,749) 53%
The increase in general and administrative expenses of 53% is due primarily to
an increase in professional and consulting fees of $1,238,434 as of September
30, 2007 compared to $768,520 of September 30, 2006. Many of these services were
paid through issuance of common stock of $837,000 as of September 30, 2007
compared to $193,500 as of September 30, 2006. The increase in common stock
issued for services is a result of insufficient funds for payment of services
and an increase in consulting services compared to prior periods. There was
$20,798 of project costs as of September 30, 2007 compared to $32,993 as of
September 30, 2006. Project costs are the expenses related to the materials used
to attract investors. All other costs in the third quarter of 2007 remained
relatively consistent when compared to September 30, 2006.
LIQUIDITY AND CAPITAL RESOURCES
We plan to focus primarily on the development of the Observation Wheel in Las
Vegas and the UAE over the next 6 to 18 months. However, we will also actively
seek partnerships and locations for other Observation Wheels throughout the
United States and other foreign countries.
September 30, 2007 September 30, 2006 $ Change % Change
Cash $ 33,498 $ 76,241 $ (42,743) (56%)
Accounts payable and accrued expenses $ 1,115,437 $ 1,042,660 $ 72,777 7%
Cash proceeds from the sale of common stock $ 320,000 $ 50,000 $ 270,000 540%
We have financed our operations during the year primarily through the use of
cash on hand, issuance of stock for services, issuance of stock for cash, and
aging of our payables. As of September 30, 2007, we had total current
liabilities of $4,748,676 compared to $4,400,899 as of December 31, 2006. The
increase in total current liabilities is primarily due to an increase in
Accounts Payable of approximately $16,000, Due to Related Parties $175,000, and
Accrued Expenses of approximately $50,000. These items increased as our lack of
cash has resulted in longer aging of payables and need for additional cash
infusion. We had no long term liabilities during any of these periods.
Cash decreased 56% as of September 30, 2007 due to payment of some of our
payables throughout the first through third quarters of 2007.
We issued common stock of $320,000 for cash as of third quarter of 2007, which
has allowed us to continue our efforts.
We had $33,498 cash on hand as of September 30, 2007 compared to $76,241 as of
December 31, 2006. We will continue to need additional cash during the following
twelve months and these needs will coincide with the cash demands resulting from
our general operations and implementing our business plan. There is no assurance
that we will be able to obtain additional capital as required, or obtain the
capital on acceptable terms and conditions.
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ITEM 3. CONTROLS AND PROCEDURES.
As of the end of the period covered by this report, we conducted an evaluation,
under the supervision and with the participation of our chief executive officer
and chief financial officer of our disclosure controls and procedures (as
defined in Rule 13a -15(e) and Rule 15d-15(e) of the Exchange Act). Based upon
this evaluation, our chief executive officer and chief financial officer
concluded that our disclosure controls and procedures are effective to ensure
that information required to be disclosed by us in the reports that we file or
submit under the Exchange Act is recorded, processed, summarized and reported,
within the time periods specified in the Commission's rules and forms. There was
no change in our internal controls or in other factors that could affect these
controls during our last fiscal quarter that has materially affected, or is
reasonably likely to materially affect, our internal control over financial
reporting.
15
PART II
OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
None.
ITEM 2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The authorized common stock of the Company consists of 200,000,000 shares of
common stock with par value of $0.001, 50,000,000 shares of series A preferred
stock with a par value of $0.001 and 10,000,000 shares of Series B Preferred
Stock.
In March 2007, the Company issued 1,000,000 shares of common stock for
consulting services rendered. These shares were valued at the fair value on the
date of grant for total compensation of $98,000 or $0.098.
In April 2007, the Company issued 500,000 shares of common stock for consulting
services rendered. These shares were valued at the fair value on the date of
grant for total compensation of $60,000 or $0.12.
In May 2007, the Company issued 1,100,000 shares of common stock for consulting
services rendered. These shares were valued at the fair value on the date of
grant for total compensation of $115,500 or $0.105.
In August 2007, the Company issued 1,300,000 shares of common stock for
consulting services rendered. These shares were valued at the fair value on the
date of grant for total compensation of $188,500 or $0.145.
In April 2007, the Company issued 89,438 shares of common stock for interest
which was accrued at December 31, 2006 for $6,261 relating to our Diversified
Lending Group, Inc. note.
In July 2007, the Company issued 2,000,000 shares of common stock as a result of
shares purchased through a private placement offering for $200,000 or $0.10.
In July 2007, the Company issued 39,800 shares of common stock for the accrued
$7,164 in interest accrued at June 30, 2007 for charges relating to the
Diversified Lending Group, Inc. note.
In August 2007, the Company issued 1,200,000 shares of common stock as a result
of shares purchased through a private placement offering for $120,000 or $0.01.
In August 2007, the Company issued 149,369 shares of common stock for interest
which was for the accrued interest at September 30, 2007 for $21,587 relating to
our Diversified Lending Group, Inc. note.
No preferred share transactions occurred as of September 30, 2007.
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4 - SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
None.
ITEM 5 - OTHER INFORMATION
(1) Committees and financial reviews.
The board of directors has not established an audit committee. In addition, we
do not have any other compensation or executive or similar committees. We will
not, in all likelihood, establish an audit committee until such time as we
increase our revenues, of which there can be no assurance. We recognize that an
audit committee, when established, will play a critical role in our financial
reporting system by overseeing and monitoring management's and the independent
auditor's participation in the financial reporting process.
Until such time as an audit committee has been established, the board of
directors will undertake those tasks normally associated with an audit committee
to include, but not by way of limitation, the (i) review and discussion of the
audited financial statements with management, and (ii) discussions with the
independent auditors with respect to the matters required to be discussed by the
Statement On Auditing Standards No. 61, "Communications with Audit Committees",
as may be modified or supplemented.
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ITEM 6 - EXHIBITS.
(a) The following exhibits are filed with this report.
31.1 Certification by Chief Executive Officer pursuant to Sarbanes Oxley
Section 302.
32.1 Certification by Chief Financial Officer pursuant to Sarbanes Oxley
Section 302.
32.1 Certification by Chief Executive Officer pursuant to 18 U.S. C.
Section 1350
32.2 Certification by Chief Financial Officer pursuant to 18 U.S. C.
Section 1350
17
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
VOYAGER ENTERTAINMENT INTERNATIONAL, INC.
-----------------------------------------
(Registrant)
Dated November 12, 2007
By: /s/ Richard Hannigan
-------------------------------------
Richard Hannigan,
President/Director
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated
By: /s/ Richard Hannigan, Sr.
-------------------------------------
Richard Hannigan, Sr.
President/CEO/Director
November 12, 2007
By: /s/ Myong Hannigan
-------------------------------------
Myong Hannigan
Secretary/Treasurer/Director
November 12, 2007
By: /s/ Tracy Jones
-------------------------------------
Tracy Jones
COO/Director
November 12, 2007
18