UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 1, 2002
-------------
Vertical Jet, Inc.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Colorado 000-30333 54-1964053
- ------------------------------- ------------------------ -------------------
(State or other jurisdiction of (Commission File Number) (IRS Employer
incorporation) Identification No.)
32 W 731 Tower Rd, Dupage County Airport, West Chicago, Il 60185
- ---------------------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 561-519-0147
------------
Item 7. Financial Statements and Exhibits.
---------------------------------
(a) Financial Statements of Business Acquired.
Independent Auditors' Report........................... F-1
Balance Sheet as of December 31, 2001.................. F-2
Statement of Operations from November 29, 2001 (inception)
to December 31, 2001................................... F-3
Statement of Changes in Stockholders' Deficiency from
November 29, 2001 (inception) to December 31, 2001..... F-4
Statement of Cash Flows from November 29, 2001 (inception)
to December 31, 2001................................... F-5
Notes to Financial Statements.......................... F-6
Balance Sheets as of March 31, 2002 (unaudited) and
December 31, 2001...................................... F-12
Statements of Operations for the Three Months Ended
March 31, 2002 (unaudited) and from
November 29, 2001 (inception) to March 31, 2002........ F-13
Statement of Cash Flows for the Three Months Ended
March 31, 2002 (unaudited) and from
November 29, 2001 (inception) to March 31, 2002........ F-14
Notes to Financial Statements (unaudited).............. F-15
1
Independent Auditors' Report
----------------------------
To the Board of Directors of:
Vertical Jet, Inc.
(A Development Stage Company)
We have audited the accompanying balance sheet of Vertical Jet, Inc. (a
development stage company) as of December 31, 2001 and the related statements of
operations, changes in stockholders' deficiency and cash flows for the period
from November 29, 2001 (inception) to December 31, 2001. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly in all
material respects, the financial position of Vertical Jet, Inc. as of December
31, 2001, and the results of its operations and its cash flows for the period
from November 29, 2001 (inception) to December 31, 2001 in conformity with
accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 8 to the
financial statements, the Company has a net loss of $45,984 from November 29,
2001 (inception) to December 31, 2001, a deficit accumulated during development
stage of $45,984 at December 31, 2001, cash used in operations of $20,084 from
November 29, 2001 (inception) to December 31, 2001 and a working capital
deficiency of $45,984 at December 31, 2001. This matter raises substantial doubt
about its ability to continue as a going concern. Management's plan in regards
to this matter is also described in Note 8. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
SALBERG & COMPANY, P.A.
Boca Raton, Florida
June 7, 2002
F-1
Vertical Jet, Inc.
(A Development Stage Company)
Balance Sheet
December 31, 2001
-----------------
Assets
------
Current Assets
Cash $ 79,916
---------
Total Current Assets $ 79,916
=========
Liabilities and Stockholders' Deficiency
----------------------------------------
Current Liabilities
Notes payable $ 100,000
Accounts payable 25,900
---------
Total Current Liabilities 125,900
---------
Stockholders' Deficiency
Preferred stock, $1.00 par value, 10,000,000 shares authorized,
none issued and outstanding --
Common stock, $0.001 par value, 80,000,000 shares authorized,
40,471,050 shares issued and outstanding 40,471
Additional paid-in capital (37,462)
Deficit accumulated during development stage (45,984)
---------
(42,975)
Less: subscription receivable (3,009)
---------
Total Stockholders' Deficiency (45,984)
---------
Total Liabilities and Stockholders' Deficiency $ 79,916
=========
See accompanying notes to financial statements.
F-2
Vertical Jet, Inc.
(A Development Stage Company)
Statement of Operations
From November 29, 2001 (Inception) to
December 31, 2001
-----------------
Revenues $ 51,017
Operating Expenses
Consulting 47,500
Bad debt 19,527
General and administrative 12,417
Travel and entertainment 17,557
------------
Total Operating Expenses 97,001
------------
Loss from Operations (45,984)
Net Loss $ (45,984)
============
Net loss per share - basic and diluted $ --
============
Weighted average number of shares outstanding during the period - basic and diluted 40,471,050
============
See accompanying notes to financial statements.
F-3
Vertical Jet, Inc.
(A Development Stage Company)
Statement of Changes in Stockholders' Deficiency
From November 29, 2001 (Inception) to December 31, 2001
-------------------------------------------------------
Deficit
Accumulated
Common Stock Additional During
----------------------- Paid-in Development Subscription
Shares Amount Capital Stage Receivable Total
---------- ---------- ---------- ---------- ---------- ----------
Common stock issued for cash 40,471,050 $ 40,471 $ (37,462) $ -- $ (3,009) $ --
Net loss from November 29, 2001
(inception) to December 31, 2001 -- -- -- (45,984) -- (45,984)
---------- ---------- ---------- ---------- ---------- ----------
Balance, December 31, 2001 40,471,050 $ 40,471 $ (37,462) $ (45,984) $ (3,009) $ (45,984)
========== ========== ========== ========== ========== ==========
See accompanying notes to financial statements.
F-4
Vertical Jet, Inc.
(A Development Stage Company)
Statement of Cash Flows
From November 29 (Inception) to
December 31, 2001
-----------------
Cash Flows from Operating Activities
Net loss $ (45,984)
Adjustments to reconcile net loss to net cash used in operating activities:
Changes in operating assets and liabilities:
Increase (decrease) in:
Accounts payable 25,900
---------
Net Cash Used in Operating Activities (20,084)
---------
Cash Flows from Financing Activities
Proceeds from promissory notes 100,000
---------
Net Cash Provided by Financing Activities 100,000
---------
Net Increase in Cash 79,916
Cash and Cash Equivalents at Beginning of Period --
---------
Cash and Cash Equivalents at End of Period $ 79,916
=========
See accompanying notes to financial statements.
F-5
Vertical Jet, Inc.
(A Development Stage Company)
Notes to Financial Statements
From November 29, 2001 (Inception) to
December 31, 2001
-----------------
Note 1 Summary of Significant Accounting Policies and Organization
- --------------------------------------------------------------------
(A) Nature of Business and Summary of Significant Accounting Policies
Vertical Jet, Inc. (the "Company") was incorporated on November 29,
2001 under the laws of the State of Delaware and has elected a fiscal
year end of December 31.
The Company is a newly formed entity, which is in the development
stage. Its primary lines of businesses are air charter, air ambulance,
aircraft management, aircraft maintenance, jet propulsion, and
training.
Activities during the development stage include developing the
Company's infrastructure, negotiating acquisitions, seeking new
customers, and raising capital.
(B) Use of Estimates
In preparing financial statements, management is required to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements, revenues, and expenses during the
reported period. Actual results may differ from these estimates.
(C) Cash Equivalents
For the purpose of the cash flow statement, the Company considers all
highly liquid investments with original maturities of three months or
less at the time of purchase to be cash equivalents.
(D) Revenue Recognition
The Company records aircraft management revenues as earned. The Company
records charter revenues upon completion of the service. The Company
records advertisement sales at the time the first advertisement is
displayed.
(E) Stock-Based Compensation
The Company accounts for stock options issued to employees in
accordance with the provisions of Accounting Principles Board ("APB")
Opinion No. 25, "Accounting for Stock Issued to Employees," and related
interpretations. As such, compensation cost is measured on the date of
grant as the excess of the current market price of the underlying stock
over the exercise price. Such compensation amounts are amortized over
the respective vesting periods of the option grant. The Company adopted
the disclosure provisions of Statement of Financial Accounting
Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation,"
which permits entities to provide pro forma net income (loss) and pro
forma earnings (loss) per share disclosures for employee stock option
grants as if the fair-valued based method defined in SFAS No. 123 had
been applied.
F-6
Vertical Jet, Inc.
(A Development Stage Company)
Notes to Financial Statements
From November 29, 2001 (Inception) to
December 31, 2001
-----------------
The Company accounts for stock options issued to non-employees for
goods or services in accordance with the fair value method of SFAS 123.
(F) Income Taxes
The Company accounts for income taxes under the Financial Accounting
Standards Board ("FASB") SFAS No. 109 "Accounting for Income Taxes."
Under SFAS No. 109, deferred tax assets and liabilities are recognized
for the future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities
and their respective tax bases. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in
the years in which those temporary differences are expected to be
recovered or settled. Under SFAS No. 109, the effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income
in the period, which includes the enactment date.
(G) Net Loss Per Common Share
Basic net income (loss) per common share (Basic EPS) excludes dilution
and is computed by dividing net income (loss) available to common
stockholder by the weighted-average number of common shares outstanding
for the period. Diluted net income per share (Diluted EPS) reflects the
potential dilution that could occur if stock options or other contracts
to issue common stock were exercised or converted into common stock or
resulted in the issuance of common stock that then shared in the
earnings of the Company. At December 31, 2001, there were no common
stock equivalents outstanding, which may dilute future earnings per
share.
(H) Fair Value of Financial Instruments
SFAS No. 107, "Disclosures about Fair Value of Financial Instruments,"
requires disclosures of information about the fair value of certain
financial instruments for which it is practicable to estimate that
value. For purposes of this disclosure, the fair value of a financial
instrument is the amount at which the instrument could be exchanged in
a current transaction between willing parties, other than in a forced
sale or liquidation.
The carrying amounts of the Company's short-term financial instruments,
including accounts payable, and notes payable, approximate fair value
due to the relatively short period to maturity for these instruments.
(I) New Accounting Pronouncements
The FASB has recently issued several new accounting pronouncements,
which may apply to the Company.
SFAS No. 141, "Business Combinations" establishes revised standards for
accounting for business combinations. Specifically, the statement
eliminates the pooling method, provides new guidance for recognizing
F-7
Vertical Jet, Inc.
(A Development Stage Company)
Notes to Financial Statements
From November 29, 2001 (Inception) to
December 31, 2001
-----------------
intangible assets arising in a business combination, and calls for
disclosure of considerably more information about a business
combination. This statement is effective for business combinations
initiated on or after July 1, 2001. The adoption of this pronouncement
on July 1, 2001 did not have a material effect on the Company's
financial position, results of operations or liquidity.
SFAS No. 142, "Goodwill and Other Intangible Assets" provides new
guidance concerning the accounting for the acquisition of intangibles,
except those acquired in a business combination, which is subject to
SFAS No. 141, and the manner in which intangibles and goodwill should
be accounted for subsequent to their initial recognition. Generally,
intangible assets with indefinite lives, and goodwill, are no longer
amortized; they are carried at lower of cost or market and subject to
annual impairment evaluation, or interim impairment evaluation if an
interim triggering event occurs, using a new fair market value method.
Intangible assets with finite lives are amortized over those lives,
with no stipulated maximum, and an impairment test is performed only
when a triggering event occurs. This statement is effective for all
fiscal years beginning after December 15, 2001. The Company believes
that the future implementation of SFAS No. 142 on January 1, 2002 will
not have a material effect on the Company's financial position, results
of operations or liquidity.
SFAS No. 143, "Accounting for Asset Retirement Obligations" requires
entities to record the fair value of a liability for an asset
retirement obligation in the period in which it is incurred. When the
liability is initially recorded, the entity capitalizes a cost by
increasing the carrying amount of the related long-lived asset. Over
time, the liability is accreted to its present value each period, and
the capitalized cost is depreciated over the useful life of the related
asset. Upon settlement of the liability, an entity either settles the
obligation for its recorded amount or incurs a gain or loss upon
settlement. The standard is effective for fiscal years beginning after
June 15, 2002. The adoption of SFAS No. 143 is not expected to have a
material effect on the Company's financial position, results of
operations or liquidity.
SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived
Assets" supercedes SFAS No. 121 "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of." Though
it retains the basic requirements of SFAS No. 121 regarding when and
how to measure an impairment loss, SFAS No. 144 provides additional
implementation guidance. SFAS No. 144 excludes goodwill and intangibles
not being amortized among other exclusions. SFAS No. 144 also
supercedes the provisions of APB Opinion No. 30, "Reporting the Results
of Operations," pertaining to discontinued operations. Separate
reporting of a discontinued operation is still required, but SFAS No.
144 expands the presentation to include a component of an entity,
rather than strictly a business segment as defined in SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information."
SFAS No. 144 also eliminates the current exemption to consolidation
when control over a subsidiary is likely to be temporary. This
statement is effective for all fiscal years beginning after December
15, 2001. The Company believes that the future implementation of SFAS
No. 144 on January 1, 2002 will not have a material effect on the
Company's financial position, results of operations or liquidity.
F-8
Vertical Jet, Inc.
(A Development Stage Company)
Notes to Financial Statements
From November 29, 2001 (Inception) to
December 31, 2001
-----------------
Note 2 Notes Payable
- ----------------------
Notes payable at December 31, 2001 are payable as follows:
Two promissory notes payable for $50,000 each, dated December 15, 2001,
non-interest bearing, due on or before February 15, 2002. The principal
amount of these notes shall be convertible into common stock of the
Company at the conversion rate of $0.1487 per share. The notes were
converted in full in January 2002 for 672,500 common shares. (See Note
9)
Note 3 Legal Matters
- ----------------------
The Company is subject to a settlement agreement and mutual release of claims as
of May 7, 2002. The Company and other parties have relieved each other of the
related accounts receivable and accounts payable as of December 31, 2001
effective May 7, 2002. The Company recognized bad debt of $19,527 as of December
31, 2001 and recognized a gain on settlement of $12,000 on May 7, 2002.
Note 4 Stockholders' Deficiency
- ---------------------------------
The Company issued 40,471,050 shares of common stock to its founders on November
30, 2001 in exchange for cash $3,009. As of December 31, 2001, no funds were
received for the stock. A subscription receivable has been established for the
entire amount of stock that has been issued for cash. (See Note 9 and Note 1(G))
Note 5 Income Taxes
- ---------------------
There was no income tax expense for the year ended December 31, 2001 due to the
Company's net losses.
The Company's tax expense differs from the "expected" tax expense for the year
ended December 31, 2001, (computed by applying the Federal Corporate tax rate of
34% to loss before taxes), as follows:
2001
---------
Computed "expected" tax expense (benefit) $ (15,635)
Change in valuation allowance 15,635
---------
$ --
=========
F-9
Vertical Jet, Inc.
(A Development Stage Company)
Notes to Financial Statements
From November 29, 2001 (Inception) to
December 31, 2001
-----------------
The effects of temporary differences that gave rise to significant portions of
deferred tax assets and liabilities at December 31, 2001 are as follows:
Deferred tax assets:
Net operating loss carryforward $ 15,635
---------
Total gross deferred tax assets 15,635
Less valuation allowance (15,635)
---------
Net deferred tax assets $ --
=========
The Company has a net operating loss carryforward of approximately $45,984
available to offset future taxable income through 2021.
The net change in valuation allowance for the year ended December 31, 2001 was
an increase of $15,635.
Note 6 Concentrations
- -----------------------
One customer provided all revenues in 2001.
Note 7 Segment Information
- ----------------------------
The Company had a single reportable segment as discussed in Note 1(A). All
revenues in 2001 were derived from customers in the United States of America.
Note 8 Going Concern
- ----------------------
As reflected in the accompanying financial statements, the Company has a net
loss of $45,984 from November 29, 2001 (inception) to December 31, 2001, a
deficit accumulated during development stage of $45,984 at December 31, 2001,
cash used in operations of $20,084 from November 29, 2001 (inception) to
December 31, 2001 and a working capital deficiency of $45,984 at December 31,
2001. The ability of the Company to continue as a going concern is dependent on
the Company's ability to generate future profits or raise additional capital.
The financial statements do not include any adjustments that might be necessary
if the Company is unable to continue as a going concern.
The Company is seeking new customers, merger/acquisition candidates, and
additional funding. Management believes that the actions presently being taken
provide the opportunity for the Company to continue as a going concern.
Note 9 Subsequent Events
- --------------------------
In January 2002, the Company entered into four three-year executive employment
agreements for aggregate annual cash compensation of $704,000 and performance
bonuses from 50% to 100% of base salary. In addition, the agreements grant
options to purchase 4,000,000 shares of common stock at $0.20 per share, which
vest pro-rata over a five-year period. Pursuant to APB Opinion No. 25, no
compensation expense will be recognized for the grants since the exercise price
of $0.20 exceeds the fair market value of $0.1487 on the grant dates.
F-10
Vertical Jet, Inc.
(A Development Stage Company)
Notes to Financial Statements
From November 29, 2001 (Inception) to
December 31, 2001
-----------------
In January 2002, the $100,000 of convertible notes were converted at $0.1487 per
share to 672,500 common shares. (See Note 2)
In March 2002, the Company entered into a one-year financial consulting
agreement and paid the consultant $100,000 upon signing of the agreement with
$50,000 due as of the date of the accompanying audit report.
On April 1, 2002, the Company was merged into a subsidiary of an inactive
publicly held company (the "Acquiror") in a transaction accounted for as a
recapitalization of the Company. The shareholders of the Company received
40,471,050 of the Acquiror or approximately 94.74% of the Acquiror in exchange
for the 3,009,000 shares of the Company then outstanding. The historical
financial statements of the combined entity after the merger are those of the
Company and the Company is deemed to have issued 2,247,500 common shares to the
stockholders of the Acquiror in the transaction. The accompanying financial
statements have been retroactively restated to reflect the recapitalization.
From January 1, 2002 to the date of the accompanying audit report, the Company
raised $255,000 through the issuance of 1,714,875 common shares at $0.1487 per
share.
In April 2002, the Company issued 5,000 shares for services valued at the
contemporaneous offering price of $0.1487 per share or $744.
F-11
Vertical Jet, Inc.
(A Development Stage Company)
Balance Sheets
--------------
Assets
------
March 31, 2002
(Unaudited) December 31, 2001
---------- ----------
Current Assets
Cash $ 6,962 $ 79,916
Employee advances 12,627 --
---------- ----------
Total Current Assets 19,589 79,916
Property and equipment 1,164 --
---------- ----------
Total Assets $ 20,753 $ 79,916
========== ==========
Liabilities and Stockholders' Deficiency
----------------------------------------
Current Liabilities
Notes payable $ -- $ 100,000
Accounts payable 62,000 25,900
---------- ----------
Total Current Liabilities 62,000 125,900
---------- ----------
Stockholders' Deficiency
Preferred stock, $1.00 par value, 10,000,000 shares
authorized, none issued and outstanding -- --
Common stock, $0.001 par value, 80,000,000 shares
authorized, 42,572,613 and 40,471,050 shares issued
and outstanding, respectively 42,573 40,471
Additional paid-in capital 267,936 (37,462)
Deficit accumulated during development stage (348,747) (45,984)
---------- ----------
(38,238) (42,975)
Less: subscription receivable (3,009) (3,009)
---------- ----------
Total Stockholders' Deficiency (41,247) (45,984)
---------- ----------
Total Liabilities and Stockholders' Deficiency $ 20,753 $ 79,916
========== ==========
See accompanying notes to financial statements.
F-12
Vertical Jet, Inc.
(A Development Stage Company)
Statements of Operations
------------------------
(Unaudited)
From November
Three Months 29, 2001
Ended (Inception) to
March 31, 2002 March 31, 2002
------------ ------------
Operating Revenues
Services $ 18,225 $ 69,242
Advertising income 1,000 1,000
------------ ------------
Total Operating Revenues $ 19,225 $ 70,242
------------ ------------
Operating Expenses
Consulting 150,815 198,315
Salaries 96,999 96,999
Bad debt 7,145 26,672
General and administrative 39,529 51,946
Professional fees 27,500 45,057
------------ ------------
Total Operating Expenses 321,988 418,989
------------ ------------
Loss from Operations (302,763) (348,747)
Net Loss $ (302,763) $ (348,747)
============ ============
Net loss per share - basic and diluted $ (0.01) $ (0.01)
============ ============
Weighted average number of shares outstanding during the
period - basic and diluted 41,460,003 41,198,462
============ ============
See accompanying notes to financial statements.
F-13
Vertical Jet, Inc.
(A Development Stage Company)
Statements of Cash Flows
------------------------
(Unaudited)
From November
Three Months 29, 2001
Ended (Inception) to
March 31, 2002 March 31, 2002
----------- -----------
Cash Flows from Operating Activities
Net loss $ (302,763) $ (348,747)
Adjustments to reconcile net loss to net cash used in operating
activities:
Bad debt 7,145 26,672
Changes in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable -- (19,527)
Advances receivable (7,145) (7,145)
Employee advances (12,627) (12,627)
Increase (decrease) in:
Accounts payable 36,100 62,000
----------- -----------
Net Cash Used in Operating Activities (279,290) (299,374)
----------- -----------
Cash Flows from Investing Activities
Purchase of machinery and equipment (1,164) (1,164)
----------- -----------
Net Cash Used in Investing Activities (1,164) (1,164)
----------- -----------
Cash Flows from Financing Activities
Proceeds from promissory notes -- 100,000
Proceeds from common stock issuances 212,500 212,500
Offering costs (5,000) (5,000)
----------- -----------
Net Cash Provided by Financing Activities 207,500 307,500
----------- -----------
Net Increase (Decrease) in Cash (72,954) 6,962
Cash and Cash Equivalents at Beginning of Period 79,916 --
----------- -----------
Cash and Cash Equivalents at End of Period $ 6,962 $ 6,962
=========== ===========
Supplemental Schedule of Non-Cash Investing and Financing Activities:
- ---------------------------------------------------------------------
On January 31, 2001, the Company issued 672,500 shares of common stock for
$0.1487 per share, in exchange for conversion of the $100,000 principal amount
due for two promissory notes.
See accompanying notes to financial statements.
F-14
Vertical Jet, Inc.
(A Development Stage Company)
Notes to Financial Statements
March 31, 2002
--------------
(Unaudited)
Note 1 Basis of Presentation
- ------------------------------
The accompanying unaudited financial statements have been prepared in accordance
with accounting principles generally accepted in the United States of America
and the rules and regulations of the United States Securities and Exchange
Commission for interim financial information. Accordingly, they do not include
all the information and footnotes necessary for a comprehensive presentation of
financial position and results of operations.
It is management's opinion, however, that all material adjustments (consisting
of normal recurring adjustments) have been made which are necessary for a fair
unaudited financial statements presentation. The results for the interim period
are not necessarily indicative of the results to be expected for the year.
For further information, refer to the audited financial statements and footnotes
for the period from November 29, 2001 (Inception) to December 31, 2001 included
in the Company's Form 8-K/A.
Note 2 Advances Receivable
- ----------------------------
The Company advanced $7,145 to a potential acquiree. Based on the recent
financial condition of that acquiree, the Company has established an allowance
for the full amount by charging bad debt expense for $7,145 at March 31, 2002.
Note 3 Commitments and Contingencies
- --------------------------------------
(A) Legal Matters
The Company is subject to a settlement agreement and mutual release of
claims as of May 7, 2002. The Company and other parties have relieved
each other of the related accounts receivable and accounts payable as
of December 31, 2001, effective May 7, 2002. The Company recognized bad
debt of $19,527 as of December 31, 2001 and recognized a gain on
settlement of $12,000 on May 7, 2002.
(B) Employment Agreements
In January 2002, the Company entered into four three-year executive
employment agreements for aggregate annual cash compensation of
$704,000 and performance bonuses from 50% to 100% of base salary. In
addition, the agreements grant options to purchase 4,000,000 shares of
common stock at $0.20 per share, which vest pro-rata over a five-year
period. Pursuant to APB Opinion No. 25, no compensation expense will be
recognized for the grants since the exercise price of $0.20 exceeds the
fair market value of $0.1487 on the grant dates.
F-15
Vertical Jet, Inc.
(A Development Stage Company)
Notes to Financial Statements
March 31, 2002
--------------
(Unaudited)
Note 4 Stockholders' Deficiency
- ---------------------------------
On January 31, 2001, the Company issued 672,500 shares of common stock for
$0.1487 per share, in exchange for conversion of the $100,000 principal amount
due for two promissory notes.
The Company issued 1,429,063 shares of common stock from February through March
2002 in exchange for $212,500 cash or $0.1487 per share. Offering costs of
$5,000 were charged to the gross proceeds raised resulting in a $5,000 reduction
of additional paid-in capital as of March 31, 2002.
Note 5 Going Concern
- ----------------------
As reflected in the accompanying unaudited financial statements, the Company has
a net loss of $302,763 for the three months ended March 31, 2002, a deficit
accumulated during development stage of $348,747 at March 31, 2002, cash used in
operations of $279,290 for the three months ended March 31, 2002 and a working
capital deficiency of $42,411 at March 31, 2002. The ability of the Company to
continue as a going concern is dependent on the Company's ability to generate
future profits or raise additional capital. The financial statements do not
include any adjustments that might be necessary if the Company is unable to
continue as a going concern.
The Company is seeking new customers, merger/acquisition candidates, and
additional funding. Management believes that the actions presently being taken
provide the opportunity for the Company to continue as a going concern.
Note 6 Subsequent Events
- --------------------------
On April 1, 2002, the Company was merged into a subsidiary of an inactive
publicly held company (the "Acquiror") in a transaction accounted for as a
recapitalization of the Company. The shareholders of the Company received
40,471,050 of the Acquiror or approximately 94.74% of the Acquiror in exchange
for the 3,009,000 shares of the Company then outstanding. The historical
financial statements of the combined entity after the merger are those of the
Company and the Company is deemed to have issued 2,247,500 common shares to the
stockholders of the Acquiror in the transaction. The accompanying financial
statements have been retroactively restated to reflect the recapitalization.
In April 2002, the Company issued 5,000 shares for services valued at the
contemporaneous offering price of $0.1487 per share or $744 which was charged to
operations.
F-16
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunder duly authorized.
VERTICAL JET, INC.
Date: June 17, 2002 By: /s/ GEORGE WIGHT, JR.
-------------------------------------
George Wight, Jr., President