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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 September 30, 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.
(Exact name of Small Business Issuer as Specified in its Charter)
DELAWARE 22-3283541
(State or Other Jurisdiction (I.R.S. Employer Identification No.)
of Incorporation or Organization)
1090 KING GEORGES POST ROAD, SUITE 301
EDISON, NEW JERSEY 08837
(Address of Principal Executive Offices)
(732) 738-3990
(Registrant'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 October 31, 2001, 3,901,431shares of Common Stock, par value
$.001 per share, were outstanding.
Transitional Small Business Disclosure Format: Yes |_| No |X|
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Part l - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
MEDJET INC.
(A Development Stage Company)
Condensed Interim Balance Sheet
September 30, 2001
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $ 210,998
Prepaid expenses 123,001
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Total Current Assets 333,999
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Property and Equipment - less accumulated depreciation of $417,099 82,146
Patents and Trademarks - less accumulated amortization of $45,928 255,963
Security deposits 4,837
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Total Assets $ 676,945
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued liabilities $ 347,946
Notes payable - Officer $ 250,000
Capital Lease Obligation $ 19,700
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Total Liabilities 617,646
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Stockholders' Equity:
Common stock, $.001 par value, 30,000,000 shares authorized, 3,935,220
shares issued and 3,901,431 shares outstanding
Preferred stock, $.01 par value, 1,000,000 shares authorized, 10,400 shares
designated as Series B Convertible Preferred issued and outstanding 3,935
Additional paid-in capital 7,365,932
Accumulated deficit (including deficit accumulated during development
stage of $8,813,643 of which $1,556,204 was applied to additional
paid-in capital upon conversion from an "S" to a "C" corporation) (7,308,972)
Less: Treasury stock, 33,789 shares, at cost (1,700)
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Total Stockholders' Equity 59,299
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Total Liabilities and Stockholders' Equity $ 676,945
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See notes to the condensed interim financial statements.
1
MEDJET INC.
(A Development Stage Company)
Condensed Interim Statements of Operations
For The Three and Nine Months Ended September 30, 2001 and 2000
And The Period From December 16, 1993 (Date of Inception) to September 30, 2001
(Unaudited)
Three Months Ended Nine Months Ended Period from
September 30, September 30, December 16,
---------------------------- ----------------------------- 1993 (Inception) to
2001 2000 2001 2000 September 30, 2001
------------- ------------- ------------- -------------- ------------------------
Revenues:
Revenues $ 381,000 $ 525,000 $ 481,500 $ 525,000 $ 1,681,500
Total revenues 381,000 525,000 481,500 525,000 1,681,500
------------- ------------- ------------- -------------- ------------------------
Expenses:
Research, development,
general and administrative 605,684 344,065 1,121,059 1,058,003 11,781,251
------------- ------------- ------------- -------------- ------------------------
Total expenses 605,684 344,065 1,121,059 1,058,003 11,781,251
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Income (Loss) from Operations (224,684) 180,935 (639,559) (533,003) (10,099,751)
Other Income (Expense):
Merger Option 500,000 - 500,000 - 500,000
Interest Income 1,003 2,865 2,528 24,710 344,823
Interest Expense (9,970) (1,436) (18,679) (9,365) (85,272)
------------- ------------- ------------- -------------- ------------------------
491,073 1,429 483,849 15,345 759,551
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Income (Loss) Before Income Tax 266,349 182,364 (155,710) (517,658) (9,340,200)
Income tax - - 200 240 (526,557)
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Net Income (Loss) 266,349 182,364 (155,910) (517,898) (8,813,643)
Dividends on Preferred Stock - - - - 184,923
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Net Income (Loss) Attributable to
Common Shareholders $ 266,349 $ 182,364 $ (155,910) $ (517,898) $ (8,998,566)
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Earnings (Loss) Per Share
Basic $ 0.07 $ 0.05 $ (0.04) $ (0.13) $ (2.74)
============= ============= ============= ============== ========================
Diluted $ 0.05 $ 0.04 $ (0.04) $ (0.13) $ (2.74)
============= ============= ============= ============== ========================
Weighted average common
shares outstanding
Basic 3,901,431 3,901,431 3,901,431 3,901,431 3,279,310
============= ============= ============= ============== ========================
Diluted 5,028,048 4,956,720 3,901,431 3,901,431 3,279,310
============= ============= ============= ============== ========================
See notes to the condensed interim financial statements.
2
MEDJET INC.
(A Development Stage Company)
Condensed Interim Statements of Cash Flows
For The Nine Months Ended September 30, 2001 and 2000
And The Period From December 16, 1993 (Date of Inception) to September 30, 2001
(Unaudited)
Period from
For the Nine Months Ended December 16,
September 30, 1993 (Inception) to
----------------------------
2001 2000 September 30, 2001
------------- ------------- -----------------------
Cash Flows from Operating Activities $ (54,848) $ (736,257) $ (8,028,794)
Cash Flows from Investing Activities (38,819) (66,426) (883,142)
Cash Flows from Financing Activities 121,000 (200,000) 9,122,934
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Net Increase (Decrease) in Cash and Cash Equivalents 27,333 (1,002,683) 210,998
Cash and Cash Equivalents - Beginning of Period 183,665 1,063,749 -
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Cash and Cash Equivalents - End of Period $ 210,998 $ 61,066 $ 210,998
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Supplemental Disclosures of Cash Flow Information:
Cash paid for:
Income taxes $ - $ 240 $ (592,719)
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Interest expense $ 18,679 $ 9,365 $ 61,342
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See notes to the condensed interim financial statements.
3
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 and nine month
periods ended September 30, 2001 are not necessarily indicative of
results to be expected for the fiscal year ending December 31, 2001.
NOTE B - NET INCOME (LOSS) PER SHARE:
Net income (loss) per share, in accordance with the provisions of
Financial Accounting Standards No. 128, "Earnings Per Share," is
computed by dividing net income (loss) by the weighted average number
of shares of Common Stock outstanding during the period. Common Stock
equivalents for the nine months ended September 30, 2001 and 2000, and
for the period from December 16, 1993 (inception) to September 30,
2001, have not been included in the computation of dilutive earnings
per share as of the effect would be anti-dilutive.
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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 OR REFERRED TO BELOW OR IN
THE INTRODUCTION TO 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
based on the use of microjets for cutting and drilling. The Company expects,
during the remainder of 2001 and the first half of 2002, to continue its
research and development activities, focusing principally on ophthalmic surgical
technology and equipment. The Company is a development stage company.
RESULTS OF OPERATIONS
The Company has not yet initiated sales of its products. The Company generated
revenues of $381,000 and $481,500 during the three and nine-month periods ended
September 30, 2001, respectively. The Company generated total revenues of
$525,000 for the comparable periods in 2000. The revenues generated during the
first nine months of fiscal 2001 resulted from payments from VISX pursuant to
research and development agreements.
Total expenses during the three months ended September 30, 2001 increased by
$261,819 (76%) to $605,884 from $344,065 for the comparable period of 2000. This
was primarily due to an increase in legal fees, principally related to the
negotiation and execution of an Agreement and Plan of Merger and Reorganization
between the Company and VISX Incorporated, and in part by increased purchases
for materials, testing and analysis and other costs associated with continuing
development activities.
During the nine months ended September 30, 2001, total expenses increased by
$63,056 (6.0%) to $1,121,059 from $1,058,003 for the comparable period of 2000,
generally for the same reasons as during the three-month period.
Other income (expense) for the three and nine months ended September 30, 2001
included a $500,000 payment by VISX to the Company made concurrently with the
execution of the
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merger agreement in August 2001. This payment was made in consideration for the
Company granting VISX the right to terminate the merger agreement at any time
prior to the effective time of the merger for any or no reason.
Net interest income for the three months ended September 30, 2001 was $(8,967)
compared to net interest income of $1,429 for the comparable period of 2000.
This decrease resulted principally from increased interest expense associated
with borrowings under a loan provided by the Company's Chief Executive Officer
and reduced income from the Company's short-term investments.
For the nine months ended September 30, 2001, net interest income decreased by
$31,496 to ($16,151) from $15,345 for the comparable period of 2000 for the same
reasons as during the three-month period.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 2001, the Company's cash and cash equivalents was $210,998.
During March 1999, Eugene I. Gordon, Ph.D., the Company's Chairman and Chief
Executive Officer, 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 September 30,
2001, amounts advanced under this agreement totaled $250,000. At September 30,
2001, the amount owed to Dr. Gordon is $250,000 with interest paid monthly.
In connection with the execution of the merger agreement with VISX, the Company
and VISX also entered into a one-year research and development agreement in
August 2001 pursuant to which VISX has agreed to provide monthly funding to the
Company in order to finance costs to support research, development and
experimental work incurred to develop waterjet related technology and products,
including a waterjet microkeratome. This agreement provides for minimum monthly
payments of $150,000 for the first six months and $100,000 for the second six
months.
The Company anticipates that its cash on hand, the monthly research and
development funding from VISX, and the sale of its New Jersey State NOL
Carryover and R&D Credits, will be sufficient to meet the Company's 2001
remaining working capital and planned capital expenditure requirements. If,
however, the Company incurs unexpected expenses, or if the remaining New Jersey
NOL Carryover and R&D Credits are not sold as anticipated, the Company may
require additional financing prior to the end of 2001 in order to repay the debt
to Dr. Gordon and the other prior expenses in order to maintain its current
operations. The Company has no current arrangements with respect to any
additional financing. Consequently, there can be no assurance that any
additional financing will be available to the Company, on commercially
reasonable terms, or at all. The failure to obtain any needed financing would
have a material adverse effect on the Company, including causing a reduction in
the Company's operations.
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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
devices 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 eyes, and live rabbits to
prove that the beam of water can smoothly incise and shape the anterior surface
of the cornea, that there is no loss of tissue by erosion, and that the cornea
will heal properly after the surgery.
If the proposed merger with VISX is not completed, the Company will depend on
third parties for the manufacture of components of its products. This 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 proposed merger with VISX is not completed, the Company intends to
undertake the manufacture and marketing of its microjet products on a limited
scale. However, it would need to pursue other possible arrangements for
larger-scale manufacturing, marketing and distribution. 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.
If the Company does not enter into license or distribution agreements 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.
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
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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 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On August 17, 2001, in connection with the execution of the merger agreement
with VISX, the Company issued to VISX a three-year warrant to purchase an
aggregate of 1,320,000 shares of the Company's common stock at an exercise price
of $0.75 per share. The issuance of the warrant was not registered under the
Securities Act of 1933, as amended, in reliance upon the exemption from
registration set forth in Section 4(2) of the Securities Act. In claiming the
Section 4(2) exemption, the Company relied upon the following facts: (i) VISX is
an accredited investor within the meaning of Rule 501(a) of Regulation D under
the Securities Act and acquired the securities for its own account in a
transaction not involving any general solicitation or general advertising, and
not with a view to the distribution thereof; and (ii) a restrictive legend was
placed on the warrant.
Item 5. OTHER INFORMATION
On August 17, 2001, the Company, VISX and Orion Acquisition Corp., a
wholly-owned subsidiary of VISX, entered into an Agreement and Plan of Merger
and Reorganization, which provides, among other things, for the potential merger
of Orion Acquisition Corp. with and into the Company, at VISX's option. On
August 17, 2001, the Company and VISX also entered into a one-year research and
development agreement under which VISX will provide funding to the Company to
pursue new ophthalmic technologies and products.
Under the terms of the merger agreement, if VISX chooses to go forward with the
merger and subject to other customary conditions to closing, each outstanding
share of common stock of the Company would be canceled and extinguished and
would be converted automatically into the right to receive $2.00 in cash at the
effective time of the merger. In addition, each outstanding vested option to
purchase shares of the Company's common stock under the Company's 1994 Stock
Option Plan and each outstanding warrant to purchase shares of the Company's
common stock not exercised prior to the effective time of the merger would be
canceled and extinguished. VISX would pay to each holder of a stock option or
warrant the difference between $2.00 and the exercise price per share (if less
than $2.00) of the Company's common stock underlying such stock option or
warrant multiplied by the total number of shares of the Company's common stock
underlying such stock option
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or warrant (other than any warrants held by VISX). VISX will not pay any amounts
with respect to any stock options or warrants that have an exercise price equal
to or greater than $2.00. Upon consummation of the merger, the Company would
become a wholly-owned subsidiary of VISX.
VISX may terminate the merger agreement at any time prior to the effective time
of the merger for any or no reason. In consideration for such termination right,
VISX paid the Company $500,000 concurrently with the execution of the merger
agreement. The Company also issued to VISX a three-year warrant to purchase
1,320,000 shares of the Company's common stock, at an exercise price per share
of $0.75.
The closing of this transaction is contingent upon, among other things, approval
by the Company's stockholders, the receipt of any necessary third party consents
and other customary closing conditions. Notwithstanding the foregoing, VISX may
elect not to consummate the merger even if all of the other conditions set forth
in the merger agreement are satisfied by the Company. The merger agreement also
provides for a break-up fee of $500,000 which would be owed by the Company, and
a non-exclusive license of Company's patents and technology which would become
effective, under certain conditions of termination.
On August 17, 2001, VISX and Eugene I. Gordon entered into a Voting and Stock
Option Agreement. Pursuant to the voting agreement, Dr. Gordon, who currently
owns approximately 32% of the outstanding shares of the Company's common stock,
agreed to vote his shares of common stock in favor of the merger. In addition,
Dr. Gordon granted to VISX an irrevocable option (the "Purchase Option") to
purchase (i) all of his shares of common stock then owned by him and all shares
of common stock or the Company's preferred stock owned by Gordon beneficially or
acquired after the date of the voting agreement, at a price of $2.00 per share,
and (ii) the number of vested options and/or warrants to purchase the Company's
common stock then owned by Gordon, any other stock options owned by Dr. Gordon
beneficially or acquired after the date of the voting agreement, at a price
equal to the difference of $2.00 and the exercise price per share (if less than
$2.00) of each stock option. The Purchase Option is exercisable only if (i) the
merger agreement is terminated under certain provisions of the merger agreement
or (ii) VISX attempts to effect the merger but is unable to do so for any
reason, as set forth in the voting agreement, and is not exercisable unless VISX
exercises the Purchase Option in full.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit No. Description
11 Computation of Net Income (Loss) Per Share
9
(b) Reports on Form 8-K
On August 24, 2001, the Company filed a Current Report on
Form 8-K dated August 17, 2001 reporting in Item 5 thereof
the execution of the merger agreement with VISX.
10
SIGNATURES
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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: November 13, 2001
MEDJET INC.
/S/ EUGENE I. GORDON
---------------------------------------------
Eugene I. Gordon, Ph.D.
Chairman of the Board and
Chief Executive Officer
/S/ CHERYL A. BLAKE
---------------------------------------------
Cheryl A. Blake
Vice President - Finance and
Human Resources
(Principal financial and accounting officer)
11