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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the quarterly period ended March 31, 2001
OR
[ ] 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: 1-11765
MEDJET INC.
( Name of Small Business Issuer as Specified in its Charter)
DELAWARE 22-3283541
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
1090 King Georges Post Road, Suite 301
Edison, New Jersey 08837
(Address of Principal Executive Offices)
(732) 738-3990
(Issuer's Telephone Number, Including Area Code)
(Former 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 [ ]
As of April 27, 2001, 3,931,700 shares of Common Stock, par value $.001 per
share, were outstanding.
Transitional Small Business Disclosure Format: Yes [ ] No [X]
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MEDJET INC.
(A Development Stage Company)
Condensed Interim Balance Sheet
March 31, 2001
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $ 1,590
Prepaid expenses 20,963
Current portion of note receivable 3,076
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Total Current Assets 25,629
Note Receivable, less current portion 5,297
Property and Equipment - less accumulated depreciation of $392,908 106,339
Patents and Trademarks - less accumulated amortization of $42,117 230,822
Security deposits 4,837
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Total Assets $ 372,924
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LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)
Current Liabilities:
Accounts payable and accrued liabilities $ 264,187
Notes payable - Officer 148,500
Current Portion of Capital Lease Obligation 23,382
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Total Current Liabilities 436,069
Deferred Rental Obligation 9,466
Capital Lease Obligation Less Current Portion 10,510
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456,044
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Stockholders' Equity:
Preferred stock, $.01 par value, 1,000,000 shares authorized, 10,400 shares
designated as Series B Convertible Preferred issued and outstanding 104
Common stock, $.001 par value, 30,000,000 shares authorized,
3,935,220 shares issued and 3,901,431 shares outstanding 3,935
Additional paid-in capital 7,365,932
Accumulated deficit (including deficit accumulated during development
stage of $8,956,391 of which $1,556,204 was applied to additional
paid-in capital upon conversion from an "S" to a "C" corporation) (7,451,391)
Less: Treasury stock, 33,789 shares, at cost (1,700)
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Total Stockholders' Equity (Deficit) (83,120)
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Total Liabilities and Stockholders' Equity (Deficit) $ 372,924
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See notes to the condensed interim financial statements.
MEDJET INC.
(A Development Stage Company)
Condensed Interim Statements of Operations
For The Three Months Ended March 31, 2001 and 2000
And The Period From December 16, 1993 (Date of Inception) to March 31, 2001
(Unaudited)
Three Months Ended Period from
March 31, December 16,
------------------------------ 1993 (Inception) to
2001 2000 March 31, 2001
----------- ----------- ---------------------
Revenues:
License fee income $ -- $ -- $ 1,200,000
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Total revenues -- -- 1,200,000
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Expenses:
Research, development,
general and administrative 295,938 350,716 10,980,813
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Total expenses 295,938 350,716 10,980,813
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Loss from Operations (295,938) (350,716) (9,780,813)
Other Income (Expense):
Net interest income (Expense) (2,392) 10,992 273,309
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Loss Before Income Tax (298,330) (339,724) (9,507,504)
Income tax -- -- (551,443)
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Net Loss (298,330) (339,724) (8,956,061)
Dividends on Preferred Stock -- -- 184,923
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Net Loss Attributable to
Common Shareholders $ (298,330) $ (339,724) $ (9,140,984)
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Net Loss Per Share $ (0.08) $ (0.09) $ (2.87)
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Weighted average common
shares outstanding 3,901,431 3,901,431 3,189,565
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See notes to the condensed interim financial statements.
MEDJET INC.
(A Development Stage Company)
Condensed Interim Statements of Cash Flows
For The Three Months Ended March 31, 2001 and 2000
And The Period From December 16, 1993 (Date of Inception) to March 31, 2001
(Unaudited)
For the Three Months Ended Period from
March 31, December 16,
---------------------------- 1993 (Inception) to
2001 2000 March 31, 2001
--------- ----------- -------------------
Cash Flows from Operating Activities $(191,709) $ (311,266) $(8,295,171)
Cash Flows from Investing Activities (9,866) (43,769) (719,691)
Cash Flows from Financing Activities 19,500 (50,000) 9,092,434
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Net Increase (Decrease) in Cash and Cash Equivalents (182,075) (405,035) 77,572
Cash and Cash Equivalents - Beginning of Period 183,665 1,063,749 --
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Cash and Cash Equivalents - End of Period $ 1,590 $ 658,714 $ 77,572
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Supplemental Disclosures of Cash Flow Information:
Cash Paid for:
Income taxes $ -- $ -- $ 600
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Interest expense $ 3,827 $ 3,811 $ 29,312
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See notes to the condensed interim financial statements.
MEDJET INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE
CONDENSED INTERIM FINANCIAL STATEMENTS
NOTE A - NATURE OF ORGANIZATION AND BASIS OF PRESENTATION:
(1) Nature of Organization:
Medjet Inc. (the "Company") was incorporated in the State of Delaware
on December 16, 1993, and is in the development stage. The Company is
engaged in research and development of medical technology, with a
current emphasis on ophthalmic surgical technology and equipment.
(2) Basis of Presentation:
The Condensed Interim Financial Statements included herein have been
prepared by the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted as permitted by such rules
and regulations.
The Condensed Interim Financial Statements included herein reflect, in
the opinion of management, all adjustments (consisting only of normal
recurring adjustments) necessary to present fairly the results for the
interim periods. The results of operations for the three months ended
March 31, 2001 are not necessarily indicative of results to be
expected for the entire year ending December 31, 2001.
NOTE B - NET LOSS PER SHARE:
Net loss per share, in accordance with the provisions of Financial
Accounting Standards No. 128, "Earnings Per Share," is computed by
dividing net loss by the weighted average number of shares of Common
Stock outstanding during the period. Common Stock equivalents have not
been included in this computation as the effect would be
anti-dilutive.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
This Quarterly Report on Form 10-QSB, including any documents that are
incorporated by reference, contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. Generally, such
statements are indicated by words or phrases such as "anticipates," "expects,"
"intends," "believes" and similar words and phrases. Such statements are based
on the Company's current expectations and are subject to risks, uncertainties
and assumptions. Certain of these risks are described below or in Part I, Item 6
of the Company's Annual Report on Form 10-KSB for the fiscal year ended December
31, 2000, on file with the Securities and Exchange Commission, and are
incorporated herein by this reference. Should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove incorrect,
actual results may vary materially from those anticipated, expected, intended or
believed.
GENERAL
The Company is engaged in research and development for manufacture of medical
technology, with a current emphasis on ophthalmic surgical technology and
equipment, and has developed a proprietary technology and derivative devices for
corneal surgery based on microjets. The Company expects, during the remainder of
2001, assuming the appropriate regulatory clearances are obtained, to continue
its research and development activities, focusing principally on ophthalmic
surgical technology and equipment, and to offer for sale its first microjet
microkeratome product. It also expects to commence early exploratory work on
dental applications of microjet technology. The Company is a development stage
company.
RESULTS OF OPERATIONS
The Company has not yet initiated sales of its products and, consequently, had
no sales revenues during the three months ended March 31, 2001.
Total expenses during the three months ended March 31, 2001 decreased by $54,778
(16 %) to $295,938 from $350,716 for the comparable period of 2000. This was
primarily due to a decrease in legal fees, related to the NJIT litigation, and
by a reduction of staff salaries. The Company also continued to curtail certain
operational activities in order to conserve its existing capital. See "Liquidity
and Capital Resources" below.
Other income/(expense) consists of interest income, interest expense and finance
charges. Net interest income for the three months ended March 31, 2001 decreased
by $12,600 to $(2,392) from $10,992 for the comparable period of 2000. This
decrease resulted principally from loss of income earned on the Company's
short-term investments, which were lower in the 2001 period, and the increased
borrowing interest expense.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 2001, the Company's working capital was $1590. During March 1999
Dr. Eugene I. Gordon, The Company's Chairman and Chief Executive Officer, agreed
to provide a $250,000 line of credit to the Company. As of April 17, 2001,
$84,700 remained available for use by the Company.
Throughout the fourth quarter of 2000 and into 2001, the Company sought
additional capital to finance its 2001 business plan. Pending obtaining
additional financing, the Company made the decision to curtail several
operational activities as well as to cut its employees' salaries in order to
conserve its existing capital. The specific goal was to reduce the Company's
monthly expenditures by 80%, to approximately $27,000.
During March 1999, Dr. Gordon agreed to make available to the Company a loan of
up to $250,000. Under the terms of this agreement, the Company issued to Dr.
Gordon warrants to purchase up to 50,000 shares of the Company's Common Stock
and agreed to pay a market interest rate on amounts borrowed. Through March 31,
2001, amounts advanced under this agreement totaled $148,500. At March 31, 2001,
$148,500 of this amount, plus accrued interest, had been repaid.
GOING CONCERN
As shown in the accompanying financial statements, the Company incurred a net
loss of $298,330 during the quarter ended March 31, 2001. As of that date, the
Company's cash was only $1,590 with a line of credit from Dr. Gordon of $101,500
still available. As of March 31, 2001 the Company's current liabilities exceeded
its current assets by $37,261. As a result of these factors, as well as the
absence of a firm commitment for financing, the Company can no longer be
characterized as a going concern. Management of the Company is developing a plan
to reduce its costs and is evaluating financial and strategic options. The
ability of the Company to continue is dependent on successful completion of one
or more of these opportunities. As a result of the change in status, the
financial statements include adjustments to the Deferred Tax Asset and the
potential for filing future NOL's to the State of New Jersey's program for tax
credit.
The Company anticipates that its cash on hand, plus the line of credit available
from Dr. Gordon will be sufficient to meet the Company's needs to June 1, 2001.
The Company does require additional financing prior to June 1, 2001 in order to
maintain its current operations. Moreover, during 2001, the Company intends to
seek additional funding in order to accelerate its product development efforts
and augment its working capital. The Company currently has no commitment or
arrangement for any capital, and there can be no assurance whether or on what
terms it will be able to obtain any needed capital. If additional financing is
not available, the Company would be materially adversely affected and be
required to further curtail or cease altogether its current operations.
ADDITIONAL FACTORS THAT MAY AFFECT FUTURE RESULTS
The Company has been in the development stage and has not sold any products. To
date, the Company's research and development activities on vision correction
have been limited to constructing and testing experimental versions of
microkeratomes for eye surgery and conducting a limited number of feasibility
studies using enucleated porcine, rabbit and human cadaver eyes and live rabbits
to prove that the beam of water can smoothly incise and shape the anterior
surface of the cornea and that the cornea will heal properly after the surgery.
Although the Company currently intends to undertake the manufacture and
marketing of its microjet products on a limited scale, it continues to have
discussions with several potential strategic partners and is investigating other
possible arrangements for larger-scale manufacturing, marketing and
distribution. These discussions are in the early stages, and no formal
understanding or agreement has been reached with any potential strategic
partner. The Company's objective in entering into any such arrangements in
addition would be to obtain adequate funding to support development of other
products, in addition to their manufacture, promotion and marketing. To the
extent that the Company fails to enter into such arrangements, the Company would
be subject to the risks and uncertainties described under "Additional Factors
That May Affect Future Results - No Manufacturing Experience; Dependence on
Third Parties," in the Company's Annual Report on Form 10-KSB, which information
is incorporated herein by reference.
The Company's dependence on third parties for the manufacture of components of
its products may adversely affect the Company's profit margins and its ability
to develop and deliver such products on a timely basis. Moreover, there can be
no assurance that such third parties will perform adequately, and any failures
by third parties may delay the submission of products for regulatory approval,
impair the Company's ability to deliver products on a timely basis, or otherwise
impair the Company's competitive position and any such failure could have a
material adverse effect on the Company.
If the Company does not enter into license or distribution arrangements with
respect to its products, it may undertake the marketing and sale of its own
products. In such event, the Company intends to market and sell its products in
the United States and certain foreign countries, if and when regulatory approval
is obtained, through a direct sales force or a combination of a direct sales
force and distributors. The Company currently has no marketing organization and
has never sold a product. Establishing sufficient marketing and sales
capabilities will require significant resources. There can be no assurance that
the Company will be able to recruit and retain skilled sales management, direct
salespersons or distributors, or that the Company's marketing or sales efforts
will be successful. To the extent that the Company enters into distribution
arrangements for the sale of its products, the Company will be dependent on the
efforts of third parties. There can be no assurance that such efforts will be
successful.
Uncertainty of Market Acceptance; Reliance on Single Technology. Acceptance of
the Company's products is difficult to predict and will require substantial
marketing efforts and the expenditure of significant funds by the Company. There
can be no assurance that the products will be accepted by the medical community
once they are permitted or approved. Market acceptance of the Company's products
will depend in large part upon the Company's ability to demonstrate the
operational advantages, safety and cost-effectiveness of its products compared
to other comparable surgical techniques. Failure of the products to achieve
market acceptance will have a material adverse effect on the Company's financial
condition and results of operations.
At present, the Company's only products (although still in development stage)
are its microkeratomes, and the Company expects that its microkeratomes will be,
if and when commercially available, its sole products for an indefinite period
of time. The Company's present narrow focus on particular products makes the
Company vulnerable to the development of superior competing products and changes
in technology that could eliminate the need for the Company's products. There
can be no assurance that significant changes in the foreseeable future in the
need for the Company's products or the desirability of those products will not
occur.
PART II - OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: April 27, 2001 MEDJET INC.
/s/ Eugene I. Gordon
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Eugene I. Gordon, Ph.D.
Chairman of the Board and
Chief Executive Officer
/s/ Cheryl A. Blake
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Cheryl A. Blake
Vice President - Finance and
Human Resources
(Principal financial and accounting officer)