UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: December 31, 2006
[ ] 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: 00-333151
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VOYAGER ENTERTAINMENT INTERNATIONAL, INC.
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(Name of Small Business Issuer in Its Charter)
Nevada 45-042009
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(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
4483 West Reno Avenue Las Vegas, Nevada 89118
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(Address of Principal Executive Offices) (Zip Code)
Issuer's Telephone Number, Including Area Code: (702) 221-8070
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Securities registered under Section 12(b) of the Act: None
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Securities registered under Section 12(g)
of the Act: Common Stock, $.001 par value
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(Title of Class)
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 [ ]
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]
Indicate by check mark whether the registrant is a shell company as defined by
rule 12b-2 of the Exchange Act. [ ]
State issuer's revenues for its most recent fiscal year: $0.00
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State the aggregate market value of the voting and non-voting common equity
held by non-affiliates computed by reference to the price at which the common
equity was sold, or the average bid and asked price of such common equity, a
specified date within the past 60 days: As of March 31, 2007, the aggregate
market value of shares held by non-affiliates (based on the close price on that
date of $0.18 was approximately $10,051,722.
State the number of shares outstanding of each of the issuer's classes of
equity, as of the last practicable date: 114,842,905 shares as of common stock,
and 1,000,000 shares of Preferred Series B stock as confirmed by the Company's
transfer agent on March 30, 2007.
Transitional Small Business Disclosure Format (check one): Yes No X
VOYAGER ENTERTAINMENT INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
FOR THE FISCAL YEAR ENDED
December 31, 2006
PART I Page
Item 1. Description of Business 2
Item 2. Description of Property 6
Item 3. Legal Proceedings 6
Item 4. Submission of Matters to a Vote of Security Holders 7
PART II
Item 5. Market for Common Equity and Related Stockholder Matters 7
Item 6. Managements' Discussion and Analysis or Plan of Operation 9
Item 7 Consolidated Financial Statements 17
Item 8 Changes in and Disagreements With Accountants on Accounting
and Financial Disclosure 17
PART III
Item 9 Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act 19
Item 10 Executive Compensation 22
Item 11 Security Ownership of Certain Beneficial Owners and Management 23
Item 12 Certain Relationships and Related Transactions 26
Item 13 Exhibits, Consolidated Financial Statement Schedules and
Reports on Form 8-K 27
Item 14 Principal Accounting Fees and Services 28
1
This Form 10-KSB contains forward-looking statements within the meaning of
the federal securities laws. These forward-looking statements are necessarily
based on certain assumptions and are subject to significant risks and
uncertainties. These forward-looking statements are based on management's
expectations as of the date hereof, and the Company does not undertake any
responsibility to update any of these statements in the future. Actual future
performance and results could differ from that contained in or suggested by
these forward-looking statements as a result of factors set forth in this Form
10-KSB (including those sections hereof incorporated by reference from other
filings with the Securities and Exchange Commission), in particular as set forth
in the "Plan of Operation" under Item 6.
In this filing references to "Company," "we," "our," and/or "us," refers to
Voyager Entertainment International, Inc.
PART I
ITEM 1. DESCRIPTION OF BUSINESS
( a ) RECENT DEVELOPMENT
On April 10, 2006, Voyager entered into a Unit Purchase (Buy-Sell) Agreement
("Agreement") to acquire all the outstanding units of Western Architectural
Services, LLC ("Western") in exchange for a total of 5,000,000 shares of
Voyager's common stock ("Shares"). On September 11, 2006, Voyager believed it
had fully completed the necessary due diligence pursuant to the Agreement and
consequently delivered the Shares consideration as required for the final
closing. Upon further evaluation of Voyager's due diligence of Western pursuant
to Section 2.02 of the Agreement, it has been determined that the existing
limited liability company ("LLC") operating agreement of Western would need to
be modified in order for Voyager to continue the existing operations of Western.
Western specializes exclusively in the development, implementation and
fabrication of world-class themed architectural designs. Western has been
instrumental in supplying pre-fabricated products to the hotel and casino
industry, including iconic statues, interior resort theming, as well as,
construction related materials and services. Projects include The Venetian, New
York, New York, Mandalay Bay, Paris, and Luxor to name a few. Western's most
notable collaborations are the Statue of Liberty at the New York, New York; the
famed fountain located at the Paris Hotel and Casino; and most of the interior
theming for the Luxor Hotel and Casino and Mandalay Bay.
Western also manufactures products for residential and institutional projects
such as architectural columns, domes, moldings, and frames. Western has
contracted and completed over $70 million dollars of construction projects over
the last ten years. More information about Western can be found at
www.western-architectural.com.
On March 30 2007, Voyager and Western were not able to come to acceptable terms
with regards to the needed changes to the LLC operating agreement and therefore
cancelled the Agreement since the transaction did not meet all the requirements
of Section 2.02 of the Agreement and was deemed as if the acquisition
transaction was never closed.
Tracy Jones was initially issued 5,000,000 shares of common stock of Voyager for
the acquisition. As a result of the nullification of the acquisition Mr. Jones
will be required to return 2,500,000 shares to the Company to be cancelled and
returned to the treasury. The remaining 2,500,000 shares will be accounted for
as a fee for the nullification . The shares were valued at the fair value of
$0.15 per share for a total value of $375,000.
As a result of the nullification of the transaction the Company will be amending
the 10-QSB for the period ending September 30, 2006. The 10-QSB on that date
reflected a consolidation of the financial statements of Both Voyager and
Western. The amendment will remove any information and financial Data of
Western.
(b) GENERAL BUSINESS DEVELOPMENT
On March 17, 2005 the Company signed a joint venture agreement with Allied
Investment House, Inc. to build a 600ft Observation Wheel in the
United Arab Emirates. According to the agreement Allied Investment House,
Inc. will provide 100% of the financing of an Observation Wheel in the UAE.
Voyager and Allied will form a UAE corporation in order for the transaction to
be completed. Both Voyager (or its assigns) and Allied (or its assigns) will
operate, govern, and own the newly formed company.
It was originally planned that a UAE corporation would be formed within 180 days
of the date of the signing of the agreement. However as of the date of this
filing an adequate site for the Observation Wheel has not been determined. A UAE
corporation will not be formed until the time when an adequate site has been
obtained. At this time there have been no funds raised for this project.
When the project begins, Voyager will be responsible for the management of the
construction of the project and will receive a premium above and beyond the cost
of building the project. There will be a management agreement which allows
Voyager to contract a third party management company to perform day-to-day
operations. Voyager will also receive a percentage of gross revenues from
operations.
The Company is currently evaluating site locations in Las Vegas, Nevada where
the Observation Wheel could be constructed by the Company. If the Company is
unsuccessful in obtaining a site and negotiating terms acceptable to both
Voyager and a prospective property owner for a Las Vegas location, the Company
will be required to identify a location outside of Las Vegas. An observation
wheel could be constructed before Voyager's Observation Wheel could be built in
Las Vegas, forcing our management to focus its efforts elsewhere for a
significant amount of time. While there are several locations outside of Las
Vegas which are currently proposed, there can be no guarantees that the Company
will obtain financing or any definitive agreements for any other locations.
The Company is currently dependent upon funding operations through the sale of
its common stock and securing debt through private individuals. If the Company
can not continue to raise funds through the sale if its common stock and
securing loans from private individuals, the Company may have to cease
operations thus rendering the Company insolvent or requiring the Company to seek
protection under the federal bankruptcy laws. While the Company is seeking
funding there can be no guarantee that funding will be attained.
2
On November 15, 2002, we entered into a loan and security agreement with
Mr. Dan Fugal, an unaffiliated individual, whereby Mr. Fugal was to provide us
with a credit facility in the form of a secured line of credit not to exceed
$2.5 million. The Company does not plan to exercise any additional funds from
this credit line.
On February 15, 2003, we executed an amendment to the Loan and Security
Agreement with Mr. Dan Fugal to amend the term date from February 15, 2003 to
April 15, 2003. As of the year ending December 31, 2003, Mr. Fugal has loaned
$605,000 to the Company. The loan and security agreement with Mr. Fugal has
expired and requires the Company to repay $605,000 to Mr. Fugal as well as a one
time interest payment of $605,000. Any agreements or amendments for Mr. Fugal to
provide additional funds have been canceled, and the Company is obligated to
repay a total of $1,210,000.
By written consent dated April 23, 2003, a majority of the Company's
stockholders elected to reincorporate the Company in the State of Nevada,
[pursuant to a reincorporation merger between the Company and its then
wholly-owned subsidiary, Voyager Entertainment International, Inc. Nevada formed
for the purpose of the reincorporation merger, and which constituent company
survived the reincorporation merger]. The reincorporation became effective on
June 23, 2003. In connection with the reincorporation, the Company increased its
authorized common stock, $0.001 par value, from 100,000,000 shares to
200,000,000 shares and its authorized Preferred Stock, $0.001 par value, from
25,000,000 shares to 50,000,000 shares.
The consolidated financial statements included in this filing have been prepared
assuming that the Company will continue as a going concern, which contemplates
the realization of assets and the satisfaction of liabilities in the normal
course of business. The Company has no established source of revenue, incurred
significant losses since inception of $13,966,083 and used cash for operations
of $771,807 and $887,534 during the years ended December 31, 2006 and 2005,
respectively. The Company also has a working capital deficit of $4,290,908 and a
stockholders' deficit of $3,774,761 as of December 31, 2006. Additionally, a
lender has the right to foreclose on the assets of the Company if the demand for
repayment of $1.2 million is not made. These factors raise substantial doubt
about the Company's ability to continue as a going concern. The Company's cash
position may be inadequate to pay all of the costs associated with production
and marketing. Management intends to use borrowings and security sales to
mitigate the effects of its cash position. However, no assurance can be given
that debt or equity financing, if and when required, will be available. The
consolidated financial statements do not include any adjustments relating to the
recoverability and classification of recorded assets and classification of
liabilities that might be necessary should the Company be unable to continue
existence.
(c) OUR BUSINESS
Our current business plan is to build multiple observation Ferris
wheels ("Observation Wheels"). Currently proposed sites for the construction of
Observations Wheels include Las Vegas, Nevada; UAE and Shanghai, China.
3
L.V. Voyager Project
--------------------
For the past 6 years, through its subsidiaries, the Company has
extensively planned and/or evaluated the available locations at both the North
and South ends of the Las Vegas Strip as well as other off-strip locations in
Las Vegas, Nevada for the construction of the L.V. Voyager Project.
The L.V. Voyager Project is intended to be designed as a visual ICON
and experience overlooking the "Las Vegas Strip". With 30 vehicles called
Orbiters, the L.V. Voyager Project is intended to be a revolving Ferris wheel
that will overlook the Las Vegas Strip as it revolves higher than a 60-story
building at approximately 600 feet. One rotation in an Orbiter will last
approximately 27 minutes. Each Orbiter will be controlled by an on-board
Navigator, who will be part entertainer and part steward, and who will also be
skilled in life-safety and security. Due to lack of adequate financing, the
Company has not been able to successfully launch these projects.
ORGANIZATION AND OPERATION
The L.V. Voyager Project will be owned by the Company, however, it will
be designed, developed, built and operated by Voyager Entertainment Holdings,
Inc., ("VEHI"), a wholly owned subsidiary of the Company. VEHI will manage the
project pursuant to a performance-based contract between the Company and VEHI
[and an as-yet unidentified partner of the Company. All covenants, restrictions
and protocols will be detailed in the performance-based contract.
As the management company, VEHI will be responsible for the design,
development, construction, and operation of the L.V. Voyager Project, and will
provide the following: concept development, project design, location assessment
and acquisition, strategic alliances in both entertainment and gaming, business
plans and budgets, financial oversight and management during both construction
and operation, marketing plans, insurance procurement and risk management,
senior operational management including development of policies and procedures,
and overall strategic focus for the L.V. Voyager Project.
The L.V. Voyager Project is fundamentally an entertainment attraction, and its
operational and maintenance requirements are very similar to those found in the
theme park industry. In addition, Las Vegas is a unique marketplace, and each
visitor, when placed in the environment, is also unique. The ability to
understand each visitor, and successfully attract customers to the L.V. Voyager
Project will come as a result of clearly understanding the marketing strategies
of the gaming industry. VEHI intends to employ highly skilled individuals from
the theme park industry and combine their specialized skills with those from the
gaming industry.
Star of Shanghai Voyager Project
---------------------------------
The western bank (Puxi) of the Huangpu River, the Bund, is the
anticipated location for a master planned development with the "Star of
Shanghai" Observation Wheel as the dominant feature (the "Star of Shanghai
Voyager Project"). The Star of Shanghai Voyager Project is to be designed as a
special tribute to the legendary figure Huang Daopo who invented the "spinning
wheel" that reformed the technique of cotton weaving, and gained fame for its
production of clothing. The Company does not currently have any agreements for a
proposed site and has not secured financing for the planned project.
The Company will require substantial additional funds to fulfill its
business plan and successfully develop its three Observation Wheel projects. The
Company intends to raise these needed funds from private placements of its
securities, debt financing or internally generated funds from the licensing of
its intellectual property or service fees. As of the date of this filing, the
Company has not received a firm commitment for financing of any of the projects
and the Company has not acquired the appropriate location for the project. The
Company continues to receive and evaluate opportunities throughout Asia as well
as Shanghai, China.
4
United Arab Emirates (UAE)
---------------------------
On March 17, 2005 the Company issued a press release announcing the signing of a
joint venture agreement with Allied Investment House, Inc. to build a 600ft
Observation Wheel in the United Arab Emirates. Allied Investment House, Inc.
will provide 100% of the financing of an Observation Wheel in the UAE. At this
time there have been no funds raised due to the fact that an adequate location
has not been obtained.
Voyager and Allied will form a UAE corporation in order for the transaction to
be completed. Both Voyager (or its assigns) and Allied (or its assigns) will
jointly own, operate and govern the newly formed company. The UAE corporation
has not be firmed until which time an adequate location for the project has been
obtained.
As a result of the signing of the agreement Voyager will be responsible for the
management of the construction of the project and will receive a premium above
and beyond the cost of building the project. There will be a management
agreement which allows Voyager to contract a third party management company to
perform day-to-day operations. Voyager will also receive a percentage of gross
revenues from operations.
Currently the primary effort of the UAE project is acquiring the proper
location. There can be no guarantees that we will find a suitable location.
However, we continue our best efforts.
Other "Observation Wheels"
---------------------------
Currently, the Company is primarily focusing on the L.V. Voyager
Project and the UAE Project. However, the Company has plans to build additional
Observation Wheels in other various locations in addition to Las Vegas, UAE and
Shanghai.
Market Overview
Management believes that, in the foreseeable future, cash generated
from operations will be inadequate to support full marketing roll out and
ongoing product development, and that we will thus be forced to rely on
additional debt and/or equity financing. Management believes that it can
identify sources and obtain adequate amounts of such financing. We intend to
enter into a cooperative arrangement with distributors or vendors, whereby we
will receive marketing and sales benefits from the professional staff of such
distributors or vendors. To date, we have not established any such arrangements.
In the event we are unsuccessful in generating equity capital, then the Company
will be unable to continue with product development and/or marketing. The lack
of equity capital may in turn cause the Company to become insolvent.
Competition
We compete with numerous other hospitality and entertainment companies.
Many of these competitors have substantially greater resources than we do.
Should a larger and better financed company decide to directly compete with us,
and be successful in its competitive efforts, our business could be adversely
affected. Other competitors could announce and build an observation wheel who
are better financed. If this occurs it would make it very difficult for the
Company to have a successful project within the same city.
There have been other companies that have announced possible development of a
large Observation Wheel.
There have been several other companies that have announced to the public plans
to build an observation wheel in Las Vegas. If any of these companies are
successful it would diminish the possibility of the Company obtaining financing
or a acquiring a proper location.
We have a limited operating history, which could make it difficult to evaluate
our business.
We have yet to establish any history of profitable operations. Although
some of our affiliates have been engaged in the acquisition and administration
of various industries for several years, we have a limited operating history. As
a result, we may not be able to successfully achieve profitability. The
5
likelihood of our success must be considered in light of the problems, expenses
and complications frequently encountered in connection with the development of a
project this size and the competitive environment in which we operate.
Accordingly, our limited operating history makes an effective evaluation of our
potential success difficult. Our viability and continued operation depend on
future profitability, our ability to generate cash flows and our successful
development and management of other business opportunities. There can be no
assurance that we will be able to successfully implement our business plan or
that if implemented, it will be profitable.
We may be unable to obtain the appropriate funding to run our Company.
We do not presently have sufficient financial resources and have no assurance
that sufficient funding will be available to us to build our project. There can
be no assurance that we will be able to obtain adequate financing in the future
or that the terms of such financing will be favorable. Failure to obtain such
additional financing could result in delay or indefinite postponement of
constructing an Observation Wheel.
Research and Development
From the inception to our predecessor in interest, Voyager Ventures,
Inc., from March of 1997 through present, we have devoted a majority of our time
on research and development. During the period from March 1, 1997 through
December 31, 2006, we incurred operating expenses of $12,330,050 and interest
expense of $1,636,033 against no revenues, which resulted in accumulated losses
of $14,096,083.
Employees
As of December 31, 2006, we only had Officers and Directors. We are
dependent upon Richard Hannigan, President, CEO and a Director of the Company;
Tracy Jones, COO and Director, and Myong Hannigan, Secretary/Treasurer and a
Director. We do not have any employees at this time and do not anticipate the
need to hire any employees until such time as we have been sufficiently
capitalized.
Our future success also depends on our ability to attract and retain
other qualified personnel, for which competition is intense. The loss of Mr.
Hannigan, Mr. Jones or our inability to attract and retain other qualified
employees could have a material adverse effect on us.
Currently there are no patents, trademarks or copyrights filed on behalf of the
Company protecting the current design of the Observation Wheel. We currently do
not have a site for the Observation Wheel. However, when a proper site is
obtained, the Company will be required to obtain proper permitting and
government approvals unless that site is currently approved for the construction
of an Observation Wheel. There can be no guarantees that the Company will be
successful in securing a suitable site or the appropriate approvals needed.
ITEM 2. DESCRIPTION OF PROPERTY
We currently lease 2,100 square feet of office space in Las Vegas,
Nevada from Synthetic Systems, LLC, of which our President is the owner. We
lease the office space at cost with no mark up for $2,325 per month on a
month-to-month basis. We believe that the property leased from Synthetic
Systems, LLC., is in reasonably good condition and is suitable for our current
and anticipated needs for the near future.
ITEM 3. LEGAL PROCEEDINGS
None.
6
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL
BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES
(a) MARKET INFORMATION
Our common stock is traded in the over-the-counter securities market
through the National Association of Securities Dealers Automated Quotation
Bulletin Board System, under the symbol "VEII". The following table sets forth
the quarterly high bid, low bid and close as well as the high ask, low ask and
close prices for our common stock during our last two fiscal years, as reported
by the National Quotations Bureau. The quotations reflect inter-dealer prices,
without retail mark-up, markdown or commission, and may not represent actual
transactions.
2006 2005
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Low High Low High Low High Low High
Bid Bid Close Ask Ask Close Bid Bid Close Ask Ask Close
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1st Quarter $0.09 $0.22 $0.14 $0.10 $0.25 $0.17 $0.13 $0.50 $0.32 $0.15 $0.51 $0.34
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2nd Quarter $0.10 $0.20 $0.13 $0.12 $0.21 $0.134 $0.12 $0.36 $0.27 $0.16 $0.43 $0.31
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3rd Quarter $0.08 $0.15 $0.081 $0.084 $0.17 $0.084 $0.23 $0.55 $0.41 $0.235 $0.60 $0.44
----------------------------------------------------------------------------------------------------------------
4th Quarter $0.04 $0.105 $0.07 $0.072 $0.14 $0.072 $0.17 $0.42 $0.24 $0.165 $0.44 $0.25
----------------------------------------------------------------------------------------------------------------
(b) HOLDERS OF COMMON STOCK
As of December 31, 2006, we had approximately 77 stockholders of record
(not including shares held by brokers or in street name), of the 114,842,905
shares of common stock outstanding. The closing bid stock price on March 30,
2007 was $0.19.
(c) DIVIDENDS
We have never declared or paid dividends on our common stock. We intend
to follow a policy of retaining earnings, if any, to finance the growth of the
business and do not anticipate paying any cash dividends in the foreseeable
future. The declaration and payment of future dividends on the common stock will
be at the sole discretion of the Board of Directors and will depend on our
profitability and financial condition, capital requirements, statutory and
contractual restrictions, future prospects and other factors deemed relevant by
the Board.
RECENT SALES OF UNREGISTERED SECURITIES AND USE OF PROCEEDS
In November 2006, the Company sold 166,667 shares of common stock for $25,000.
The common stock was offered in reliance upon the private offering exemptions
contained in Sections 3(b) and 4(6) of the Securities Act of 1933, as amended,
and Rule 506 of Regulation D promulgated thereunder. All purchasers were
"accredited" investors within the meaning of Rule 501(a) of Regulation D. We
received net proceeds in the offering of $25,000. All purchasers represented
that they were acquiring the Common shares for investment purposes only and not
with a view to distribute. The purchasers further represented that they (a) have
such knowledge and experience in financial and business matters and are capable
of evaluating the merits and risks of the investment, (b) are able to bear the
complete loss of the investment, (c) have had the opportunity to ask questions
of, and receive answers from, the Company and its management concerning the
terms and conditions of the offering and to obtain additional information, and
(d) qualify as "accredited investors" as such term is defined in Rule 501(a) of
Regulation D.
On November 2, 2006, 2,000,000 shares of our common stock was issued to Tracy
Jones, Managing Member of Western Architectural Services, LLC. for the closing
of the purchase of Western. The fair value of the shares issued based on the
closing bid price on that day was $0.15 per share for a total value of $300,000.
7
On November 2, 2006, 9,812,500 shares were issued to Richard and Myong Hannigan
for accumulated accrued bonuses of $750,000. The fair value of the shares was
based on the closing bid price on November 2, 2006 of $0.08
In November 2006, the Company issued 464,278 shares to Diversified Lending Group
as part of the dilution schedule. These shares were valued at the fair value of
$0.06 per share for total compensation of $27,840.
In December 2006, the Company sold 166,667 shares of common stock for $25,000.
The common stock was offered in reliance upon the private offering exemptions
contained in Sections 3(b) and 4(6) of the Securities Act of 1933, as amended,
and Rule 506 of Regulation D promulgated thereunder. All purchasers were
"accredited" investors within the meaning of Rule 501(a) of Regulation D. We
received net proceeds in the offering of $25,000. All purchasers represented
that they were acquiring the Common shares for investment purposes only and not
with a view to distribute. The purchasers further represented that they (a) have
such knowledge and experience in financial and business matters and are capable
of evaluating the merits and risks of the investment, (b) are able to bear the
complete loss of the investment, (c) have had the opportunity to ask questions
of, and receive answers from, the Company and its management concerning the
terms and conditions of the offering and to obtain additional information, and
(d) qualify as "accredited investors" as such term is defined in Rule 501(a) of
Regulation D.
In December 2006, the Company issued 600,000 shares of common stock for
consulting services rendered. These shares were valued at the fair value of
$0.06 per share for total compensation of $36,000.
In December 2006, the Company also issued 1,000,000 shares of restricted Common
Stock, for services. The Company believes that the issuance of the shares was
exempt from the registration and prospectus delivery requirements of the
Securities Act of 1933 by virtue of Section 4(2). The shares were issued
directly by the Company and did not involve a public offering or general
solicitation. The recipients of the shares had a preexisting relationship with
our management, had performed services for the Company and had full and complete
access to the Company and had the opportunity to speak with management with
regards to their investment decision. These shares were valued at a fair market
value of $58,000.,
SUBSEQUENT EVENTS
------------------
In March 2007, the Company also issued 1,000,000 shares of restricted Common
Stock for services. The Company believes that the issuance of the shares was
exempt from the registration and prospectus delivery requirements of the
Securities Act of 1933 by virtue of Section 4(2). The shares were issued
directly by the Company and did not involve a public offering or general
solicitation. The recipients of the shares had a preexisting relationship with
our management, had performed services for the Company, had full and complete
access to the Company and had the opportunity to speak with management with
regards to their investment decision. These shares were valued at a fair market
value of $100,000.
8
ITEM 6. MANAGEMENTS' DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
This report contains forward-looking statements. Actual results and
events could differ materially from those projected, anticipated, or implicit,
in the forward-looking statements as a result of the risk factors set forth
below and elsewhere in this report.
With the exception of historical matters, the matters discussed herein
are forward looking statements that involve risks and uncertainties. Forward
looking statements include, but are not limited to, statements concerning
anticipated trends in revenues and net income, the date of introduction or
completion of our products, projections concerning operations and available cash
flow. Our actual results could differ materially from the results discussed in
such forward-looking statements primarily as the result of insufficient cash to
pursue production and marketing efforts. The following discussion of our
financial condition and results of operations should be read in conjunction with
our financial statements and the related notes thereto appearing elsewhere
herein.
9
Overview
Voyager Entertainment International, Inc., formerly named Dakota
Imaging, Inc., was incorporated in North Dakota on January 31, 1991. Effective
February 8, 2002, the Company completed a reverse triangular merger between
Dakota Subsidiary Corp. ("DSC"), a wholly owned subsidiary of the Company, and
Voyager Ventures, Inc., a Nevada Corporation ("Ventures"), whereby the Company
issued 3,660,000 shares of its Series A preferred stock in exchange for 100% of
Ventures outstanding common stock. Pursuant to the terms of the merger, DSC
merged with and into Ventures and ceased to exist, and Ventures became a wholly
owned subsidiary of the Company.
On April 2, 2002, we amended our Certificate of Incorporation to change
our name from Dakota Imaging, Inc. to Voyager Entertainment International, Inc.
In June 2003, the Company reincorporated in the State of Nevada. The
reincorporation became effective in the states of North Dakota and Nevada on
June 23, 2003, the date the Certificate of Merger was issued by the Secretary of
State of North Dakota.
Critical Accounting Policies
----------------------------
The methods, estimates and judgments we use in applying our accounting policies
have a significant impact on the results we report in our financial statements,
which we discuss under the heading "Results of Operations" following this
section of our MD&A. Some of our accounting policies require us to make
difficult and subjective judgments, often as a result of the need to make
estimates of matters that are inherently uncertain. Our most critical accounting
estimates include the accounting for stock based compensation.
Stock Based Compensation:
On January 1, 2006, we adopted the fair value recognition provisions of SFAS No.
123(R), "Accounting for Stock-Based Compensation", to account for compensation
costs under our stock option plans. We previously utilized the intrinsic value
method under Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees" (as amended).
We use the fair value method for equity instruments granted to employees and
non-employees and will use the Black Scholes model for measuring the fair value
of options, if issued. The stock based fair value compensation is determined as
of the date of the grant or the date at which the performance of the services is
completed (measurement date) and is recognized over the vesting periods.
Section 15(g) of the Exchange Act
---------------------------------
The Company's shares are covered by Section 15(g) of the Securities Exchange Act
of 1934, as amended, and Rules 15g-1 through 15g-6 promulgated thereunder, which
impose additional sales practice requirements on broker-dealers who sell our
securities to persons other than established customers and accredited investors.
Rule 15g-2 declares unlawful any broker-dealer transactions in penny stocks
unless the broker-dealer has first provided to the customer a standardized
disclosure document.
Rule 15g-3 provides that it is unlawful for a broker-dealer to engage in a penny
stock transaction unless the broker-dealer first discloses and subsequently
confirms to the customer the current quotation prices or similar market
information concerning the penny stock in question.
Rule 15g-4 prohibits broker-dealers from completing penny stock transactions for
a customer unless the broker-dealer first discloses to the customer the amount
of compensation or other remuneration received as a result of the penny stock
transaction.
Rule 15g-5 requires that a broker-dealer executing a penny stock transaction,
other than one exempt under Rule 15g-1, disclose to its customer, at the time of
or prior to the transaction, information about the sales person's compensation.
The Company's common stock may be subject to the foregoing rules. The
application of the penny stock rules may affect our stockholder's ability to
sell their shares because some broker-dealers may not be willing to make a
market in our common stock because of the burdens imposed upon them by the penny
stock rules.
Plan of Operation
During the next 12 months, we plan to focus our efforts on our
development of the Observation Wheels; however, actual production will not
commence until we have sufficient capital for construction and marketing.
Currently, our monthly cash need is approximately $80,000 per month. As of the
year ending December 31, 2006, the Company did not have enough cash on hand to
continue operations through the next quarter. However, from time-to-time the
officers of the Company loan funds to provide for operations. There can be no
guarantees that the Company's officers and directors will continue to loan funds
to the Company on an ongoing basis. However, if we do not receive a substantial
amount of funding it will be unlikely we can continue operations. We have been
successful in the past in selling our common stock in private transactions to
provide for minimal operations. We plan to seek additional funding through debt
transactions and the sale of our common stock either privately or publicly.
There can be no guarantees we will continue to be successful in completing those
transactions. The primary expenses for the Company consist of consulting fees
that are primarily paid by the issuance of our common stock.
We are not the traditional Company that has the standard research and
development expenses. As a result, most of our research and development expenses
consist of presentation materials and architectural designs. Upon funding of the
project the initial expense will be engineering and architectural.
10
Our primary costs consist mainly of professional and consulting, legal and
accounting fees along with those fees paid to related parties, rent expenses and
printing expenses. As the project is being developed we are incurring additional
architectural and travel related fees. The Company expects that travel expenses
will increase when an adequate location is found in the UAE. If this project is
successful there will be a significant increase in expenses for all aspects of
the construction process to include an additional office set up and continual
travel.
We plan to focus primarily on the development of the Observation Wheel
in Las Vegas and the UAE over the next 12 months. However, we will also actively
seek partnerships and locations for other Observation Wheels throughout the
United States and other foreign countries.
Other than presentation materials, if a suitable site is acquired and
selected the primary focus will be on completing engineering and starting the
construction of an Observation Wheel.
We will face considerable risk in each of our business plan steps, such
as difficulty of hiring competent personnel within our budget and a shortfall of
funding due to our inability to raise capital in the equity securities market.
If no funding is received during the next twelve months, we will be forced to
rely on existing cash in the bank. As stated above, our current cash reserves
are not sufficient to fund operations for the next twelve months.
We have no operating history, no significant current operations,
minimum cash on hand, and no profit. Because of these factors, our auditors have
issued an audit opinion for us which includes a statement describing doubts
about our ability to continue as a going concern status. This means there is
substantial doubt about our ability to continue as a going concern. While we
believe we have made good faith estimates of our ability to secure additional
capital in the future to reach our goals, there is no guarantee that we will
receive sufficient funding to implement any future business plan steps. In the
event that we do not receive additional financing, we will not be able to
continue our operations.
The timing of most of our capital expenditures is discretionary.
Currently there are no material long-term commitments associated with our
capital expenditure plans. Consequently, we have a significant degree of
flexibility to adjust the level of such expenditures as circumstances warrant.
The level of our capital expenditures will vary in future periods depending on
market conditions and other related economic factors.
11
Results of Operations
Years Ended December 31, 2006 and December 31, 2005
For the year ended For the year ended
December 31, 2006 December 31, 2005
----------------- -----------------
Net revenue $ -- $ --
Operating expenses:
Professional and consulting fees 1,377,970 1,469,866
Project costs 46,119 11,592
Depreciation 10,143 7,566
Other operating expenses 144,547 177,924
----------- -----------
1,578,779 1,666,948
----------- -----------
Loss from operations (1,578,779) (1,666,948)
Interest expense (309,056) (69,710)
Interest Income 1,141 --
----------- -----------
Loss before income taxes (1,886,694) (1,736,658)
Income taxes -- --
----------- -----------
Net loss $(1,886,694) (1,736,658)
----------- -----------
Revenues. We did not have any revenues for the fiscal year ending
December 31, 2006 and 2005. There was no change in revenues from the year ending
2006 versus 2005 because we are still in the development stage and revenues will
not be generated until operations of an Observation Wheel begin.
Blue Prints/Project Costs for the year ended December 31, 2006 were
$46,119 which is $34,527 more than the $11,592 of project costs incurred in the
year ended December 31, 2005. These expenses consisted primarily of presentation
and development materials provided to prospective funding sources. In the fiscal
year ended December 31, 2005, the Company converted the presentation materials
into mini DVD presentations. It was found necessary to continue to print the
presentation materials along with the DVD presentations. This resulted in the
need to purchase large amounts of ink and presentation supplies. Our total
project costs since inception are $138,298.
Operating Expenses. We had operating expenses of $1,578,779 for the
year ended December 31, 2006 versus operating expenses of $1,666,948 for the
year ended December 31, 2005 which primarily consisted of office rental
expenses, legal and accounting fees and professional expenses. There was a
decrease in our operating expenses for the year ending December 31, 2006 of
$88,169. The decrease in operating expenses for the year ending December 31,
2006 was primarily due to the fact that the Company utilized fewer consultants
throughout 2006, and was not required to issue its common stock for services. We
did not incur any settlement expenses in 2006. If the Company receives funding
for either the Las Vegas Project or the UAE Project we expect these fees to
increase substantially including support for employees that will be required.
Professional and Consulting Fees. We paid professional and consulting
fees of $1,377,970 for the year ending December 31, 2006 versus $1,469,866 for
the year ending December 31, 2005 that attributed to a decrease of $91,896 or
6.2%. Our primary expense is the issuance of common stock to consultants as well
as professional fees to Synthetic Systems totaling $800,000. There is currently
an accrued unpaid balance of $625,000. Synthetic Systems is controlled by our
President. In 2006 we issued fewer shares to consultants for services than in
2005.
Net Losses from Operations. As a result of the decreases, primarily in
professional and consulting fees where our common stock was issued for services,
net loss from operations for the period ended December 31, 2005 was $1,666,948
and was an decrease of $88,169 as compared to the net loss from operations of
$1,578,779 for the year ended December 31, 2006. The decrease in net losses can
Be attributed to a decrease in common stock issuances to consultants.
12
Interest Expense. Our interest expense for the year ending December 31,
2006 was $309,056 versus $69,710. It resulted in an increase in interest expense
of $239,346. The increase was attributable to interest being paid on a note of
$1,250,000 Bearing an interest rate of 14% per anum. The note was secured in
September 2006 and the Company commenced making monthly interest payments of
$14,583.
Liquidity and Capital Resources
A critical component of our operating plan impacting our continued
existence is the ability to obtain additional capital through additional equity
and/or debt financing. We do not anticipate enough positive internal operating
cash flow until such time as we can generate substantial revenues, which may
take the next few years to fully realize. In the event we cannot obtain the
necessary capital to pursue our strategic plan, we may have to cease or
significantly curtail our operations. This would materially impact our ability
to continue operations.
Our near term cash requirements are anticipated to be offset through
the receipt of funds from private placement offerings and loans obtained through
private sources. Since inception, we have financed cash flow requirements
through debt financing and issuance of common stock for cash and services. As we
initiate operational activities, we may continue to experience net negative cash
flows from operations, pending receipt of servicing or licensing fees, and will
be required to obtain additional financing to fund operations through stock
offerings and bank borrowings to the extent necessary to provide working
capital.
Over the next twelve months, we believe that existing capital and
anticipated funds from operations will not be sufficient to sustain operations
and planned development. Consequently, we will be required to seek additional
capital in the future to fund growth and expansion through additional equity or
debt financing or credit facilities. No assurance can be made that such
financing would be available, and if available it may take either the form of
debt or equity. In either case, the financing could have a negative impact on
our financial condition and our stockholders.
We anticipate incurring operating losses over the next twelve months.
Our lack of operating history makes predictions of future operating results
difficult to ascertain. Our prospects must be considered in light of the risks,
expenses and difficulties frequently encountered by companies in their early
stage of development, particularly companies in new and rapidly evolving markets
such as development related companies. Such risks include, but are not limited
to, an evolving and unpredictable business model and the management of growth.
To address these risks we must, among other things, implement and successfully
execute our business and marketing strategy, continue to develop and upgrade
technology and products, respond to competitive developments, and attract,
retain and motivate qualified personnel. There can be no assurance that we will
be successful in addressing such risks, and the failure to do so can have a
material adverse effect on our business prospects, financial condition and
results of operations.
As of December 31, 2006, we had cash of $76,241, which consisted
primarily of cash on hand and current liabilities of $4,440,899, resulting in
working capital deficit of $4,324,658 versus current assets of $108,552, current
liabilities of $3,256,762 and a working capital deficit of $3,148,210
respectively for the year ending December 31, 2005. The increase in cash was
attributable to the Company conducting private placement transactions throughout
2005.
OFF BALANCE SHEET ARRANGEMENTS
The Company does not have any off-balance sheet arrangements and does not
participate in non-exchange traded contracts requiring fair value accounting
treatment.
NOTE PAYABLE
On November 15, 2002, we entered into a loan and security agreement
with Mr. Dan Fugal, an unaffiliated individual, whereby Mr. Fugal was to provide
us with a credit facility in the form of a secured line of credit not to exceed
$2.5 million.
On February 15, 2003, we executed an amendment to the Loan and Security
Agreement to amend the term date from February 15, 2003 to April 15, 2003. As of
the year ending December 31, 2005, Mr. Fugal has loaned $605,000 to the Company.
The loan and security agreement with Mr. Fugal has expired and requires the
Company to repay $605,000 to Mr. Fugal as well as a one time interest payment of
13
$605,000. Any agreements or amendments for Mr. Fugal to provide additional funds
have been canceled, and the Company is obligated to repay a total of $1,210,000.
As a requirement of the Agreement, the Company is obligated to repay Mr. Fugal
when an adequate amount of funding is received. At this time, unless funding is
received, it is likely that the Company will be unable to repay the debt. As
collateral for the Loan and Security Agreement with Mr. Fugal, Mr. Fugal filed a
UCC-1 against the assets and intellectual property of the Company which would
give Mr. Fugal the right to institute foreclosure proceedings toward the
Company. Mr. Fugal could institute foreclosure proceedings at any time if he
believes that he will not be repaid. As of this date Mr. Fugal has not indicated
any intentions to institute foreclosure proceedings. However, we can not
guarantee that Mr. Fugal will not attempt to institute foreclosure proceedings
against the Company. This credit facility is deemed closed and will not
increase.
Diversified Lending
---------------------
On September 5, 2006, the Company entered into a note payable with Diversified
Lending for $1,250,000. The Company is a joint tenant with Western Architectural
in this debt which bears interest of 14% and is due within one year from the
date of the note.
As consideration for the loan, the Company was required to pay $50,000 and issue
4,000,000 shares of its common stock, both of which have been completed. Also,
to collateralize the loan, the Company was required to issue 7,500,000 shares of
its common stock. The promissory note also holds an anti-dilution clause where
the Company is required to issue additional shares of its common stock to the
debt holder so that their 4% ownership is not diluted. As of December 31, 2006,
we issued an additional 464,278 of common shares relating to third quarter 2006
dilution and have accounted for this issuance as additional interest expense of
$27,857. At December 31, 2006, we have accrued an additional $6,261 of interest
relating to the year end dilution calculation which will result in us issuing an
additional 89,438 shares once these financial statements have been filed.
As the collateral, loan fees and anti-dilution components of the agreement are
dominated in Company common stock, the Company maintains the full risk of loss
and we have recorded the full debt component on our balance sheet.
From the proceeds of the debt facility we issued $500,000 to Western
Architectural Services, LLC and recorded an unsecured Note Receivable on our
balance sheet.
United Arab Emirates (UAE)
--------------------------
On March 17, 2005 the Company issued a press release announcing the signing of a
definitive joint venture agreement with Allied Investment House, Inc. to build a
600ft Observation Wheel in the United Arab Emirates. Allied Investment House,
Inc. will provide 100% of the financing of an Observation Wheel in the UAE up to
$150 million.
Voyager and Allied will form a UAE corporation in order for the transaction to
be completed. Both Voyager (or its assigns) and Allied (or its assigns) will
own, operate and govern the newly formed company.
As a result of the signing of the agreement Voyager will be responsible for the
management of the construction of the project and will receive a premium above
and beyond the cost of building the project. There will be a management
agreement which allows Voyager to contract a third party management company to
perform day-to-day operations. Voyager will also receive a percentage of gross
revenues from operations.
The primary goal for the UAE project is locating an appropriate site for the
project to be located. There can be no guarantees that if a site is located it
will be attainable at terms acceptable to the Company and its partner.
Risks that could cause actual performance to differ from expected
performance are detailed in the remainder of this section, and under the section
titled "Factors That May Affect the Company's Future Operating Results."
14
FACTORS THAT MAY AFFECT THE COMPANY'S FUTURE OPERATING RESULTS
We must comply with penny stock regulations which could effect the liquidity and
price of our stock.
The Securities and Exchange Commission has adopted rules that
regulate broker-dealer practices in connection with transactions in "penny
stocks." Penny stocks generally are equity securities with a price of less than
$5.00, other than securities registered on certain national securities exchanges
or quoted on NASDAQ, provided that current price and volume information with
respect to transactions in such securities is provided by the exchange or
system. Prior to a transaction in a penny stock, a broker-dealer is required to:
Deliver a standardized risk disclosure document prepared by the SEC; Provide the
customer with current bid and offers quotations for the penny stock; Explain the
compensation of the broker-dealer and its salesperson in the transaction;
Provide monthly account statements showing the market value of each penny stock
held in the customer's account; Make a special written determination that the
penny stock is a suitable investment for the purchaser and Provide a written
agreement to the transaction. These requirements may have the effect of reducing
the level of trading activity in the secondary market for our stock. Because our
shares are subject to the penny stock rules, you may find it more difficult to
sell your shares.
We may in the future issue additional shares of our common stock which would
reduce investors percentage ownership and may dilute our share value.
Our articles of incorporation authorize the issuance of 200,000,000
shares of common stock. As of March 31, 2006, we have 114,842,905 shares of our
common stock issued and outstanding. We are also authorized to issue 50,000,000
shares of Series A Preferred Stock at par value $.001 with no face value,
convertible to common stock at 10 to 1 and 10,000,000 shares of Preferred B
Stock face value of $.10 convertible to Common Stock at 2 to 1 of which there
are 1,000,000 shares of our Series B Preferred Stock outstanding. The future
issuance of all or part of our remaining authorized common stock, Preferred
Stock or any combination of either, may result in substantial dilution in the
percentage of our common stock held by our then existing shareholders. We may
value any common stock issued in the future on an arbitrary basis. The issuance
of common stock for future services or acquisitions or other corporate actions
will have the effect of diluting the value of the shares held by our investors,
and might have an adverse effect on any trading market for our common stock.
We are a development stage Company, recently reorganized and have minimal
operating history, which makes an evaluation of us extremely difficult. At this
stage of our business operations, even with our good faith efforts, potential
investors have a high probability of losing their investment.
As a result of our reorganization in 2002, we have yet to generate
revenues from operations and have been focused on organizational, start-up,
market analysis and fund raising activities. Although we have a project to
market, there is nothing at this time on which to base an assumption that our
business operations will prove to be successful or that we will ever be able to
operate profitably. Our future operating results will depend on many factors,
including our ability to raise adequate working capital, demand and acceptance
of our project, the level of our competition and our ability to attract and
maintain key management and employees.
Our auditors' report reflects the fact that without realization of additional
capital, it would be unlikely for us to continue as a going concern. If we are
unable to continue as a going concern, it is unlikely that we will continue in
business.
15
As a result of our deficiency in working capital and other factors, our
auditors have included a paragraph in their report regarding substantial doubt
about our ability to continue as a going concern. Our plans in this regard are
to seek additional funding through future equity private placements or debt
facilities. Without funding for one of our projects the Company would have to
rely primarily on raising capital through investors. There can be no guarantee
that we are capable of continuing to raise additional capital.
There is a limited current public market for our common stock.
Although our common stock is listed on the Over-the-Counter Bulletin
Board, there is a limited volume of sales, thus providing a limited liquidity
into the market for our shares. As a result of the foregoing, stockholders may
be unable to liquidate their shares for any reason.
Operating in Foreign Countries
Currently we have a signed definitive agreement to build a Voyager
Project in the UAE. Operating in a foreign country provides additional risks
such as, permitting and licensing can be more difficult to obtain, obtaining
personnel for the daily operations could present significant challenges, and if
the local government were to become unstable our results could be severely
affected.
Acts of Terrorism
Because the Voyager Project will depend upon tourism, if there is a
terrorist attack in the city or country where the project will be located, the
anticipated results could be dramatically affected.
Personnel
As of December 31, 2006, we had three Officers and Directors. The
Company pays approximately $35,000 a month in consulting fees to Synthetic
Systems LLC, an entity wholly owned by Richard Hannigan. We are dependent upon
Richard Hannigan, President, CEO and Director and Tracy Jones, COO and Director
and Myong Hannigan, Secretary and Treasurer. We do not have any employees at
this time and do not anticipate the need to hire any employees until such time
as we have been sufficiently capitalized.
Going Concern
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company has no established source
of revenue, has a working capital deficit of $4,290,908, total debt plus accrued
interest of $3,675,889 of which $1,210,000 is callable at any time and
$1,250,000 is due in 2007, and has an accumulated deficit of $13,966,083.
Additionally we have incurred significant losses of $1,886,694 and $1,736,658,
and used cash from operating activities of $771,807 and $887,534 in 2006 and
2005, respectively. All of this raises substantial doubt about the Company's
ability to continue as a going concern. These financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
The Company has limited operations and is still in the development stage. The
Company will need to raise a substantial amount of capital in order to continue
its business plan. Management intends to initial their business plan and will
continue to seek out joint venture partners, attempt to locate the appropriate
location for the Las Vegas Project as well as other projects and continually
seek funding opportunities
Management intends to use borrowings and security sales to mitigate the effects
of its cash position. However, no assurance can be given that debt or equity
financing, if and when required, will be available. The consolidated financial
statements do not include any adjustments relating to the recoverability and
classification of recorded assets and classification of liabilities that might
be necessary should the Company be unable to continue existence.
16
ITEM 7. FINANCIAL STATEMENTS.
VOYAGER ENTERTAINMENT INTERNATIONAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2006
VOYAGER ENTERTAINMENT INTERNATIONAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONTENTS
REPORT OF THE INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM ON THE
CONSOLIDATED FINANCIAL STATEMENTS F-1
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheet F-2
Consolidated Statements of Operations F-3
Consolidated Statement of Stockholders' deficit F-5
Consolidated Statements of Cash Flows F-6
Notes to Consolidated Financial Statements F-7-16
--------------------------------------------------------------------------------
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
Voyager Entertainment International, Inc. and Subsidiaries
Las Vegas, Nevada
We have audited the accompanying consolidated balance sheet of Voyager
Entertainment International, Inc. and subsidiaries as of December 31, 2006, and
the related consolidated statements of operations, stockholders' deficit, and
cash flows for the years ended December 31, 2006 and 2005. 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 audits.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). 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 audits provide a
reasonable basis for our opinion.
In our opinion, based on our audits, the financial statements referred to above
present fairly, in all material respects, the financial position of Voyager
Entertainment International, Inc. as of December 31, 2006, and the results of
its operations and cash flows for the years ended December 31, 2006 and 2005 in
conformity with accounting principles generally accepted in the United States.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has suffered losses from operations and
current liabilities exceed current assets, all of which raise substantial doubt
about its ability to continue as a going concern. Management's plans in regards
to these matters are also described in Note 1. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
/s/ De Joya Griffith & Company, LLC
CERTIFIED PUBLIC ACCOUNTANTS
Henderson, Nevada
April 10, 2007
F-1
VOYAGER ENTERTAINMENT INTERNATIONAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEET
December 31,
2006
-------------
ASSETS
CURRENT ASSETS
Cash $ 76,241
Loan origination costs net of amortization of $16,250 33,750
-------------
Total current assets 109,991
-------------
NOTE RECEIVABLE 500,000
FIXED ASSETS, net of accumulated depreciation of $26,505 16,147
-------------
Total assets $ 626,138
=============
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 1,042,660
Accrued expenses - related party 625,000
Loans and settlement payable 878,239
Notes payable 1,855,000
-------------
Total current liabilities 4,400,899
-------------
Total liabilities 4,400,899
COMMITMENTS & CONTINGENCIES
STOCKHOLDERS' DEFICIT
Preferred stock: $.001 par value; authorized 50,000,000 shares
Series A - 1,500,000 designated, none outstanding --
Series B - 10,000,000 designated, 1,000,000 outstanding 1,000
Common stock: $.001 par value; authorized 200,000,000 shares;
issued and outstanding: 113,842,905 113,844
Additional paid-in capital 12,043,353
Deferred construction costs paid with common stock (196,875)
Acquisition deposit paid with common stock (750,000)
Loan collateral paid with common stock (750,000)
Loan fees paid with common stock, net of accretion (270,000)
Accumulated deficit during the development stage (13,966,083)
-------------
Total stockholders' deficit (3,774,761)
-------------
Total liabilities and
stockholders' deficit $ 626,138
=============
The accompanying notes form an integral part of these consolidated financial
statements.
F-2
VOYAGER ENTERTAINMENT INTERNATIONAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
From inception
March 1, 1997 to
December 31, 2006 December 31, 2005 December 31, 2006
----------------- ----------------- -----------------
Revenues $ -- $ -- $ --
Operating Expenses:
Professional and consulting fees
(including $800,000 and $660,000
to related parties in 2006 and 2005,
respectively) 1,377,970 1,469,866 10,659,721
Project costs 46,119 11,592 138,298
Depreciation 10,143 7,566 27,117
Settlement expense -- -- 650,000
Other expense 144,547 177,924 854,914
------------ ------------ ------------
1,578,779 1,666,948 12,330,050
Operating loss (1,578,779) (1,666,948) (12,330,050)
Other income (expense):
Interest income 1,141 -- 1,141
Interest expense (309,056) (69,710) (1,637,174)
------------ ------------ ------------
(307,915) (69,710) (1,636,033)
Net Loss (1,886,694) (1,736,658) (13,966,083)
Preferred stock dividends -- -- (130,000)
------------ ------------ ------------
Net loss allocable to common stockholders $ (1,886,694) $ (1,736,658) $(14,096,083)
============ ============ ============
Net loss per common share - basic and
diluted $ (0.01) $ (0.02)
============ ============
Weighted average number of
common shares outstanding 89,541,635 72,741,543
============ ============
The accompanying notes form an integral part of these consolidated financial
statements.
F-3
VOYAGER ENTERTAINMENT INTERNATIONAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
FROM INCEPTION MARCH 1, 1997 TO December 31, 2006
Preferred Stock Series A Preferred Stock Series B common stock
------------------------ ------------------------ ------------
Shares Amount Shares Amount Shares Amount
------ ------ ------ ------ ------ ------
For the period since inception on March 1,
1997 to December 31, 2000 (as restated
for reorganization) -- $ -- -- $ -- 15,000,000 $15,000
Net loss for the year ended
December 31, 2001 -- -- -- -- -- --
--------- ------- --------- -------- ---------- -------
Balance at December 31, 2001 -- -- -- -- 15,000,000 15,000
Issuance of stock for cash and
services (pre-merger) 2,160,000 2,160 -- -- -- --
Conversion of preferred stock
to common stock (660,000) (660) -- -- 6,600,000 6,600
Acquisition of net assets of Dakota -- -- -- -- 11,615,000 11,615
Issuance of common stock for cash -
February 15, 2002 -- -- -- -- 800,000 800
Issuance of common stock for services -
April 2002 -- -- -- -- 200,000 200
Issuance of common stock for
Architectural agreement - May 2002 -- -- -- -- 2,812,500 2,813
Issuance of common stock for cash -
June 2002 -- -- -- -- 50,000 50
Issuance of common stock for
Architectural agreement - October 2002 -- -- -- -- 600,000 600
Issuance of common stock for
financing costs - November 2002 -- -- -- -- 650,000 650
Issuance of stock for services -
October 2002 -- -- -- -- 325,000 325
Net loss for the year ended
December 31, 2002 -- -- -- -- -- --
--------- ------- --------- -------- ---------- -------
Balance at December 31, 2002 1,500,000 1,500 -- -- 38,652,500 38,653
Issuance of common stock for
financing costs - June 2003 -- -- -- -- 2,600,000 2,600
Issuance of preferred stock for cash
June 2003 -- -- 1,000,000 1,000 -- --
Issuance of preferred stock for cash
August 2003 -- -- 500,000 500 -- --
Issuance of common stock for cash
September 2003 -- -- -- -- 769,222 769
BCF associated with preferred stock -- -- -- -- -- --
Amortization of beneficial conversion
feature in a manner similar to
preferred stock dividends -- -- -- -- -- --
Issuance of common stock for services
September 2003 -- -- -- -- 625,000 625
Issuance of common stock for cash
December 2003 -- -- -- -- 2,307,692 2,308
Issuance of common stock for cash -
December 2003 -- -- -- -- 1,538,461 1,538
Issuance of common stock for cash -
December 2003 -- -- -- -- 1,538,461 1,538
Issuance of common stock for cash -
December 2003 -- -- -- -- 192,308 192
Issuance of common stock for cash -
December 2003 -- -- -- -- 384,614 384
Issuance of preferred stock for
service RP - December 2003 -- -- (2,500,000) (2,500) -- --
Issuance of common stock for services -
December 2003 -- -- -- -- 1,163,000 1,163
Net loss for the year ended 12/31/03 -- -- -- -- -- --
--------- ------- --------- -------- ---------- -------
Balance at December 31, 2003 1,500,000 $ 1,500 4,000,000 $ 4,000 49,771,258 $49,770
========= ======= ========= ======== ========== =======
Issuance of common stock for cash
January 2004 -- -- -- -- 192,307 192
Issuance of common stock for cash
February 2004 -- -- -- -- 384,614 385
Issuance of common stock for cash
February 2004 -- -- -- -- 250,000 250
Issuance of common stock for cash
February 2004 -- -- -- -- 500,000 500
Issuance of common stock for services
February 2004 -- -- -- -- 425,000 425
Issuance of common stock for services
February 2004 -- -- -- -- 150,000 150
Issuance of common stock for services
February 2004 -- -- -- -- 150,000 150
Conversion of preferred stock to
common stock March 2004 (500,000) (500) -- -- 5,000,000 5,000
Conversion of preferred stock to
common stock March 2004 (500,000) (500) -- -- 5,000,000 5,000
Issuance of common stock for cash
March 2004 -- -- -- -- 384,614 385
Issuance of common stock for services
June 2004 -- -- -- -- 650,000 650
Issuance of common stock for cash
September 2004 -- -- -- -- 333,333 333
Issuance of common stock for cash
October 2004 -- -- -- -- 1,000,000 1,000
Issuance of common stock for services
October 2004 -- -- -- -- 500,000 500
Net loss for the year ended
December 31, 2004 -- -- -- -- -- --
--------- ------- --------- -------- ---------- -------
Balance at December 31, 2004 500,000 $ 500 4,000,000 $ 4,000 64,691,126 $64,690
========= ======= ========= ======== ========== =======
Issuance of common stock for services
January 2005 -- -- -- -- 500,000 500
Issuance of common stock for cash
February 2005 -- -- -- -- 500,000 500
Issuance of common stock for services
March 2005 -- -- -- -- 500,000 500
Issuance of common stock for cash
March 2005 -- -- -- -- 375,000 375
Issuance of common stock for cash
June 2005 -- -- -- -- 666,667 667
Issuance of common stock for cash
June 2005 -- -- -- -- 2,000,000 2000
Issuance of common stock for cash
July 2005 -- -- -- -- 200,000 200
Issuance of common stock for cash
July 2005 -- -- -- -- 666,667 667
Issuance of common stock for cash
July 2005 -- -- -- -- 166,666 167
Conversion of preferred stock to common
Stock August 2005 -- -- (2,500,000) (2,500) 5,000,000 5,000
Issuance of common stock for cash
September 2005 -- -- -- -- 100,000 100
Issuance of common stock for cash
September 2005 -- -- -- -- 500,000 500
Issuance of common stock for cash
November 2005 -- -- -- -- 333,333 333
Issuance of common stock for cash
November 2005 -- -- -- -- 800,000 800
Issuance of common stock for cash
November 2005 -- -- -- -- 666,667 667
Issuance of common stock for cash
December 2005 -- -- -- -- 166,667 167
Net loss for the year ended
December 31, 2005 -- -- -- -- -- --
--------- ------- --------- -------- ---------- -------
Balance at December 31, 2005 500,000 $ 500 1,500,000 $ 1,500 $77,832,793 $77,833
========= ======= ========= ======== ========== =======
Issuance of common stock for cash
February 2006 -- -- -- -- 166,667 167
Conversion of preferred series B stock
To common stock April 2006 -- -- (500,000) (500) 1,000,000 1,000
Issuance of common stock for Services
April 2006 -- -- -- -- 950,000 950
Issuance of common stock for Acquisition
Deposit April 2006 -- -- -- -- 3,000,000 3,000
Issuance of common Stock for services
May 2006 -- -- -- -- 100,000 100
Issuance of common stock for services
June 2006 -- -- -- -- 250,000 250
Conversion of Preferred Series A
To common Stock July 2006 (500,000) (500) -- -- 5,000,000 5,000
Issuance of common stock for loan
August 2006 -- -- -- -- 4,000,000 4,000
Issuance of common Stock for collateral
August 2006 -- -- -- -- 7,500,000 7,500
Issuance of common stock for services
November 2006 -- -- -- -- 9,812,500 9,813
Issuance of common stock as deposit
For acquisition November 2006 -- -- -- -- 2,000,000 2,000
Issuance of common stock for additional
Debt interest December 2006 -- -- -- -- 464,278 464
Issuance of common stock for cash
December 2006 -- -- -- -- 166,667 167
Issuance of common stock for services
December 2006 -- -- -- -- 1,600,000 1,600
Fair market adjustment to stock for
Deferred Construction Costs, December 2006 -- -- -- -- -- --
Accretion of loan costs to interest expense
December 2006 -- -- -- -- -- --
Net loss as of December 31, 2006 -- -- -- -- -- --
------ ------- ------- ------ --------- -----
Balance at December 31, 2006 -- -- 1,000,000 $1,000 113,842,905 $113,844
====== ======= ======= ====== ========= =====
Deficit
accumulated
Deferred during the Total
Additional construction Acquisition Loan Loan development stockholders'
paid-in capital costs deposit collateral Fee stage deficit
--------------- ----- ---------- ---------- ------ ----------- -------------
For the period since inception on March 1,
1997 to December 31, 2000 (as restated
for reorganization) $ 20,000 $ -- -- -- -- $ (87,193) $ (52,193)
Net loss for the year ended
December 31, 2001 -- -- -- -- -- (101,432) (101,432)
------------ ------------ --------- -------- ----- ----------- ----------
Balance at December 31, 2001 20,000 -- -- -- -- (188,625) (153,625)
Issuance of stock for cash and
services (pre-merger) 25,840 -- -- -- -- -- 28,000
Conversion of preferred stock
to common stock (5,940) -- -- -- -- -- --
Acquisition of net assets of Dakota (11,615) -- -- -- -- -- --
Issuance of common stock for cash -
February 15, 2002 399,200 -- -- -- -- -- 400,000
Issuance of common stock for services -
April 2002 399,800 -- -- -- -- -- 400,000
Issuance of common stock for
Architectural agreement - May 2002 18,138,722 (18,141,535) -- -- -- -- --
Issuance of common stock for cash -
June 2002 149,950 -- -- -- -- -- 150,000
Issuance of common stock for
Architectural agreement - October 2002 162,000 (162,600) -- -- -- -- --
Issuance of common stock for
financing costs - November 2002 162,500 -- -- -- -- -- 163,150
Issuance of stock for services -
October 2002 74,750 -- -- -- -- -- 75,075
Net loss for the year ended
December 31, 2002 -- -- -- -- -- -- (1,754,327)
------ ------------ -------- ------- -------- ----------- -----------
Balance at December 31, 2002 19,515,207 (18,304,135) -- -- -- (1,942,952) (691,727)
Issuance of common stock for
financing costs - June 2003 309,400 -- -- -- -- -- 312,000
Issuance of preferred stock for cash
June 2003 99,000 -- -- -- -- -- 100,000
Issuance of preferred stock for cash
August 2003 49,500 -- -- -- -- -- 50,000
Issuance of common stock for cash
September 2003 99,231 -- -- -- -- -- 100,000
BCF associated with preferred stock 130,000 -- -- -- -- -- 130,000
Amortization of beneficial conversion
feature in a manner similar to
preferred stock dividends (130,000) -- -- -- -- -- (130,000)
Issuance of common stock for services
September 2003 99,375 -- -- -- -- -- 100,000
Issuance of common stock for cash
December 2003 297,692 -- -- -- -- -- 300,000
Issuance of common stock for cash -
December 2003 198,462 -- -- -- -- -- 200,000
Issuance of common stock for cash -
December 2003 198,462 -- -- -- -- -- 200,000
Issuance of common stock for cash -
December 2003 24,808 -- -- -- -- -- 25,000
Issuance of common stock for cash -
December 2003 49,616 -- -- -- -- -- 50,000
Issuance of preferred stock for
service RP - December 2003 2,347,500 -- -- -- -- -- 2,350,000
Issuance of common stock for services -
December 2003 847,827 -- -- -- -- -- 848,990
Net loss for the year ended 12/31/03 -- -- -- -- -- $(7,886,847) $(1,199,632)
-------- ------- ------ ------- -------- ----------- -----------
Balance at December 31, 2003 $24,136,080 $ 18,304,135) -- -- -- $(7,886,847) $(1,999,632)
=========== ============ ====== ======= ======== =========== ===========
Issuance of common stock for cash
January 2004 24,808 -- -- -- -- -- 50,000
Issuance of common stock for cash
February 2004 49,615 -- -- -- -- -- 50,000
Issuance of common stock for cash
February 2004 199,500 -- -- -- -- -- 200,000
Issuance of common stock for cash
February 2004 318,325 -- -- -- -- -- 318,750
Issuance of common stock for services
February 2004 119,850 -- -- -- -- -- 120,000
Issuance of common stock for services
February 2004 119,850 -- -- -- -- -- 120,000
Issuance of common stock for services
February 2004 (4,500) -- -- -- -- -- --
Conversion of preferred stock to
common stock March 2004 (4,500) -- -- -- -- -- --
Conversion of preferred stock to
common stock March 2004 49,615 -- -- -- -- -- 50,000
Issuance of common stock for cash
March 2004 49,615 -- -- -- -- -- 50,000
Issuance of common stock for services
June 2004 322,350 -- -- -- -- -- 323,000
Issuance of common stock for cash
September 2004 49,667 -- -- -- -- -- 50,000
Issuance of common stock for cash
October 2004 149,000 -- -- -- -- -- 150,000
Issuance of common stock for services
October 2004 54,500 -- -- -- -- -- 55,000
Net loss for the year ended
December 31, 2004 -- -- -- -- -- (2,455,886) (2,455,886)
---------- ------------ --------- ------ ------- ----------- ----------
Balance at December 31, 2004 $25,683,910 $(18,304,135) -- -- -- $(10,342,732) $(2,893,767)
=========== ============ ========= ====== ======= ============ ===========
Issuance of common stock for services
January 2005 74,500 -- -- -- -- -- 75,000
Issuance of common stock for cash
February 2005 99,500 -- -- -- -- -- 100,000
Issuance of common stock for services
March 2005 159,500 -- -- -- -- -- 160,000
Issuance of common stock for cash
March 2005 74,625 -- -- -- -- -- 75,000
Issuance of common stock for cash
June 2005 99,333 -- -- -- -- -- 100,000
Issuance of common stock for cash
June 2005 298,000 -- -- -- -- -- 300,000
Issuance of common stock for cash
July 2005 69,800 -- -- -- -- -- 70,000
Issuance of common stock for cash
July 2005 99,333 -- -- -- -- -- 100,000
Issuance of common stock for cash
July 2005 24,833 -- -- -- -- -- 25,000
Conversion of preferred stock to common
Stock August 2005 (2,500) -- -- -- -- -- --
Issuance of common stock for cash
September 2005 32,900 -- -- -- -- -- 33,000
Issuance of common stock for cash
September 2005 164,500 -- -- -- -- -- 165,000
Issuance of common stock for cash
November 2005 49,667 -- -- -- -- -- 50,000
Issuance of common stock for cash
November 2005 119,200 -- -- -- -- -- 120,000
Issuance of common stock for cash
November 2005 99,333 -- -- -- -- -- 100,000
Issuance of common stock for cash
December 2005 24,833 -- -- -- -- -- 25,000
Net loss for the year ended
December 31, 2005 -- -- -- -- -- (1,736,658) (1,736,658)
------- ------- ------- ------ -------- ---------- -----------
Balance at December 31, 2005 27,171,267 $(18,304,135) -- -- -- $(12,079,389) $(3,132,424)
========== ============= ======= ====== ========= ============ ===========
Issuance of common stock for cash
February 2006 24,833 -- -- -- -- -- 25,000
Conversion of preferred series B stock
To common stock April 2006 (500) -- -- -- -- -- --
Issuance of common stock for Services
April 2006 141,550 -- -- -- -- -- 142,500
Issuance of common stock for Acquisition
Deposit April 2006 447,000 -- (450,000) -- -- -- --
Issuance of common Stock for services
May 2006 15,900 -- -- -- -- -- 16,000
Issuance of common stock for services
June 2006 34,750 -- -- -- -- -- 35,000
Conversion of Preferred Series A
To common Stock July 2006 (4,500) -- -- -- -- -- --
Issuance of common stock for loan
August 2006 396,000 -- -- -- (400,000) -- --
Issuance of common Stock for collateral
August 2006 742,500 -- -- (750,000) -- -- --
Issuance of common stock for services
November 2006 740,182 -- -- -- -- -- 750,000
Issuance of common stock as deposit
For acquisition November 2006 298,000 -- (300,000) -- -- -- --
Issuance of common stock for additional
Debt interest December 2006 27,393 -- -- -- -- -- 27,857
Issuance of common stock for cash
December 2006 24,833 -- -- -- -- -- 25,000
Issuance of common stock for services
December 2006 91,400 -- -- -- -- -- 93,000
Fair market adjustment to stock for
Deferred Construction Costs, December 2006 (18,107,260) 18,107,260 -- -- -- -- --
Accretion of loan costs to interest expense
December 2006 -- -- -- -- 130,000 -- 130,000
Net loss as of December 31, 2006 -- -- -- -- -- (1,886,694) (1,886,694)
---------- ---------- -------- ------- --------- ----------- ----------
Balance at December 31, 2006 $12,043,353 $ (196,875) $(750,000)$(750,000) (270,000) (13,966,083) (3,774,761)
========== =========== ======== ======= ========= =========== ==========
F-5
VOYAGER ENTERTAINMENT INTERNATIONAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF CASH FLOWS
From inception
March 1, 1997 to
December 31, 2006 December 31, 2005 December 31, 2006
----------------- ----------------- -----------------
Cash Flows from Operating Activities:
Net Loss $ (1,886,694) $ (1,736,658) $(13,966,083)
Adjustments to reconcile net loss to
net cash used by operating activities:
Depreciation 10,143 7,566 27,117
Issuance of common stock for services 286,500 503,000 5,518,315
Issuance of common stock for accrued
bonus 750,000 -- 750,000
Interest expense from the issuance of
common stock 34,118 -- 509,268
Accretion of debt issuance costs 146,250 -- 146,250
Changes in assets and liabilities:
Accounts payable and accrued expenses 47,876 48,558 1,036,401
Accrued expenses - related party (160,000) 290,000 625,000
Accrued settlement obligation -- -- 650,000
Net cash used in operating
activities (771,807) (887,534) (4,703,732)
------------ ------------ ------------
Cash flows used in Investing Activities:
Payments to acquire fixed assets (10,504) (14,889) (43,174)
Note receivable (500,000) -- (500,000)
------------ ------------ ------------
Net cash used in investing activities (510,504) (14,889) (543,174)
Cash flows provided by Financing Activities:
Proceeds from notes payable 1,250,000 -- 2,083,239
Proceeds from the sale of preferred stock -- -- 150,000
Proceeds from the sale of common stock 50,000 995,000 3,140,000
Payments for loan fees (50,000) -- (50,000)
Net cash provided by financing
activities 1,250,000 995,000 5,323,239
------------ ------------ ------------
Net increase (decrease) in cash (32,311) 92,577 76,241
Cash, beginning of year 108,552 15,974 --
------------ ------------ ------------
Cash, end of year $ 76,241 $ 108,552 $ 76,241
============ ============ ============
Cash paid for:
Interest $ 60,000 $ -- $ 60,000
Income Taxes $ -- $ -- $ --
Supplemental schedule of non-cash Investing
And Financing Activities:
Common stock issued for financing costs $ 400,000 $ -- $ 988,300
Common stock issued for loan collateral $ 750,000 $ -- $ 750,000
Deferred construction costs, adjusted
to fair value $(18,107,260) $ -- $ 196,875
Conversion of preferred shares $ 1,000 $ 5,000 $ 12,600
Common stock issued as acquisition deposit $ 750,000 $ -- $ 750,000
The accompanying notes form an integral part of these consolidated financial
statements.
F-6
VOYAGER ENTERTAINMENT INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION AND ORGANIZATION
Voyager Entertainment International, Inc. (the "Company"), a Delaware
corporation formerly known as Dakota Imaging, Inc. on January 31, 1991, is in
entertainment development business with plans to develop the world's tallest
Observation Wheel on the Las Vegas strip area. The financial statements reflect
from the period of inception of Outland Development in 1997. During April 2002,
the Company changed its name from Dakota Imaging, Inc. to Voyager Entertainment
International, Inc. and adopted a new fiscal year.
As used in these Notes to the Consolidated Financial Statements, the terms the
"Company", "we", "us", "our" and similar terms refer to Voyager Entertainment
International, Inc. and, unless the context indicates otherwise its consolidated
subsidiaries. The Company's wholly owned subsidiaries include Voyager Ventures,
Inc. ("Ventures"), a Nevada corporation, Outland Development, LLC ("Outland"), a
Nevada Limited Liability Corporation, and Voyager Entertainment Holdings, Inc.
("Holdings"), a Nevada corporation.
The Company is currently a development stage company reporting under the
provisions of Statement of Financial Accounting Standard ("FASB") No. 7,
"Accounting and Reporting for Development Stage Enterprises."
The consolidated financial statements include the accounts of the Company and
its subsidiaries. All significant intercompany transactions and accounts have
been eliminated in consolidation.
GOING CONCERN
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. There is no established source of
revenue, has a working capital deficit of $4,290,908, total debt plus accrued
interest of $3,675,899 of which $1,210,000 is callable at any time and
$1,250,000 is due in 2007, and has an accumulated deficit of $13,966,083.
Additionally we have incurred significant losses of $1,886,694 and $1,736,658,
and used cash from operating activities of $771,807 and $887,534 in 2006 and
2005, respectively. All of this raises substantial doubt about the Company's
ability to continue as a going concern. These financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
The Company has limited operations and is still in the development stage. The
Company will need to raise a substantial amount of capital in order to continue
its business plan. Management intends to initiate their business plan and will
continue to seek out joint venture partners, attempt to locate the appropriate
location for the Las Vegas Project as well as other projects and continually
seek funding opportunities.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management 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 and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
CASH
For the Statements of Cash Flows, all highly liquid investments with maturity of
three months or less are considered to be cash equivalents. There were no cash
equivalents as of December 31, 2006.
CONCENTRATIONS
The Company maintains cash balances at a financial institution in Nevada.
Accounts at this institution are insured by the Federal Deposit Insurance
Corporation ("FDIC") up to $100,000. From time to time the Company's cash
balance may exceed the FDIC limits. At December 31, 2006, the Company did not
have any accounts in excess of $100,000.
Due to the uniqueness of the Observation Wheel, we may encounter concentrations
with certain vendors who specialize in this type of construction.
F-7
FIXED ASSETS
Furniture, fixtures and equipment are stated at cost less accumulated
depreciation and amortization. Depreciation and amortization are provided for in
amounts sufficient to relate the cost of depreciable assets to operations over
their estimated service lives, principally on a straight-line basis. Estimated
service lives of property and equipment is 3 years.
INCOME TAXES
Income taxes are provided for using the liability method of accounting in
accordance with Statement of Financial Accounting Standard ("SFAS") No. 109,
"Accounting for Income Taxes." A deferred tax asset or liability is recorded for
all temporary differences between financial and tax reporting. Temporary
differences are the differences between the reported amounts of assets and
liabilities and their tax basis. Deferred tax assets are reduced by a valuation
allowance when, in the opinion of management, it is more likely than not that
some portion or all of the deferred tax assets will not be realized. Deferred
tax assets and liabilities are adjusted for the effect of changes in tax laws
and rates on the date of enactment.
STOCK BASED COMPENSATION
On January 1, 2006, we adopted the fair value recognition provisions of SFAS No.
123(R), "Accounting for Stock-Based Compensation", to account for compensation
costs under our stock option plans. We previously utilized the intrinsic value
method under Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees" (as amended).
We use the fair value method for equity instruments granted to employees and
non-employees and will use the Black Scholes model for measuring the fair value
of options, if issued. The stock based fair value compensation is determined as
of the date of the grant or the date at which the performance of the services is
completed (measurement date) and is recognized over the vesting periods.
NET LOSS PER COMMON SHARE
Net loss per share is calculated in accordance with SFAS No. 128, "Earnings Per
Share". The weighted-average number of common shares outstanding during each
period is used to compute basic loss per share. Diluted loss per share is
computed using the weighted averaged number of shares and dilutive potential
common shares outstanding. Potentially dilutive common shares consist of
employee stock options, warrants, and restricted stock, and are excluded from
the diluted earnings per share computation in periods where the Company has
incurred a net loss.
FAIR VALUE
The carrying amounts reflected in the consolidated balance sheets for cash,
accounts payable and accrued expenses approximate the respective fair values due
to the short maturities of these items. The Company does not hold any
investments that are available-for-sale.
ADVERTISING AND MARKETING COSTS
Advertising and marketing costs are charged to operations as incurred.
Advertising and marketing costs for the years ended December 31, 2006 and 2005
were $7,084 and $7,005, respectively.
RECLASSIFICATION
Certain reclassifications, which have no effect on net income (loss), have been
made in the prior period financial statements to conform to the current
presentation. Specifically, we have presented accrued interest relating the debt
on our balance sheet in accrued expenses.
NEW ACCOUNTING PRONOUNCEMENTS
In February 2006, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 155, "Accounting for Certain Hybrid Financial Instruments--an Amendment of
FASB Statements No. 133 and 140" ("SFAS No. 155"). SFAS No. 155 allows financial
instruments that contain an embedded derivative and that otherwise would require
bifurcation to be accounted for as a whole on a fair value basis, at the
holders' election. SFAS No. 155 also clarifies and amends certain other
provisions of SFAS No. 133 and SFAS No. 140. This statement is effective for all
financial instruments acquired or issued in fiscal years beginning after
September 15, 2006. We do not expect that the adoption of SFAS No. 155 will have
a material impact on our financial condition or results of operations.
In March 2006, the FASB issued SFAS No. 156, "Accounting for Servicing of
Financial Assets--an Amendment of FASB Statement No. 140" ("SFAS No. 156"). SFAS
No. 156 provides guidance on the accounting for servicing assets and liabilities
when an entity undertakes an obligation to service a financial asset by entering
into a servicing contract. This statement is effective for all transactions in
fiscal years beginning after September 15, 2006. We do not expect that the
adoption of SFAS No. 156 will have a material impact on our financial condition
or results of operations.
F-8
In July 2006, the FASB issued FIN 48, "Accounting for Uncertainty in Income
Taxes--an interpretation of FASB Statement No. 109" ("FIN 48"). FIN 48 clarifies
the recognition threshold and measurement of a tax position taken on a tax
return. FIN 48 is effective for fiscal years beginning after December 15, 2006.
FIN 48 also requires expanded disclosure with respect to the uncertainty in
income taxes. We are currently evaluating the requirements of FIN 48 and the
impact this interpretation may have on our financial statements.
In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements" (SFAS
157). SFAS 157 provides guidance for using fair value to measure assets and
liabilities. SFAS 157 addresses the requests from investors for expanded
disclosure about the extent to which companies measure assets and liabilities at
fair value, the information used to measure fair value and the effect of fair
value measurements on earnings. SFAS 157 applies whenever other standards
require (or permit) assets or liabilities to be measured at fair value, and does
not expand the use of fair value in any new circumstances. SFAS 157 is effective
for financial statements issued for fiscal years beginning after November 15,
2007 and will be adopted by the Company in the first quarter of fiscal year
2008. We do not expect that the adoption of SFAS 157 will have a material impact
on our financial condition or results of operations.
In September 2006, the FASB issued SFAS No. 158, "Statement of Financial
Accounting Standards" ("SFAS 158") which amends SFAS No. 87, 88, 106, and
132(R). Post application of SFAS 158, an employer should continue to apply the
provisions in Statements 87, 88, and 106 in measuring plan assets and benefit
obligations as of the date of its statement of financial position and in
determining the amount of net periodic benefit cost. SFAS 158 requires amounts
to be recognized as the funded status of a benefit plan, that is, the difference
between plan assets at fair value and the benefit obligation. SFAS 158 further
requires recognition of gains/losses and prior service costs or credits not
recognized pursuant to SFAS No. 87 or SFAS No. 106. Additionally, the
measurement date is to be the date of the employer's fiscal year-end. Lastly,
SFAS 158 requires disclosure in the financial statements effects from delayed
recognition of gains/losses, prior service costs or credits, and transition
assets or obligations. SFAS No. 158 is effective for years ending after December
15, 2006 for employers with publicly traded equity securities and as of the end
of the fiscal year ended after June 15, 2007 for employers without publicly
traded equity securities. We do not expect that the adoption of SFAS 158 will
have a material impact on our financial condition or results of operations.
In February 2007, the FASB issued Statement No. 159, "The Fair Value Option for
Financial Assets and Financial Liabilities, including an amendment of FASB
Statement No. 115" (FAS 159). FAS 159 permits companies to choose to measure
many financial instruments and certain other items at fair value that are not
currently required to be measured at fair value and establishes presentation and
disclosure requirements designed to facilitate comparisons between companies
that choose different measurement attributes for similar types of assets and
liabilities. The provisions of FAS 159 become effective as of the beginning of
our 2009 fiscal year. We do not expect that the adoption of SFAS 159 will have a
material impact on our financial condition or results of operations.
NOTE 2. NOTE RECEIVABLE
The Company issued $500,000 as a note receivable to a related party from the
proceeds of their debt secured in late 2006. This receivable bears no interest
and is unsecured. See Note 6 for additional information.
NOTE 3. FIXED ASSETS
Fixed assets and accumulated depreciation consists of the following:
December 31,
2006
-------------
Computer equipment $ 42,652
Accumulated depreciation (26,505)
-------------
$ 16,147
=============
F-9
NOTE 4. ACCRUED EXPENSES
Accrued expenses consist of the following:
December 31,
2006
-------------
Accounts payable $ 100,000
Accrued interest 942,660
-------------
$ 1,042,660
=============
NOTE 5. LOAN PAYABLE
Loans payable have no stated interest rate, are due on demand and unsecured.
Interest has been accrued at an estimated market interest rate of 8%, is
included in accrued expenses, and totaled $319,413 and $179,025 as of December
31, 2006 and 2005, respectively.
The original balance was $228,239 and the proceeds were received and used for
operating capital during the year ended December 31, 2002. In March 2003, a
claim of $1,460,000 was asserted by the lender. Although management believed the
claims were frivolous, due to the additional resources needed by management to
defend against these claims and the likely distraction of management's efforts
from moving forward with the Company's business plan, a settlement agreement was
executed with the lender in August 2003.
Pursuant to the Settlement Agreement, the Company agreed to pay a settlement
amount of an additional $650,000, without claiming any fault or wrong doing. As
of December 31, 2006, the total obligation included loans of $228,239 in
principal and the settlement obligation of $650,000, plus total accrued interest
of $319,143 amounting to an aggregate of $1,197,382. One half of this amount, or
$563,566 is due and payable at the closing of the first round of project funding
and the remaining balance is due and payable at the closing of any subsequent
project funding, neither of which have occurred as of December 31, 2006. Since
the loan payable does not have a maturity date, the entire balance has been
presented as a current liability. The debt holder is a shareholder in our
Company and owns approximately 7.4 million shares of our common stock.
F-10
NOTE 6. NOTES PAYABLE
Line of Credit
On November 19, 2002, the Company entered into a line of credit financing
agreement which entitled the Company to borrow from creditor up to an aggregate
of $2,500,000. Advances under this line of credit are based on achievement of
certain milestones pursuant to the agreement. Upon the receipt of funds, the
Company was required to issue up to 1,500,000 shares of its common stock on a
pro rata basis.
The Company borrowed $605,000 against this line of credit and issued 1,500,000
shares. The balance payable under this line of credit was due on April 15, 2003
and is secured by all of the Company's assets.
The original line of credit bore interest at the rate of 12% per annum. This
line of credit has expired and no principal or accrued interest has been paid
back. Consequently, during the year ended December 31, 2003, the Company agreed
to pay 100% interest related to this line of credit. Interest of $605,000 has
been accrued and included in accrued expenses in the accompanying consolidated
financial statements.
As of December 31, 2006, the total obligation including loans of $605,000, and
accrued interest of $605,000, amounted to $1,210,000. The debt holder has agreed
to be repaid from those funds received by the Company at its next project
funding. If the Company does not receive significant project funding it will not
be able to repay the debt. As collateral for the Loan and Security Agreement the
debt holder filed a UCC-1 against the assets and intellectual property of the
Company giving the debt holder the right to institute foreclosure proceedings
against the Company. Foreclosure proceedings could be instituted at any time if
the debt holder believes that he will not be repaid. As of the date of these
financial statements the debt holder has not indicated any intentions to
institute foreclosure proceedings.
Diversified Lending
On September 5, 2006, the Company entered into a note payable with Diversified
Lending Group, Inc. for $1,250,000. The Company is a joint tenant with Western
Architectural in this debt which bears interest of 14% and is due within one
year from the date of the note.
As consideration for the loan, the Company was required to pay $50,000 and issue
4,000,000 shares of its common stock, both of which have been completed. Also,
to collateralize the loan, the Company was required to issue 7,500,000 shares of
its common stock. The promissory note also holds an anti-dilution clause where
the Company is required to issue additional shares of its common stock to the
debt holder so that their 4% ownership is not diluted. As of December 31, 2006,
we issued an additional 464,278 of common stock relating to third quarter 2006
dilution and have accounted for this issuance as additional interest expense of
$27,857. At December 31, 2006 we have accrued an additional $6,261 of interest
relating to the year end dilution calculation which will result in us issuing an
additional 89,438 shares once these financial statements have been filed.
As the collateral, loan fees and anti-dilution components of the agreement are
dominated in Company common stock, the Company maintains the full risk of loss
and we have recorded the full debt component on our balance sheet.
From the proceeds of the debt facility we issued $500,000 to Western
Architectural Services, LLC and recorded an unsecured Note Receivable on our
balance sheet.
Year Ended December 31, Principal Payments
------------------
2007 $ 1,250,000
2008 -
Thereafter -
------------------
Total $ 1,250,000
==================
F-11
NOTE 7. RELATED PARTY TRANSACTIONS AND ACQUISITION
Related Party Transactions
During February 2004, the Company paid $300,000 in cash to Western Architectural
Services, LLC, an entity owned by an officer-stockholder and director of the
Company pursuant to a Contractor Agreement between Western Architectural
Services and the Company to design and build a car for the Voyager project and
conduct a feasibility study.
During the years ended December 31, 2006 and 2005, the Company awarded a bonus
of $380,000 payable to Synthetic Systems, LLC, an entity jointly owned by its
Chief Executive Officer and Secretary. At December 31, 2006, accrued expenses -
related party consists of the $625,000 unpaid bonus balance, which includes the
bonuses disclosed above.
During the years ended December 31, 2006 and 2005, the Company paid consulting
fees of approximately $35,000 per month to Synthetic Systems, LLC, for a total
of $420,000 in each year. Synthetic Systems is jointly owned by our Chief
Executive Officer and Secretary. The Company also paid to Synthetic Systems
LLC., office rent expenses of $34,694 and $31,794 and furniture and equipment
lease of $13,800 or $1,150 per month as of December 31, 2006 and 2005,
respectively.
On May 30, 2002, the Company executed a Contractor Agreement with Western
Architectural Services, LLC ("Western") where Western will provide to the
Company certain architectural services for the Las Vegas Observation Wheel
Project in exchange for which the Company issued 2,812,500 shares of restricted
common stock to Western. Although he was not an affiliate of the Company upon
execution of the Contractor Agreement, Westerns Chief Executive Officer is
currently an executive officer, director and significant stockholder of the
Company. We have accounted for these shares as Deferred Construction Costs in
these financial statements.
Western plans to sell the amount of common stock at the time before and during
the contract to purchase supplies and pay subcontractors. At the time the
contract was issued the shares of the Company were trading at $6.50 per share.
The current stock price of the Company has a trading range of $0.10 to $0.50. If
at the time Western performs the services contracted and the share price is
below $6.50 per share, the Company will be required to issue new shares to
Western in order for the contract to be fulfilled. Western's Chief Executive
Officer is currently an affiliate of the Company which will also limit the
amount of shares that can be sold based on the trading volume and shares
outstanding in accordance with Rule 144 of the Securities Act of 1933. As of
December 31, 2006, we have marked these shares to market in accordance with EITF
No. 96-18 "Accounting for Equity Instruments That Are Issued to Other Than
Employees for Acquiring, or in Conjunction with Selling, Goods or Services",
Issue 3, using the year end closing price of our stock. The change in valuation
was debited to additional-paid in capital due to the deferred construction cost
nature of these shares.
Acquisition
On April 10, 2006, Voyager entered into a Unit Purchase (Buy-Sell) Agreement
("Agreement") to acquire all the outstanding units of Western Architectural
Services, LLC ("Western") in exchange for a total of 5,000,000 shares of
Voyager's common stock ("Shares"). On September 11, 2006, Voyager believed it
had fully completed the necessary due diligence pursuant to the Agreement and
consequently delivered the Shares consideration as required for the final
closing. Upon further evaluation of Voyager's due diligence of Western pursuant
to Section 2.02 of the Agreement, it has been determined that the existing
limited liability company ("LLC") operating agreement of Western would need to
be modified in order for Voyager to continue the existing operations of Western.
On March 30 2007, Voyager and Western were not able to come to acceptable terms
with regards to the needed changes to the LLC operating agreement and therefore
cancelled the Agreement since the transaction did not meet all the requirements
of Section 2.02 of the Agreement and was deemed as if the acquisition
transaction was never closed.
As a result, the acquisition was nullified effective March 30, 2007. As a result
of the nullification of the acquisition transaction 2,500,000 shares of common
stock will be returned to the Company for cancellation and returned to the
treasury. The remaining 2,500,000 shares will be accounted for as a fee for the
nullification. The shares were valued at fair value of $0.15 per shares for a
total value of $375,000. As of the date of these financial statements the
Company and Western are in the process of cancelling the necessary shares under
the March 30, 2007 agreement.
We have removed Western from our financial statements as of December 31, 2006
due to the above and will subsequently remove the Acquisition Deposit when all
necessary shares have been cancelled and reissued.
NOTE 8. COMMITMENTS AND CONTINGENCIES
The Company shares office space with Synthetic Systems as previously disclosed.
The Company has no other commitments.
F-12
NOTE 9. STOCKHOLDERS' EQUITY
The authorized common stock of the Company consists of 200,000,000 shares of
common stock with par value of $0.001, 50,000,000 shares of series A preferred
stock with a par value of $0.001 an 10,000,000 shares of Series B Preferred
Stock..
PREFERRED STOCK
Convertible Preferred Stock - Series A
The Series A convertible preferred stock carries the following rights and
preferences:
o 10 to 1 voting rights per share
o Each share has 10 for 1 conversion rights to shares of common stock
o No redemption rights
During 2002, prior to the date of the Merger discussed in Note 1, the Company
issued 2,160,000 shares of convertible preferred stock as consideration for cash
and services, of which 660,000 shares were immediately converted to shares of
common stock, resulting in the Company having 3,660,000 shares of common stock
outstanding.
Effective February 8, 2002 the Company, as consideration for the Merger, issued
3,660,000 shares of its Series A convertible preferred stock in exchange for
100% of Voyager's outstanding common stock. Additionally, simultaneously upon
closing of the Merger 2,160,000 shares of the Series A convertible preferred
stock immediately converted into 21,600,000 shares of common stock, resulting in
a balance of 1,500,000 shares of convertible preferred stock remaining
outstanding. These amounts have been adjusted pursuant to reverse merger
accounting in the accompanying financial statements.
Immediately preceding the Merger, Dakota, the legal acquirer, had 11,615,000
shares of common stock outstanding.
On March 5, 2004, the Company's CEO converted 500,000 Series A Preferred shares
into 5,000,000 shares of common stock of the Company.
On March 31, 2004, a former officer and director converted 500,000 Series A
Preferred shares into 5,000,000 shares of common stock of the Company.
In September 2006, 500,000 Series A Preferred shares were converted into
5,000,000 shares of common stock of the Company by a non-officer.
Convertible Preferred Stock - Series B
The Series B convertible preferred stock carries the following rights and
preferences:
o 2 to 1 voting rights per share
o Each share has 2 for 1 conversion rights to shares of common stock
o No redemption rights
o Preferential liquidation rights to Series A preferred stock and common
stock
o Anti-dilution clauses in the event of a reverse split
In June 2003, the Company sold 1,000,000 of the Series B Preferred Stock Shares
for total cash consideration of $100,000 to one investor at $0.10 per share. The
Company recognized a beneficial conversion feature of $80,000 accounted for as a
preferred stock dividend during the year. Since these shares are immediately
convertible into common stock of the Company, pursuant to Emerging Issues Task
Force ("EITF") Nos. 00-27 and EITF 98-5, the Company recognized the dividend
immediately.
In August 2003, the Company sold 500,000 of the Series B Preferred Stock Shares
for total cash consideration of $50,000 to one investor at $0.10 per share. The
Company recognized a beneficial conversion feature of $50,000 accounted for as a
preferred stock dividend during the year. Since these shares are immediately
convertible into common stock of the Company, pursuant to EITF 00-27 and EITF
98-5, the Company recognized the dividend immediately.
In December 2003, the Company issued 2,500,000 of the Series B Preferred Stock
Shares for total consideration valued at $2,350,000, or $0.94 per share, to its
officer-stockholders. The fair value of the services received was determined
based on the fair value of the underlying trading common stock.
In August 2005, the Company's CEO converted 1,000,000 Series B Preferred shares
into 2,000,000 shares of common stock of the Company.
In August 2005, the Company's Secretary converted 1,000,000 Series B Preferred
shares into 2,000,000 shares of common stock of the Company.
F-13
In August 2005, an entity controlled by an officer and director of the Company
converted 500,000 Series B Preferred shares into 1,000,000 shares of common
stock of the Company.
In May 2006, an officer and director of the Company converted 500,000 Series B
Preferred Shares into 1,000,000 shares of common stock of the Company.
Common Stock Issuances
On February 15, 2002, the Company sold 800,000 restricted shares of common stock
at a price of $0.50 per share for $400,000, which represented the fair market
value of the common stock on date of issuance.
On April 5, 2002, the Company issued 200,000 restricted shares of common stock
in exchange for services performed totaling $200,000. The fair market value of
the common stock on the date of issuance totaled $400,000. Therefore, the
Company has recognized stock discount expense of $200,000.
On May 30, 2002, the Company executed a Contractor Agreement with Western
Architectural Services, LLC ("Western") where Western will provide to be
determined architectural services to the Company for its Las Vegas Observation
Wheel Project. The Company issued 2,812,500 shares of restricted common stock in
consideration for Western's contract sum of $18,141,533 classified as deferred
construction costs. See Note 7 above.
During June 2002, the Company sold 50,000 restricted shares of common stock at a
price of $3.00 per share solely to accredited investors for cash consideration
totaling $150,000, which represents the fair market value of the common stock on
date of issuance. Since the cash consideration received was from unrelated
parties, it was determined to best represent the fair market value of the shares
on the transaction date.
On October 28, 2002, the Company entered into a professional architectural
services agreement with an architect firm in exchange for 600,000 shares of
common stock. The Company's stock must be issued within 10 days of the
agreement. In addition, the Company is responsible for reimbursement of
expenses.
On November 19, 2002, the Company entered into a line of credit financing in the
amount of $1,000,000 in exchange for 650,000 shares of common stock. The fair
market value of the trading common stock on the date of issuance totaled
$163,150.
On December 9, 2002, the Company entered into a consulting agreement in exchange
for 325,000 shares of common stock. The fair market value of the trading common
stock on the date of issuance totaled $75,075.
In September 2003, the Company sold 769,222 shares of common stock for total
cash consideration of $100,000 to one investor, which represents the fair market
value of the common stock on date of issuance. Since the cash consideration
received was from unrelated parties, it was determined to best represent the
fair market value of the shares on the transaction date. The common stock was
offered in reliance upon the private offering exemptions contained in Sections
3(b) and 4(2) of the Securities Act of 1933, as amended, and Rule 506 of
Regulation D promulgated thereunder.
In September 2003, the Company also issued 625,000 shares of restricted common
stock to two individuals for consulting services rendered. These shares were
valued at the trading fair market value of $0.16 per share or total compensation
cost of $100,000.
In December 2003, an investor entered into an agreement to purchase 1,346,154
additional shares of common stock for cash proceeds of $175,000. These shares
were purchase and issued as follows: |X| In January 2004, $25,000 was received
from the sale of 192,307 shares of common stock pursuant to a purchase agreement
from December 2003, |X| In February 2004, $50,000 was received from the sale of
384,614 shares of common stock pursuant to a purchase agreement from December
2003, |X| In March 2004, $100,000 was received from the sale of 769,228 shares
of common stock pursuant to a purchase agreement from December 2003,
The common stock above was offered in reliance upon the private offering
exemptions contained in Sections 3(b) and 4(2) of the Securities Act of 1933, as
amended, and Rule 506 of Regulation D promulgated thereunder.
In February 2004, $300,000 was received for 750,000 shares of common stock. The
common stock was offered in reliance upon the private offering exemptions
contained in Sections 3(b) and 4(2) of the Securities Act of 1933, as amended,
and Rule 506 of Regulation D promulgated thereunder.
During February 2004, the Company also issued 725,000 shares of restricted
common stock to three consultants for services rendered. These shares were
valued at the fair market value ranging from $0.75 to $0.80 per share for total
consideration of $558,750.
F-14
On March 5, 2004, the Company's CEO converted 500,000 Series A Preferred shares
into 5,000,000 shares of common stock of the Company.
On March 31, 2004, a former officer and director converted 500,000 Series A
Preferred shares into 5,000,000 shares of common stock of the Company.
On June 17, 2004, the Company initiated negotiations to potentially purchase a
parcel of property in Las Vegas, Nevada At that time, the Company issued 500,000
shares of common stock as an incentive to the owner of that property which will
not be recovered regardless of whether the Company completes the transaction.
The shares were valued at the fair market value of $0.49 per share for a total
of $245,000.
On June 30, 2004, the Company issued 150,000 shares of common stock to an
individual for services rendered. These shares were valued at the fair market
value of $0.52 per share for total consideration of $78,000.
In September 2004, $50,000 was received for 333,333 shares of common stock. The
common stock was offered in reliance upon the private offering exemptions
contained in Sections 3(b) and 4(2) of the Securities Act of 1933, as amended,
and Rule 506 of Regulation D promulgated thereunder.
In October 2004, $150,000 was received for 1,000,000 shares of common stock. The
common stock was offered in reliance upon the private offering exemptions
contained in Sections 3(b) and 4(6) of the Securities Act of 1933, as amended,
and Rule 506 of Regulation D promulgated thereunder.
In October 2004, the Company issued 500,000 shares of common stock to an
individual for services rendered. These shares were valued at the fair market
value of $0.11 per share for total consideration of $55,000.
In January 2005, the Company issued 500,000 shares of common stock for
consulting services rendered in the first quarter of 2005. These shares were
valued at the fair value of $0.15 per share for total compensation of $75,000.
In February 2005, $100,000 was received for 500,000 shares of common stock at
$0.20 per share.
In March 2005, $75,000 was received for 375,000 shares of common stock at $0.20
per share.
In March 2005, the Company issued 500,000 shares of common stock for consulting
services rendered. These shares were valued at the fair value of $0.32 per share
for total compensation of $160,000.
In June 2005, $400,000 was received for 2,666,667 shares of common stock at
$0.15 per share.
In July 2005, $125,000 was received for 833,333 shares of common stock at $0.15
per share.
In July 2005, the Company issued 200,000 shares of common stock for consulting
services rendered. These shares were valued at the fair value of $0.35 per share
for total compensation of $70,000.
In August 2005, the Company's CEO converted 1,000,000 Series B Preferred shares
into 2,000,000 shares of common stock of the Company.
In August 2005, the Company's Secretary converted 1,000,000 Series B Preferred
shares into 2,000,000 shares of common stock of the Company.
In August 2005, an entity controlled by an officer and director of the Company
converted 500,000 Series B Preferred shares into 1,000,000 shares of common
stock of the Company.
In September 2005, the Company issued 600,000 shares of common stock for
consulting services rendered. These shares were valued at the fair value of
$0.33 per share for total compensation of $198,000.
In November 2005, $25,000 was received for 166,667 shares of common stock at
$0.15 per share.
In December 2005, $270,000 was received for 1,800,000 shares of common stock at
$0.15 per share.
In February 2006, $25,000 was received for 166,667 shares of common stock at
$0.15 per share.
In April 2006, the Company issued 3,000,000 shares of common stock in
anticipation of the Western merger, see Note 7. These shares were valued at fair
value of $0.15 per share or $450,000.
In April 2006, the Company issued 950,000 shares of common stock for consulting
services rendered. These shares were valued at the fair value on the date of
grant of $0.15 per share for total compensation of $142,500.
F-15
In May 2006, an officer and director of the Company converted 500,000 Series B
Preferred Shares into 1,000,000 shares of common stock of the Company.
In May 2006, the Company issued 100,000 shares of common stock for consulting
services rendered. These shares were valued at the fair value of $0.16 per share
on the date of grant for total compensation of $16,000.
In June 2006, the Company issued 250,000 shares of common stock for consulting
services rendered. These shares were valued at the fair value per share of $0.14
per share on the date of grant for total compensation of $35,000.
In September 2006, 500,000 Series A Preferred shares were converted into
5,000,000 shares of common stock of the Company by a non-officer.
In August 2006, the Company issued 4,000,000 and 7,500,000 shares of common
stock in association with loan origination costs and collateral for the loan,
valued at fair value on the issuance date at $0.10 per share for a total value
of $400,000 and $750,000, respectively.
In November 2006, the Company issued 9,812,500 shares of common stock for
consulting services rendered. These shares were valued at the fair value of
$0.08 per share on the date of grant for total compensation of $750,000.
In November 2006, the Company issued 2,000,000 shares of common stock in
anticipation of the Western merger, see Note 7. These shares were valued at fair
value of $0.15 per share for a total value of $300,000.
In December 2006, the Company issued 464,278 shares of common stock due to the
anti-dilution clause in our debt agreement, see Note 6 above. The shares were
valued at the fair value of $0.06 per share
In December 2006, $25,000 was received for 166,667 shares of common stock at
$0.15 per share.
In December 2006, the Company issued 1,000,000 shares of common stock for
consulting services rendered. 1, 000,000 shares were valued at the fair value of
$.058 per share on the date of grant for total compensation of $58,000 and
600,000 shares were valued at the fair value of $0.06 per share for a total
value of $36,000.
Stock Option Plan
The Company's stockholders approved the 2002 Stock Option Plan on April 2, 2002
at the Company's annual meeting. The plan authorizes the Company to issue
5,000,000 shares of common stock for issuance upon exercise of options.
The plan is intended to encourage directors, officers, employees and consultants
of the Company to acquire ownership of common stock. Officers (including
officers who are members of the Board of Directors), directors (other than
members of the Stock Option Committee (the "Committee") to be established to
administer the Stock Option Plan) and other employees and consultants of the
Company and its subsidiaries (if established) will be eligible to receive
options under the planned Stock Option Plan. The Committee will administer the
Stock Option Plan and will determine those persons to whom options will be
granted, the number of options to be granted, the provisions applicable to each
grant and the time periods during which the options may be exercised. No options
may be granted more than ten years after the date of the adoption of the Stock
Option Plan.
Unless the Committee, in its discretion, determines otherwise, non-qualified
stock options will be granted with an option price equal to the fair market
value of the shares of common stock to which the non-qualified stock option
relates on the date of grant. In no event may the option price with respect to
an incentive stock option granted under the Stock Option Plan be less than the
fair market value of such common stock to which the incentive stock option
relates on the date the incentive stock option is granted. Each option granted
under the Stock Option Plan will be exercisable for a term of not more than ten
years after the date of grant. Certain other restrictions will apply in
connection with this Plan when some awards may be exercised.
In the event of a change of control (as defined in the Stock Option Plan), the
date on which all options outstanding under the Stock Option Plan may first be
exercised will be accelerated. Generally, all options terminate 90 days after a
change of control. As of December 31, 2006, no options have been issued under
this plan.
F-16
NOTE 11. INCOME TAXES
No tax benefit has been reported in connection with the net operating loss carry
forwards in the consolidated financial statements as the Company believes it is
more likely than not that the net operating loss carry forwards will expire
unused. Accordingly, the potential tax benefits of the net operating loss carry
forwards are offset by a valuation allowance of the same amount. Net operating
loss carry forwards start to expire in 2021.
The components of the Company's deferred tax asset as of December 31, 2006 and
2005 are as follows:
2006 2005
----------- -----------
Net operating loss carry forward $ 4,557,900 $ 4,027,500
Valuation allowance (4,557,900) (4,027,500)
----------- -----------
Net deferred tax asset $ -- $ --
=========== ===========
A reconciliation of income taxes computed at the statutory rate to the
income tax amount recorded is as follows:
2006 2005 Since Inception
----------- ----------- ---------------
Tax at statutory rate (35%) $ 530,400 $ 477,500 $ 4,557,900
Increase in valuation allowance (530,400) (477,500) (4,557,900)
----------- ----------- -----------
Net deferred tax asset $ -- $ -- $ --
=========== =========== ===========
NOTE 12. SUBSEQUENT EVENTS
In March 2007, the Company issued 1,000,000 shares of common stock for
consulting services rendered. These shares were valued at the fair value on the
date of grant for total compensation of $100,000 or $0.10 a share.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
On January 17, 2006 Stonefield Josephson, Inc. ("Stonefield") resigned as the
Company's independent registered public accounting firm.
As a result, the Company's board of directors believed that it was in the best
interest of the Company to seek local representation. On January 23, 2006, upon
approval of the board of directors,the Company engaged De Joya Griffith &
Company, LLC ("De Joya Griffith") of Las Vegas, Nevada to serve as the Company's
independent auditors.
Stonefield Josephson, Inc. had audited the Company's financial statements for
each of the two fiscal years ended December 31, 2004 and December 31, 2003. The
report of Stonefield Josephson, Inc. for each of those years did not contain an
adverse opinion or disclaimer of opinion and was not modified as to uncertainty,
audit scope, or accounting principles, except that the audit report of
Stonefield Josephson, Inc. on the financial statements of the registrant as of
and for the fiscal year ended December 31, 2004 contained an explanatory
paragraph expressing substantial doubt about the registrant's ability to
continue as a going concern.
17
During the two most recent fiscal years and the subsequent interim period
through the date of Stonefield's resignation there were no disagreements with
Stonefield Josephson, Inc. on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure which, if not
resolved to the satisfaction of Stonefield Josephson, Inc., would have caused it
to make reference to the subject matter of the disagreement in connection with
its report.
There were no other "reportable events" as that term is described in Item 304
(a)(1)(iv)(B) of Regulation S-B occurring within the registrant's two most
recent fiscal years and through the subsequent interim period through the date
of Stonefield's resignation.
During the two most recent fiscal years ended December 31, 2005 and December 31,
2004 and the subsequent interim period ending through the date of engagement,
the Company did not consult De Joya Griffith with respect to the application of
accounting principles to a specified transaction, either completed or proposed,
or the type of audit opinion that might be rendered on the Company's
consolidated financial statements, or any disagreement as described under Item
304(a)(1)(iv)(B) of Regulation S-B, or event described under Item 304(a)(2) of
Regulation S-B.
ITEM 8A. CONTROLS AND PROCEDURES
We maintain disclosure controls and procedures that are designed to
ensure that information required to be disclosed in the Company's Exchange Act
reports is recorded, processed, summarized and reported within the time periods
specified in the SEC's rules and forms, and that such information is accumulated
and communicated to our management, including our Chief Executive Officer and
Chief Financial Officer, as appropriate, to allow timely decisions regarding
required disclosure. Management recognizes that any controls and procedures, no
matter how well designed and operated, can provide only reasonable assurance of
achieving the desired control objectives, and management necessarily was
required to apply its judgment in evaluating the cost-benefit relationship of
possible controls and procedures. We do realize that we are a small company and
as a small company with only the officers and directors participating in the day
to day management, with the ability to override controls, each officer and
director has multiple positions and responsibilities that would normally be
distributed among several employees in larger organizations with adequate
segregation of duties to ensure the appropriate checks and balances.
EVALUATION OF DISCLOSURE, CONTROLS AND PROCEDURES
--------------------------------------------------
Based on their evaluation of the Company's disclosure controls and procedures
(as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act
of 1934) as of the end of the period covered by this annual report on Form
10-KSB the Company's chief executive officer has concluded that the Company's
disclosure controls and procedures are designed to ensure that information
required to be disclosed by the Company in the reports that it files or submits
under the Exchange Act is recorded, processed, summarized and reported within
the time periods specified in the SEC's rules and forms and are operating in an
effective manner.
CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING
------------------------------------------------------
There were no significant changes to our internal controls or in other factors
that could significantly affect internal controls over financial reporting
subsequent to the date of our accountant's evaluation.
ITEM 8B. OTHER INFORMATION
For the period ending September 30, 2006 the Company filed financial statement
and the 10-QSB for that period to reflect the acquisition of Western
Architectural Services. As a result of the cancellation of the acquisition it
will be necessary to amend the 10-QSB for the period ending September 30, 2006.
The amendment will extract any information from the financial statements
referring to Western and will only be based on the financial results of Voyager.
18
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth the names and positions of our executive
officers and directors. Directors will be elected at our annual meeting of
stockholders and serve for one year or until their successors are duly elected
and qualified. Officers are elected by the Board and their terms of office are,
except to the extent governed by employment contract, at the discretion of the
Board.
--------------------------------------------------------------------------
Name Age Positions and Offices held
--------------------------------------------------------------------------
Richard Hannigan 57 President, CEO and
Director
--------------------------------------------------------------------------
Tracy Jones 54 Chief Operating
Officer and Director
--------------------------------------------------------------------------
Myong Hannigan 58 Secretary, Treasurer and
Director
--------------------------------------------------------------------------
Duties, Responsibilities and Experience
Richard L. Hannigan, Sr., has been the Company's President and Chief
Executive Officer and a Director since February 8, 2002. Mr. Hannigan also
serves as the President, Chief Executive Officer and a Director of Voyager
Entertainment Holdings, Inc., our wholly-owned subsidiary ("VEHI"). Mr. Hannigan
has been President of a design and construction company, Synthetic Systems,
Inc., since 1991. This Company specializes in custom designs for interior and
exterior casino construction. Under Mr. Hannigan's control, Synthetic Systems,
Inc. has been involved in several casino projects in Las Vegas, including the
Luxor Hotel Casino, its interior themed areas and exterior main entry Sphinx.
Prior to forming Synthetic Systems, Inc., Mr. Hannigan owned and operated two
consulting and construction companies from 1983-1991. These companies,
Architectural Services, Inc. and Architectural Systems, Inc., respectively, have
been responsible for construction projects located in Las Vegas, Palm Springs,
Los Angeles and Salt Lake City Mr. Hannigan has also consulted for exterior
glazing and exotic fenestrations on commercial as well as casino companies in
Las Vegas.
Tracy Jones, has been the Company's Chief Operating Officer and became
a Board member, on May 26, 2003. Mr. Jones also serves as the Chief Operating
Officer of VEHI, our wholly-owned subsidiary. Mr. Jones formed Western
Architectural Services, LLC ("Western") in 1982, as an architectural design and
fabrication company. Over the past 20 years Mr. Jones has been instrumental in
the development of "themed" environments for the Hotel/Casino, Restaurant, and
Theme Park industry. At Western, Mr. Jones has revolutionized the use of
digitized computer enhancement for the replication of historical features.
Mr. Jones created methods that reduced the time to produce large-scale
projects such as the Statue of Liberty at the New York - New York Hotel and
Casino in Las Vegas. Previously, this project would have taken almost 1-1/2
years to recreate. However, with methods developed at Western, this project was
fabricated in just over 6 months.
Mr. Jones has a history of producing the most difficult projects on
time, and on budget. With his new position at the Company, Mr. Jones can take
this same approach to developing the Observation Wheels. Through many years of
difficult construction projects and budgetary constraints, Mr. Jones has
developed creative and effective means of manufacturing and construction that
will revolutionize] this industry.
Mr. Jones will bring his expertise of manufacturing to this world class
project. Mr. Jones will focus on product development, quality control, safety,
state and federal regulations, freight issues, and on-time production and
overall construction review.
Myong Hannigan has served as Secretary of the Company, and a Board
member, since April 4, 2004. Ms. Hannigan also serves as the Secretary and
Treasurer of VEHI, our wholly-owned subsidiary. Ms. Hannigan attended college at
Seoul University in Seoul, South Korea for general studies and business
management. Ms. Hannigan has been a managing partner of a design and
construction company, Synthetic Systems, Inc., since 1991. This Company
specializes in custom design for interior and exterior casino construction.
Prior to Synthetic Systems, Inc., Ms. Hannigan was a managing partner for
Architectural Services, Inc. and Architectural Systems, Inc., from 1983-1991.
This company specialized in design and installation of custom glass and glazing
systems. Prior to Architectural Services, Inc. and Architectural Systems, Ms.
Hannigan owned and managed Antiqua Stain Glass Company in Honolulu, Hawaii from
1979-1981, which was relocated from Bloomington, Illinois (1976-1979). This
company specialized in design, manufacturing, installation and retail/wholesale
products. Ms. Hannigan is the wife of Richard Hannigan, President, Chief
Executive Officer and Director of the Company.
19
AUDIT COMMITTEE AND FINANCIAL EXPERT
The Board of Directors does not have a separate Audit Committee; rather
the Board as a whole performs all functions of an Audit Committee. The Board
currently does not have an "audit committee financial expert" as defined by the
Securities and Exchange Commission Regulation S-B, Item 401(c)(2). The Board
believes that, given the developmental stage of the Company, the Company is not
currently in a position to attract the services of a Board member who does
qualify as a financial expert. However, the Board will continue its search for
an individual who would qualify as a financial expert.
BOARD OF DIRECTORS COMMITTEES AND COMPENSATION
COMPENSATION COMMITTEE INTERLOCK AND INSIDER PARTICIPATION
The Board of Directors does not have a Compensation Committee. Richard
Hannigan, President, oversaw the compensation of our executive officers.
BOARD OF DIRECTOR'S REPORT ON EXECUTIVE REPORT ON EXECUTIVE COMPENSATION
General. As noted above, our Board of Directors does not have a
Compensation Committee and, accordingly, during the year ended December 31,
2006, the Board of Directors, through the President, reviewed and approved the
compensation of our executive officers.
Overall Policy; Significant Factors. The compensation decisions made by
the Board of Directors in respect of our executive officers were influenced by
two major factors. First, our start-up nature brings with it all of the normal
capital requirements to sustain growth; therefore, certain stock compensation
was granted in lieu of salaries or commissions for services rendered. This
practice may be extended into the future on a case-by-case basis. Finally, as we
continue to mature, certain additions to the executive staff will be required.
As we are required to seek talent in the outside market, we will be required to
provide a competitive compensation package.
As an overall policy, however, the Board continues to believe that
long-term compensation tied to the creation of stockholder value should
constitute a significant component of the compensation to be earned by our
executive officers. In this respect, it will be the Board's policy to attempt to
restrain base cash compensation (subject to competitive pressures), while
providing the incentive for management to increase stockholder value by
providing such officers with significant numbers of market-price stock that will
not confer value upon the officers unless and until the Company's share price
rises. The Board of Directors expects that stock options will constitute a
significant component of the compensation package provided to executive
officers.
The Board believes that cash bonuses are, at times, appropriate based
upon the performance of our business compared to our internal expectations and
general business conditions.
STOCK OPTION PLAN
Our stockholders approved the 2002 Stock Option Plan on April 2, 2002
at our annual meeting. The plan authorizes the Company to issue 5,000,000 shares
of common stock for issuance upon exercise of options.
The plan is intended to encourage directors, officers, employees and
consultants of the Company to acquire ownership of common stock. Officers
(including officers who are members of the Board of Directors), directors (other
than members of the Stock Option Committee (the "Committee") to be established
to administer the Stock Option Plan) and other employees and consultants of the
Company and its subsidiaries (if established) will be eligible to receive
options under the planned Stock Option Plan. The Committee will administer the
Stock Option Plan and will determine those persons to whom options will be
granted, the number of options to be granted, the provisions applicable to each
grant and the time periods during which the options may be exercised. No options
may be granted more than ten years after the date of the adoption of the Stock
Option Plan.
20
Unless the Committee in its discretion determines otherwise,
non-qualified stock options will be granted with an option price equal to the
fair market value of the shares of common stock to which the non-qualified stock
option relates on the date of grant. In no event may the option price with
respect to an incentive stock option granted under the Stock Option Plan be less
than the fair market value of our common stock on the date the incentive stock
option is granted. Each option granted under the Stock Option Plan will be
exercisable for a term of not more than ten years after the date of grant.
Certain other restrictions will apply in connection with this Plan when some
awards may be exercised.
In the event of a change of control (as defined in the Stock Option
Plan), the date on which all options outstanding under the Stock Option Plan may
first be exercised will be accelerated. Generally, all options terminate 90 days
after a change of control. As of December 31, 2006, no options have been issued
under this plan.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires our executive officers and directors, and persons who
beneficially own more than ten percent of our common stock, to file initial
reports of ownership and reports of changes in ownership with the SEC. Executive
officers, directors and greater than ten percent beneficial owners are required
by SEC regulations to furnish us with copies of all Section 16(a) forms they
file. Based upon a review of the copies of such forms furnished to us, and
written representations from our executive officers and directors, our belief is
that during and prior to the year ended 2006, all reports were filed timely as
required except for the following:
Officer, Director or 10% Stockholder Required Form Transaction and Date
Richard Hannigan Form 4 Converted 1,000,000 shares of Series B
Convertible Preferred Stock into 2,000,000
shares of common stock on August 17, 2005
Form 4 Issued 2,550,000 shares of common stock as
convert bonus and accrued salary payable on
November 20, 2006
Myong Hannigan Form 4 Converted 1,000,000 shares of Series B
Convertible Preferred Stock into 2,000,000
shares of common stock on August 17, 2005
Form 4 Issued 7,162,500 shares of common stock as
convert bonus and accrued salary payable on
November 20, 2006
Tracy Jones Form 4 Converted 500,000 shares of Series B
Convertible Preferred Stock into 1,000,000
shares of common stock on August 17, 2005
Form 4 Converted 500,000 shares of Series B
Convertible Preferred Stock into 1,000,000
shares of common stock on August 17, 2005
Form 4 Issued 3,000,000 shares of common stock for
For the acquisition of Western Architectural
21
CODE OF ETHICS
The Company has not adopted a code of ethics primarily because there are only
three officers and directors who have focused mainly on acquiring a suitable
site location and financing for the project. The Company plans to adopt a code
of ethics as soon as practicable.
ITEM 10. EXECUTIVE COMPENSATION
The following table sets forth the compensation for the fiscal
period(s) for the past three years for our Executive Officers who served in
those positions, and the remaining two executive officers of the Company who
were serving as executive officers as of December 31, 2006.
SUMMARY COMPENSATION TABLE
===========================================================================================================================
Long Term Compensation
===========================================================================================================================
===========================================================================================================================
Annual Compensation Awards Payouts
===========================================================================================================================
===========================================================================================================================
Other Annual Restricted Securities All Other
Name and Principle Salary Bonus Compensation Stock Underlying LTIP Payouts Compensation
Position Year ($) ($)(1) ($)(2) Award(s) ($) Options/SARs (#) ($) ($)
===========================================================================================================================
Richard Hannigan
President/CEO/ 2006 -0- 190,000 210,000 -0- -0- -0- -0-
Director
Tracy Jones 2006 -0- -0- -0- -0- -0- -0- -0-
COO/Director
Myong Hannigan (3) 2006 -0- 190,000 210,000 -0- -0- -0- -0-
Secretary
Richard Hannigan
President/CEO/ 2005 -0- 190,000 210,000 -0- -0- -0- -0-
Director
Tracy Jones 2005 -0- -0- -0- -0- -0- -0- -0-
COO/Director
Myong Hannigan (3) 2005 -0- 190,000 210,000 -0- -0- -0- -0-
Secretary
Richard Hannigan 2004 $-0- $185,500 145,000 -0- -0- -0- -0-
President/CEO/
Director
Tracy Jones 2004 $-0- -0- -0- -0- -0- -0- -0-
COO/Director
Myong Hannigan (3) 2004 $-0- $185,000 145,000 -0- -0- -0- -0-
Secretary
===========================================================================================================================
(1) 2005/2006 Bonus: The Company awarded a cash bonus of $380,000 payable to
Synthetic Systems, Inc. for each respective year. The 2005 bonus was
retired by the issuance of common stock. Synthetic Systems, Inc. is jointly
owned equally by Richard L. Hannigan Sr., our President, and Myong
Hannigan, our Secretary. The total bonus of $380,000 will be issued to
Synthetic Systems at the appropriate time when the Company deems it
practicable.
2004 Bonus: The Company awarded a cash bonus of $370,000 payable to
Synthetic Systems, Inc. Synthetic Systems, Inc. is jointly owned equally by
Richard L.Hannigan Sr., our President, and Myong Hannigan our Secretary.
The total bonus of $370,000 will be issued to Synthetic Systems at the
appropriate time when the Company deems it practicable.
22
(2) 2005/2006: Other Annual Compensation for fiscal year 2005 includes (i)
$420,000 in professional consulting fees paid by the Company to Synthetic
Systems, Inc., an entity owned by Richard and Myong Hannigan (Mr. Hannigan
$210,000 and Ms. Hannigan $210,000)
2004: Other Annual Compensation for fiscal year 2004 includes (i) $290,000
in professional consulting fees paid by the Company to Synthetic Systems,
Inc., an entity owned jointly and equally by Richard and Myong Hannigan
(Mr. Hannigan received $145,000 and Ms. Hannigan received $145,000 for a
total of $290,000).
(3) Myong Hannigan is the wife of Richard Hannigan, Sr.
COMPENSATION PURSUANT TO PLANS
None.
PENSION TABLE
None.
OTHER COMPENSATION
None.
COMPENSATION OF DIRECTORS
None.
TERMINATION OF EMPLOYMENT
There are no compensatory plans or arrangements, including payments to be
received from the Company, with respect to any person named in Cash
Consideration set out above which would in any way result in payments to any
such person because of his resignation, retirement, or other termination of such
person's employment with the Company or its subsidiaries, or any change in
control of the Company, or a change in the person's responsibilities following a
change in control of the Company.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
EQUITY COMPENSATION PLAN INFORMATION
========================================================================================================================
Plan category Number of securities remaining
Number of securities to Weighted average available for future issuance
be issued upon exercise exercise price of under equity compensation plans
of outstanding options, outstanding options, (excluding securities reflected
warrants and rights warrants and rights in column (a))
========================================================================================================================
(a) (b) (c)
========================================================================================================================
Equity compensation plans approved by -0- -0- 5,000,000
security holders (1) (common stock)
========================================================================================================================
Equity compensation plans not approved
by security holders
========================================================================================================================
Total -0- -0- 5,000,000
========================================================================================================================
(1) On April 2, 2002, the Company's stockholders approved the 2002 Stock Option
Plan, authorizing the issuance of up to 5,000,000 shares of common stock under
the Plan.
23
There were no stock options issued to any employee or consultants for the year
ending December 31, 2006 and there have not been any options issued since
inception. The board of directors determines on an individual basis as to
whether the Company should issue stock for services. There are no current plans
to issue additional stock for services. However, as the Company conducts
business there may be situations from time to time where the Company may elect
to issue stock for services.
The following table sets forth information as of March 31, 2007 with
respect to the beneficial ownership of the Company's common stock, Series A
Convertible Preferred Stock and Series B Convertible Preferred Stock by (i) each
person who, to the knowledge of the Company, beneficially owned or had the right
to acquire more than 5% of the outstanding common stock, Series A Convertible
Preferred Stock and Series B Convertible Preferred Stock, (ii) each director and
executive officer of the Company and (iii) all executive officers and directors
of the Company as a group.
=======================================================================================================
Title of Class Percent
Name and Amount and Nature of of Class
Address of Beneficial Owner Beneficial Owner(1) (2)
=======================================================================================================
=======================================================================================================
Gregg Giuffria (4)
8617 Rainbow Ridge Dr
Las Vegas, NV 89117 10,000,000 8.7%
=======================================================================================================
Don and Nancy Tyner (4)
9807 Highridge
Las Vegas, NV 89134 7,450,694 6.4%
=======================================================================================================
Richard Hannigan (5)
President, CEO
4483 West Reno Avenue
Las Vegas, NV 89118 34,947,500 30.4%
=======================================================================================================
Myong Hannigan (5)
Secretary
4483 West Reno Avenue
Las Vegas, NV 89118 24,197,500 21.0%
=======================================================================================================
Tracy Jones
COO
4483 West Reno Avenue
Las Vegas, NV 89118 6,717,500 5.8%
=======================================================================================================
All Directors & Officers as a Group 41,665,000 36.2 %
=======================================================================================================
=======================================================================================================
Gregg Giuffria -0- -0-
=======================================================================================================
Richard Hannigan
President, CEO -0- -0-
=======================================================================================================
Myong Hannigan
Secretary -0- -0-
=======================================================================================================
Tracy Jones
COO -0- -0-
=======================================================================================================
All Directors & Officers as a Group -0- -0-
=======================================================================================================
24
Series B Preferred Stock
=======================================================================================================
Dan and Jill Fugal (3) 1,000,000 100.0%
1216 N 600 W
Pleasant Grove UT 84062
=======================================================================================================
Richard Hannigan
President, CEO -0- 0.0%
=======================================================================================================
Myong Hannigan
Secretary -0- 0.0%
=======================================================================================================
Tracy Jones
COO -0- 0.0%
=======================================================================================================
All Directors & Officers as a Group (8) -0- 0.0%
==========================================================================================
(1) Pursuant to the rules of the Securities and Exchange Commission, shares
shown as "beneficially" owned include those shares over which the
individual has voting power, including power to vote, or direct the
voting of, such security, and/or investment power, including the power
to dispose or direct the disposition of such security, and includes all
shares the individual has the right to acquire beneficial ownership of
within 60 days, including, but not limited to, any right to acquire
shares (a) through the exercise of any options, warrants, or other
right, (b) through conversion of a security, (c) pursuant to the power
to revoke a trust, discretionary account or similar arrangement, and
(d) pursuant to the automatic termination of a trust, discretionary
account or similar arrangement. This information is not necessarily
indicative of beneficial ownership for any other purpose. The directors
and executive officers of the Company have sole voting and investment
power over the shares of the Company's common stock, Series A
Convertible Preferred Stock and Series B Convertible Preferred Stock
held in their names, except as noted in the following footnotes.
(2) Calculations are based on 114,842,905 shares of common stock, and
1,000,000 shares of Series B Convertible Preferred Stock, as
applicable, outstanding as of March 31, 2007. Each outstanding share of
Series B Convertible Preferred Stock is immediately convertible into 2
shares of common stock.
(3) Mr. and Mrs. Fugal jointly own 2,653,837 shares of common stock and
1,000,000 shares of Series B Convertible Preferred Stock which are
immediately convertible into 2,000,000 shares of common stock. Mr.
Fugal currently holds all of the 1,000,000 shares of Series B Preferred
Stock outstanding.
(4) Includes all shares beneficially owned as reported on most recent Form
4.
(5) Richard Hannigan and Myong Hannigan are husband and wife, Richard
Hannigan directly owns 12,135,000 shares of common stock and has voting
power Over an additional 10,750,000 shares. Myong Hannigan is the
direct owner of 12,062,500 shares of common stock.
25
(6) Mr. Jones is the direct owner of 3,570,000 shares of common stock and
335,000 shares of common stock owned by the Tracy Jones Charitable
Remainder Trust. In addition, Mr. Jones (i) is the sole owner of
Western Architectural LLC and deemed to beneficially own the 2,812,500
shares of common stock owned by Western.
(7) Currently Mr. Dan Fugal is the only owner of the Series B Preferred
stock. Mr. Fugal is neither an officer or director of the Company.
(8) Includes all shares beneficially owned as reported by the Company's
transfer agent Nevada Agency and Trust Company.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
We have numerous related party transactions with Synthetic Systems,
Inc. ("Synthetic"). Synthetic is a company owned jointly by Richard L. Hannigan,
Sr., our President and CEO and Myong Hannigan, Secretary, Mr. Hannigans spouse.
We are obligated to pay to Synthetic $35,000 per month for management and
consulting fees. As of the year ended December 31, 2006, the Company had paid a
total of $420,000 to Synthetic Systems for professional and consulting fees.
During 2006, a bonus was awarded to Synthetic in the amount of $380,000. In
November 2006, the Company issued shares of our common stock in order to retire
the accrued salary and bonuses.
During the years ended December 31, 2006 and 2005, the Company awarded a bonus
of $380,000 payable to Synthetic Systems, LLC, an entity jointly owned by its
Chief Executive Officer and Secretary. At December 31, 2006 accrued expenses -
related party consists of the $625,000 unpaid bonus balance, which includes the
bonuses disclosed above.
We also currently lease 2,100 square feet of office space on a month-to-month
basis from Synthetic for $2,325 per month and paid as of December 31, 2005 an
aggregate of $31,794.
In addition, the Company leases office furniture and equipment from
Synthetic at a monthly rental rate of $1,150. During 2005 and 2006, the Company
paid an aggregate of $13,800 or $1,150 per month to Synthetic for the lease of
this office furniture and equipment.
During the fiscal year ended December 31, 2004, the Company issued
shares of its Series B Convertible Preferred Stock, valued at approximately
$0.94 per share based upon the fair value of the underlying common stock into
which such Series B Convertible Preferred Stock is convertible on a 2 for 1
basis, to the following executive officers and directors of the Company, as
compensation for services provided by such individuals as executive officers.
Richard Hannigan 1,000,000 shares
Tracy Jones 500,000 shares
Myong Hannigan 1,000,000 shares
On May 30, 2002, the Company executed a Contractor Agreement with
Western Architectural Services, LLC ("Western"), pursuant to which Western will
provide to the Company certain architectural services for the L.V. Voyager
Project and in exchange for which the Company issued 2,812,500 shares of
restricted common stock to Western. Moreover, pursuant to the Contractor
Agreement, Western is entitled to earn up to an aggregate of $18,141,533.
Although he was not an affiliate of the Company upon execution of the Contractor
Agreement, Mr. Jones, currently an executive officer, director and significant
stockholder of the Company, formed Western in 1982 and is currently its 85%
majority owner and managing member.
Western plans to sell the amount of common stock at the time before and during
the contract to purchase supplies and pay subcontractors. At the time the
contract was issued the shares of the Company were trading at $6.50 per share.
The current stock price of the Company has a trading range of $0.10 to $0.50. If
at the time Western performs the services contracted and the share price is
below $6.50 per share the Company will be required to issue new shares to
Western in order for the contract to be fulfilled. Western's Chief Executive
Officer is currently an affiliate of the Company which will also limit the
amount of shares that can be sold by can based on the trading volume and shares
outstanding in accordance with Rule 144 of the Securities Act of 1933. As of
December 31, 2006, we have marked these shares to market at the year end closing
price of our stock. The change in valuation was debited to additional -paid in
capital due to the deferred construction cost nature of these shares.
In February 2004, the Company advanced a payment of $300,000 to
Western, pursuant to the Contractor Agreement, to enable Western to design and
build an Orbiter for an Observation Wheel in order to conduct a feasibility
study.
On March 4, 2004, Richard L. Hannigan Sr., our President and CEO,
converted a total of 500,000 shares of Series A Convertible Preferred Stock held
by Mr. Hannigan into 5,000,000 shares of our common stock.
On August 17, 2005, Richard L. Hannigan Sr., our President and CEO,
converted a total of 1,000,000 shares of Series B Convertible Preferred Stock
held by Mr. Hannigan into 2,000,000 shares of our common stock.
On August 17, 2005, Myong Hannigan,our Secretary converted a total of
1,000,000 shares of Series B Convertible Preferred Stock held by Mr. Hannigan
into 2,000,000 shares of our common stock.
On August 17, 2005, Varna Group LC, which is controlled by Tracy Jones
our COO, converted a total of 500,000 shares of Series B Convertible Preferred
Stock held by Varna Group LC into 1,000,000 shares of our common stock. The
stock is now held directly by Mr. Jones.
Acquisition
On April 10, 2006, Voyager entered into a Unit Purchase (Buy-Sell) Agreement
("Agreement") to acquire all the outstanding units of Western Architectural
Services, LLC ("Western") in exchange for a total of 5,000,000 shares of
Voyager's common stock ("Shares"). On September 11, 2006, Voyager believed it
had fully completed the necessary due diligence pursuant to the Agreement and
consequently delivered the Shares consideration as required for the final
closing. Upon further evaluation of Voyager's due diligence of Western pursuant
to Section 2.02 of the Agreement, it has been determined that the existing
limited liability company ("LLC") operating agreement of Western would need to
be modified in order for Voyager to continue the existing operations of Western.
On March 30 2007, Voyager and Western were not able to come to acceptable terms
with regards to the needed changes to the LLC operating agreement and therefore
cancelled the Agreement since the transaction did not meet all the requirements
of Section 2.02 of the Agreement and was deemed as if the acquisition
transaction was never closed.
As a result, the acquisition transaction was nullified effective March 30, 2007,
in order for the new structure to move forward. As a result of the nullification
of the transaction, 2,500,000 shares of common stock will be returned to the
Company for cancellation and returned to the treasury. The remaining 2,500,000
shares will be accounted for as a fee for the nullification. The shares were
valued at the fair value of $0.15 per share for a total value of $375,000. As of
the date of these financial statements the Company and Western are in the
process of canceling the necessary shares under the March 30, 2007 agreement.
26
ITEM 13. EXHIBITS
Number Description
------- -----------
2.1 Plan and Agreement of Merger of Voyager Entertainment International,
Inc. (North Dakota) into Voyager Entertainment International, Inc.
(Nevada) (incorporated by reference to Exhibit 3.3 to the Company's
Quarterly Report on Form 10- QSB for the period ended September 30,
2003 filed on November 14, 2003).
2.2 Nevada Articles of Merger (incorporated by reference to Exhibit 3.4 to
the Company's Quarterly Report on Form 10- QSB for the period ended
September 30, 2003 filed on November 14, 2003).
2.3 North Dakota Certificate of Merger (incorporated by reference to
Exhibit 3.5 to the Company's Quarterly Report on Form 10-QSB for the
period ended September 30, 2003 filed on November 14, 2003).
3.1 Nevada Articles of Incorporation (incorporated by reference to Exhibit
3.1 to the Company's Quarterly Report on Form 10-QSB for the period
ended September 30, 2003 filed on November 14, 2003).
3.2 Amended and Restated Bylaws (incorporated by reference to Exhibit 3.2
to the Company's Quarterly Report on Form 10-QSB for the period ended
September 30, 2003 filed on November 14, 2003).
4.1 Certificate of Designation of Series A Convertible Preferred Stock
(incorporated by reference to Exhibit 4.1 to the Company's Quarterly
Report on Form 10-QSB for the period ended September 30, 2003 filed on
November 14, 2003).
4.2 Certificate of Designation of Series B Convertible Preferred Stock
(incorporated by reference to Exhibit 10.3 to the Company's Quarterly
Report on Form 10-QSB for the period ended September 30, 2003 filed on
November 14, 2003)
4.3 2002 Stock Plan for Voyager Entertainment International, Inc.
(incorporated by reference to Exhibit 99 to the Company's Current
Report on Form 8-K filed on April 15, 2002.)
10.1 Loan and Security Agreement [by and between the Company and Dan Fugal,
dated November 15, 2002] (incorporated by reference to Exhibit 10.1 to
the Company's Current Report on Form 8-K filed on November 22, 2002).
10.2 Amendment No. 1 to Loan and Security Agreement [by and between the
Company and Dan Fugal, dated February 15, 2003] (incorporated by
reference to Exhibit 10(k) to the Company's Form 10-KSB filed on April
16, 2003).
10.3 Amendment No. 2 to Loan and Security Agreement [by and between the
Company and Dan Fugal, dated April 23, 2003 (incorporated by reference
to Exhibit 10.3 to the Company's Quarterly Report on Form 10-QSB for
the period ended March 31, 2003 filed on May 20, 2003).
10.4 Contractor Agreement by and between the Company and Western
Architectural Services, LLC, dated May 30, 2002 (incorporated by
reference as exhibit 10.1 to for the Quarter ending September 30, 2004
and filed with the 10QSB on November 23, 2004).
10.5 Definitive Joint Venture Agreement between Allied Investment House,
Inc. and Voyager to build a Voyager Project in the United Arab Emirates
dated March 15, 2005 (incorporated by reference as filed and attached
as exhibit 99.1 to the 8- K filed on March 17, 2005.)
10.6 Settlement and General Release Agreement (incorporated by reference as
exhibit 10.6 as filed with the 10QSB for the Quarter Ending September
30, 2004 and filed on November 23, 2004.)
31.1 Certification of Chief Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002, filed herein.
31.2 Certification of Chief Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002, filed herein.
32.1 Section 1350 Certification of Chief Executive Officer, filed herein.
32.2 Section 1350 Certification of Chief Financial Officer, filed herein.
(b) Reports on Form 8-K
* On January 24, 2006, the Company filed with the SEC a Current
Report pursuant to Item 4.01 of Form 8-K, "Change in
registrants Certifying Accountant".
* On January 25, 2006, the Company filed an amended report with
the SEC pursuant to Item 4.01 of Form 8-K, "Change in
registrants Certifying Accountant".
* On January 25, 2006, the Company filed an amended report with
the SEC pursuant to Item 4.01 and 9.01 of Form 8-K, "Change in
registrants Certifying Accountant" and "Financial Statements
and Exhibits".
* On April 12, 2006, the Company filed with the SEC a Current
Report pursuant to Item 8.01 and 9.01 of Form 8-K, "Other
Events" And "Financial Statements and Exhibits".
* On September 12, 2006, the Company filed with the SEC a
Current Report on Form 8-K pursuant to items 2.01, 2.03, 8.01,
and 9.01.
* On March 30, 2007, the Company filed with the SEC a Current
Report pursuant to Item 2.01 of Form 8-K, "Completion of
Acquisition Or Disposition of Assets".
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ITEM 14. Principal Accounting Fees and Services
Audit Fees.
The audit fees billed to the Company by DeJoya Griffith and Company for the
fiscal year ended December 31, 2005 was approximately $32,000 These fees pertain
to the audit of the Company's annual financial statements and review of our
financial statements included in our quarterly reports on Form 10-QSBs in 2006.
It is anticipated that the audit fees for the period ending December 31, 2006
will be approximately $30,000.
Audit-Related Fees, Tax Fees and All Other Fees.
No "audit-related fees," "tax fees" or "other fees," as those terms are defined
by the Securities and Exchange Commission, were paid to Stonefield Josephson,
Inc. for the fiscal years ended December 31, 2005 and 2004.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant has caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
VOYAGER ENTERTAINMENT INTERNATIONAL, INC.
By: /s/ Richard Hannigan
------------------------------
Richard Hannigan,
President/Director
Dated: April 10, 2007
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ Richard Hannigan, Sr.
------------------------------
Richard Hannigan, Sr.
President/CEO/Director
April 10, 2007
By: /s/ Myong Hannigan
------------------------------
Myong Hannigan
Secretary/Treasurer/Director
April 10, 2007
By: /s/Tracy Jones
------------------------------
Tracy Jones
COO/Director
April 10, 2007
28