UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: December 31, 2004
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to _________
Commission file number: 00-333151
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VOYAGER ENTERTAINMENT INTERNATIONAL, INC.
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(Name of Small Business Issuer in Its Charter)
Nevada 45-042009
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(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
4483 West Reno Avenue Las Vegas, Nevada 89118
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(Address of Principal Executive Offices) (Zip Code)
Issuer's Telephone Number, Including Area Code: (702) 221-8070
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Securities registered under Section 12(b) of the Act: None
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Securities registered under Section 12(g)
of the Act: Common Stock, $.001 par value
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(Title of Class)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act 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
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]
State issuer's revenues for its most recent fiscal year: $0.00
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State the aggregate market value of the voting and non-voting common equity
held by non-affiliates computed by reference to the price at which the common
equity was sold, or the average bid and asked price of such common equity, a
specified date within the past 60 days: As of March 31, 2005, the aggregate
market value of shares held by non-affiliates (based on the close price on that
date of $0.32 was approximately $21,301,000.
State the number of shares outstanding of each of the issuer's classes of
equity, as of the last practicable date: 66,566,126 shares as of common stock,
500,000 shares of Preferred Series A stock and 4,000,000 shares of Preferred
Series B stock as confirmed by the company's transfer agent on March 31, 2005.
Transitional Small Business Disclosure Format (check one): Yes No X
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VOYAGER ENTERTAINMENT INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
FOR THE FISCAL YEAR ENDED
December 31, 2004
PART I Page
Item 1. Description of Business 2
Item 2. Description of Property 6
Item 3. Legal Proceedings 6
Item 4. Submission of Matters to a Vote of Security Holders 7
PART II
Item 5. Market for Common Equity and Related Stockholder Matters 7
Item 6. Managements' Discussion and Analysis or Plan of Operation 10
Item 7 Consolidated Financial Statements 18
Item 8 Changes in and Disagreements With Accountants on Accounting
and Financial Disclosure 19
Item 8A Controls and Procedures 19
Item 8B Other Information 19
PART III
Item 9 Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act 20
Item 10 Executive Compensation 23
Item 11 Security Ownership of Certain Beneficial Owners and Management 24
Item 12 Certain Relationships and Related Transactions 27
Item 13 Exhibits, Consolidated Financial Statement Schedules and
Reports on Form 8-K 28
Item 14 Principal Accounting Fees and Services 29
1
This Form 10-KSB contains forward-looking statements within the meaning of
the federal securities laws. These forward-looking statements are necessarily
based on certain assumptions and are subject to significant risks and
uncertainties. These forward-looking statements are based on management's
expectations as of the date hereof, and the Company does not undertake any
responsibility to update any of these statements in the future. Actual future
performance and results could differ from that contained in or suggested by
these forward-looking statements as a result of factors set forth in this Form
10-KSB (including those sections hereof incorporated by reference from other
filings with the Securities and Exchange Commission), in particular as set forth
in the "Plan of Operation" under Item 6.
In this filing references to "Company," "we," "our," and/or "us," refers to
Voyager Entertainment International, Inc.
PART I
ITEM 1. DESCRIPTION OF BUSINESS
( a ) RECENT DEVELOPMENT
On March 17, 2005 the company signed a joint venture agreement with Allied
Investment House, Inc. to build a 600ft Observation Wheel in the
United Arab Emirates. Allied Investment House, Inc. will provide 100% of the
financing of an Observation Wheel in the UAE up to $150 million.
Voyager and Allied will form a UAE corporation in order for the transaction to
be completed. Both Voyager (or its assigns) and Allied (or its assigns) will
operate and govern the newly formed company. Voyager and Allied will jointly own
the newly formed company.
Using "best efforts" within 180 days and depending on current prevailing market
Conditions, Allied will cause the newly formed company to offer its stock in a
public offering that will cause the newly formed company's stock to be traded on
an internationally recognized stock exchange.
As a result of the signing of the agreement Voyager will be responsible for the
management of the construction of the project and will receive a premium above
and beyond the cost of building the project. There will be a management
agreement which allows Voyager to contract a third party management company to
perform day-to-day operations. Voyager will also receive a percentage of gross
revenues from operations.
(b) GENERAL BUSINESS DEVELOPMENT
Voyager Entertainment International, Inc., a Nevada corporation, formerly
named Dakota Imaging, Inc., was originally 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
Convertible Preferred Stock in exchange for 100% of Ventures outstanding common
stock. Pursuant to the terms of the merger, Ventures merged with DSC wherein DSC
ceased to exist and Ventures became a wholly owned subsidiary of the Company.
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On November 15, 2002, we entered into a loan and security agreement with
Mr. Dan Fugal, an unaffiliated individual, whereby Mr. Fugal was to provide us
with a credit facility in the form of a secured line of credit not to exceed
$2.5 million.
On February 15, 2003, we executed an amendment to the Loan and Security
Agreement to amend the term date from February 15, 2003 to April 15, 2003. As of
the year ending December 31, 2003 Mr. Fugal has loaned $605,000 to the Company.
The loan and security agreement with Mr. Fugal has expired and requires the
company to repay $605,000 to Mr. Fugal as well as a one time interest payment of
$605,000. Any agreements or amendments for Mr. Fugal to provide additional funds
have been canceled, and the Company is obligated to repay a total of $1,210,000.
By written consent dated April 23, 2003, a majority of the Company's
stockholders elected to reincorporate the Company in the State of Nevada,
[pursuant to a reincorporation merger between the Company and its then
wholly-owned subsidiary, Voyager Entertainment International, Inc. Nevada
unknown if this was the name will find out from prior counsel, formed for the
purpose of the reincorporation merger, and which constituent company survived
the reincorporation merger]. The reincorporation became effective on June 23,
2003. In connection with the reincorporation, the Company increased its
authorized Common Stock, $0.001 par value, from 100,000,000 shares to
200,000,000 shares and its authorized Preferred Stock, $0.001 par value, from
25,000,000 shares to 50,000,000 shares.
The consolidated financial statements included in this filing have been prepared
assuming that the Company will continue as a going concern, which contemplates
the realization of assets and the satisfaction of liabilities in the normal
course of business. The Company has no established source of revenue, incurred
significant losses since inception of $10,342,732 and used cash for operations
of $1,094,500 and $744,562 during the years ended December 31, 2004 and 2003
respectively. The Company also has a working capital deficit of $2,902,229 and a
stockholders' deficit of $2,893,767 as of December 31, 2004. Additionally, a
lender has the right to foreclose on the assets of the Company if the demand for
repayment of $1.2 million is not made. These factors raise substantial doubt
about the Company's ability to continue as a going concern. The Company's cash
position may be inadequate to pay all of the costs associated with production
and marketing. Management intends to use borrowings and security sales to
mitigate the effects of its cash position. However, no assurance can be given
that debt or equity financing, if and when required, will be available. The
consolidated financial statements do not include any adjustments relating to the
recoverability and classification of recorded assets and classification of
liabilities that might be necessary should the Company be unable to continue
existence.
(c) OUR BUSINESS
Our current business plan is to build multiple observation Ferris
wheels ("Observation Wheels"). Currently proposed sites for the construction of
Observations Wheels include Las Vegas, Nevada; UAE and Shanghai, China.
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L.V. Voyager Project
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For the past 6 years, through its subsidiaries, the Company has
extensively planned and/or evaluated the available locations at both the North
and South ends of the Las Vegas Strip as well as other off-strip locations in
Las Vegas, Nevada for the construction of the L.V. Voyager Project.
The L.V. Voyager Project is intended to be designed as a visual ICON
and experience overlooking the "Las Vegas Strip". With 30 vehicles called
Orbiters, the L.V. Voyager Project is intended to be a revolving Ferris wheel
that will overlook the Las Vegas Strip as it revolves higher than a 60-story
building at approximately 600 feet. One rotation in an Orbiter will last
approximately 27 minutes. Each Orbiter will be controlled by an on-board
Navigator, who will be part entertainer and part steward, and who will also be
skilled in life-safety and security. Due to lack of adequate financing, the
Company has not been able to successfully launch these projects.
ORGANIZATION AND OPERATION
The L.V. Voyager Project will be owned by the Company, however, it will
be designed, developed, built and operated by Voyager Entertainment Holdings,
Inc., "VEHI"), a wholly owned subsidiary of the Company. VEHI will manage the
project pursuant to a performance-based contract between the Company and VEHI
[and an as-yet unidentified partner of the Company]. All covenants, restrictions
and protocols will be detailed in the performance-based contract.
As the management company, VEHI will be responsible for the design,
development, construction, and operation of the L.V. Voyager Project, and will
provide the following: concept development, project design, location assessment
and acquisition, strategic alliances in both entertainment and gaming, business
plans and budgets, financial oversight and management during both construction
and operation, marketing plans, insurance procurement and risk management,
senior operational management including development of policies and procedures,
and overall strategic focus for the L.V. Voyager Project.
The L.V. Voyager Project is fundamentally an entertainment attraction,
and its operational and maintenance requirements are very similar to those found
in the theme park industry. In addition, Las Vegas is a unique marketplace, and
each visitor, when placed in the environment, is also unique. The ability to
understand each visitor, and successfully attract customers to the L.V. Voyager
Project will come as a result of clearly understanding the marketing strategies
of the gaming industry. VEHI intends to employ highly skilled individuals from
the theme park industry and combine their specialized skills with those from the
gaming industry.
The initial management team at VEHI is anticipated to consist of
Richard Hannigan, President, CEO and a Director, Tracy Jones, COO and a
Director, Myong Hannigan, Secretary and Treasurer, Michael Schaunessy, CFO, and
Sig Rogich, Director of Public Relations & Communications.
Star of Shanghai Voyager Project
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The western bank (Puxi) of the Huangpu River, the Bund, is the
anticipated location for a master planned development with the "Star of
Shanghai" Observation Wheel as the dominant feature (the "Star of Shanghai
Voyager Project"). The Star of Shanghai Voyager Project is to be designed as a
special tribute to the legendary figure Huang Daopo who invented the "spinning
wheel" that reformed the technique of cotton weaving, and gained fame for its
production of clothing. The Company does not currently have any agreements for a
proposed site and has not secured financing for the planned project.
The Company will require substantial additional funds to fulfill its
business plan and successfully develop its three Observation Wheel projects. The
Company intends to raise these needed funds from private placements of its
securities, debt financing or internally generated funds from the licensing of
its intellectual property or service fees. As of the date of this filing the
Company has not received a firm commitment for financing of any of the projects.
The company continues to receive and evaluate opportunities throughout Asia as
well as Shanghai, China.
4
United Arab Emirates (UAE)
--------------------------
On March 17, 2005 the company issued a press release announcing the signing of a
joint venture agreement with Allied Investment House, Inc. to build a 600ft
Observation Wheel in the United Arab Emirates. Allied Investment House, Inc.
will provide 100% of the financing of an Observation Wheel in the UAE up to $150
million.
Voyager and Allied will form a UAE corporation in order for the transaction to
be completed. Both Voyager (or its assigns) and Allied (or its assigns) will
operate and govern the newly formed company. Voyager and Allied will jointly own
the newly formed company.
Using "best efforts" within 180 days and depending on current prevailing market
Conditions, Allied will cause the newly formed company to offer stock from the
company in a public offering that will cause the new company's stock to be
traded on an internationally recognized stock exchange.
As a result of the signing of the agreement Voyager will be responsible for the
management of the construction of the project and will receive a premium above
and beyond the cost of building the project. There will be a management
agreement which allows Voyager to contract a third party management company to
perform day-to-day operations. Voyager will also receive a percentage of gross
revenues from operations.
Currently the determination is being made as to the exact location where the
Voyager Project is going to be located in UAE.
Other "Observation Wheels"
--------------------------
Currently, the Company is primarily focusing on the L.V. Voyager
Project and the UAE Project. However, the Company has plans to build additional
Observation Wheels in other various locations in addition to Las Vegas, UAE and
Shanghai.
Market Overview
Management believes that, in the foreseeable future, cash generated
from operations will be inadequate to support full marketing roll out and
ongoing product development, and that we will thus be forced to rely on
additional debt and/or equity financing. Management believes that it can
identify sources and obtain adequate amounts of such financing. We intend to
enter into a cooperative arrangement with distributors or vendors, whereby we
will receive marketing and sales benefits from the professional staff of such
distributors or vendors. To date, we have not established any such arrangements.
In the event we are unsuccessful in generating equity capital, then the Company
will be unable to continue with product development and/or marketing. The lack
of equity capital may in turn cause the Company to become insolvent.
Competition
We compete with numerous other hospitality and entertainment companies.
Many of these competitors have substantially greater resources than we do.
Should a larger and better financed company decide to directly compete with us,
and be successful in its competitive efforts, our business could be adversely
affected. Other competitors could announce and build an observation wheel who
are better financed. If this occurs it would make it very difficult for the
company to have a successful project within the same city.
There have been other companies that have announced possible development of a
large Observation Wheel.
There have been several other companies that have announced to the public plans
to build an observation wheel in Las Vegas. If any of these companies are
successful it would diminish the possibility of the company obtaining financing
or a acquiring a proper location.
We have a limited operating history, which could make it difficult to evaluate
our business.
We have yet to establish any history of profitable operations. Although
some of our affiliates have been engaged in the acquisition and administration
of various industries for several years, we have a limited operating history. As
a result, we may not be able to successfully achieve profitability. The
5
likelihood of our success must be considered in light of the problems, expenses
and complications frequently encountered in connection with the development of a
project this size and the competitive environment in which we operate.
Accordingly, our limited operating history makes an effective evaluation of our
potential success difficult. Our viability and continued operation depend on
future profitability, our ability to generate cash flows and our successful
development and management of other business opportunities. There can be no
assurance that we will be able to successfully implement our business plan or
that if implemented, it will be profitable.
We may be unable to obtain the appropriate funding to run our company.
We do not presently have sufficient financial resources and have no assurance
that sufficient funding will be available to us to build our project. There can
be no assurance that we will be able to obtain adequate financing in the future
or that the terms of such financing will be favorable. Failure to obtain such
additional financing could result in delay or indefinite postponement of
constructing an Observation Wheel.
Research and Development
From the inception to our predecessor in interest, Voyager Ventures,
Inc., in March of 1997 through present, we have devoted a majority of our time
on research and development. During the period from March 1, 1997 through
December 31, 2004, we incurred operating expenses of $9,084,324 and interest
expense of $1,258,407 against no revenues, which resulted in accumulated losses
of $10,342,731.
Employees
As of December 31, 2004, we only had unpaid Officers and Directors. We
are dependent upon Richard Hannigan, President, CEO and a Director of the
Company; Tracy Jones, COO and Director, and Myong Hannigan Secretary/Treasurer
and a Director. We do not have any employees at this time and do not anticipate
the need to hire any employees until such time as we have been sufficiently
capitalized.
Our future success also depends on our ability to attract and retain
other qualified personnel, for which competition is intense. The loss of Mr.
Hannigan, Mr. Jones or our inability to attract and retain other qualified
employees could have material adverse effect on us.
Currently there are no patents, trademarks or copyrights filed on behalf of the
company protecting the current design of the Observation Wheel. We currently do
not have a site for the Observation Wheel. However, when a proper site is
obtained the Company will be required to obtain proper permitting and government
approvals unless that site currently approved for the construction of an
Observation Wheel. There can be no guarantees that the Company will be
successful in securing a suitable site or the appropriate approvals needed.
ITEM 2. DESCRIPTION OF PROPERTY
We currently lease 2,100 square feet of office space in Las Vegas,
Nevada from Synthetic Systems, LLC, of which our President is the owner. We
lease the office space at cost with no mark up for $2,325 per month on a
month-to-month basis. We believe that the property leased from Synthetic
Systems, LLC., is in reasonably good condition and is suitable for our current
and anticipated needs for the near future.
ITEM 3. LEGAL PROCEEDINGS
On April 30, 2004, the Company and The Rio All-Suite Hotel & Casino in Las
Vegas, Nevada mutually agreed to discontinue negotiations to build "The World's
Tallest Observation Wheel" at the property of The Rio All-Suite Hotel & Casino.
On May 3, 2004, the Company filed a complaint in the U.S. District Court for the
District of Nevada (Case No. CV-S-04-0558) against Donald and Nancy Tyner, who
are stockholders of the Company, alleging that Mr. and Mrs. Tyner are liable to
the Company pursuant to Section 16(b) of the Securities Exchange Act of 1934 for
short-swing profits realized by Mr. and Mrs. Tyner in connection with their
sales and purchases of the Company's Common Stock between December 3, 2003 and
February 4, 2004. While the complaint in this matter has been filed, Mr. And
Mrs. Tyner have not been served with the complaint.
In June 2004 the Company withdrew the complaint filed in the U.S. District Court
for the District of Nevada (Case No. CV-S-04-0558) against Donald and Nancy
Tyner.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL
BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES
(a) MARKET INFORMATION
Our Common Stock is traded in the over-the-counter securities market
through the National Association of Securities Dealers Automated Quotation
Bulletin Board System, under the symbol "VEII". The following table sets forth
the quarterly high bid, low bid and close as well as the high ask, low ask and
close prices for our Common Stock during our last two fiscal years, as reported
by the National Quotations Bureau. The quotations reflect inter-dealer prices,
without retail mark-up, markdown or commission, and may not represent actual
transactions.
2004 2003
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Low High Low High Low High Low High
Bid Bid Close Ask Ask Close Bid Bid Close Ask Ask Close
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1st Quarter $0.105 $0.27 $0.19 $0.11 $0.33 $0.23 $0.14 $1.21 $0.68 $0.16 $1.22 $0.71
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2nd Quarter $0.16 $0.51 $0.20 $0.19 $0.53 $0.23 $0.07 $0.26 $0.14 $0.09 $0.29 $0.16
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3rd Quarter $0.40 $0.75 $0.31 $0.23 $0.78 $0.36 $0.07 $0.31 $0.07 $0.09 $0.32 $0.09
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4th Quarter $0.41 $0.96 $0.46 $0.46 $1.01 $0.51 $0.15 $0.29 $0.15 $0.18 $0.33 $0.20
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(b) HOLDERS OF COMMON STOCK
As of December 31, 2004, we had approximately 75 stockholders of record
(not including shares held by brokers or in street name), of the 65,566,126
shares of Common Stock outstanding. The closing bid stock price on March 31,
2004 was $0.36.
(c) DIVIDENDS
We have never declared or paid dividends on our Common Stock. We intend
to follow a policy of retaining earnings, if any, to finance the growth of the
business and do not anticipate paying any cash dividends in the foreseeable
future. The declaration and payment of future dividends on the Common Stock will
be at the sole discretion of the Board of Directors and will depend on our
profitability and financial condition, capital requirements, statutory and
contractual restrictions, future prospects and other factors deemed relevant by
the Board.
RECENT SALES OF UNREGISTERED SECURITIES AND USE OF PROCEEDS
In the year ended December 31, 2004 we issued and sold the following
unregistered securities:
On January 5, 2004, the Company sold 192,307 shares of Common Stock for $25,000.
The Common Stock was offered in reliance upon the private offering exemptions
contained in Sections 3(b) and 4(2) of the Securities Act of 1933, as amended,
and Rule 506 of Regulation D promulgated thereunder. The purchaser was an
"accredited" investor within the meaning of Rule 501(a) of Regulation D. We
received net proceeds in the offering of $25,000. The purchaser represented that
he was acquiring the Common Stock for investment purposes only and not with a
view to distribute. The purchaser further represented that he (a) had such
knowledge and experience in financial and business matters and was capable of
evaluating the merits and risks of the investment, (b) is able to bear the
complete loss of the investment, (c) has had the opportunity to ask questions
7
of, and receive answers from, the Company and its management concerning the
terms and conditions of the offering and to obtain additional information, and
(d) qualifies as an "accredited investor" as such term is defined in Rule 501(a)
of Regulation D. This sale of securities was part of the agreement dated
December 3, 2003 to purchase a total of 1,538,461 shares of Common Stock at a
price of $0.13 per share for $200,000.
On February 2, 2004, the Company sold 384,614 shares of Common Stock for
$50,000. The Common Stock was offered in reliance upon the private offering
exemptions contained in Sections 3(b) and 4(2) of the Securities Act of 1933, as
amended, and Rule 506 of Regulation D promulgated thereunder. The purchaser was
an "accredited" investor within the meaning of Rule 501(a) of Regulation D. We
received net proceeds in the offering of $50,000. The purchaser represented that
he was acquiring the Common shares for investment purposes only and not with a
view to distribute. The purchaser further represented that he (a) had such
knowledge and experience in financial and business matters and was capable of
evaluating the merits and risks of the investment, (b) is able to bear the
complete loss of the investment, (c) has had the opportunity to ask questions
of, and receive answers from, the Company and its management concerning the
terms and conditions of the offering and to obtain additional information, and
(d) qualifies as an "accredited investor" as such term is defined in Rule 501(a)
of Regulation D. This sale of securities was part of the agreement dated
December 3, 2003 to purchase a total of 1,538,461 shares of Common Stock at a
price of $0.13 per share for $200,000.
In February 2004, the Company sold 750,000 shares of Common Stock for $300,000.
The Common Stock was offered in reliance upon the private offering exemptions
contained in Sections 3(b) and 4(2) of the Securities Act of 1933, as amended,
and Rule 506 of Regulation D promulgated thereunder. All purchasers were
"accredited" investors within the meaning of Rule 501(a) of Regulation D. We
received net proceeds in the offering of $300,000. All purchasers represented
that they were acquiring the Common shares for investment purposes only and not
with a view to distribute. The purchasers further represented that they (a) have
such knowledge and experience in financial and business matters and are capable
of evaluating the merits and risks of the investment, (b) are able to bear the
complete loss of the investment, (c) have had the opportunity to ask questions
of, and receive answers from, the Company and its management concerning the
terms and conditions of the offering and to obtain additional information, and
(d) qualify as "accredited investors" as such term is defined in Rule 501(a) of
Regulation D.
In February 2004, the Company also issued 575,000 shares of restricted Common
Stock to four individuals for consulting services valued at the fair market
value of $438,750. The Company believes that the issuance of the shares was
exempt from the registration and prospectus delivery requirements of the
Securities Act of 1933 by virtue of Section 4(2). The shares were issued
directly by the Company and did not involve a public offering or general
solicitation. The recipient of the shares had a preexisting relationship with
our management, had performed services for the Company and had full and complete
access to the Company and had the opportunity to speak with management with
regards to their investment decision.
In February 2004, the Company also issued 150,000 shares of restricted Common
Stock, that was approved in February 2004, to two individuals for consulting
services. The consulting services were valued at the fair market value of
$120,000. The Company believes that the issuance of the shares was exempt from
the registration and prospectus delivery requirements of the Securities Act of
1933 by virtue of Section 4(2). The shares were issued directly by the Company
and did not involve a public offering or general solicitation. The recipients of
the shares had a preexisting relationship with our management, had performed
services for the Company and had full and complete access to the Company and had
the opportunity to speak with management with regards to their investment
decision.
On March, 2004, the Company sold 384,614 shares of Common Stock for $50,000. The
Common Stock was offered in reliance upon the private offering exemptions
contained in Sections 3(b) and 4(2) of the Securities Act of 1933, as amended,
and Rule 506 of Regulation D promulgated thereunder. The purchaser was an
"accredited" investor within the meaning of Rule 501(a) of Regulation D. We
received net proceeds in the offering of $50,000. The purchaser represented that
he was acquiring the Common Stock for investment purposes only and not with a
view to distribute. The purchaser further represented that he (a) had such
knowledge and experience in financial and business matters and was capable of
evaluating the merits and risks of the investment, (b) is able to bear the
complete loss of the investment, (c) has had the opportunity to ask questions
of, and receive answers from, the Company and its management concerning the
terms and conditions of the offering and to obtain additional information, and
(d) qualifies as an "accredited investor" as such term is defined in Rule 501(a)
of Regulation D. This sale of securities was part of the agreement dated
December 3, 2003 to purchase a total of 1,538,461 shares of Common Stock at a
price of $0.13 per share for $200,000.
8
On March 5 2004, the Company issued 5,000,000 shares of Common Stock to Richard
L. Hannigan Sr., an officer and director of the corporation as a result of the
officer converting 500,000 shares of Series A Preferred Stock that converted at
the rate of ten Common shares for every one share of Series A Preferred Stock
owned by such officer. The Company believes that the issuance of the shares was
exempt from the registration and prospectus delivery requirements of the
Securities Act of 1933 by virtue of Section 4(2). The shares were issued
directly by the Company and did not involve a public offering or general
solicitation. The recipient of the shares had a preexisting relationship with
our management, had performed services for the Company and had full and complete
access to the Company and had the opportunity to speak with management with
regards to his investment decision.
On March 31 2004, the Company issued 5,000,000 shares of Common Stock to Gregg
Giuffria, a former officer and director of the corporation as a result of the
officer converting 500,000 shares of Series A Preferred Stock that converted at
the rate of ten Common shares for every one share of Series A Preferred Stock
owned by such officer. The Company believes that the issuance of the shares was
exempt from the registration and prospectus delivery requirements of the
Securities Act of 1933 by virtue of Section 4(2). The shares were issued
directly by the Company and did not involve a public offering or general
solicitation. The recipient of the shares had a preexisting relationship with
our management, had performed services for the Company and had full and complete
access to the Company and had the opportunity to speak with management with
regards to his investment decision.
On June 17, 2004 the Company entered in to negotiations to purchase a parcel of
property located in Las Vegas, Nevada. As a result the Company issued 500,000
shares of Common Stock to the owner of the parcel of property. The shares will
remain outstanding regardless of whether or not the Company completes the
transaction. The shares were valued at the fair market value of $245,000.
On June 30, 2004, the Company also issued 150,000 shares of restricted Common
Stock, to an individual for consulting services valued at the fair market value
of $78,000. The Company believes that the issuance of the shares was exempt from
the registration and prospectus delivery requirements of the Securities Act of
1933 by virtue of Section 4(2). The shares were issued directly by the Company
and did not involve a public offering or general solicitation. The recipients of
the shares had a preexisting relationship with our management, had performed
services for the Company and had full and complete access to the Company and had
the opportunity to speak with management with regards to their investment
decision.
In September 2004, the Company sold 333,333 shares of Common Stock for $50,000.
The Common Stock was offered in reliance upon the private offering exemptions
contained in Sections 3(b) and 4(6) of the Securities Act of 1933, as amended,
and Rule 506 of Regulation D promulgated thereunder. All purchasers were
"accredited" investors within the meaning of Rule 501(a) of Regulation D. We
received net proceeds in the offering of $50,000. All purchasers represented
that they were acquiring the Common shares for investment purposes only and not
with a view to distribute. The purchasers further represented that they (a) have
such knowledge and experience in financial and business matters and are capable
of evaluating the merits and risks of the investment, (b) are able to bear the
complete loss of the investment, (c) have had the opportunity to ask questions
of, and receive answers from, the Company and its management concerning the
terms and conditions of the offering and to obtain additional information, and
(d) qualify as "accredited investors" as such term is defined in Rule 501(a) of
Regulation D.
In October 2004, the Company sold 1,000,000 shares of Common Stock for $150,000.
The Common Stock was offered in reliance upon the private offering exemptions
contained in Sections 3(b) and 4(6) of the Securities Act of 1933, as amended,
and Rule 506 of Regulation D promulgated thereunder. All purchasers were
"accredited" investors within the meaning of Rule 501(a) of Regulation D. We
received net proceeds in the offering of $100,000. All purchasers represented
that they were acquiring the Common shares for investment purposes only and not
with a view to distribute. The purchasers further represented that they (a) have
such knowledge and experience in financial and business matters and are capable
of evaluating the merits and risks of the investment, (b) are able to bear the
complete loss of the investment, (c) have had the opportunity to ask questions
of, and receive answers from, the Company and its management concerning the
terms and conditions of the offering and to obtain additional information, and
(d) qualify as "accredited investors" as such term is defined in Rule 501(a) of
Regulation D.
In October, 2004, the Company also issued 500,000 shares of restricted Common
Stock, to an individual for consulting services valued at the fair market value
of $55,000. The Company believes that the issuance of the shares was exempt from
the registration and prospectus delivery requirements of the Securities Act of
1933 by virtue of Section 4(2). The shares were issued directly by the Company
and did not involve a public offering or general solicitation. The recipients of
the shares had a preexisting relationship with our management, had performed
services for the Company and had full and complete access to the Company and had
the opportunity to speak with management with regards to their investment
decision.
9
SUBSEQUENT EVENTS
------------------
In February, 2005, the Company also issued 500,000 shares of restricted Common
Stock, for consulting services performed during the first quarter and to be
performed throughout the second quarter. The Company believes that the issuance
of the shares was exempt from the registration and prospectus delivery
requirements of the Securities Act of 1933 by virtue of Section 4(2). The shares
were issued directly by the Company and did not involve a public offering or
general solicitation. The recipients of the shares had a preexisting
relationship with our management, had performed services for the Company and had
full and complete access to the Company and had the opportunity to speak with
management with regards to their investment decision. These shares were valued
at a fair market value of $0.15 per share for total consideration of $75,000.
In February 2005, the Company sold 500,000 shares of Common Stock for $100,000.
The Common Stock was offered in reliance upon the private offering exemptions
contained in Sections 3(b) and 4(6) of the Securities Act of 1933, as amended,
and Rule 506 of Regulation D promulgated thereunder. All purchasers were
"accredited" investors within the meaning of Rule 501(a) of Regulation D. We
received net proceeds in the offering of $100,000. All purchasers represented
that they were acquiring the Common shares for investment purposes only and not
with a view to distribute. The purchasers further represented that they (a) have
such knowledge and experience in financial and business matters and are capable
of evaluating the merits and risks of the investment, (b) are able to bear the
complete loss of the investment, (c) have had the opportunity to ask questions
of, and receive answers from, the Company and its management concerning the
terms and conditions of the offering and to obtain additional information, and
(d) qualify as "accredited investors" as such term is defined in Rule 501(a) of
Regulation D.
In March, 2005, the Company also issued 500,000 shares of restricted Common
Stock, for consulting services performed during the first quarter and to be
performed throughout the second quarter. The Company believes that the issuance
of the shares was exempt from the registration and prospectus delivery
requirements of the Securities Act of 1933 by virtue of Section 4(2). The shares
were issued directly by the Company and did not involve a public offering or
general solicitation. The recipients of the shares had a preexisting
relationship with our management, had performed services for the Company and had
full and complete access to the Company and had the opportunity to speak with
management with regards to their investment decision. These shares were valued
at a fair market value of $160,000.
In March 2005, the Company sold 375,000 shares of Common Stock for $75,000. The
Common Stock was offered in reliance upon the private offering exemptions
contained in Sections 3(b) and 4(6) of the Securities Act of 1933, as amended,
and Rule 506 of Regulation D promulgated thereunder. All purchasers were
"accredited" investors within the meaning of Rule 501(a) of Regulation D. We
received net proceeds in the offering of $75,000. All purchasers represented
that they were acquiring the Common shares for investment purposes only and not
with a view to distribute. The purchasers further represented that they (a) have
such knowledge and experience in financial and business matters and are capable
of evaluating the merits and risks of the investment, (b) are able to bear the
complete loss of the investment, (c) have had the opportunity to ask questions
of, and receive answers from, the Company and its management concerning the
terms and conditions of the offering and to obtain additional information, and
(d) qualify as "accredited investors" as such term is defined in Rule 501(a) of
Regulation D.
ITEM 6. MANAGEMENTS' DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
This report contains forward-looking statements. Actual results and
events could differ materially from those projected, anticipated, or implicit,
in the forward-looking statements as a result of the risk factors set forth
below and elsewhere in this report.
With the exception of historical matters, the matters discussed herein
are forward looking statements that involve risks and uncertainties. Forward
looking statements include, but are not limited to, statements concerning
anticipated trends in revenues and net income, the date of introduction or
completion of our products, projections concerning operations and available cash
flow. Our actual results could differ materially from the results discussed in
such forward-looking statements primarily as the result of insufficient cash to
pursue production and marketing efforts. The following discussion of our
financial condition and results of operations should be read in conjunction with
our financial statements and the related notes thereto appearing elsewhere
herein.
10
Overview
Voyager Entertainment International, Inc., formerly named Dakota
Imaging, Inc., was incorporated in North Dakota on January 31, 1991. Effective
February 8, 2002 the Company completed a reverse triangular merger between
Dakota Subsidiary Corp. ("DSC"), a wholly 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.
Section 15(g) of the Exchange Act
---------------------------------
The Company's shares are covered by Section 15(g) of the Securities Exchange Act
of 1934, as amended, and Rules 15g-1 through 15g-6 promulgated thereunder, which
impose additional sales practice requirements on broker-dealers who sell our
securities to persons other than established customers and accredited investors.
Rule 15g-2 declares unlawful any broker-dealer transactions in penny stocks
unless the broker-dealer has first provided to the customer a standardized
disclosure document.
Rule 15g-3 provides that it is unlawful for a broker-dealer to engage in a penny
stock transaction unless the broker-dealer first discloses and subsequently
confirms to the customer the current quotation prices or similar market
information concerning the penny stock in question.
Rule 15g-4 prohibits broker-dealers from completing penny stock transactions for
a customer unless the broker-dealer first discloses to the customer the amount
of compensation or other remuneration received as a result of the penny stock
transaction.
Rule 15g-5 requires that a broker-dealer executing a penny stock transaction,
other than one exempt under Rule 15g-1, disclose to its customer, at the time of
or prior to the transaction, information about the sales person's compensation.
The Company's common stock may be subject to the foregoing rules. The
application of the penny stock rules may affect our stockholder's ability to
sell their shares because some broker-dealers may not be willing to make a
market in our common stock because of the burdens imposed upon them by the penny
stock rules.
Plan of Operation
During the next 12 months, we plan to focus our efforts on our
development of the Observation Wheels; however actual production will not
commence until we have sufficient capital for production and marketing.
Currently, our monthly cash need is approximately $85,000 per month. As of the
year ending December 31, 2004 the Company did not have enough cash on hand to
continue operations through the next quarter. However, from time-to-time the
officers of the company loan funds to provide for operations. There can be no
guarantees that the company's officers and directors will continue to loan funds
to the company on an ongoing basis. However, if we do not receive a substantial
amount of funding it will be unlikely we can continue operations. We have been
successful in the past in selling our common stock in private transactions to
provide for minimal operations. We plan to seek additional funding through debt
transactions and the sale of our common stock either privately or publicly.
There can be no guarantees we will continue to be successful in completing those
transactions. The primary expenses for the company consist of consulting fees
that are primarily paid by the issuance of our common stock.
We are not the traditional company that has the standard research and
development expenses. As a result, most of our research and development expenses
consist of presentation materials and architectural designs. Upon funding of the
project the initial expense will be engineering and architectural.
11
Our primary costs consist mainly of professional and consulting, legal and
accounting fees along with those fees paid to related parties, rent expenses and
printing expenses. As the project is being developed we are incurring additional
architectural and travel related fees. The company expects that travel expenses
will increase throughout 2005 as a result of the agreement signed to develop a
observation wheel in the United Arab Emirates. If this project is successful
there will be a significant increase in expenses for all aspects of the
construction process to include an additional office set up and continual
travel.
We plan to focus primarily on the development of the Observation Wheel
in Las Vegas and the UAE over the next 12 months. However, we will also actively
seek partnerships and locations for other Observation Wheels throughout the
United States and other foreign countries.
Other than presentation materials, if a suitable site is acquired and
selected the primary focus will be on completing engineering and starting the
construction of an Observation Wheel.
We will face considerable risk in each of our business plan steps, such
as difficulty of hiring competent personnel within our budget and a shortfall of
funding due to our inability to raise capital in the equity securities market.
If no funding is received during the next twelve months, we will be forced to
rely on existing cash in the bank. As stated above, our current cash reserves
are not sufficient to fund operations for the next twelve months.
We have no operating history, no significant current operations,
minimum cash on hand, and no profit. Because of these factors, our auditors have
issued an audit opinion for us which includes a statement describing doubts
about our going ability to continue as a going concern status. This means there
is substantial doubt about our ability to continue as a going concern. While we
believe we have made good faith estimates of our ability to secure additional
capital in the future to reach our goals, there is no guarantee that we will
receive sufficient funding to implement any future business plan steps. In the
event that we do not receive additional financing, we will not be able to
continue our operations.
The timing of most of our capital expenditures is discretionary.
Currently there are no material long-term commitments associated with our
capital expenditure plans. Consequently, we have a significant degree of
flexibility to adjust the level of such expenditures as circumstances warrant.
The level of our capital expenditures will vary in future periods depending on
market conditions and other related economic factors.
12
Results of Operations
Years Ended December 31, 2004 and December 31, 2003
For the year ended For the year ended
December 31, 2004 December 31, 2003
----------------- -----------------
Net revenue $ -- $ --
Operating expenses:
Professional and consulting fees 2,211,423 3,967,918
Rent expense 27,900 28,045
Settlement expense, excluding interest -- 650,000
Project costs 3,463 13,354
Other operating expenses 144,011 155,043
----------- -----------
2,386,798 4,814,360
----------- -----------
Loss from operations (2,386,798) (4,814,360)
Interest expense 69,088 1,129,535
----------- -----------
Loss before income taxes (2,455,885) (5,943,895)
Income taxes -- --
----------- -----------
Net loss $(2,455,885) $(5,943,895)
----------- -----------
Revenues. We did not have any revenues for the fiscal year ending
December 31, 2004 and 2003. There was no change in revenues from the year ending
2004 versus 2003 because we are still in a development stage and revenues will
not be generated until operations of an Observation Wheel begin.
Project Costs for the year ended December 31, 2004 were $3,463, which
is $9,891 less than the $13,354, of project costs incurred in the year ended
December 31, 2003. These expenses consisted primarily of presentation and
development materials provided to prospective funding sources. The reduction in
project costs can be attributed to purchasing less materials and items
associated with preparation of project and presentation books. Our project costs
continue to increase primarily due to the type of paper used and the ability to
purchase the paper in bulk. Our total project costs since inception are $80,587.
Operating Expenses. We had operating expenses of $2,386,798 for the
year ended December 31, 2004 verses operating expenses of $4,814,360 for the
year ended December 31, 2003 which primarily consisted of office rental
expenses, legal and accounting fees and professional expenses. There was a
decrease in our operating expenses for the year ending December 31, 2004 of
$2,427,562. The significant decrease in operating expenses for the year ending
December 31, 2004 was primarily due to the fact that the company utilized fewer
consultants throughout 2004, and was not required to issue its common stock for
services. We did not incur any settlement expenses in 2004. If the company
receives funding for either the Las Vegas Project or the UAE Project we expect
these fees to increase substantially including support for employees that will
be required.
Net Losses from Operations. As a result of the decreases, primarily in
professional and consulting fees where our common stock was issued for services,
net loss from operations for the period ended December 31, 2004 was $2,455,885,
and was a decrease of $1,928,905 compared to the net loss from operations of
$4,814,361 for the year ended December 31, 2004.
13
Interest Expense. Our interest expense for the year ending December 31,
2004 was $69,088 verses $1,129,535. The decrease in interest expense for 2004
was primarily due to the fact that the company had previously accounted for the
one time interest expense of $605,000 owed to a lender. The decrease in interest
expense was also due to an interest expense of $312,000 for the issuance of
2,600,000 shares of our common stock that were issued in relation to financing
costs and amortization of debt issue costs arising from a 2002 financing
arrangement.
Liquidity and Capital Resources
A critical component of our operating plan impacting our continued
existence is the ability to obtain additional capital through additional equity
and/or debt financing. We do not anticipate enough positive internal operating
cash flow until such time as we can generate substantial revenues, which may
take the next few years to fully realize. In the event we cannot obtain the
necessary capital to pursue our strategic plan, we may have to cease or
significantly curtail our operations. This would materially impact our ability
to continue operations.
Our near term cash requirements are anticipated to be offset through
the receipt of funds from private placement offerings and loans obtained through
private sources. Since inception, we have financed cash flow requirements
through debt financing and issuance of Common Stock for cash and services. As we
initiate operational activities, we may continue to experience net negative cash
flows from operations, pending receipt of servicing or licensing fees, and will
be required to obtain additional financing to fund operations through stock
offerings and bank borrowings to the extent necessary to provide working
capital.
Over the next twelve months, we believe that existing capital and
anticipated funds from operations will not be sufficient to sustain operations
and planned development. Consequently, we will be required to seek additional
capital in the future to fund growth and expansion through additional equity or
debt financing or credit facilities. No assurance can be made that such
financing would be available, and if available it may take either the form of
debt or equity. In either case, the financing could have a negative impact on
our financial condition and our stockholders.
We anticipate incurring operating losses over the next twelve months.
Our lack of operating history makes predictions of future operating results
difficult to ascertain. Our prospects must be considered in light of the risks,
expenses and difficulties frequently encountered by companies in their early
stage of development, particularly companies in new and rapidly evolving markets
such as development related companies. Such risks include, but are not limited
to, an evolving and unpredictable business model and the management of growth.
To address these risks we must, among other things, implement and successfully
execute our business and marketing strategy, continue to develop and upgrade
technology and products, respond to competitive developments, and attract,
retain and motivate qualified personnel. There can be no assurance that we will
be successful in addressing such risks, and the failure to do so can have a
material adverse effect on our business prospects, financial condition and
results of operations.
As of December 31, 2004, we had current assets of $24,438, which
consisted primarily of cash on hand and current liabilities of $2,918,204,
resulting in working capital deficit of $2,893,767 versus current assets of
$489,104, current liabilities of $2,498,895 and a working capital deficit of
$2,009,791 respectively for the year ending December 31, 2003. The decrease in
cash was attributable to the Company not conducting as many private placement
transactions throughout 2004.
OFF BALANCE SHEET ARRANGEMENTS
The Company does not have any off-balance sheet arrangements and does not
participate in non-exchange traded contracts requiring fair value accounting
treatment.
NOTE PAYABLE
On November 15, 2002, we entered into a loan and security agreement
with Mr. Dan Fugal, an unaffiliated individual, whereby Mr. Fugal was to provide
us with a credit facility in the form of a secured line of credit not to exceed
$2.5 million.
On February 15, 2003, we executed an amendment to the Loan and Security
Agreement to amend the term date from February 15, 2003 to April 15, 2003. As of
the year ending December 31, 2003 Mr. Fugal has loaned $605,000 to the Company.
The loan and security agreement with Mr. Fugal has expired and requires the
company to repay $605,000 to Mr. Fugal as well as a one time interest payment of
14
$605,000. Any agreements or amendments for Mr. Fugal to provide additional funds
have been canceled, and the Company is obligated to repay a total of $1,210,000.
As a requirement of the Agreement the Company is obligated to repay Mr. Fugal
when an adequate amount of funding is received. At this time unless funding is
received it is likely that the Company will be unable to repay the debt. As
collateral for the Loan and Securtiy Agreement with Mr. Fugal, Mr. Fugal filed a
UCC-1 against the assets and intellectual property of the company which would
give Mr. Fugal the right to institute foreclosure proceedings toward the
Company. Mr. Fugal could institute foreclosure proceedings at any time if he
believes that he will not be repaid. As of this date Mr. Fugal has not indicated
any intentions to institute foreclosure proceedings. However, we can not
guarantee that Mr. Fugal will not attempt to institute foreclosure proceedings
against the Company.
SUBSEQUENT EVENTS
United Arab Emirates (UAE) (unaudited)
--------------------------------------
On March 17, 2005 the company issued a press release announcing the signing of a
definitive joint venture agreement with Allied Investment House, Inc. to build a
600ft Observation Wheel in the United Arab Emirates. Allied Investment House,
Inc. will provide 100% of the financing of an Observation Wheel in the UAE up to
$150 million.
Voyager and Allied will form a UAE corporation in order for the transaction to
be completed. Both Voyager (or its assigns) and Allied (or its assigns) will
operate and govern the newly formed company. Voyager and Allied will jointly own
the newly formed company.
Using "best efforts" within 180 days and depending on current prevailing market
Conditions, Allied will cause the newly formed company to offer stock from the
company in a public offering that will cause the company's stock to be traded on
an internationally recognized stock exchange.
As a result of the signing of the agreement Voyager will be responsible for the
management of the construction of the project and will receive a premium above
and beyond the cost of building the project. There will be a management
agreement which allows Voyager to contract a third party management company to
perform day-to-day operations. Voyager will also receive a percentage of gross
revenues from operations.
Risks that could cause actual performance to differ from expected
performance are detailed in the remainder of this section, and under the section
titled "Factors That May Affect the Company's Future Operating Results."
15
FACTORS THAT MAY AFFECT THE COMPANY'S FUTURE OPERATING RESULTS
We must comply with penny stock regulations which could effect the liquidity and
price of our stock.
The Securities and Exchange Commission has adopted rules that
regulate broker-dealer practices in connection with transactions in "penny
stocks." Penny stocks generally are equity securities with a price of less than
$5.00, other than securities registered on certain national securities exchanges
or quoted on NASDAQ, provided that current price and volume information with
respect to transactions in such securities is provided by the exchange or
system. Prior to a transaction in a penny stock, a broker-dealer is required to:
Deliver a standardized risk disclosure document prepared by the SEC; Provide the
customer with current bid and offers quotations for the penny stock; Explain the
compensation of the broker-dealer and its salesperson in the transaction;
Provide monthly account statements showing the market value of each penny stock
held in the customer's account; Make a special written determination that the
penny stock is a suitable investment for the purchaser and receives the
purchaser's; and Provide a written agreement to the transaction. These
requirements may have the effect of reducing the level of trading activity in
the secondary market for our stock. Because our shares are subject to the penny
stock rules, you may find it more difficult to sell your shares.
We may in the future issue additional shares of our common stock which would
reduce investors percentage ownership and may dilute our share value.
Our articles of incorporation authorize the issuance of 200,000,000
shares of common stock. As of March 31, 2005 we have 66,566,126 shares of our
common stock issued and outstanding. We are also authorized to issue 50,000,000
shares of our Preferred Stock par value $.001 of which there are 500,000 shares
of Series A, with no face value, convertible to Common Stock at 10 to 1 and
4,000,000 shares of Preferred B Stock face value of $.10 convertible to Common
Stock at 2 to 1. The future issuance of all or part of our remaining authorized
Common Stock, Preferred Stock or any combination of either, may result in
substantial dilution in the percentage of our common stock held by our then
existing shareholders. We may value any common stock issued in the future on an
arbitrary basis. The issuance of common stock for future services or
acquisitions or other corporate actions will have the effect of diluting the
value of the shares held by our investors, and might have an adverse effect on
any trading market for our common stock.
We are a development stage company, recently reorganized and have minimal
operating history, which makes an evaluation of us extremely difficult. At this
stage of our business operations, even with our good faith efforts, potential
investors have a high probability of losing their investment.
As a result of our reorganization in 2002, we have yet to generate
revenues from operations and have been focused on organizational, start-up,
market analysis and fund raising activities. Although we have a project to
market [please confirm], there is nothing at this time on which to base an
assumption that our business operations will prove to be successful or that we
will ever be able to operate profitably. Our future operating results will
depend on many factors, including our ability to raise adequate working capital,
demand and acceptance of our project, the level of our competition and our
ability to attract and maintain key management and employees.
Our auditor's report reflects the fact that without realization of additional
capital, it would be unlikely for us to continue as a going concern. If we are
unable to continue as a going concern, it is unlikely that we will continue in
business.
16
As a result of our deficiency in working capital and other factors, our
auditors have included a paragraph in their report regarding substantial doubt
about our ability to continue as a going concern. Our plans in this regard are
to seek additional funding through future equity private placements or debt
facilities. Without funding for one of our projects the company would have to
rely primarily on raising capital through investors. There can be no guarantee
that we are capable of continuing to raise additional capital.
There is a limited current public market for our common stock.
Although our common stock is listed on the Over-the-Counter Bulletin
Board, there is a limited volume of sales, thus providing a limited liquidity
into the market for our shares. As a result of the foregoing, stockholders may
be unable to liquidate their shares for any reason.
Operating in Foreign Countries
Currently we have a signed definitive agreement to build a Voyager
Project in the UAE. Operating in a foreign country provides additional risks
such as, permitting and licensing can be more difficult to obtain, obtaining
personnel for the daily operations could present significant challenges, if the
local government were to become unstable our results could be severely affected.
Acts of Terrorism
Because the Voyager Project will depend upon tourism, if there is a
terrorist attack in the city or country where the project will be located, the
anticipated results could be dramatically affected.
Personnel
As of December 31, 2004, we had three Officers and Directors. The
Company pays approximately $25,000 a month in consulting fees to Synthetic
Systems LLC, an entity wholly owned by Richard Hannigan. We are dependent upon
Richard Hannigan, President, CEO and Director and Tracy Jones, COO and Director
and Myong Hannigan Secretary and Treasurer. We do not have any employees at this
time and do not anticipate the need to hire any employees until such time as we
have been sufficiently capitalized.
Going Concern
The consolidated financial statements included in this filing have been prepared
assuming that the Company will continue as a going concern, which contemplates
the realization of assets and the satisfaction of liabilities in the normal
course of business. The Company has no established source of revenue, incurred
significant losses since inception of $10,342,732 and used cash for operations
of $1,094,500 and $744,562 during the years ended December 31, 2004 and 2003,
respectively. The Company also has a working capital deficit of $2,902,229 and a
stockholders' deficit of $2,893,767 as of December 31, 2004. Additionally, a
lender has the right to foreclose on the assets of the Company if the demand for
repayment of $1.2 million is not made. These factors raise substantial doubt
about the Company's ability to continue as a going concern. The Company's cash
position may be inadequate to pay all of the costs associated with production
and marketing. Management intends to use borrowings and security sales to
mitigate the effects of its cash position. However, no assurance can be given
that debt or equity financing, if and when required, will be available. The
consolidated financial statements do not include any adjustments relating to the
recoverability and classification of recorded assets and classification of
liabilities that might be necessary should the Company be unable to continue
existence.
17
ITEM 7. FINANCIAL STATEMENTS
1. Financial Statements:
A. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
1. Report to Independent Registered Public Accounting Firm F-1
2. Consolidated Financial Statements:
Consolidated Balance Sheet F-2
Consolidated Statements of Operations F-3
Consolidated Statement of Stockholders' Deficit F-4
Consolidated Statements of Cash Flows F-5
Notes to Consolidated Financial Statements F-6 - F-18
18
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
-------------------------------------------------------
Board of Directors
Voyager Entertainment International, Inc. and Subsidiaries
Las Vegas, Nevada
We have audited the accompanying consolidated balance sheet of Voyager
Entertainment International, Inc. (a Development Stage Company) and Subsidiaries
as of December 31, 2004 and the related consolidated statements of operations,
stockholders' deficit and cash flows for the years ended December 31, 2004 and
2003 and for the period from inception on March 1, 1997 to December 31, 2004.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States of America). Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the consolidated financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Voyager
Entertainment International, Inc. as of December 31, 2004, and the results of
their consolidated operations and cash flows for the two years in the period
then ended, in conformity with accounting principles generally accepted in the
United States of America.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
accompanying consolidated financial statements, the Company has no established
source of revenue, has a working capital deficit of $2,902,229, has debt of $1.2
million which can be called at any time, has an accumulated deficit of
$10,342,732, incurred significant net losses of $2,455,885 and $5,943,895 and
has used cash for operating activities of $1,094,500 and $744,562 in 2004 and
2003, respectively, all of which raise substantial doubt about its ability to
continue as a going concern. Management's plan in regard to these matters is
also discussed in Note 1. These financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/ Stonefield Josephson, Inc.
CERTIFIED PUBLIC ACCOUNTANTS
Santa Monica, California
April 8, 2005
F-1
VOYAGER ENTERTAINMENT INTERNATIONAL, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEET - DECEMBER 31, 2004
ASSETS
Current asset:
Cash and cash equivalents $ 15,975
Property and equipment, net of
accumulated depreciation 8,463
------------
Total assets $ 24,438
============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable and accrued expenses $ 155,940
Accrued expenses - related party 495,000
Loans and settlement payable including accrued
interest of $179,025 1,057,264
Note payable and accrued interest of $605,000 1,210,000
------------
Total current liabilities $ 2,918,204
Stockholders' deficit:
Preferred stock - Series A; $.001 par value; 1,500,000 shares
authorized, 500,000 shares outstanding 500
Preferred stock - Series B; $.001 par value; 10,000,000 shares
authorized, 4,000,000 shares outstanding 4,000
Common stock; $.001 par value; 200,000,000 shares
authorized, 64,691,126 shares issued and outstanding
Issued and outstanding 64,690
Additional paid-in capital 25,683,910
Deferred construction cost (18,304,135)
Deficit accumulated during development stage (10,342,732)
------------
Total stockholders' deficit (2,893,767)
------------
Total liabilities and stockholders' deficit $ 24,437
============
The accompanying notes form an integral part of these consolidated financial
statements.
F-2
VOYAGER ENTERTAINMENT INTERNATIONAL, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
For the period
since inception on
Year Ended March 1, 1997 to
December 31, 2004 December 31, 2003 December 31, 2004
----------------- ----------------- -----------------
Net revenue $ -- $ -- $ --
Operating expenses:
Professional and consulting fees (including
$660,000 to related parties in 2004) 2,211,423 3,967,918 7,811,885
Project costs 3,463 13,354 80,587
Rent expense 27,900 28,045 88,710
Settlement expense -- 650,000 650,000
Other operating expenses 144,011 155,043 453,142
------------ ------------ ------------
2,386,797 4,814,360 9,084,324
------------ ------------ ------------
Interest expense 69,088 1,129,535 1,258,408
------------ ------------ ------------
Loss from operations before income taxes (2,455,885) (5,943,895) (10,342,731)
------------ ------------ ------------
Income taxes -- -- --
Net loss $ (2,455,885) $ (5,943,895) $(10,342,731)
============ ============ ============
Preferred stock dividends -- (130,000) (130,000)
------------ ------------ ------------
Net loss attributed to common stockholders (2,455,885) (6,073,895) (10,472,731)
============ ============ ============
Net loss per share - basic and diluted $ (0.04) $ (0.15)
============ ============
Weighted average common stock
shares outstanding - basic and diluted 60,983,000 40,792,000
============ ============
The accompanying notes form an integral part of these consolidated financial
statements.
F-3
VOYAGER ENTERTAINMENT INTERNATIONAL, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
FOR THE PERIOD SINCE INCEPTION ON MARCH 1, 1997 TO DECEMBER 31, 2004
Preferred Stock Series A Preferred Stock Series B Common Stock
------------------------ ------------------------ ------------
Shares Amount Shares Amount Shares Amount
------ ------ ------ ------ ------ ------
For the period since inception on March 1,
1997 to December 31, 2000 (as restated
for reorganization) -- $ -- -- $ -- 15,000,000 $15,000
Net loss for the year ended
December 31, 2001 -- -- -- -- -- --
--------- ------- --------- -------- ---------- -------
Balance at December 31, 2001 -- -- -- -- 15,000,000 15,000
Issuance of stock for cash and
services (pre-merger) 2,160,000 2,160 -- -- -- --
Conversion of preferred stock
to common stock (660,000) (660) -- -- 6,600,000 6,600
Acquisition of net assets of Dakota -- -- -- -- 11,615,000 11,615
Issuance of common stock for cash -
February 15, 2002 -- -- -- -- 800,000 800
Issuance of common stock for services -
April 2002 -- -- -- -- 200,000 200
Issuance of common stock for
Architectural agreement - May 2002 -- -- -- -- 2,812,500 2,813
Issuance of common stock for cash -
June 2002 -- -- -- -- 50,000 50
Issuance of common stock for
Architectural agreement - October 2002 -- -- -- -- 600,000 600
Issuance of common stock for
financing costs - November 2002 -- -- -- -- 650,000 650
Issuance of stock for services -
October 2002 -- -- -- -- 325,000 325
Net loss for the year ended
December 31, 2002 -- -- -- -- -- --
--------- ------- --------- -------- ---------- -------
Balance at December 31, 2002 1,500,000 1,500 -- -- 38,652,500 38,653
Issuance of common stock for
financing costs - June 2003 -- -- -- -- 2,600,000 2,600
Issuance of preferred stock for cash -
June 2003 -- -- 1,000,000 1,000 -- --
Issuance of preferred stock for cash -
August 2003 -- -- 500,000 500 -- --
Issuance of common stock for cash
September 2003 -- -- -- -- 769,222 769
BCF associated with preferred stock -- -- 130,000 130,000
Amortization of beneficial conversion
feature in a manner similar to
preferred stock dividends -- -- -- -- -- --
Issuance of common stock for services
September 2003 -- -- -- -- 625,000 625
Issuance of common stock for cash
December 2003 -- -- -- -- 2,307,692 2,308
Issuance of common stock for cash -
December 2003 -- -- -- -- 1,538,461 1,538
Issuance of common stock for cash -
December 2003 -- -- -- -- 1,538,461 1,538
Issuance of common stock for cash -
December 2003 -- -- -- -- 192,308 192
Issuance of common stock for cash -
December 2003 -- -- -- -- 384,614 384
Issuance of preferred stock for
service RP - December 2003 -- -- 2,500,000 2,500 -- --
Issuance of common stock for services -
December 2003 -- -- -- -- 1,163,000 1,163
Net loss for the year ended 12/31/03 -- -- -- -- -- --
--------- ------- --------- -------- ---------- -------
Balance at December 31, 2003 1,500,000 $ 1,500 4,000,000 $ 4,000 49,771,258 $49,770
========= ======= ========= ======== ========== =======
Issuance of common stock for cash
January 2004 -- -- -- -- 192,307 192
Issuance of common stock for cash
February 2004 -- -- -- -- 384,614 385
Issuance of common stock for cash
February 2004 -- -- -- -- 250,000 250
Issuance of common stock for cash
February 2004 -- -- -- -- 500,000 500
Issuance of common stock for services
February 2004 -- -- -- -- 425,000 425
Issuance of common stock for services
February 2004 -- -- -- -- 150,000 150
Issuance of common stock for services
February 2004 -- -- -- -- 150,000 150
Conversion of preferred stock to
common stock March 2004 (500,000) (500) -- -- 5,000,000 5,000
Conversion of preferred stock to
common stock March 2004 (500,000) (500) -- -- 5,000,000 5,000
Issuance of common stock for cash
March 2004 -- -- -- -- 384,614 385
Issuance of common stock for services
June 2004 -- -- -- -- 650,000 650
Issuance of common stock for cash
September 2004 -- -- -- -- 333,333 333
Issuance of common stock for cash
October 2004 -- -- -- -- 1,000,000 1,000
Issuance of common stock for services
October 2004 -- -- -- -- 500,000 500
Net loss for the year ended
December 31, 2004 -- -- -- -- -- --
--------- ------- --------- -------- ---------- -------
Balance at December 31, 2004 500,000 $ 500 4,000,000 $ 4,000 64,691,126 $64,690
========= ======= ========= ======== ========== =======
Deficit
accumulated
Deferred during the Total
Additional construction development stockholders'
paid-in capital costs stage deficit
--------------- ----- ----- -------
For the period since inception on March 1,
1997 to December 31, 2000 (as restated
for reorganization) $ 20,000 $ -- $ (87,193) $ (52,193)
Net loss for the year ended
December 31, 2001 -- -- (101,432) (101,432)
------------ ------------ ------------ -----------
Balance at December 31, 2001 20,000 -- (188,625) (153,625)
Issuance of stock for cash and
services (pre-merger) 25,840 -- -- 28,000
Conversion of preferred stock
to common stock (5,940) -- -- --
Acquisition of net assets of Dakota (11,615) -- -- --
Issuance of common stock for cash -
February 15, 2002 399,200 -- -- 400,000
Issuance of common stock for services -
April 2002 399,800 -- -- 400,000
Issuance of common stock for
Architectural agreement - May 2002 18,138,722 (18,141,535) -- --
Issuance of common stock for cash -
June 2002 149,950 -- -- 150,000
Issuance of common stock for
Architectural agreement - October 2002 162,000 (162,600) -- --
Issuance of common stock for
financing costs - November 2002 162,500 -- -- 163,150
Issuance of stock for services -
October 2002 74,750 -- -- 75,075
Net loss for the year ended
December 31, 2002 -- -- (1,754,327) (1,754,327)
------------ ------------ ------------ -----------
Balance at December 31, 2002 19,515,207 (18,304,135) (1,942,952) (691,727)
Issuance of common stock for
financing costs - June 2003 309,400 -- -- 312,000
Issuance of preferred stock for cash -
June 2003 99,000 -- -- 100,000
Issuance of preferred stock for cash -
August 2003 49,500 -- -- 50,000
Issuance of common stock for cash
September 2003 99,231 -- -- 100,000
BCF associated with preferred stock
Amortization of beneficial conversion
feature in a manner similar to
preferred stock dividends (130,000) -- (130,000)
Issuance of common stock for services
September 2003 99,375 -- -- 100,000
Issuance of common stock for cash
December 2003 297,692 -- -- 300,000
Issuance of common stock for cash -
December 2003 198,462 -- -- 200,000
Issuance of common stock for cash -
December 2003 198,462 -- -- 200,000
Issuance of common stock for cash -
December 2003 24,808 -- -- 25,000
Issuance of common stock for cash -
December 2003 49,616 -- -- 50,000
Issuance of preferred stock for
service RP - December 2003 2,347,500 -- -- 2,350,000
Issuance of common stock for services -
December 2003 847,827 -- -- 848,990
Net loss for the year ended 12/31/03 -- -- (5,943,895) (5,943,895)
------------ ------------ ------------ -----------
Balance at December 31, 2003 $ 24,136,080 $(18,304,135) $ (7,886,847) $(1,999,632)
============ ============ ============ ===========
Issuance of common stock for cash
January 2004 24,808 -- -- 25,000
Issuance of common stock for cash
February 2004 49,615 -- -- 50,000
Issuance of common stock for cash
February 2004 99,750 -- -- 100,000
Issuance of common stock for cash
February 2004 199,500 -- -- 200,000
Issuance of common stock for services
February 2004 318,325 -- -- 318,750
Issuance of common stock for services
February 2004 119,850 -- -- 120,000
Issuance of common stock for services
February 2004 119,850 -- -- 120,000
Conversion of preferred stock to
common stock March 2004 (4,500) -- -- --
Conversion of preferred stock to
common stock March 2004 (4,500) -- -- --
Issuance of common stock for cash
March 2004 49,615 -- -- 50,000
Issuance of common stock for services
June 2004 322,350 -- -- 323,000
Issuance of common stock for cash
September 2004 49,667 -- -- 50,000
Issuance of common stock for cash
October 2004 149,000 -- -- 150,000
Issuance of common stock for services
October 2004 54,500 -- -- 55,000
Net loss for the year ended
December 31, 2004 -- -- (2,455,885) (2,455,885)
------------ ------------ ------------ -----------
Balance at December 31, 2004 $ 25,683,910 $(18,304,135) $(10,342,732) $(2,893,767)
============ ============ ============ ===========
The accompanying notes form an integral part of these consolidated financial
statements.
F-4
VOYAGER ENTERTAINMENT INTERNATIONAL, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the period
since inception on
Year Ended Year Ended March 1, 1997 to
December 31, 2004 December 31, 2003 December 31, 2004
----------------- ----------------- -----------------
Cash flows provided by (used for) operating activities:
Net loss $(2,455,885) $(5,943,895) $(10,342,731)
----------- ----------- ------------
Adjustments to reconcile net loss to net cash provided by operating
activities:
Depreciation 5,327 3,403 9,408
Issuance of common stock for services 936,750 3,298,990 4,728,815
Interest expense from the issuance of common stock -- 425,150 475,150
Changes in assets and liabilities:
(Increase) decrease in assets:
Other current assets -- 4,268 --
Increase (decrease) in liabilities:
Accounts payable and accrued expenses 103,308 638,522 939,967
Accrued payable - related parties 316,000 179,000 495,000
Accrued settlement obligation -- 650,000 650,000
----------- ----------- ------------
Net cash used for operating activities (1,094,500) (744,562) (3,044,391)
----------- ----------- ------------
Cash flows used for investing activities -
payments to acquire property and equipment (3,630) (8,520) (17,870)
Cash flows provided by (used for) financing activities:
Proceeds from notes payable -- 105,000 833,239
Proceeds from sale of preferred stock -- 150,000 150,000
Proceeds from issuance of common stock 625,000 875,000 2,095,000
----------- ----------- ------------
Net cash provided by financing activities 625,000 1,130,000 3,078,239
----------- ----------- ------------
Net increase (decrease) in cash (473,130) 376,918 15,978
Cash, beginning of year 489,104 112,186 --
----------- ----------- ------------
Cash, end of year $ 15,974 $ 489,104 $ 15,978
=========== =========== ============
Cash paid during the period for:
Interest expense $ -- $ -- $ --
=========== =========== ============
Income taxes $ -- $ -- $ --
=========== =========== ============
Non cash financing activity:
Common stock issued for services $ 936,750 $ 3,298,990 $ 4,673,815
=========== =========== ============
Common stock issued for financing costs and services $ -- $ 425,150 $ 588,300
=========== =========== ============
Common stock issued for Architectural Agreement $ -- $ -- $ 18,304,135
=========== =========== ============
Conversion of preferred stock to common stock $ -- $ -- $ 6,600
=========== =========== ============
The accompanying notes form an integral part of these consolidated financial
statements.
F-5
(1) Summary of Significant Accounting Policies:
The Company is in the entertainment development business and is planning the
development of the world's tallest Ferris wheel on the Las Vegas Strip area. The
Company's corporate offices are located in Las Vegas, Nevada.
Business Activity:
The Company is in the entertainment development business and is planning the
development of the world's tallest Ferris wheel on the Las Vegas Strip area. The
Company's corporate offices are located in Las Vegas, Nevada.
Basis of Presentation:
The accompanying consolidated financial statements include the accounts of
Voyager Entertainment International, Inc. (the "Company"), formerly known as
Dakota Imaging, Inc., ("Dakota"), incorporated under the laws of the state of
North Dakota on January 31, 1991, and its subsidiaries:
a) Voyager Ventures, Inc. ("Ventures"), incorporated under the laws of the State
of Nevada on January 15, 2002 (owned 100% by the Company); b) Outland
Development, LLC ("Outland"), a limited liability company formed under the laws
of the State of Nevada on March 1, 1997(owned 100% by Ventures); and c) Voyager
Entertainment Holdings, Inc. ("Holdings"), incorporated under the laws of the
State of Nevada on May 2, 2002 (owned 100% by the Company).
The Company is currently a development stage enterprise reporting under the
provisions of Statement of Financial Accounting Standards ("SFAS") No. 7.
During April 2002, the Company changed its name from Dakota Imaging, Inc. to
Voyager Entertainment International, Inc. and adopted a new fiscal year-end of
December 31.
Going Concern
-------------
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1 to the
accompanying consolidated financial statements, the Company has no established
source of revenue, has a working capital deficit of $2,902,229 has debt of $1.2
million which can be called at any time, has an accumulated deficit of
$10,342,732 incurred significant net losses of $2,455,885 and $5,943,895 and has
used cash for operating activities of $1,094,500 and $744,562 in 2004 and 2003,
respectively all of which raised substantial doubt about it's ability to
continue as a going concern. Management's plan in regard to these matters is
also discussed in Note 1. These financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
The Company has limited operations and is still in the development stage. The
Company will need to raise a substantial amount of capital in order to continue
its business plan. This situation raises substantial doubt about its ability to
continue as a going concern. The accompanying
F-6
consolidated financial statements do not include any adjustments relative to the
recoverability and classification of asset carrying amounts or the amount and
classification of liabilities that might result from the outcome of this
uncertainty. Management intends to initiate their business plan and will
continue to seek out joint venture partners, attempt to locate the appropriate
location for the Las Vegas Project as well as other projects, continually seek
funding opportunities. Management also intends to raise additional capital
through the sale of it's stock to private individuals that have prior
relationships with the company and has been successful in providing enough
capital in the past for minimal operations in the past. However, there can be no
guarantees that management will continue to be successful in the future.. The
company is currently indebted to two creditors and will not have the ability to
repay either of the creditors if significant project funding is not received. If
repayment does not occur, it is possible that a creditor could foreclose on the
assets of the company causing the Company to be insolvent.
The preparation of consolidated financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
Fair Value:
Unless otherwise indicated, the fair values of all reported assets and
liabilities which represent financial instruments, none of which are held for
trading purposes, approximate carrying values of such amounts.
Comprehensive Income:
SFAS No. 130, "Reporting Comprehensive Income," establishes standards for the
reporting and display of comprehensive income and its components in the
financial statements. For the years ended December 31, 2004 and 2003, the
Company has no items that represent other comprehensive income and, accordingly,
has not included a Statement of Comprehensive Income in the financial
statements.
Stock Based Compensation:
SFAS No. 123, "Accounting for Stock-Based Compensation," establishes and
encourages the use of the fair value based method of accounting for stock-based
compensation arrangements under which compensation cost is determined using the
fair value of stock-based compensation determined as of the date of grant and is
recognized over the periods in which the related services are rendered. The
statement also permits companies to elect to continue using the current
intrinsic value accounting method specified in Accounting Principles Board
("APB") Opinion No. 25, "Accounting for Stock Issued to Employees," to account
for stock-based compensation. The
F-7
Company has elected to use the intrinsic value based method and has disclosed
the pro forma effect of using the fair value based method to account for its
stock-based compensation issued to employees. For options granted to employees
where the exercise price is less than the fair value of the stock at the date of
grant, the Company recognizes an expense in accordance with APB 25.
For non-employee stock based compensation the Company recognizes an expense in
accordance with SFAS No. 123 and values the equity securities based on the fair
value of the security on the date of grant. For stock-based awards the value is
based on the market value for the stock on the date of grant and if the stock
has restrictions as to transferability a discount is provided for lack of
tradability.
Stock option awards are valued using the Black-Scholes option-pricing model. The
Company did not issue any Stock option rewards during the years ended December
31, 2004 and 2003.
Net Loss Per Share:
In accordance with SFAS No. 128, "Earnings Per Share," the basic loss per common
share is computed by dividing net loss available to common stockholders by the
weighted average number of common shares outstanding. Diluted loss per common
share is computed similar to basic loss per common share except that the
denominator is increased to include the number of additional common shares that
would have been outstanding if the potential common shares had been issued and
if the additional common shares were dilutive.
Cash and Cash Equivalents:
Equivalents - For purposes of the statement of cash flows, cash equivalents
include all highly liquid debt instruments with original maturities of three
months or less which are not securing any corporate obligations.
Concentration - The Company maintains its cash in bank deposit accounts which,
at times, may exceed federally insured limits. The Company has not experienced
any losses in such accounts.
Property and Equipment:
Property and equipment are stated at cost. Depreciation is computed using the
straight-line method based on estimated useful lives from 5 to 7 years.
Expenditures for maintenance and repairs are charged to operations as incurred
while renewals and betterments are capitalized. Gains and losses on disposals
are included in the results of operations.
Advertising and Marketing Costs
The Company expenses costs of advertising and marketing as incurred. Advertising
and marketing expense for the years ended December 31, 2004 and 2003 was $5,919
and $6,061, respectively.
Segment Information:
The Company's management believes it operates in a single business segment; all
operations for the year ended December 31, 2004 and 2003 are domestic.
F-8
Income Taxes:
The Company accounts for income taxes in accordance with SFAS No. 109,
"Accounting for Income Taxes." Deferred taxes are provided on the liability
method whereby deferred tax assets are recognized for deductible temporary
differences, and deferred tax liabilities are recognized for taxable temporary
differences.
Temporary differences are the differences between the reported amounts of assets
and liabilities and their tax bases. Deferred tax assets are reduced by a
valuation allowance when, in the opinion of management, it is more likely than
not that some portion or all of the deferred tax assets will be realized.
Deferred tax assets and liabilities are adjusted for the effects of changes in
tax laws and rates on the date of enactment.
Recent Accounting Pronouncements:
In March 2004, the Financial Accounting Standards Board (FASB) approved the
consensus reached on the Emerging Issues Task Force (EITF) Issue No. 03-1, "The
Meaning of Other-Than-Temporary Impairment and Its Application to Certain
Investments." The objective of this Issue is to provide guidance for identifying
impaired investments. EITF 03-1 also provides new disclosure requirements for
investments that are deemed to be temporarily impaired. The accounting
provisions of EITF 03-1 are effective for all reporting periods beginning after
June 15, 2004, while the disclosure requirements for certain investments are
effective for annual periods ending after December 15, 2003, and for other
investments such disclosure requirements are effective for annual periods ending
after June 15, 2004. The Company has evaluated the impact of the adoption of
EITF 03-1, and does not believe the impact will be significant to the Company's
overall results of operations or financial position, as the company does not
engage in these sorts of transactions.
In November 2004, the FASB issued SFAS No. 151 "Inventory
Costs, an amendment of ARB No. 43, Chapter 4. The amendments made by Statement
151 clarify that abnormal amounts of idle facility expense, freight, handling
costs, and wasted materials (spoilage) should be recognized as current-period
charges and require the allocation of fixed production overheads to inventory
based on the normal capacity of the production facilities. The guidance is
effective for inventory
F-9
costs incurred during fiscal years beginning after June 15, 2005. Earlier
application is permitted for inventory costs incurred during fiscal years
beginning after November 23, 2004. . The Company has evaluated the impact of the
adoption of SFAS 151, and does not believe the impact will be significant to the
Company's overall results of operations or financial position, as the company
does not engage in these sorts of transactions.
In December 2004, the FASB issued SFAS No.152, "Accounting for Real Estate
Time-Sharing Transactions--an amendment of FASB Statements No. 66 and 67" ("SFAS
152) The amendments made by Statement 152 This Statement amends FASB Statement
No. 66, Accounting for Sales of Real Estate, to reference the financial
accounting and reporting guidance for real estate time-sharing transactions that
is provided in AICPA Statement of Position (SOP) 04-2, Accounting for Real
Estate Time-Sharing Transactions. This Statement also amends FASB Statement No.
67, Accounting for Costs and Initial Rental Operations of Real Estate Projects,
to state that the guidance for (a) incidental operations and (b) costs incurred
to sell real estate projects does not apply to real estate time-sharing
transactions. The accounting for those operations and costs is subject to the
guidance in SOP 04-2. This Statement is effective for financial statements for
fiscal years beginning after June 15, 2005. with earlier application encouraged
The Company has evaluated the impact of the adoption of SFAS 152, and does not
believe the impact will be significant to the Company's overall results of
operations or financial position, as the company does engage in these sorts of
transactions.
In December 2004, the FASB issued SFAS No.153, "Exchanges of Nonmonetary Assets,
an amendment of APB Opinion No. 29, Accounting for Nonmonetary Transactions."The
amendments made by Statement 153 are based on the principle that exchanges of
nonmonetary assets should be measured based on the fair value of the assets
exchanged. Further, the amendments eliminate the narrow exception for
nonmonetary exchanges of similar productive assets and replace it with a broader
exception for exchanges of nonmonetary assets that do not have commercial
substance. Previously, Opinion 29 required that the accounting for an exchange
of a productive asset for a similar productive asset or an equivalent interest
in the same or similar productive asset should be based on the recorded amount
of the asset relinquished. Opinion 29 provided an exception to its basic
measurement principle (fair value) for exchanges of similar productive assets.
The Board believes that exception required that some nonmonetary exchanges,
although commercially substantive, be recorded on a carryover basis. By focusing
the exception on exchanges that lack commercial substance, the Board believes
this Statement produces financial reporting that more faithfully represents the
economics of the transactions. The Statement is effective for nonmonetary asset
exchanges occurring in fiscal periods beginning after June 15, 2005. Earlier
application is permitted for nonmonetary asset exchanges occurring in fiscal
periods beginning after the date of issuance. The provisions of this Statement
shall be applied prospectively. The Company has evaluated the impact of the
adoption of SFAS 153, and does not believe the impact will be significant to the
Company's overall results of operations or financial position.
In December 2004, the FASB issued SFAS No.123 (revised 2004), "Share-Based
Payment". Statement 123(R) will provide investors and other users of financial
statements with more complete and neutral financial information by requiring
that the compensation cost relating to share-based payment transactions be
recognized in financial statements. That cost will be measured based on the fair
value of the equity or liability instruments issued. Statement 123(R) covers a
wide range of share-based compensation arrangements including share options,
restricted share plans, performance-based awards, share appreciation rights, and
employee share purchase
F-10
plans. Statement 123(R) replaces FASB Statement No. 123, Accounting for
Stock-Based Compensation, and supersedes APB Opinion No. 25, Accounting for
Stock Issued to Employees. Statement 123, as originally issued in 1995,
established as preferable a fair-value-based method of accounting for
share-based payment transactions with employees. However, that Statement
permitted entities the option of continuing to apply the guidance in Opinion 25,
as long as the footnotes to financial statements disclosed what net income would
have been had the preferable fair-value-based method been used. Public entities
(other than those filing as small business issuers) will be required to apply
Statement 123(R) as of the first interim or annual reporting period that begins
after June 15, 2005. Small business public entities will be required to apply
Statement 123(R) as of the first interim or annual reporting period that begins
after December 15, 2005. The Company has evaluated the impact of the adoption of
SFAS 123(R), and does not believe the impact will be significant to the
Company's overall results of operations or financial position.
(2) Property and equipment:
The cost of property and equipment at December 31, 2004 consisted of the
following:
Computer equipment $ 17,258
Less accumulated depreciation (8,795)
--------
$ 8,463
========
Depreciation expense for the years ended December 31, 2004 and 2003 was
$5,327 and $3,403, respectively.
(3) Loan Payable:
Loans payable had no stated interest rate, were due on demand and unsecured.
Interest has been accrued at an estimated market interest rate of 8% and is
included with the principal balance. The original balance was $228,239 and the
proceeds were received and used for operating capital during the year ended
December 31, 2002. In March 2003, a claim of $1,460,000 was asserted by the
lender. Although management believed the claims were frivolous, due to the
additional resources needed by management to defend against these claims and the
likely distraction of management's efforts from moving forward with the business
plan, a settlement agreement was executed with the lender in August 2003.
Pursuant to the Settlement Agreement, the Company agreed to pay a settlement
amount of an additional $650,000, without claiming any fault or wrong doing. As
of December 31, 2004, the total obligation including loans of $228,239 in
principal the settlement obligation of $650,000, and accrued interest of
$179,025 amounted to an aggregate of $1,057,264. One half of this amount, or
$528,632 is due and payable at the closing of the first round of project funding
and the remaining balance is due and payable at the closing of any subsequent
project funding. Since the loan payable does not have a maturity date, the
entire balance has been presented as a current liability.
(4) Note Payable:
On November 19, 2002, the Company entered into a line of credit financing
agreement which entitled the Company to borrow of from Dan Fugal up to an
aggregate of $2,500,000. Advances
F-11
under this line of credit are based on achievement of certain milestones
pursuant to the agreement. Upon the receipt of funds, the Company was required
to issue up to 1,500,000 shares of its Common Stock on a pro rata basis. The
Company has borrowed $605,000 against this line of credit and issued 1,500,000
shares. The balance payable under this line of credit was due on April 15, 2003
and is secured by all of the Company's assets. The original line of credit bore
interest at the rate of 12% per annum. This line of credit has expired and no
principal or accrued interest has been paid back. Consequently, during the year
ended December 31, 2003, the Company agreed to pay 100% interest related to this
line of credit. Interest of $605,000 has been accrued and included with the
principal balance in the accompanying consolidated financial statements. As of
September 30, 2004, the total obligation including loans of $605,000, and
accrued interest of $605,000, amounted to $1,210,000. Mr. Fugal has agreed to be
repaid from those funds received by the Company at its next project funding. If
the Company does not receive significant project funding it will not be able to
repay Mr. Fugal. As collateral for the Loan and Security Agreement with Mr.
Fugal, Mr. Fugal filed a UCC-1 against the assets and intellectual property of
the company which gives Mr. Fugal the right to institute foreclosure proceedings
against the Company. Mr. Fugal could institute foreclosure proceedings at any
time if he believes that he will not be repaid. As of the date of this Annual
Report on Form 10-KSB, Mr. Fugal has not indicated any intentions to institute
foreclosure proceedings. However, management can not guarantee that Mr. Fugal
will not attempt to institute foreclosure proceedings against the Company.
(5) Related Party Transactions:
During February 2004, the Company paid $300,000 in cash to Western Architectural
Services, LLC, an entity owned by an officer-stockholder and director of the
Company pursuant to a Contractor Agreement between Western Architectural
Services and the Company to design and build a car for the Voyager project and
conduct a feasibility study.
During the year ended December 31, 2004, the Company and its board of directors
approved a bonus of $370,000 payable to Synthetic Systems, LLC, an entity
jointly owned by its Chief Executive Officer and Secretary. At December 31, 2004
accrued expenses, related party consists of the $495,000 unpaid bonus balance,
which includes $125,000 from the year ended December 31, 2003.
During the year ended December 31 2004, the Company paid consulting fees of
approximately $25,000 per month to Synthetic Systems, LLC. For a total of
$290,000. Synthetic Systems is jointly owned by Richard L. Hannigan Sr. and his
spouse Myong Hannigan. The company also paid to Synthetic Systems LLC.,
furniture rental expenses for the year ending December 31, 2004 of approximately
$18,000 and office rent expenses of approximately $28,000.
(6) Litigation
On May 3, 2004, the Company filed a complaint in the U.S. District Court for the
District of Nevada (Case No. CV-S-04-0558) against Donald and Nancy Tyner, who
are significant stockholders of the Company, alleging that Mr. and Mrs. Tyner
are liable to the Company pursuant to Section 16(b) of the Securities Exchange
Act of 1934 for short-swing profits realized by Mr. and Mrs. Tyner in connection
with their sales and purchases of the Company's Common
F-12
Stock between December 3, 2003 and February 4, 2004. While the complaint was
filed in this matter, Mr. And Mrs. Tyner were not served.
In June 2004 the Company withdrew the complaint filed on May 3, 2004 in the U.S.
District Court for the District of Nevada (Case No. CV-S-04-0558) against Donald
and Nancy Tyner.
(7) Stockholders' Deficit
Convertible Preferred Stock - Series A
--------------------------------------------------------------------------------
The Series A convertible preferred stock carries the following rights and
preferences:
o 10 to 1 voting rights per share
o Each share has 10 for 1 conversion rights to shares of common
stock
o No redemption rights
During 2002, prior to the date of the Merger discussed in Note 1, the
Company issued 2,160,000 shares of convertible preferred stock as consideration
for cash and services, of which 660,000 shares were immediately converted to
shares of common stock, resulting in the Company having 3,660,000 shares of
common stock outstanding.
Effective February 8, 2002 the Company, as consideration for the
Merger, issued 3,660,000 shares of its Series A convertible preferred stock in
exchange for 100% of Voyager's outstanding common stock. Additionally,
simultaneously upon closing of the Merger 2,160,000 shares of the Series A
convertible preferred stock immediately converted into 21,600,000 shares of
common stock, resulting in a balance of 1,500,000 shares of convertible
preferred stock remaining outstanding. These amounts have been adjusted pursuant
to reverse merger accounting in the accompanying financial statements.
Immediately preceding the Merger, Dakota, the legal acquirer, had
11,615,000 shares of common stock outstanding.
Convertible Preferred Stock - Series B
The Series B convertible preferred stock carries the following rights
and preferences:
o 2 to 1 voting rights per share
o Par value of $0.001
o Each share has 2 for 1 conversion rights to shares of common
stock
o No redemption rights
o Preferential liquidation rights to Series A preferred stock
and common stock
o Anti-dilution clauses in the event of a reverse split
In June 2003, the Company sold 1,000,000 of the Series B Preferred
Stock Shares for total
F-13
cash consideration of $100,000 to one investor at $0.10 per share. The Company
recognized a beneficial conversion feature of $80,000 accounted for as a
preferred stock dividend during the year. Since these shares are immediately
convertible into common stock of the Company, pursuant to EITF 00-27 and EITF
98-5, the Company recognized the dividend immediately.
In August 2003, the Company sold 500,000 of the Series B Preferred
Stock Shares for total cash consideration of $50,000 to one investor at $0.10
per share. The Company recognized a beneficial conversion feature of $50,000
accounted for as a preferred stock dividend during the year. Since these shares
are immediately convertible into common stock of the Company, pursuant to EITF
00-27 and EITF 98-5, the Company recognized the dividend immediately.
In December 2003, the Company issued 2,500,000 of the Series B
Preferred Stock Shares for total consideration valued at $2,350,000, or $0.94
per share, to its officer-stockholders. The fair value of the services received
was determined based on the fair value of the underlying trading common stock.
On March 5, 2004, Richard L. Hannigan, Sr. an officer and director converted
500,000 Series A Preferred shares into 5,000,000 Common shares of the Company.
On March 31, 2004 , Gregg Giuffria, a former officer and director converted
500,000 Series A Preferred shares into 5,000,000 Common shares of the Company.
Common Stock Issuances
--------------------------------------------------------------------------------
On February 15, 2002 the Company sold 800,000 restricted shares of common stock
at a price of $0.50 per share for $400,000, which represented the fair market
value of the common stock on date of issuance.
On April 5, 2002, the Company issued 200,000 restricted shares of common stock
in exchange for services performed totaling $200,000. The fair market value of
the common stock on the date of issuance totaled $400,000. Therefore, the
Company has recognized stock discount expense of $200,000.
On April 5, 2002, the Company issued 125,000 restricted common shares for
Investor Relations Services. The shares were being held by the Company in
anticipation of executing a formal definitive agreement with the service
provider. On June 6, 2002 the Company cancelled the shares due to an inability
to reach an agreement with the service provider.
On May 30, 2002, the Company executed a Contractor Agreement with Western
Architectural Services, LLC ("WAL") whereby Western Architectural will provide
to be determined architectural services to the Company for its Voyager Project
to be located on the Las Vegas Strip.
The Company issued 2,812,500 shares of restricted common stock to Western
Architectural in consideration for Western Architecture's contract sum of
$18,304,135 classified as deferred financing costs, to be expensed as earned. As
of December 31, 2003, no amounts have been earned by WAL and accordingly, no
amounts have been expensed. Although he is now a related party, at the time of
this transaction, this principal of WAL was not a related party.
During June 2002, the Company sold 50,000 restricted shares of common stock at a
price of
F-14
$3.00 per share solely to accredited investors for cash consideration totaling
$150,000, which represents the fair market value of the common stock on date of
issuance. Since the cash consideration received was from unrelated parties, it
was determined to best represent the fair market value of the shares on the
transaction date.
On October 28, 2002, the Company entered into a professional architectural
services agreement with A.C.E Architect, Inc. in exchange for 600,000 shares of
preferred stock. The Company's stock must be issued within 10 days of the
agreement. In addition, the Company is responsible for reimburse of expenses.
On November 19, 2002, the Company entered into a line of credit financing in the
amount of $1,000,000 $1,000,000 in exchange for 650,000 shares of common stock.
The fair market value of the trading common stock on the date of issuance
totaled $163,150.
On December 9, 2002, the Company entered into a consulting agreement in exchange
for 325,000 shares of common stock. The fair market value of the trading common
stock on the date of issuance totaled $75,075.
In September 2003, the Company sold 769,222 shares of par value $.001 common
stock for total cash consideration of $100,000 to one investor, which represents
the fair market value of the common stock on date of issuance. Since the cash
consideration received was from unrelated parties, it was determined to best
represent the fair market value of the shares on the transaction date. The
common stock was offered in reliance upon the private offering exemptions
contained in Sections 3(b) and 4(2) of the Securities Act of 1933, as amended,
and Rule 506 of Regulation D promulgated thereunder.
In September 2003, the Company also issued 625,000 shares of restricted common
stock to two individuals for consulting services rendered. These shares were
valued at the trading fair market value of $0.16 per share or total compensation
cost of $100,000.
In December 2003, an investor entered into an agreement to purchase 1,346,154
additional shares of Common Stock for cash proceeds of $175,000. During the
three months ended March 31, 2004, this investor had acquired 961,535 Common
shares for total proceeds of $125,000 as follows:
In January 2004, $25,000 was received from the sale of 192,307 Common
shares pursuant to a purchase agreement from December 2003,
In February 2004, $50,000 was received from the sale of 384,614 common
shares pursuant to a purchase agreement from December 2003,
In March 2004, $50,000 was received from the sale of 384,614 common shares
pursuant to a purchase agreement from December 2003,
The Common Stock was offered in reliance upon the private offering exemptions
contained in
F-15
Sections 3(b) and 4(2) of the Securities Act of 1933, as amended, and Rule 506
of Regulation D promulgated thereunder.
In February 2004, $300,000 was received for 750,000 common shares. The Common
Stock was offered in reliance upon the private offering exemptions contained in
Sections 3(b) and 4(2) of the Securities Act of 1933, as amended, and Rule 506
of Regulation D promulgated thereunder.
During February 2004, the Company also issued 725,000 shares of restricted
Common Stock to three consultants for services rendered. These shares were
valued at the fair market value ranging from $0.75 to $0.80 per share for total
consideration of $558,750.
On March 5 2004, an Richard L. Hannigan, Sr., an officer-stockholder converted
500,000 Series A Preferred shares into 5,000,000 Common shares of the Company.
On March 31, 2004, Gregg Giuffria, a former officer-stockholder converted
500,000 Series A Preferred shares into 5,000,000 Common shares of the Company.
On June 17, 2004 the Company initiated negotiations to potentially purchase a
parcel of property in Las Vegas, Nevada. The Company at that time issued 500,000
shares of Common Stock as an incentive to the owner of that property which will
not be recovered regardless of whether the Company completes the transaction.
The shares were valued at the fair market value of $0.49 per share for a total
of $245,000.
On June 30, 2004 the company issued 150,000 shares of Common Stock to an
individual for services rendered. These shares were valued at the fair market
value of $0.52 per share for total consideration of $78,000.
In September 2004, $50,000 was received for 333,333 common shares. The Common
Stock was offered in reliance upon the private offering exemptions contained in
Sections 3(b) and 4(2) of the Securities Act of 1933, as amended, and Rule 506
of Regulation D promulgated thereunder.
In October 2004, $150,000 was received for 1,000,000 common shares. The Common
Stock was offered in reliance upon the private offering exemptions contained in
Sections 3(b) and 4(6) of the Securities Act of 1933, as amended, and Rule 506
of Regulation D promulgated thereunder.
In October, 2004 the company issued 500,000 shares of Common Stock to an
individual for services rendered. These shares were valued at the fair market
value of $0.11 per share for total consideration of $55,000.
Stock Option Plan
-----------------
The Company's stockholders approved the 2002 Stock Option Plan on April 2, 2002
at the Company's annual meeting. The plan authorizes the Company to issue
5,000,000 shares of common stock for issuance upon exercise of options.
The plan is intended to encourage directors, officers, employees and consultants
of the Company to acquire ownership of Common Stock. Officers (including
officers who are members of the Board of Directors), directors (other than
members of the Stock Option Committee (the
F-16
"Committee") to be established to administer the Stock Option Plan) and other
employees and consultants of the Company and its subsidiaries (if established)
will be eligible to receive options under the planned Stock Option Plan. The
Committee will administer the Stock Option Plan and will determine those persons
to whom options will be granted, the number of options to be granted, the
provisions applicable to each grant and the time periods during which the
options may be exercised. No options may be granted more than ten years after
the date of the adoption of the Stock Option Plan.
Unless the Committee, in its discretion, determines otherwise, non-qualified
stock options will be granted with an option price equal to the fair market
value of the shares of Common Stock to which the non-qualified stock option
relates on the date of grant. In no event may the option price with respect to
an incentive stock option granted under the Stock Option Plan be less than the
fair market value of such Common Stock to which the incentive stock option
relates on the date the incentive stock option is granted. Each option granted
under the Stock Option Plan will be exercisable for a term of not more than ten
years after the date of grant. Certain other restrictions will apply in
connection with this Plan when some awards may be exercised.
In the event of a change of control (as defined in the Stock Option Plan), the
date on which all options outstanding under the Stock Option Plan may first be
exercised will be accelerated. Generally, all options terminate 90 days after a
change of control. As of December 31, 2004, no options have been issued under
this plan.
(8) Commitments and Contingencies:
During January 2002, the Company entered into a month-to- month office
lease totaling $2,350 per month with a related party.
Contingent Liability
--------------------
During the year ended December 31, 2002, an officer of the Company who lacked
appropriate authority offered approximately 16.4 million options to investors at
an exercise price of $0.001. There were no written agreements and Board approval
was required for such transactions, and hence, the officer did not have the
authority to grant the options. These options were contingently issuable upon
the successful completion of debt financing of amounts ranging from $100 million
to $300 million, unrelated to the above. The Company and its Board of Directors
have denied any liability for the issuance of these options, plans to vigorously
defend its position and accordingly, no amount has been accrued for this
contingency in the accompanying consolidated financial statements. These
disputed options expired in August 2003.
(9) Income Taxes:
The reconciliation of the effective income tax rate to the federal
statutory rate for the years ended December 31, 2004 and 2003 is as follows:
2004 2003
Federal income tax rate 35.0% 35.0%
Accrued expenses and stock based (17.0) (7.0)
Effect of net operating loss (18.0)% (28.0)%
----- -----
Effective income tax rate 0.0% 0.0%
----- -----
F-17
Deferred tax assets and liabilities reflect the net effect of temporary
differences between the carrying amount of assets and liabilities for financial
reporting purposes and amounts used for income tax purposes. Significant
components of the Company's deferred tax assets and liabilities at December 31,
2004 are as follows:
Loss carry forwards $ 2,530,000
Accrued expenses 700,000
Stock based compensation 320,000
Less valuation allowance (3,550,000)
-----------
$ --
-----------
At December 31, 2004, the Company has provided a valuation allowance for the
deferred tax asset since management has not been able to determine that the
realization of that asset is more likely than not. The net change in the
valuation allowance for the years ended December 31, 2004 and 2003 were an
increase of approximately $850,000 and $2,100,000, respectively. Net operating
loss carry forwards start to expire in 2021.
(10) SUBSEQUENT EVENTS
-----------------
In February 2005, $100,000 was received for 500,000 common shares at $0.20 per
share.
In January, 2005 the company issued 500,000 shares of Common Stock for
consulting services being rendered in the first and second quarters of 2005.
These shares were valued at the fair value of $0.15 per share for total
compensation of $75,000.
In March 2005, $75,000 was received for 375,000 common shares at $0.20 per
share.
In March, 2005 the company issued 500,000 shares of Common Stock for consulting
services being rendered in the first and second quarters of 2005. These shares
were valued at the fair value of $0.32 per share for total compensation of
$160,000.
(11) SUBSEQUENT EVENTS (unaudited)
-----------------------------
On March 17, 2005 the company signed a joint venture agreement with Allied
Investment House, Inc. to build a 600ft Observation Wheel in the United Arab
Emirates. Allied Investment House, Inc. will provide 100% of the financing of an
Observation Wheel in the UAE up to $150 million.
Voyager and Allied will form a UAE corporation in order for the transaction to
be completed. Both Voyager (or its assigns) and Allied (or its assigns) will
operate and govern the newly formed company. Voyager and Allied will jointly own
the newly formed company.
Using "best efforts" within 180 days and depending on current prevailing market
Conditions, Allied will cause the newly formed company to offer stock in a
public offering that will cause the new company's stock to be traded on an
internationally recognized stock exchange.
As a result of the signing of the agreement Voyager will be responsible for the
management of the construction of the project and will receive a premium above
and beyond the cost of building the project. There will be a management
agreement which allows Voyager to contract a third party management company to
perform day-to-day operations. Voyager will also receive a percentage of gross
revenues from operations.
As a result of the agreement the Company is still determining the exact location
where the Voyager Project will be located in the UAE.
F-18
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 8A. CONTROLS AND PROCEDURES
We maintain disclosure controls and procedures that are designed to
ensure that information required to be disclosed in the Company's Exchange Act
reports is recorded, processed, summarized and reported within the time periods
specified in the SEC's rules and forms, and that such information is accumulated
and communicated to our management, including our Chief Executive Officer and
Chief Financial Officer, as appropriate, to allow timely decisions regarding
required disclosure. Management recognizes that any controls and procedures, no
matter how well designed and operated, can provide only reasonable assurance of
achieving the desired control objectives, and management necessarily was
required to apply its judgment in evaluating the cost-benefit relationship of
possible controls and procedures. We do realize that we are a small company and
as a small company with only the officers and directors participating in the day
to day management, with the ability to override controls, each officer and
director has multiple positions and responsibilities that would normally be
distributed among several employees in larger organizations with adequate
segregation of duties to ensure the appropriate checks and balances.
EVALUATION OF DISCLOSURE, CONTROLS AND PROCEDURES
-------------------------------------------------
Based on their evaluation of the Company's disclosure controls and procedures
(as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act
of 1934) as of the end of the period covered by this annual report on Form
10-KSB the Company's chief executive officer has concluded that the Company's
disclosure controls and procedures are designed to ensure that information
required to be disclosed by the Company in the reports that it files or submits
under the Exchange Act is recorded, processed, summarized and reported within
the time periods specified in the SEC's rules and forms and are operating in an
effective manner.
CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING
-----------------------------------------------------
There were no significant changes to our internal controls or in other factors
that could significantly affect internal controls over financial reporting
subsequent to the date of our accountant's evaluation.
ITEM 8B. OTHER INFORMATION
On October 19, 2004 the Company announced that it was postponing until the year
ending 2004 implementing the corporate governance measures noted in the press
release dated June 2, 2004. The Company has identified two individuals to act as
independent directors and will present them to the shareholders for election as
soon as practicable. It will also allow the Company to establish the audit
committee and compensation committee. Additionally, the Company, during the
second quarter, is going to implement a code of business conduct and ethics.
19
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth the names and positions of our executive
officers and directors. Directors will be elected at our annual meeting of
stockholders and serve for one year or until their successors are duly elected
and qualified. Officers are elected by the Board and their terms of office are,
except to the extent governed by employment contract, at the discretion of the
Board.
------------------------------------------------------------------------
Name Age Positions and Offices held
------------------------------------------------------------------------
Richard Hannigan 55 President, CEO and
Director
------------------------------------------------------------------------
Tracy Jones 52 Chief Operating
Officer and Director
------------------------------------------------------------------------
Myong Hannigan 56 Secretary, Treasurer and
Director
------------------------------------------------------------------------
Duties, Responsibilities and Experience
Richard L. Hannigan, Sr., has been the Company's President and Chief
Executive Officer and a Director since February 8, 2002. Mr. Hannigan also
serves as the President, Chief Executive Officer and a Director of Voyager
Entertainment Holdings, Inc., our wholly-owned subsidiary ("VEHI"). Mr. Hannigan
has been President of a design and construction company, Synthetic Systems,
Inc., since 1991. This company specializes in custom designs for interior and
exterior casino construction. Under Mr. Hannigan's control, Synthetic Systems,
Inc. has been involved in several casino projects in Las Vegas, including the
Luxor Hotel Casino, its interior themed areas and exterior main entry Sphinx.
Prior to forming Synthetic Systems, Inc., Mr. Hannigan owned and operated two
consulting and construction companies from 1983-1991. These companies,
Architectural Services, Inc. and Architectural Systems, Inc., respectively, have
been responsible for construction projects located in Las Vegas, Palm Springs,
Los Angeles and Salt Lake City. Mr. Hannigan has also consulted for exterior
glazing and exotic fenestrations on commercial as well as casino companies in
Las Vegas.
Tracy Jones, has been the Company's Chief Operating Officer and became
a Board member, on May 26, 2003. Mr. Jones also serves as the Chief Operating
Officer of VEHI, our wholly-owned subsidiary. Mr. Jones formed Western
Architectural Services, LLC ("Western") in 1982, as an architectural design and
fabrication company. Over the past 20 years Mr. Jones has been instrumental in
the development of "themed" environments for the Hotel/Casino, Restaurant, and
Theme Park industry. At Western, Mr. Jones [has revolutionized] the use of
digitized computer enhancement for the replication of historical features.
Mr. Jones created methods that reduced the time to produce large-scale
projects such as the Statue of Liberty at the New York - New York Hotel and
Casino in Las Vegas. Previously, this project would have taken almost 1-1/2
years to recreate. However, with methods developed at Western, this project was
fabricated in just over 6 months.
Mr. Jones has a history of producing the most difficult projects on
time, and on budget. With his new position at the Company, Mr. Jones can take
this same approach to developing the Observation Wheels. Through many years of
difficult construction projects and budgetary restraints, Mr. Jones has
developed creative and effective means of manufacturing and construction that
will revolutionize] this industry.
Mr. Jones will bring his expertise of manufacturing to this world class
project. Mr. Jones will focus on product development, quality control, safety,
state and federal regulations, freight issues, and on-time production and
overall construction review.
Myong Hannigan has served as Secretary of the Company, and a Board
member, since April 4, 2004. Ms. Hannigan also serves as the Secretary and
Treasurer of VEHI, our wholly-owned subsidiary. Ms. Hannigan attended college at
Seoul University in Seoul, South Korea for general studies and business
management. Ms. Hannigan has been a managing partner of a design and
construction company, Synthetic Systems, Inc., since 1991. This company
specializes in custom design for interior and exterior casino construction.
Prior to Synthetic Systems, Inc., Ms. Hannigan was a managing partner for
Architectural Services, Inc. and Architectural Systems, Inc., from 1983-1991.
This company specialized in design and installation of custom glass and glazing
systems. Prior to Architectural Services, Inc. and Architectural Systems, Ms.
Hannigan owned and managed Antiqua Stain Glass Company in Honolulu, Hawaii from
1979-1981, which was relocated from Bloomington, Illinois (1976-1979). This
company specialized in design, manufacturing, installation and retail/wholesale
products. Ms. Hannigan is the wife of Richard Hannigan, President, Chief
Executive Officer and Director of the Company.
20
AUDIT COMMITTEE AND FINANCIAL EXPERT
The Board of Directors does not have a separate Audit Committee; rather
the Board as a whole performs all functions of an Audit Committee. The Board the
Board currently does not have an "audit committee financial expert" as defined
by the Securities and Exchange Commission Regulation S-B, Item 401(c)(2). The
Board believes that, given the developmental stage of the Company, the Company
is not currently in a position to attract the services of a Board member who
does qualify as a financial expert. However, the Board will continue its search
for an individual who would qualify as a financial expert.
BOARD OF DIRECTORS COMMITTEES AND COMPENSATION
COMPENSATION COMMITTEE INTERLOCK AND INSIDER PARTICIPATION
The Board of Directors does not have a Compensation Committee. Richard
Hannigan, President, oversaw the compensation of our executive officers.
BOARD OF DIRECTOR'S REPORT ON EXECUTIVE REPORT ON EXECUTIVE COMPENSATION
General. As noted above, our Board of Directors does not have a
Compensation Committee and, accordingly, during the year ended December 31,
2004, the Board of Directors, through the President, reviewed and approved the
compensation of our executive officers.
Overall Policy; Significant Factors. The compensation decisions made by
the Board of Directors in respect of our executive officers were influenced by
two major factors. First, our start-up nature brings with it all of the normal
capital requirements to sustain growth; therefore, certain stock compensation
was granted in lieu of salaries or commissions for services rendered. This
practice may be extended into the future on a case-by-case basis. Finally, as we
continue to mature, certain additions to the executive staff will be required.
As we are required to seek talent in the outside market, we will be required to
provide a competitive compensation package.
As an overall policy, however, the Board continues to believe that
long-term compensation tied to the creation of stockholder value should
constitute a significant component of the compensation to be earned by our
executive officers. In this respect, it will be the Board's policy to attempt to
restrain base cash compensation (subject to competitive pressures), while
providing the incentive for management to increase stockholder value by
providing such officers with significant numbers of market-price stock that will
not confer value upon the officers unless and until the Company's share price
rises. The Board of Directors expects that stock options will constitute a
significant component of the compensation package provided to executive
officers.
The Board believes that cash bonuses are, at times, appropriate based
upon the performance of our business compared to our internal expectations and
general business conditions.
STOCK OPTION PLAN
Our stockholders approved the 2002 Stock Option Plan on April 2, 2002
at our annual meeting. The plan authorizes the Company to issue 5,000,000 shares
of common stock for issuance upon exercise of options.
The plan is intended to encourage directors, officers, employees and
consultants of the Company to acquire ownership of Common Stock. Officers
(including officers who are members of the Board of Directors), directors (other
than members of the Stock Option Committee (the "Committee") to be established
to administer the Stock Option Plan) and other employees and consultants of the
Company and its subsidiaries (if established) will be eligible to receive
options under the planned Stock Option Plan. The Committee will administer the
Stock Option Plan and will determine those persons to whom options will be
granted, the number of options to be granted, the provisions applicable to each
grant and the time periods during which the options may be exercised. No options
may be granted more than ten years after the date of the adoption of the Stock
Option Plan.
21
Unless the Committee in its discretion determines otherwise,
non-qualified stock options will be granted with an option price equal to the
fair market value of the shares of Common Stock to which the non-qualified stock
option relates on the date of grant. In no event may the option price with
respect to an incentive stock option granted under the Stock Option Plan be less
than the fair market value of our Common Stock on the date the incentive stock
option is granted. Each option granted under the Stock Option Plan will be
exercisable for a term of not more than ten years after the date of grant.
Certain other restrictions will apply in connection with this Plan when some
awards may be exercised.
In the event of a change of control (as defined in the Stock Option
Plan), the date on which all options outstanding under the Stock Option Plan may
first be exercised will be accelerated. Generally, all options terminate 90 days
after a change of control. As of December 31, 2004, no options have been issued
under this plan.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires our executive officers and directors, and persons who
beneficially own more than ten percent of our common stock, to file initial
reports of ownership and reports of changes in ownership with the SEC. Executive
officers, directors and greater than ten percent beneficial owners are required
by SEC regulations to furnish us with copies of all Section 16(a) forms they
file. Based upon a review of the copies of such forms furnished to us, and
written representations from our executive officers and directors, our belief is
that during and prior to the year ended 2004, the following officers, directors
and/or ten percent stockholders failed to file the required forms in a timely
manner.
Officer, Director or 10% Stockholder Required Form Transaction and Date
Veldon Simpson Form 3 Elected as an officer and director on
(10% Owner former officer/director) February 8, 2002
Form 4 Aquired 6,000,000 shares of common stock
and 500,000 shares of Series A Preferred A Stock
Richard Hannigan Form 3 Elected as an officer and director on
(Executive Officer and Director) February 8, 2002
Form 5 Disposed of 3,000,000 shares of Common
Stock on April 10, 2002
Form 5 Disposed of 415,000 shares of Common Stock
on May 30, 2002
Form 4 Acquired 1,000,000 shares of Series B
Convertible Preferred Stock on December 31, 2003
Form 4 Converted 500,000 shares of Series A
Convertible Preferred Stock into 5,000,000
shares of Common Stock on March 4, 2004
Myong Hannigan Form 3 Elected as executive officer and director
on April 4, 2002
Form 5 Acquired 3,000,000 shares of Common Stock
on April 10, 2002
Form 4 Acquired 1,000,000 shares of Series B
Convertible Preferred Stock on December 31,
2003
Tracy Jones Form 3 Elected as an officer and director on May
(Executive Officer and Director) 26, 2003
Form 4 Acquired 500,000 shares of Series B
Convertible Preferred Stock on August 12,
2003 through Varna Holdings, L.C.
Form 4 Acquired 500,000 shares of Series B
Convertible Preferred Stock on December 31,
2003
22
CODE OF ETHICS
The Company has not adopted a code of ethics primarily because there are only
three officers and directors who have focused mainly on acquiring a suitable
site location and financing for the project. The Company will adopt a code of
ethics in the second quarter of 2005.
ITEM 10. EXECUTIVE COMPENSATION
The following table sets forth the compensation for the fiscal
period(s) for the past three years for our Executive Officers who served in
those positions, and the remaining two executive officers of the Company who
were serving as executive officers as of December 31, 2004.
SUMMARY COMPENSATION TABLE
===========================================================================================================================
Long Term Compensation
===========================================================================================================================
===========================================================================================================================
Annual Compensation Awards Payouts
===========================================================================================================================
===========================================================================================================================
Other Annual Restricted Securities All Other
Name and Principle Salary Bonus Compensation Stock Underlying LTIP Payouts Compensation
Position Year ($) ($)(1) ($)(2) Award(s) ($) Options/SARs (#) ($) ($)
===========================================================================================================================
Richard Hannigan
President/CEO/ 2004 -0- 185,000 145,000 -0- -0- -0- -0-
Director
Tracy Jones 2004 -0- -0- -0- -0- -0- -0- -0-
COO/Director
Myong Hannigan (3) 2004 -0- 185,000 145,000 -0- -0- -0- -0-
Secretary
Richard Hannigan 2003 $-0- $94,500 $1,180,000 -0- -0- -0- -0-
President/CEO/
Director
Tracy Jones 2003 $-0- -0- $470,000 -0- -0- -0- -0-
COO/Director
Myong Hannigan (3) 2003 $-0- $94,500 $1,180,000 -0- -0- -0- -0-
Secretary
===========================================================================================================================
(1) 2004 Bonus: The Company awarded a cash bonus of $370,000 payable to
Synthetic Systems, Inc., of which none had been paid as of December 31,
2004. Synthetic Systems, Inc. is jointly owned equally by Richard L.
Hannigan Sr., our President, and Myong Hannigan our Secretary. The
total bonus of $370,000 will be issued to Synthetic Systems at the
appropriate time when the Company deems it practicable.
2003 Bonus: The Company awarded a cash bonus of $189,000 payable to
Synthetic Systems, Inc., of which $10,000 had been paid on December 31,
2003.
23
(2) 2004: Other Annual Compensation for fiscal year 2004 includes (i)
$290,000 in professional consulting fees paid by the Company to
Synthetic Systems, Inc., an entity owned jointly and equally by Richard
and Myong Hannigan (Mr. Hannigan received $145,000 and Ms. Hannigan
received $145,000 for a total of $290,000).
2003: Other Annual Compensation for fiscal year 2003 includes (i)
$240,000 in professional consulting fees paid by the Company to
Synthetic Systems, Inc., an entity owned by Richard and Myong Hannigan
(Mr. Hannigan $94,500 and Ms. Hannigan $94,500) and (ii) shares of
Series B Convertible Preferred Stock issued to our officers, valued at
$0.94 per share based upon the trading price of the Common Stock
underlying the Series B Convertible Preferred Stock (Mr. Hannigan,
1,000,000 shares valued at $940,000, Mr. Jones, 500,000 shares valued
at $470,000, and Ms. Hannigan, 1,000,000 shares valued at $940,000).
(3) Myong Hannigan is the wife of Richard Hannigan, Sr.
(4) Our officers and directors did not receive compensation in 2002 other
than shares received as a result of the reverse triangular merger
between Outland Development, Voyager Ventures and Dakota Imaging, Inc.
COMPENSATION PURSUANT TO PLANS
None.
PENSION TABLE
None.
OTHER COMPENSATION
None.
COMPENSATION OF DIRECTORS
None.
TERMINATION OF EMPLOYMENT
There are no compensatory plans or arrangements, including payments to be
received from the Company, with respect to any person named in Cash
Consideration set out above which would in any way result in payments to any
such person because of his resignation, retirement, or other termination of such
person's employment with the Company or its subsidiaries, or any change in
control of the Company, or a change in the person's responsibilities following a
change in control of the Company.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
EQUITY COMPENSATION PLAN INFORMATION
========================================================================================================================
Plan category Number of securities remaining
Number of securities to Weighted average available for future issuance
be issued upon exercise exercise price of under equity compensation plans
of outstanding options, outstanding options, (excluding securities reflected
warrants and rights warrants and rights in column (a))
========================================================================================================================
(a) (b) (c)
========================================================================================================================
Equity compensation plans approved by -0- -0- 5,000,000
security holders (1) (Common Stock)
========================================================================================================================
Equity compensation plans not approved
by security holders
========================================================================================================================
Total -0- -0- 5,000,000
========================================================================================================================
(1) On April 2, 2002, the Company's stockholders approved the 2002 Stock Option
Plan, authorizing the issuance of up to 5,000,000 shares of Common Stock under
the Plan.
24
There were no stock options issued to any employee or consultants for the year
ending December 31, 2004 and there have not been any options issued since
inception. The board of directors determines on an individual basis as to
whether the Company should issue stock for services. There are no current plans
to issue additional stock for services. However, as the Company conducts
business there may be situations from time to time where the Company may elect
to issue stock for services.
The following table sets forth information as of March 31, 2005 with
respect to the beneficial ownership of the Company's Common Stock, Series A
Convertible Preferred Stock and Series B Convertible Preferred Stock by (i) each
person who, to the knowledge of the Company, beneficially owned or had the right
to acquire more than 5% of the outstanding Common Stock, Series A Convertible
Preferred Stock and Series B Convertible Preferred Stock, (ii) each director and
executive officer of the Company and (iii) all executive officers and directors
of the Company as a group.
=======================================================================================================
Title of Class Percent
Name and Amount and Nature of of Class
Address of Beneficial Owner Beneficial Owner(1) (2)
=======================================================================================================
Veldon Simpson (3)
193 South 200 East
St George, UT 84770 3,870,522 5.9%
=======================================================================================================
Gregg Giuffria (3)
8617 Rainbow Ridge Dr
Las Vegas, NV 89117 10,000,000 15.25%
=======================================================================================================
Don and Nancy Tyner (5)
9807 Highridge
Las Vegas, NV 89134 6,258,500 9.54%
=======================================================================================================
Richard Hannigan (6)
President, CEO
4483 West Reno Avenue
Las Vegas, NV 89118 10,585,000 16.11%
=======================================================================================================
Myong Hannigan (6)
Secretary
4483 West Reno Avenue
Las Vegas, NV 89118 10,585,000 16.11%
=======================================================================================================
Tracy Jones (7)
COO
4483 West Reno Avenue
Las Vegas, NV 89118 3,217,500 4.9%
=======================================================================================================
All Directors & Officers as a Group 13,802,500 21.01%
=======================================================================================================
=======================================================================================================
Veldon Simpson 500,000 100%
=======================================================================================================
Gregg Giuffria -0- -0-
=======================================================================================================
Richard Hannigan
President, CEO -0- -0-
=======================================================================================================
Myong Hannigan
Secretary -0- -0-
=======================================================================================================
Tracy Jones
COO -0- -0-
=======================================================================================================
All Directors & Officers as a Group -0- -0-
=======================================================================================================
25
Series B Preferred Stock
=======================================================================================================
Dan and Jill Fugal (4) 1,000,000 25.0%
1216 N 600 W
Pleasant Grove UT 84062
=======================================================================================================
Richard Hannigan (9)
President, CEO 2,000,000 50.0%
=======================================================================================================
Myong Hannigan (9)
Secretary 2,000,000 50.0%
=======================================================================================================
Tracy Jones (10)
COO 1,000,000 25.0%
=======================================================================================================
All Directors & Officers as a Group (8) 3,000,000
75.0%
=======================================================================================================
(1) Pursuant to the rules of the Securities and Exchange Commission, shares
shown as "beneficially" owned include those shares over which the
individual has voting power, including power to vote, or direct the
voting of, such security, and/or investment power, including the power
to dispose or direct the disposition of such security, and includes all
shares the individual has the right to acquire beneficial ownership of
within 60 days, including, but not limited to, any right to acquire
shares (a) through the exercise of any options, warrants, or other
right, (b) through conversion of a security, (c) pursuant to the power
to revoke a trust, discretionary account or similar arrangement, and
(d) pursuant to the automatic termination of a trust, discretionary
account or similar arrangement. This information is not necessarily
indicative of beneficial ownership for any other purpose. The directors
and executive officers of the Company have sole voting and investment
power over the shares of the Company's Common Stock, Series A
Convertible Preferred Stock and Series B Convertible Preferred Stock
held in their names, except as noted in the following footnotes.
(2) Calculations are based on 65,566,126 shares of Common Stock, 500,000
shares of Series A Convertible Preferred Stock, and 4,000,000 shares of
Series B Convertible Preferred Stock, as applicable, outstanding as of
March 31, 2005. Each outstanding share of Series A Convertible
Preferred Stock is immediately convertible into 10 shares of Common
Stock, and each outstanding shares of Series B Convertible Preferred
Stock is immediately convertible into 2 shares of Common Stock.
(3) Includes 500,000 shares of Series A Convertible Preferred Stock
immediately convertible into 5,000,000 shares of Common Stock.
(4) Mr. and Mrs. Fugal jointly own 2,653,837 shares of Common Stock and
1,000,000 shares of Series B Convertible Preferred Stock which are
immediately convertible into 2,000,000 shares of Common Stock.
(5) Includes all shares beneficially owned as reported on most recent Form
4.
(6) Richard Hannigan and Myong Hannigan are husband and wife, Richard
Hannigan directly owns 7,585,000 shares of Common Stock, and 1,000,000
shares of Series B Convertible Preferred Stock, immediately convertible
into 2,000,000 shares of Common Stock. Myong Hannigan is the direct
owner of 3,000,000 shares of Common Stock and 1,000,000 shares of
Series B Convertible Preferred Stock, immediately convertible into
2,000,000 shares of Common Stock.
26
(7) Mr. Jones is the direct owner of 70,000 shares of Common Stock, 500,000
shares of Series B Convertible Preferred Stock, which are immediately
convertible into 1,000,000 shares of Common Stock and 335,000 shares of
Common Stock owned by the Tracy Jones Charitable Remainder Trust. In
addition, Mr. Jones (i) is the sole owner of Western Architectural LLC
and deemed to beneficially own the 2,812,500 shares of Common Stock
owned by Western and (ii) is the majority owner of Varna Holdings LC
and deemed to beneficially own the 500,000 shares of Series B
Convertible Preferred Stock owned by Varna Holdings, LC, which are
immediately convertible into 1,000,000 shares of Common Stock.
(8) Includes an aggregate of 3,000,000 shares of Series B Convertible
Preferred Stock which are immediately convertible into 6,000,000 shares
of Common Stock.
(9) Includes 1,000,000 shares of Series B Convertible Preferred Stock held
directly by Richard Hannigan and 1,000,000 shares of Series B
Convertible Preferred Stock held directly by Myong Hannigan. Richard
Hannigan and Myong Hannigan are husband and wife and are deemed to
directly control the same amount of shares.
(10) Includes 1,000,000 shares of Series B Convertible Preferred Stock held
directly by Varna Holdings, LC, of which Mr. Jones owns a majority of
outstanding interests.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
We have numerous related party transactions with Synthetic Systems,
Inc. ("Synthetic"). Synthetic is a company owned jointly by Richard L. Hannigan,
Sr., our President and CEO and Myong Hannigan, Secretary, Mr. Hannigans spouse.
We are obligated to pay to Synthetic $25,000 per month for management and
consulting fees. As of the year ended December 31, 2004 the company had paid a
total of $290,000 to Synthetic Systems for professional and consulting fees.
Moreover, during 2004, our Board of Directors approved a bonus to Synthetic in
the amount of $370,000. As of December 31, 2004 the Company had not paid any of
the bonus that had been awarded. We also currently lease 2,100 square feet of
office space on a month-to-month basis from Synthetic for $2,325 per month.
In addition, the Company leases office furniture and equipment from
Synthetic at a monthly rental rate of $1,150. During 2004, the Company paid an
aggregate of $17,554 to Synthetic for the lease of this office furniture and
equipment.
During the fiscal year ended December 31, 2004, the Company issued
shares of its Series B Convertible Preferred Stock, valued at approximately
$0.94 per share based upon the fair value of the underlying Common Stock into
which such Series B Convertible Preferred Stock is convertible on a 2 for 1
basis, to the following executive officers and directors of the Company, as
compensation for services provided by such individuals as executive officers.
Richard Hannigan 1,000,000 shares
Tracy Jones 500,000 shares
Myong Hannigan 1,000,000 shares
On May 30, 2002, the Company executed a Contractor Agreement with
Western Architectural Services, LLC ("Western"), pursuant to which Western will
provide to the Company certain architectural services for the L.V. Voyager
Project and in exchange for which the Company issued 2,812,500 shares of
restricted Common Stock to Western. Moreover, pursuant to the Contractor
Agreement, Western is entitled to earn up to an aggregate of $18.3 million.
Although he was not an affiliate of the Company upon execution of the Contractor
Agreement, Mr. Jones, currently an executive officer, director and significant
stockholder of the Company, formed Western in 1982 and is currently its 85%
majority owner and managing member.
In February 2004, the Company advanced a payment of $300,000 to
Western, pursuant to the Contractor Agreement, to enable Western to design and
build an Orbiter for an Observation Wheel in order to conduct a feasibility
study.
On March 4, 2004, Richard L. Hannigan Sr., our President and CEO,
converted a total of 500,000 shares of Series A Convertible Preferred Stock held
by Mr. Hannigan into 5,000,000 shares of our Common Stock.
27
ITEM 13. EXHIBITS
Number Description
------ -----------
2.1 Plan and Agreement of Merger of Voyager Entertainment International,
Inc. (North Dakota) into Voyager Entertainment International, Inc.
(Nevada) (incorporated by reference to Exhibit 3.3 to the Company's
Quarterly Report on Form 10- QSB for the period ended September 30,
2003 filed on November 14, 2003).
2.2 Nevada Articles of Merger (incorporated by reference to Exhibit 3.4 to
the Company's Quarterly Report on Form 10- QSB for the period ended
September 30, 2003 filed on November 14, 2003).
2.3 North Dakota Certificate of Merger (incorporated by reference to
Exhibit 3.5 to the Company's Quarterly Report on Form 10-QSB for the
period ended September 30, 2003 filed on November 14, 2003).
3.1 Nevada Articles of Incorporation (incorporated by reference to Exhibit
3.1 to the Company's Quarterly Report on Form 10-QSB for the period
ended September 30, 2003 filed on November 14, 2003).
3.2 Amended and Restated Bylaws (incorporated by reference to Exhibit 3.2
to the Company's Quarterly Report on Form 10- QSB for the period ended
September 30, 2003 filed on November 14, 2003).
4.1 Certificate of Designation of Series A Convertible Preferred Stock
(incorporated by reference to Exhibit 4.1 to the Company's Quarterly
Report on Form 10-QSB for the period ended September 30, 2003 filed on
November 14, 2003).
4.2 Certificate of Designation of Series B Convertible Preferred Stock
(incorporated by reference to Exhibit 10.3 to the Company's Quarterly
Report on Form 10-QSB for the period ended September 30, 2003 filed on
November 14, 2003)
4.3 2002 Stock Plan for Voyager Entertainment International, Inc.
(incorporated by reference to Exhibit 99 to the Company's Current
Report on Form 8-K filed on April 15, 2002.
10.1 Loan and Security Agreement [by and between the Company and Dan Fugal,
dated November 15, 2002] (incorporated by reference to Exhibit 10.1 to
the Company's Current Report on Form 8-K filed on November 22, 2002).
10.2 Amendment No. 1 to Loan and Security Agreement [by and between the
Company and Dan Fugal, dated February 15, 2003] (incorporated by
reference to Exhibit 10(k) to the Company's Form 10-KSB filed on April
16, 2003).
10.3 Amendment No. 2 to Loan and Security Agreement [by and between the
Company and Dan Fugal, dated April 23, 2003 (incorporated by reference
to Exhibit 10.3 to the Company's Quarterly Report on Form 10-QSB for
the period ended March 31, 2003 filed on May 20, 2003).
10.4 Contractor Agreement by and between the Company and Western
Architectural Services, LLC, dated may 30, 2002 (incorporated by
reference as exhibit 10.1 to for the Quarter ending September 30, 2004
and filed with the 10QSB on November 23, 2004).
10.5 Definitive Joint Venture Agreement between Allied Investment House,
Inc. and Voyager to build a Voyager Project in the United Arab Emirates
dated March 15, 2005 (incorporated by reference as filed and attached
as exhibit 99.1 to the 8- K filed on March 17, 2005.
10.6 Settlement and General Release Agreement ( incorporated by reference as
exhibit 10.6 as filed with the 10QSB for the Quarter Ending September
30, 2004 and filed on November 23, 2004.
31.1 Certification of Chief Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002, filed herein.
31.2 Certification of Chief Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002, filed herein.
32.1 Section 1350 Certification of Chief Executive Officer, filed herein.
32.2 Section 1350 Certification of Chief Financial Officer, filed herein.
(b) Reports on Form 8-K
* On May 6, 2004, the Company filed with the SEC a Current
Report pursuant to Item 5 of Form 8-K, "Other Events and
Reported FD Disclosure
28
* On June 3, 2004 the Company filed with the SEC a Current
Report pursuant to Item 5 of Form 8-K, "Other Events and
Reported FD Disclosure
* On October 19, 2004 the Company filed with the SEC a Current
Report pursuant to Item 5 of Form 8-K, "Other Events and
Reported FD Disclosure
* On January 18, 2005 the Company filed with the SEC a Current
Report pursuant to Item 5 of Form 8-K, "Other Events and
Reported FD Disclosure
* On March 17, 2005 the Company filed with the SEC a Current
Report pursuant to Item 5 of Form 8-K, "Other Events and
Reported FD Disclosure
ITEM 14. Principal Accounting Fees and Services
Audit Fees.
The audit fees billed to the Company by Stonefield Josephson, Inc. for the
fiscal year ended December 31, 2003 was approximately $55,000 These fees pertain
to the audit of the Company's annual financial statements and review of our
financial statements included in our quarterly reports on Form 10-QSBs in 2003.
The audit fees paid to Stonefield Josephson by the Company for the audit of our
annual financial statements and review of our financial statements included in
our quarterly reports on Form 10-QSB, for the fiscal year ended December 31,
2004, is estimated to be $55,000.
Audit-Related Fees, Tax Fees and All Other Fees.
No "audit-related fees," "tax fees" or "other fees," as those terms are defined
by the Securities and Exchange Commission, were paid to Stonefield Josephson,
Inc. for the fiscal years ended December 31, 2004 and 2003.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant has caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
VOYAGER ENTERTAINMENT INTERNATIONAL, INC.
By: /s/ Richard Hannigan
------------------------------
Richard Hannigan,
President/Director
Dated: April 15, 2005
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
April 15, 2005
By: /s/ Myong Hannigan
------------------------------
Myong Hannigan
Secretary/Treasurer/Director
April 15, 2005
By: /s/Tracy Jones
------------------------------
Tracy Jones
COO/Director
April 15, 2005
29