UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington DC 20549
FORM 10-QSBA
[X] Amended Quarterly report under Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended: March 31, 2005
[ ] Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from to
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Commission File Number: 000-33151
VOYAGER ENTERTAINMENT INTERNATIONAL, INC.
-----------------------------------------
(Exact Name of Small Business Issuer as Specified in Its Charter)
Nevada 54-2110681
------------------------ ----------------
(State of incorporation) (I.R.S. Employer
Identification No.)
4483 West Reno Avenue, Las Vegas, NV 89118
------------------------------------------
(Address of Principal Executive Offices)
(702) 221-8070
------------------------------------------
(Issuer's Telephone Number, Including Area Code)
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Name, Former Address and Former Fiscal Year, if Changed Since Last Report.)
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 [ ]
There were 66,566,126 shares of Common Stock issued and outstanding 500,000
shares of Series A Preferred Stock and 4,000,000 shares of Series B Preferred
Stock issued and outstanding as of the latest practicable date.
Transitional Small Business Disclosure Format (check one) Yes [ ] No [X]
This amendment to the quarterly report for the period ending March 31, 2005 is
being filed in order to correct typographical errors in the (Unaudited)
Statement of Operations. Changes made in this 10-QSBA in no way reflect a
material omition or a change in our results.
INDEX
Page
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements............................................ 3
Consolidated Balance Sheet (Unaudited).......................... 3
Consolidated Statements of Operations (Unaudited)............... 4
Consolidated Statements of Stockholders' Deficit (Unaudited).... 5
Consolidated Statements of Cash Flows (Unaudited)............... 6
Notes to Consolidated Financial Statements...................... 7
Item 2. Plan of Operation............................................... 15
Item 3. Controls and Procedures......................................... 26
PART II - OTHER INFORMATION
Item 1. Legal Proceedings............................................... 27
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds..... 27
Item 3. Defaults Upon Senior Securities................................ 28
Item 4. Submission of Matters to a Vote of Security holders............ 28
Item 5. Other Information............................................... 28
Item 6. Exhibits....................................................... 29
Signatures................................................................. 30
2
PART I - FINANCIAL INFORMATION
VOYAGER ENTERTAINMENT INTERNATIONAL, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEET - MARCH 31, 2005
(UNAUDITED)
ASSETS
Current asset:
Cash and cash equivalents $ 87,856
Property and equipment, net of
accumulated depreciation 8,592
------------
Total assets $ 96,448
============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable and accrued expenses $ 162,678
Accrued expenses - related party 550,000
Loans and settlement payable and accrued
interest of $196,492 1,074,731
Notes payable and accrued interest of $605,000 1,210,000
------------
Total current liabilities $ 2,997,409
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, 66,566,126 shares issued and outstanding
Issued and outstanding 66,565
Additional paid-in capital 26,092,035
Deferred construction cost (18,304,135)
Deficit accumulated during development stage (10,759,926)
------------
Total stockholders' deficit (2,900,961)
------------
Total liabilities and stockholders' deficit $ 96,448
============
The accompanying notes form an integral part of these consolidated financial
statements
3
VOYAGER ENTERTAINMENT INTERNATIONAL, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
For the period
since inception on
Three Months Ended March 1, 1997 to
March 31, March 31, March 31,
2005 2004 2005
------------ ------------ ------------
Net revenue $ -- $ -- $ --
------------ ------------ ------------
Operating expenses:
Professional and consulting fee, 364,590 1,009,553 8,176,475
Including related party
Stock discount expense -- -- --
Project costs 2,793 754 83,380
Rent expense 6,975 6,975 95,685
Settlement expense -- -- 650,000
Other operating expenses 25,373 41,798 478,516
------------ ------------ ------------
399,731 1,059,080 9,484,056
------------ ------------ ------------
Interest (income) expense, net (17,463) 16,930 1,275,871
------------ ------------ ------------
Loss from operations before income taxes (417,194) (1,076,010) (10,759,927)
------------ ------------ ------------
Income taxes -- -- --
------------ ------------ ------------
Net loss (417,194) (1,076,010) (10,759,927)
============ ============ ============
Preferred stock dividends from amortization
of beneficial conversion feature -- -- 130,000
============ ============ ============
Net loss attributed to common stockholders $ (417,194) $ (1,076,010) $ (10,889,927)
============ ============ ============
Net loss per share - basic and diluted $ (0.01) $ (0.02)
============ ============
Weighted average common stock
shares outstanding - basic and diluted 65,674,000 54,110,000
============ ============
The accompanying notes form an integral part of these consolidated financial
statements
4
VOYAGER ENTERTAINMENT INTERNATIONAL, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT (UNAUDITED)
FOR THE PERIOD SINCE INCEPTION ON MARCH 1, 1997 TO March 31, 2005
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
========= ======= ========= ======== ========== =======
Issuance of common stock for services
January 2005 -- -- -- -- 500,000 500
Issuance of common stock for cash
February 2005 -- -- -- -- 500,000 500
Issuance of common stock for services
March 2005 -- -- -- -- 500,000 500
Issuance of common stock for cash
March 2005 -- -- -- -- 375,000 375
Net loss for the three months ended
March 31, 2005 -- -- -- -- -- --
--------- ------- --------- -------- ---------- -------
Balance at March 31, 2005 500,000 $ 500 4,000,000 $ 4,000 66,566,126 $66,565
========= ======= ========= ======== ========== =======
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)
============ ============ ============ ===========
Issuance of common stock for services
January 2005 74,500 -- -- 75,000
Issuance of common stock for cash
February 2005 99,500 -- -- 100,000
Issuance of common stock for services
March 2005 159,500 -- -- 160,000
Issuance of common stock for cash
March 2005 74,625 -- -- 75,000
Net loss for the three months ended
March 31, 2005 -- -- (417,194) (417,194)
--------- --------- ---------- ---------
Balance at March 31, 2005 $ 26,092,035 $(18,304,135) $(10,759,926) $(2,900,961)
============ ============ ============ ===========
The accompanying notes form an integral part of these consolidated financial
statements
5
VOYAGER ENTERTAINMENT INTERNATIONAL, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
For the period
since inception on
Three Months Ended Three Months Ended March 1, 1997 to
March 31, 2005 March 31, 2004 March 31, 2005
------------------ ------------------ ------------------
Cash flows provided by (used for) operating activities:
Net loss $ (417,194) $ (1,076,010) $(10,759,927)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation 1,555 1,227 10,963
Issuance of common stock for services 235,000 558,750 4,963,815
Interest expense from the issuance of common stock -- 475,150
Changes in assets and liabilities:
(Increase) decrease in assets:
Prepaid expenses -- -- --
Increase (decrease) in liabilities:
Accounts payable and accrued expenses 24,204 24,348 964,170
Accrued payable - related parties (55,000) -- 550,000
Accrued settlement obligation -- -- 650,000
------------ ------------ ------------
Net cash used for operating activities (101,435) (491,685) (3,145,829)
------------ ------------ ------------
Cash flows used for investing activities -
payments to acquire property and equipment (1,684) (6,659) (19,554)
------------ ------------ ------------
Cash flows provided by (used for) financing activities:
Proceeds from notes payable -- -- 833,239
Proceeds from sale of preferred stock -- -- 150,000
Proceeds from issuance of common stock 175,000 425,000 2,270,000
------------ ------------ ------------
Net cash provided by financing activities 175,000 425,000 3,253,239
------------ ------------ ------------
Net increase (decrease) in cash 71,881 (73,344) 87,856
Cash, beginning of period 15,975 489,104 --
------------ ------------ ------------
Cash, end of period $ 87,856 $ 415,760 $ 87,856
============ ============ ============
Cash paid during the period for:
Interest expense $ -- $ -- $ --
============ ============ ============
Income taxes $ -- $ -- $ --
============ ============ ============
Non cash financing activity:
Common stock issued for services $ 235,000 $ 558,750 $ 4,908,815
============ ============ ============
Common stock issued for financing costs and services $ -- $ -- $ 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
6
VOYAGER ENTERTAINMENT INTERNATIONAL, INC.
AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 2005
(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 Ferris wheel on the Las Vegas Strip area, and other
countries. The Company's corporate offices are located in Las Vegas, Nevada.
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.
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.
Interim Financial Statements:
-----------------------------
The accompanying consolidated financial statements include all adjustments
(consisting of only normal recurring accruals) which are, in the opinion of
management, necessary for a fair presentation of the results of operations for
the periods presented. Interim results are not necessarily indicative of the
results to be expected for the full year ending December 31, 2005. The
consolidated financial statements should be read in conjunction with the
consolidated financial statements included in the annual report of Voyager
Entertainment International, Inc. and its subsidiaries (the "Company") on Form
10-KSB for the year ended December 31, 2004.
Going Concern
-------------
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. The Company has no
established source of revenue, has a working capital deficit of $2,909,553 has
debt of $1.2 million which can be called at any time, has an accumulated deficit
of $10,759,927 incurred significant net losses and has used cash for operating
activities of $3,145,829 since inception and 101,435 for the three months ended
March 31, 2005 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 discussed below. 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
7
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 and United Arab Emirates 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 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.
Accounting Policies:
There has been no change in accounting policies used by the Company during the
quarter ended March 31, 2005.
There were no stock options granted from the period from inception to March 31,
2005.
8
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.
9
(2) 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 March 31, 2005, the total obligation including loans of $228,239 in principal
the settlement obligation of $650,000, and accrued interest of $196,492 amounted
to an aggregate of $1,074,731. One half of this amount, or $537,365 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.
(3) 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
10
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 amended
Quarterly Report on Form 10-QSBA, 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.
(4) Related Party Transactions:
During the three months ended March 31 2005, the Company paid management
consulting fees of approximately $105,000 or $35,000 per month to Synthetic
Systems, LLC., which 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 three months ending March 31, 2005 of approximately
$3,450 and office rent expenses of approximately $6,975.
11
(5) 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
12
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
----------------------
In January, 2005 the company issued 500,000 shares of Common Stock for
consulting services being rendered in the first quarter of 2005. These shares
were valued at the fair value of $0.15 per share for total compensation of
$75,000.
In February 2005, $100,000 was received for 500,000 common shares at $0.20 per
share.
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 rendered. These shares were valued at the fair value of $0.32 per share
for total compensation of $160,000.
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.
13
(6) 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.
14
ITEM 2. PLAN OF OPERATION
The following discussion should be read in conjunction with the Company's
financial statements and the notes thereto contained elsewhere in this filing.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Except for the historical information contained herein, this amended quarterly
report on Form 10-QSBA includes certain "forward-looking statements" within
the meaning of that term in Section 27A of the Securities Act of 1933 and
Section 21E of the Exchange Act of 1934, including, among others, those
statements preceded by, followed by, or including the words "estimates,"
"believes," "expects," "anticipates," "plans," "projects," or similar
expressions. Forward-looking statements include, but are not limited to,
statements concerning anticipated trends in revenues and net income, projections
concerning operations and available cash flow. The Company's actual results
could differ materially fromthe results discussed in such forward-looking
statements. The following discussion of the Company's financial condition
and results of operations should be read in conjunction with the Company's
financial statements and the related notes thereto appearing elsewhere herein.
15
These forward-looking statements are based largely on our current expectations
and are subject to a number of risks and uncertainties. These forward-looking
statements include, but are not limited to:
o The Company's wholly-owned subsidiary, Voyager Entertainment Holdings, Inc.
("VEHI"), intends to manage the Las Vegas Voyager Project pursuant to a
performance-based contract between the Company and VEHI and potentially an
as-yet unidentified partner of the Company;
o VEHI intends to employ highly skilled individuals from the theme park
industry and combine their specialized skills with those from the gaming
industry;
o The western bank (Puxi) of the Huangpu River, the Bund, is our anticipated
location for a master planned development with the "Star of Shanghai"
Observation Wheel as the dominant feature (the "Star of Shanghai Voyager
Project");
o The Company intends to design the Star of Shanghai Voyager Project 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;
o Management believes that it can identify sources and obtain adequate
amounts of such financing;
o The Company intends to enter into a cooperative arrangement with
distributors, whereby we will receive marketing and sales benefits from the
professional staff of such distributors;
o The Company believes that it cannot satisfy the cash requirements of its
plan of operation for the next twelve months without raising additional
funds through debt or equity financings;
o 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;
o During the next 12 months, we plan to focus our efforts on our development
of the Observation Wheels; however actual construction will not commence
until we have sufficient capital for construction and marketing;
o We anticipate that our monthly cash need is approximately $60,000 per
month;
o The Company plans to focus primarily on the development of the Observation
Wheel in Las Vegas and the United Arab Emirates over the next 12 months.
However, we will also actively seek partnerships and locations for other
observation Wheels throughout the United States and foreign countries;
O 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.
o 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; and
16
o The Company believes that it cannot satisfy the cash requirements of its
plan of operation for the next twelve months without raising additional
funds through debt or equity financings. However, if the Company receives
adequate funding, the Company anticipates that there will be a need to
purchase a significant amount of equipment and materials as well as
significant need to hire additional employees throughout the next twelve
months. The Company also believes that in this event there will also be a
significant amount of research and development such as building mock-ups,
statistical modeling and engineering.
o 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 or other financing may in turn cause
the Company to become insolvent and may cause the Company to seek
protection under the federal bankruptcy laws.
o As of the date hereof the Company anticipates that it has enough cash to
fund operations for the next six months however, the Company does not have
sufficient capital to initiate or complete construction of any of the
Voyager Projects.
o There have been other companies that have announced possible development of
a large Observation Wheel.
o 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.
o The Company has 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 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.
Management may be unable to obtain the appropriate funding to run our company.
The Company does 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
17
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
The Company wishes to caution investors that any forward-looking statements made
by or on behalf of the Company are subject to uncertainties and other factors
that could cause actual results to differ materially from such statements. These
uncertainties and other factors include, but are not limited to the Risk Factors
listed below (many of which have been discussed in prior SEC filings by the
Company). Though the Company has attempted to list comprehensively these
important factors, the Company wishes to caution investors that other factors
could in the future prove to be important in affecting the Company's results of
operations. New factors emerge from time to time and it is not possible for
management to predict all of such factors, nor can it assess the impact of each
such factor on the business or the extent to which any factor, or combination of
factors, may cause actual results to differ materially from those contained in
any forward-looking statements.
Readers are further cautioned not to place undue reliance on such
forward-looking statements as they speak only of the Company's views as of the
date the statement was made. The Company undertakes no obligation to publicly
update or revise any forward- looking statements, whether as a result of new
information, future events or otherwise.
Recent Developments
( 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.
The Company is currently evaluating site locations in Las Vegas, Nevada where
the Observation Wheel could be constructed by the Company . If the Company is
unsuccessful in obtaining a site and negotiating terms acceptable to both
Voyager and a prospective property owner for a Las Vegas location, the Company
will be required to identify a location outside of Las Vegas where an
Observation Wheel could be constructed before an Observation Wheel could be
built in Las Vegas forcing our management to focus its efforts elsewhere for a
significant amount of time. While there are several locations outside of Las
Vegas which are currently proposed, there can be no guarantees that the Company
will obtain financing or any definitive agreements for any other locations.
The Company is currently dependent upon funding operations through the sale of
its Common Stock and securing debt through private individuals. If the Company
can not continue to raise funds through the sale if its Common Stock and
securing loans from private individuals, the Company may have to cease
operations thus rendering the Company insolvent or requiring the Company to seek
protection under the federal bankruptcy laws. While the company is seeking
funding there can be no guarantee that funding will be attained.
18
Business of the Company
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; Shanghai, China and the UAE.
L.V. Voyager Project
For the past 5 years, through its subsidiaries, the Company has 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 an Observation Wheel in Las Vegas ( the "L.V. Voyager Project").
The Las Vegas Voyager Project is intended to be one of the most unique
architectural and engineering designs making it a "must see" attraction that
will give the patron an experience overlooking the "Las Vegas Strip." With 30
vehicles called "Orbiters" the Las Vegas Voyager Project is intended a revolving
Observation 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 and
onboard Navigator, who will be part entertainer and part steward, and who will
also be trained in life safety and security.
Organization and Operation
--------------------------
The L.V. Voyager Project would 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 intends to manage the
project pursuant to a performance-based contract between the Company and VEHI
[and potentially an as-yet unidentified partner of the Company]. All covenants,
restrictions and protocols would be detailed in the performance-based contract.
As the management company, VEHI would be responsible for the design,
development, construction, and operation of the L.V. Voyager Project, and would
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 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 and Director, Michael Schaunessy, CFO, and Sig
Rogich, Director of Public Relations & Communications.
19
Star of Shanghai Voyager Project
--------------------------------
The western bank (Puxi) of the Huangpu River, the Bund, is our anticipated
location for a master planned development with the "Star of Shanghai"
Observation Wheel as the dominant feature (the "Star of Shanghai Voyager
Project"). We intend to design the Star of Shanghai Voyager Project 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. Therefore
the Company does not currently have a suitable site and we can offer no
assurances that we will find a suitable site.
The Company requires substantial additional funds to build its Las Vegas Voyager
Project and 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.
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.
20
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
---------------
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
21
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 March
31, 2005, we incurred operating expenses of $9,484,056 and interest expense of
$1,275,871 against no revenues, which resulted in accumulated losses of
$10,759,927.
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, whereby we will receive marketing and sales
benefits from the professional staff of such distributors. To date, we have not
established any such arrangements.
In the event we are unsuccessful in generating equity capital, then the Company
will be unable to continue with product development and/or marketing. The lack
of equity capital or other financing may in turn cause the Company to become
insolvent and may cause the Company to seek protection under the federal
bankruptcy laws.
As of the date hereof the Company anticipates that it has enough cash to fund
operations for the next six months however, the Company does not have sufficient
capital to initiate or complete construction of any of the Voyager Projects.
Plan of Operation
During the next 12 months, the Company plans to focus its efforts on its
development of the Observation Wheels; however actual production will not
commence until the Company has sufficient capital for production and marketing..
The Company believes that it cannot satisfy the cash requirements of its plan of
operation for the next twelve months without raising additional
22
funds through debt or equity financings. However, if the Company receives
adequate funding, the Company anticipates that there will be a need to purchase
a significant amount of equipment and materials as well as significant need to
hire additional employees throughout the next twelve months. The Company also
believes that in this event there will also be a significant amount of research
and development such as building mock-ups, statistical modeling and engineering.
The Company is dependent upon Richard Hannigan, CEO, President and Director,
Myong Hannigan, Secretary/Treasurer and Director, and Tracy Jones, COO and
Director. The Company does not have any employees at this time and does not
anticipate the need to hire any employees until such time as the Company has
been sufficiently capitalized.
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."
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. If
this occurs, there could be a possibility that management of the company could
seek protection under the federal bankruptcy laws.
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 or other financing may in turn cause the Company to become
insolvent and may cause the Company to seek protection under the federal
bankruptcy laws. As of the date hereof the Company has enough cash to fund
operations for the next six months however, the Company does not have sufficient
capital to initiate or complete construction of any of the Voyager Projects.
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.
During the next 12 months, we plan to focus our efforts on our development of
the Observation Wheels; however actual construction will not commence until we
have sufficient capital for construction and marketing. Currently, we anticipate
that our monthly cash need is approximately $85,000 per month. These costs
consist primarily of professional fees (including legal and accounting fees) and
consulting fees, including those paid to related parties, as well as rent
expenses and printing expenses. 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.
23
If a suitable site is acquired and selected the primary focus will be on
completing engineering and starting the construction of an Observation Wheel.
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. The lack of equity capital or other financing
may in turn cause the Company to become insolvent. At that time the Company
might elect to seek protection under the federal bankruptcy laws. As of the date
hereof the Company anticipates that it has enough cash to fund operations for
the next six months; however the Company does not have sufficient capital to
initiate or complete construction of any of the Voyager Projects.
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 March 31, 2005, the Company had current assets of
$87,856 which consisted primarily of cash on hand,and current liabilities of
$2,997,408 resulting in working capital deficit of $2,909,552.
The Company is currently obligated to repay two of its creditors at the time we
receive adequate project funding. One of the creditors, Mr. Fugal, to whom the
Company owes an aggregate of $1,210,000, 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 amended Quarterly Report on Form 10-QSBA, Mr. Fugal has
not indicated any intention to institute foreclosure proceedings. However, we
can not guarantee that Mr. Fugal will not attempt to institute foreclosure
proceedings against the Company in the future.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Management's Discussion and Plan of Operations discusses the Company's
consolidated
24
financial statements, which have been prepared in accordance with accounting
principles generally accepted in the United States of America. The preparation
of these financial statements requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. On an on-going basis, management evaluates
its estimates and judgments, including those related to financing operations,
and contingencies and litigation.
Management bases its estimates and judgments on historical experience and on
various other factors that are believed to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying value of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates under different
assumptions or conditions. The most significant accounting estimates inherent in
the preparation of the Company's financial statements include estimates as to
the appropriate carrying value of certain assets and liabilities which are not
readily apparent from other sources, primarily accruals for operating costs, and
the classification of net operating loss and tax credit carryforwards.
FACTORS THAT MAY AFFECT THE COMPANY'S FUTURE OPERATING RESULTS We are a
development stage company, recently reorganized and have minimal operating
history, which makes an evaluation of us extremely difficult. At this stage of
our business operations, even with our good faith efforts, potential investors
have a high probability of losing their investment. As a result of our recent
reorganization we have yet to generate revenues from operations and have been
focused on organizational, start-up, market analysis and fund raising
activities. Although we have a project to market, there is nothing at this time
on which to base an assumption that our business operations will prove to be
successful or that we will ever be able to operate profitably. Our future
operating results will depend on many factors, including our ability to raise
adequate working capital, demand and acceptance of our product, the level of our
competition and our ability to attract and maintain key management and
employees.
While Management believes its estimates of projected occurrences and events are
within the timetable of its business plan, there can be no guarantees or
assurances that the results anticipated will occur.
Our auditor's report filed with our Annual Report on Form 10-KSB for the year
ended December 31, 2004 reflects the fact that without realization of additional
capital, it would be unlikely for us to continue as a going concern. If we are
unable to continue as a going concern, it is unlikely that we will continue in
business.
As a result of our deficiency in working capital and other factors, our auditors
included a paragraph in their report filed with our Annual Report on Form 10-KSB
for the year ended December 31, 2003, 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.
There is a limited current public market for our Common Stock.
25
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.
The Company is currently seeking potential locations in Las Vegas where the
Company can resume its plans to construct and operate the L.V. Voyager Project;
however, we can offer no assurances that we will be successful in finding a
suitable location or negotiating the lease or purchase of land on terms
acceptable to the Company or favorable to its stockholders.
The Company is currently obligated to repay two of its creditors at the time we
receive adequate project funding. Pursuant to the Loan and Security Agreement,
as amended, with Mr. Fugal, to whom the Company owes an aggregate of $1,210,000,
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 against the Company. Mr. Fugal could institute foreclosure
proceedings at any time if he believes that he will not be repaid. As of this
the date of the Amended Quarterly Report on Form 10-QSBA, 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 in the future. If this occurs management may
elect to seek protection under the federal bankruptcy laws.
We are uncertain about the possible demand for our Observation Wheels. Their can
be no assurances that if built there will be adequate demand for our Project in
Las Vegas or other proposed sites in Shanghai, China or Dallas, Texas.
The Company is highly dependent upon management's ability to execute the
Company's business plan. We believe our officers and directors have a great deal
of experience in the construction industry but do not have experience in
managing an attraction. We will be highly dependent upon securing the
appropriate management personnel in order for the attraction to operate
correctly. If adequate funding is not received or management elects to manage
the attraction itself, there can be no assurance that the Company can
effectively execute its business plan.
ITEM 3. 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 quarterly report on Form
10-QSBA 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.
26
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
In February, 2005, the Company also issued 500,000 shares of restricted Common
Stock, for consulting services performed during the first quarter of 2005. 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 March 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 of 2005. 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.
27
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
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 has agreed to pay a settlement
amount of an additional $650,000, without claiming any fault or wrong doing. As
of September 30, 2004, the total obligation including loans of $228,239 in
principal the settlement obligation of $650,000, and accrued interest, of
$196,492 amounted to an aggregate of $1,074,731. One half of this amount, or
$537,365.5, 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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
28
ITEM 6. 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 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
29
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
VOYAGER ENTERTAINMENT INTERNATIONAL, INC.
-----------------------------------------
(Registrant)
Dated May 23, 2005
By: /s/ Richard Hannigan
----------------------------------------
Richard Hannigan,
President/Director
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated
By: /s/ Richard Hannigan, Sr.
------------------------------
Richard Hannigan, Sr.
President/CEO/Director
May 23, 2005
By: /s/ Myong Hannigan
------------------------------
Myong Hannigan
Secretary/Treasurer/Director
May 23, 2005
By: /s/ Tracy Jones
------------------------------
Tracy Jones
COO/Director
May 23, 2005
30