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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, 1998
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, 1998, 3,881,158 shares of Common Stock, par value $.001
per share, were outstanding.
Transitional Small Business Disclosure Format: Yes [_] No [X]
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MEDJET INC.
INDEX
-----
PAGE NO.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed Interim Balance Sheet as of September 30, 1998 (Unaudited)............... 3
Condensed Interim Statements of Operations for the three and nine months ended
September 30, 1998 and 1997 and the period from December 16, 1993 (date of
inception) to September 30, 1998 (Unaudited)....................................... 4
Condensed Interim Statements of Cash Flows for the nine months ended September 30,
1998 and 1997 and the period from December 16, 1993 (date of inception) to
September 30, 1998 (Unaudited)..................................................... 5
Notes to Condensed Interim Financial Statements (Unaudited)........................ 6
Item 2. Management's Discussion and Analysis or Plan of Operation.......................... 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.................................................................. 14
Item 2 Changes in Securities and Use of Proceeds.......................................... 15
Item 3. Defaults Upon Senior Securities.................................................... 15
Item 4. Submission of Matters to a Vote of Security Holders................................ 15
Item 5. Other Information.................................................................. 15
Item 6. Exhibits and Reports on Form 8-K................................................... 16
SIGNATURES.......................................................................................... 17
2
MEDJET INC.
(A Development Stage Company)
Condensed Interim Balance Sheet
September 30, 1998
(Unaudited)
ASSETS LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT ASSETS: CURRENT LIABILITIES:
- --------------- --------------------
Cash and cash equivalents $ 961,276 Accounts payable and accrued liabilities $ 343,695
Prepaid expenses 27,641 Preferred dividends payable 49,123
---------- Income taxes payable 150
988,917 ----------
---------- Total Liabilities 392,968
----------
PROPERTY, PLANT & EQUIPMENT -
- -----------------------------
Less accumulated depreciation of $244,277 260,714 STOCKHOLDERS' EQUITY:
----------
ORGANIZATION COSTS - Preferred stock, $.01 par value, 1,000,000 shares
- -------------------- authorized, 110,000 shares designated as Series
Less accumulated amortization of $33,222 4,165 A 10% Cumulative Convertible issued and
---------- outstanding 1,100
PATENTS and TRADEMARKS -
- ------------------------ Common stock, $.001 par value, 7,000,000
Less accumulated amortization of $14,500 114,041 shares authorized, 3,720,069 shares issued
---------- and 3,686,280 shares outstanding 3,720
SECURITY DEPOSITS 7,050
- ----------------- ---------- Additional paid-in capital 5,880,221
Total Assets $1,374,887 Additional paid-in capital - Beneficial conversion
========== feature on cumulative convertible preferred stock 133,389
Accumulated deficit (including deficit accumulated
during development stage of $6,541,892 of which
$1,556,204 was applied to additional paid-in
capital upon conversion from an "S" to a "C"
corporation) (5,034,811)
Less: Treasury stock, 33,789 shares, at cost (1,700)
----------
Total Stockholders' Equity 980,819
----------
Total Liabilities and Stockholders' Equity $1,374,887
==========
See Notes to the Condensed Interim Financial Statements.
3
MEDJET INC.
(A Development Stage Company)
Condensed Interim Statements of Operations
For The Three and Nine Months Ended September 30, 1998 and 1997
And The Period From December 16, 1993 (Date of Inception), to September 30, 1998
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------------ -------------------------------------
1998 1997 1998 1997
---------------- ---------------- ---------------- ----------------
Revenues:
License fee income $ 500,000 $ - $ 500,000 $ -
---------------- ---------------- ---------------- ----------------
Total revenues 500,000 - 500,000 -
---------------- ---------------- ---------------- ----------------
Expenses:
Research, development,
general and administrative 821,210 625,672 2,270,235 1,906,062
---------------- ---------------- ---------------- ----------------
Total expenses 821,210 625,672 2,270,235 1,906,062
---------------- ---------------- ---------------- ----------------
Loss from Operations (321,210) (625,672) (1,770,235) (1,906,062)
Other Income (Expense):
Interest income, net 16,326 32,150 45,444 118,106
---------------- ---------------- ---------------- ----------------
Loss before provision for
(benefit from) income tax (304,884) (593,522) (1,724,791) (1,787,956)
Provision for (benefit from)
income tax - 946,787 - -
---------------- ---------------- ---------------- ----------------
Net Loss (304,884) (1,540,309) (1,724,791) (1,787,956)
Dividends on preferred stock 182,512 - 182,512 -
---------------- ---------------- ---------------- ----------------
Net Loss Attributable to
Common Shareholders $ (487,396) $(1,540,309) $(1,907,303) $(1,787,956)
=============== ================ ================ ================
Net Loss Per Share $ (0.13) $ (0.42) $ (0.50) $ (0.49)
=============== ================ ================ ================
Weighted average common and
equivalent shares outstanding 3,869,004 3,669,785 3,792,659 3,655,783
=============== =============== ================ ================
Period from
December 16,
1993 (Inception) to
September 30, 1998
-------------------
Revenues:
License fee income $ 500,000
-------------------
Total revenues 500,000
-------------------
Expenses:
Research, development,
general and administrative 7,298,119
-------------------
Total expenses 7,298,119
-------------------
Loss from Operations (6,798,119)
Other Income (Expense):
Interest income, net 257,077
-------------------
Loss before provision for
(benefit from) income tax (6,541,042)
Provision for (benefit from)
income tax 850
-------------------
Net Loss (6,541,892)
Dividends on preferred stock 182,512
-------------------
Net Loss Attributable to
Common Shareholders $(6,724,404)
===================
Net Loss Per Share $ (2.26)
===================
Weighted average common and
equivalent shares outstanding 2,976,815
===================
See Notes to the Condensed Interim Financial Statements.
4
MEDJET INC.
(A Development Stage Company)
Condensed Interim Statements of Cash Flows
For The Nine Months Ended September 30, 1998 and 1997
And The Period From December 16, 1993 (Date of Inception), to September 30, 1998
(Unaudited)
For the Nine Months Ended
September 30,
-------------------------------------
1998 1997
--------------- ---------------
Cash Flows from Operating Activities $ (1,493,574) $ (1,842,842)
Cash Flows from Investing Activities (153,938) (107,575)
Cash Flows from Financing Activities 1,117,748 (138,898)
--------------- ---------------
Net Increase (Decrease) in Cash and Cash Equivalents (529,764) (2,089,315)
Cash and Cash Equivalents - Beginning of Period 1,491,040 4,241,985
--------------- ---------------
Cash and Cash Equivalents - End of Period $ 961,276 $ 2,152,670
=============== ===============
Supplemental Disclosures of Non-Cash Financing Activities:
Cash Paid During the Period for Interest Expense $ 487 $ 12,967
=============== ===============
Period from
December 16,
1993 (Inception) to
September 30, 1998
-------------------
Cash Flows from Operating Activities $ (5,933,671)
Cash Flows from Investing Activities (677,969)
Cash Flows from Financing Activities 7,572,916
-------------------
Net Increase (Decrease) in Cash and Cash Equivalents 961,276
Cash and Cash Equivalents - Beginning of Period -
-------------------
Cash and Cash Equivalents - End of Period $ 961,276
===================
Supplemental Disclosures of Non-Cash Financing Activities:
Cash Paid During the Period for Interest Expense $ 38,423
===================
See Notes to the Condensed Interim Financial Statements.
5
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 and, with a
current emphasis on ophthalmic surgical technology and equipment, has
developed a technology and derivative devices for corneal surgery.
The Company's technology is based on small-diameter, fluid or ice
microjets moving at high speeds. In each application, the microjet
beam substitutes for conventional, oscillating metal or diamond
blades. For example, in combination with other elements of the
Company's devices, the microjet beam is capable of removing the
epithelium (the front surface layer of the eye) in a procedure known
as epithelial keratoplasty and of shaving thin, shaped layers from the
cornea in a procedure known as lamellar keratoplasty. The Company
believes that the microjet produces less tissue trauma and is
potentially more accurate than blades or lasers for tissue separation
or removal. The Company also believes that such microjets will bring
new surgical capability and performance to the clinic or operating
room and may become the standard of care for the treatment of several
diseases and conditions.
(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 primarily 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
6
periods ended September 30, 1998 are not necessarily indicative of
results to be expected for the entire year ending December 31, 1998.
NOTE B - EQUITY TRANSACTIONS:
(1) Initial Public Offering:
-----------------------
During the third quarter of 1996, the Company consummated an initial
public offering (the "Offering") in which it issued and sold to the
public a total of 1,232,143 Units (the "Units"), each Unit consisting
of one share of common stock, $.001 par value, of the Company (the
"Common Stock") and one Class A Redeemable Common Stock Purchase
Warrant (the "Warrants") to purchase one share of Common Stock at a
price of $10.00 per share for a 24-month period commencing on November
6, 1996. The Units became separable on that date and the Common Stock
and the Warrants began trading separately on November 8, 1996. In
July 1998, in connection with its private placement described in
paragraph (2) of this Note B, the Company agreed to extend the
exercise period of the Warrants for an additional 12 months. As a
result, the Warrants will expire on November 6, 1999, unless
exercised prior to that time.
The Company realized approximately $5,600,000 of net proceeds from the
Offering, which were used, in part, to repay outstanding indebtedness
of approximately $550,000. The balance of the net proceeds was used
to fund the Company's research and development activities and business
operations.
(2) Private Placement:
-----------------
In January 1998, the Company commenced a private placement of its 10%
Cumulative Convertible Preferred Stock, $.01 par value (the "Preferred
Stock"), at a price of $10 per share. At the closing for this private
placement, which was held in April 1998, the Company sold and issued
110,000 shares of Preferred Stock for an aggregate price of
$1,100,000. The net proceeds of the private placement have been and
will be used to augment the Company's working capital.
The Preferred Stock bears a cumulative annual dividend of 10% (subject
to increase to 12% in certain events) and is convertible into
approximately 1.66 shares of Common Stock for each share of Preferred
Stock, subject to adjustment for any stock splits, stock dividends,
recapitalizations, reclassifications and similar events.
7
The private placement, which was terminated on July 31, 1998, was
carried out pursuant to available exemptions from registration under
Section 4(2) of the Securities Act of 1933 and rules promulgated under
that section.
On October 9, 1998, the 110,000 shares of Preferred Stock outstanding
were converted into 182,724 shares of Common Stock. At the same time,
a total of 12,154 shares of Common Stock was issued in payment of the
cumulative dividends on the Preferred Stock. The dividend was
computed at 10% per annum and totalled approximately $51,534.
NOTE C - NET LOSS PER SHARE:
Net loss per share is computed by dividing the net loss by the
weighted average number of shares of Common Stock outstanding during
the period, plus Common Stock equivalents from the assumed conversion
of Preferred Stock.
NOTE D - LICENSE AGREEMENT:
In July 1998, the Company entered into an agreement with Nestle S.A.
("Nestle") granting Nestle and its wholly-owned subsidiary, Alcon
Laboratories, Inc. ("Alcon"), an exclusive, worldwide license for the
use of the Company's proprietary microjet technology for corneal
refractive surgery. Under the terms of the agreement, Alcon will
register, manufacture, promote and market refractive microjet devices
and consumables developed by the Company.
In connection with the execution of the agreement, a payment in the
amount of $500,000 was made by Alcon to the Company. The agreement
provides for future payments and royalties based on the attainment of
certain milestones and upon sales by Alcon of the Company's products.
8
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 "anticipate," "expect,"
"intend," "management 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 under "Certain Considerations" and in the introduction to Part I of the
Company's annual report on Form 10-KSB for the fiscal year ended December 31,
1997 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 the research and development of medical technology
and, with a current emphasis on ophthalmic surgical technology and equipment,
has developed a proprietary technology and derivative devices for corneal
surgery. During the remainder of 1998, the Company expects to continue its
research and development activities, with a principal focus on ophthalmic
surgical technology and equipment, and to commence early exploratory work on
orthopedic and other applications of its 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 or nine months ended September 30,
1998. In connection with the execution of the license agreement with Nestle (as
described under "License Agreement" in Note D of Notes to the Condensed Interim
Financial Statements), a payment in the amount of $500,000 was made by Alcon to
the Company during the three months ended September 30, 1998. This amount has
been reflected as License Fee Income in the accompanying Condensed Interim
Financial Statements.
Total costs and expenses during the three months ended September 30, 1998
increased by $195,538 (31.3%) to $821,210 from $625,672 for the comparable
period of 1997. This was primarily due to a net increase in staff (to seventeen
full-time and two part-time employees from seventeen full-time employees) and an
increase in professional fees as the Company continued its research and
development and clinical trials activities, offset in part by a reduction in the
use of outside consultants (their duties being assumed by the
9
staff). Expenses were also higher during the 1998 period due to increased
purchases for materials, testing and analysis and higher insurance costs
associated with the higher level of activity.
During the nine months ended September 30, 1998, total costs and expenses
increased by $364,173 (19.1%) to $2,270,235 from $1,906,062 for the comparable
period of 1997, generally for the same reasons as during the three-month period.
Other income/expense consists of interest income and interest expense and
finance charges. Net interest income for the three months ended September 30,
1998 decreased by $15,824 (49.2%) to $16,326 from $32,150 for the comparable
period of 1997. This decrease principally results from income earned on the
Company's short-term investments which were lower in the 1998 period, reflecting
the utilization of these funds to continue the Company's research and
development activities.
For the nine months ended September 30, 1998, net interest income decreased by
$72,662 (61.5%) to $45,444 from $118,106 for the comparable period of 1997 for
the same reason as during the three-month period.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1998, the Company's working capital was $595,949. Until the
consummation of the Offering, the Company's liquidity requirements were met
through private sales of Common Stock and short-term borrowings from affiliates
of the Company, including Eugene I. Gordon, Ph.D., the founder of the Company
and its Chairman of the Board and Chief Executive Officer. All such loans were
repaid utilizing proceeds of the Offering. The Company has no long-term
indebtedness.
In January 1998, the Company commenced a private placement of its Preferred
Stock at a price of $10 per share. Pursuant to the private placement, the
Company sold and issued 110,000 shares of Preferred Stock for an aggregate price
of $1,100,000, the net proceeds of which were released to the Company following
a closing in April 1998 and added to the Company's working capital. The private
placement was terminated on July 31, 1998.
On July 23, 1998, the Company entered into an agreement with Nestle S.A.
("Nestle") pursuant to which the Company granted Nestle and its wholly-owned
subsidiary, Alcon Laboratories, Inc. ("Alcon"), an exclusive, worldwide license
for the use of the Company's proprietary microjet technology for corneal
refractive surgery. Under the terms of the agreement, Alcon will register,
manufacture, promote and market refractive microjet devices and consumables
developed by the Company. In connection with the execution of the agreement, a
payment in the amount of $500,000 was made by Alcon to the Company. The
agreement also provides for future payments based on the attainment of certain
milestones and upon sales by Alcon of the Company's products.
10
The Company has not yet obtained marketing approval for the devices covered by
the license agreement, and the timing and amount of any future payments to the
Company under the agreement will depend upon the Company's success in obtaining
such approvals and certain other events, all of which cannot be predicted with
any certainty.
Throughout the second half of 1998, the Company has been seeking additional
capital to finance its 1999 business plan. The Company expects that this
activity will be successful but, because of the depressed equity and capital
markets since June, it is apparent this will take considerably more time to
complete. Pending obtaining additional financing, the Company made the decision
to curtail several operational activities as well as to downsize its employee
base in order to husband and stretch its existing capital to the next financing.
On October 30, 1998, the Company dismissed 7 of its 19 employees. It also
significantly reduced the salary of the management group, some reductions being
as large as 50%. The specific goal was to reduce the Company's monthly
expenditures by 60%, to approximately $100,000. The Company will focus on
fulfilling its commitment with respect to its agreement with Alcon. The Company
also intends to complete a filing with the FDA for Section 510(k) approval for
the use of its HydroBrush(TM) Keratome for treatment of pterygium, and complete
associated clinical studies. Assuming the application is approved, no attempt
will be made to manufacture or market the device until the necessary funding is
available. The Company has not excluded the possibility of licensing the
HydroBrush(TM) Keratome to a third party at some future date. The Company
will also begin to submit proposals to the government and to industrial
organizations to fund some of the costs of the study of other medical
applications of its technology platform. Finally, the Company will continue
explorations and analyses of potential new medical applications of its novel
microjet technology.
The Company anticipates that the remaining net proceeds from the private
placement of its Preferred Stock, together with the payment received by the
Company in connection with the execution of the license agreement, will be
sufficient to meet the Company's 1998 working capital and planned capital
expenditure requirements. The Company will need to raise additional capital in
late 1998 or early 1999 to maintain its current scope of operations. The
Company currently has no commitment or arrangement for any such capital,
however, 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 its current operations.
CERTAIN CONSIDERATIONS
The Company's current strategy is to selectively license its ophthalmology
products where appropriate. To date, the Company has entered into one such
agreement to license its proprietary microjet technology for corneal refractive
surgery only. If the Company is
11
unable or elects not to enter into additional license agreements with respect to
its other products, it may undertake the manufacture and marketing of such
products directly. At present, the Company has not decided whether to license or
manufacture and market its HydroBrush(TM) Keratome product for epithelial
removal and treatment of pterygium. If manufactured internally, the Company's
proposed products must be produced in commercial quantities in compliance with
regulatory requirements at acceptable costs. Production in clinical or
commercial-scale quantities will involve scale-up challenges for the Company.
The Company currently has no volume manufacturing capacity or experience in
manufacturing medical devices or any other products. If the Company elects to
manufacture certain of its potential products, it would be required to establish
its own manufacturing capabilities, which would require significant scale-up
expenses and additions to facilities and personnel. There can be no assurance
that the Company would be able to obtain the necessary regulatory approvals on a
timely basis, or at all, and delays in receipt of, or failure to receive such
approvals, or loss of previously received approvals, would have a material
adverse effect on the Company. There can be no assurance that the Company will
be able to enter into agreements with third parties with respect to the
manufacture of any products or develop its own manufacturing capability at an
acceptable cost.
The Company's dependence on third parties for the manufacture 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 additional license or distribution
arrangements with respect to its products other than those related to its
proprietary microjet technology for corneal refractive surgery, 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.
12
OTHER MATTERS
The Company has been assessing its "Year 2000" computer readiness and exposure
to Year 2000 issues. In connection with such assessment, the Company initiated
a review of all information technology systems utilized by the Company. The
Company uses no internally-developed systems, only those available from
commercial software vendors. As part of its review, the Company has received
confirmation from its principal software vendors that such systems are Year 2000
compliant. Based on its review to date, the Company believes there are no major
Year 2000 compliance issues with respect to its information technology systems,
and, therefore, the Company has not and does not intend to prepare a contingency
plan for these systems. The Company anticipates that the total cost for its
Year 2000 compliance efforts will not exceed $5,000.
In addition, although the Company has not yet initiated commercial production of
any of its products, the list of component parts used in those products was
reviewed and it was determined that multiple vendors, parts suppliers or
contract manufacturers are available to the Company for all of the critical
component parts of these products. Although there are no vendors currently
engaged by the Company for products to be manufactured, when engaging vendors,
the Company will ascertain that they are compliant. Based on its review to
date, the Company believes, in the most likely worst case scenario, that Year
2000 issues would have only a minimal impact on the Company.
13
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On April 21, 1998, the Company was served with a complaint by the New Jersey
Institute of Technology ("NJIT") commencing a lawsuit in the United States
District Court for the District of New Jersey ("U.S. District Court"). Each of
the Company, Eugene I. Gordon, Ph.D. (the Company's Chairman and Chief Executive
Officer), a former employee of the Company, certain patent law firms and an
individual were named as defendants. The complaint alleges that the defendants,
with deceptive intent, failed to name an NJIT professor and/or NJIT research
associate as a co-inventor on the Company's U.S. Patent No. 5,556,406 on the
"Lamellar Surgical Device and Procedure" (the "Patent") and breached fiduciary
duties and contractual obligations owed to NJIT. The complaint seeks monetary
damages from the Company and an order directing that the Company's Patent (and
corresponding foreign patents and patent applications) be assigned and
transferred to NJIT. It further seeks an order that NJIT has not infringed any
claims of such Patent and a declaratory judgment that all of the Company's
claims under such Patent are invalid and unenforceable against NJIT.
NJIT's patent application relating to a refractive corrective procedure based on
the use of an isotonic waterjet had previously been denied by the Patent and
Trademark Office as inoperable. NJIT also learned that a similar invention had
been made and disclosed publicly prior to the NJIT invention. NJIT did not
contest the ruling and did not pursue a U.S. patent. The three inventors of the
subject of such denied patent application, one of which was Dr. Gordon, had
assigned such patent application to NJIT as part of a dispute settlement in
which NJIT agreed to grant an exclusive license to the Company of the patent
rights under such patent application. That license was terminated by the
Company. NJIT then claimed, without being specific, that the Company's Patent
emanated from the earlier invention. Prior to being served with the complaint
by NJIT, the Company and Dr. Gordon had filed a complaint, on March 27, 1998,
against NJIT in the Superior Court of the State of New Jersey, Middlesex County,
seeking a declaratory judgment that NJIT had no ownership or other interest in
the patent rights to the Company's Patent and seeking certain monetary damages.
NJIT has moved to have the Company's lawsuit removed to the U.S. District Court
and included in its lawsuit. The Company has moved to have the NJIT lawsuit
dismissed on the basis that NJIT has not been harmed by the Company's Patent and
therefore it cannot challenge its validity.
During October 1998, the lawsuit brought in U.S. District Court by NJIT was
dismissed on jurisdictional grounds. In addition, the U.S. District Court also
held that NJIT improperly removed the Company's state court action and ordered
that action remanded to the state court. NJIT has appealed the remand action
and has informed the Company that it intends to appeal the dismissal of its
lawsuit brought in U.S. District Court. These matters are in the preliminary
stages and no prediction can be made as to their final outcome.
14
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
(a) Not applicable.
(b) Not applicable.
(c) Not applicable.
(d) The Company's Offering was consummated in August 1996. Since that
time, through September 30, 1998, the Company has applied all of the
net proceeds realized in the Offering (in the aggregate approximate
amount of $5,600,000) in the following manner: $362,000 for the
purchase and installation of machinery and equipment; $715,000 for the
repayment of indebtedness; $1,229,000 for working capital; $56,000 for
patent and trademark filings; and $3,238,000 for research and
development and human clinical trials (which includes compensation
expense attributable to employees performing solely research and
development functions in the amount of $1,089,000). Other than the
repayment of indebtedness in the aggregate amount of $415,000, none of
such payments were made to directors, officers, general partners of the
Company or their associates, to persons owning 10% or more of any class
of equity securities of the Company, or to affiliates of the Company.
Item 3. Defaults Upon Senior Securities
-------------------------------
None
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
None
Item 5. Other Information
-----------------
None
15
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
10 Exclusive License Agreement, effective as of July 22,
1998, between the Company and Nestle S.A.
11 Statement regarding computation of per share earnings
27 Financial Data Schedule
16
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, 1998 MEDJET INC.
------------------------------
(Registrant)
/s/ Eugene I. Gordon
------------------------------
Eugene I. Gordon, Ph.D.
Chairman of the Board and
Chief Executive Officer
/s/ Terence A. Walts
------------------------------
Terence A. Walts
President and Chief Operating Officer
/s/ Thomas M. Handschiegel
------------------------------
Thomas M. Handschiegel
Chief Financial Officer and
Chief Accounting Officer
17
MEDJET INC.
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION
10 Exclusive License Agreement, effective as of July 22, 1998,
between the Company and Nestle S.A.
11 Statement regarding computation of per share earnings
27 Financial Data Schedule
18