SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 2
TO
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report: February 11, 2003
VisiJet, Inc.
(Exact name of the Company as specified in its charter)
Delaware 0--256111 33-0838660
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
192 Technology Drive, Suite Q
Irvine, California 92618
(Address of principal executive offices)
The Company's telephone number, including area code:
949-450-1660
Item 7. Financial Statements and Exhibits
(a) Financial statements of businesses acquired.
Attached are financial statements of VisiJet, Inc., a California
corporation, predecessor of the Registrant, for the years ended
December 31, 2001 (restated) and 2002 and for the period February 2,
1996 (inception) to December 31, 2002.
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
VisiJet, Inc., a Delaware
corporation
By: /s/ Laurence M. Schreiber
--------------------------------
Laurence M. Schreiber, Secretary
Date: February 9, 2004
VISIJET, INC.
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS AND AUDITORS' REPORT
YEARS ENDED DECEMBER 31, 2002 AND 2001
AND FOR THE PERIOD FEBRUARY 2, 1996 (INCEPTION)
TO DECEMBER 31, 2002
TABLE OF CONTENTS
-----------------
PAGE
----
REPORT OF PETERSON & CO., LLP, INDEPENDENT AUDITORS..........................1
FINANCIAL STATEMENTS
BALANCE SHEETS......................................................2
STATEMENTS OF OPERATIONS............................................3
STATEMENTS OF SHAREHOLDERS' DEFICIT...............................4-5
STATEMENTS OF CASH FLOWS............................................6
NOTES TO FINANCIAL STATEMENTS....................................7-18
INDEPENDENT AUDITORS' REPORT
----------------------------
To the Board of Directors
VISIJET, INC.
(A Development Stage Company)
Irvine, California
We have audited the accompanying balance sheet of VisiJet, Inc. (a development
stage company) as of December 31, 2002, and the related statements of
operations, shareholders' deficit and cash flows for the year then ended and for
the period from February 2, 1996 (inception) to December 31, 2002. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit. The financial statements of VisiJet, Inc. for the period from
February 2, 1996 (inception) to December 31, 2001, before the restatement
described in Note 10 of the 2002 financial statements, were audited by other
auditors whose report dated October 25, 2002, except Note 10, which is November
12, 2002, expressed an unqualified opinion.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of VisiJet, Inc. (a development
stage company) as of December 31, 2002, and the results of its operations and
its cash flows for the year then ended and for the period from February 2, 1996
(inception) to December 31, 2002 in conformity with accounting principles
generally accepted in the United States of America.
We also audited the adjustments described in Note 10 that were applied to
restate the financial statements for the period from February 2, 1996
(inception) to December 31, 2001. In our opinion, such adjustments are
appropriate and have been properly applied.
As discussed in Note 1 to the financial statements, VisiJet, Inc. (a development
stage company) has reported accumulated losses during the development stage
aggregating $5,817,067 and without additional financing, lacks sufficient
working capital to fund operations beyond May 2003, which raises substantial
doubt about its ability to continue as a going concern. Management's plans as to
these matters are described in Note 1. The financial statements do not include
any adjustments to reflect the possible future effects on the recoverability and
classification of assets or the amounts and classification of liabilities that
may result from the outcome of this uncertainty.
April 22, 2003 PETERSON & CO., LLP
San Diego, California
1
VISIJET, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
December 31,
-------------------------------
ASSETS Restated
2002 2001
------------- -------------
Current assets:
Cash $ 960 $ --
Notes receivable -- 4,340
------------- -------------
Total current assets 960 4,340
Property and equipment, net of accumulated depreciation 47,443 104,541
------------- -------------
Total assets $ 48,403 $ 108,881
============= =============
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Overdraft $ -- $ 3,781
Accounts payable 196,985 58,571
Accrued liabilities 130,469 298,274
Accrued interest payable 160,837 118,448
Royalties payable 60,000 --
Compensation settlement agreement - current portion 595,833 --
Notes payable - related parties 1,543,843 745,000
------------- -------------
Total current liabilities 2,687,967 1,224,074
------------- -------------
Compensation settlement agreement, net of current portion 104,167 408,349
------------- -------------
Shareholders' deficit
Common stock, no par value; 10,000,000 shares authorized;
7,997,735 and 7,673,401 shares issued and outstanding
as of December 31, 2002 and 2001, respectively 615,248 608,761
Preferred stock, no par; 5,000,000 shares authorized;
140,306 Series A shares authorized, issued and outstanding
as of December 31, 2002 and 2001 550,000 550,000
636,364 Series B shares authorized; 363,946 issued and outstanding
as of December 31, 2002 and 2001 1,908,088 1,908,088
Deficit accumulated during development stage (5,817,067) (4,590,391)
------------- -------------
Shareholders' deficit (2,743,731) (1,523,542)
------------- -------------
Total liabilities and shareholders' deficit $ 48,403 $ 108,881
============= =============
The accompanying notes are an integral part of these financial statements.
2
VISIJET, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
Restated
Years Ended December 31, For the period
------------------------------- February 2, 1996
Restated (inception) to
2002 2001 December 31, 2002
------------- ------------- -----------------
Operating expenses:
General and administrative expenses $ 751,717 $ 458,773 $ 1,859,262
Research and development expenses 294,736 957,665 3,600,877
------------- ------------- -----------------
Total operating expenses 1,046,453 1,416,438 5,460,139
------------- ------------- -----------------
Loss from operations (1,046,453) (1,416,438) (5,460,139)
------------- ------------- -----------------
Other expense
Interest expense (131,319) (57,935) (281,741)
Loss on judgment -- -- (21,483)
Loss on disposal of asset (48,104) -- (48,104)
------------- ------------- -----------------
Total other expense (179,423) (57,935) (351,328)
------------- ------------- -----------------
Loss before provision for income taxes (1,225,876) (1,474,373) (5,811,467)
Provision for income taxes 800 800 5,600
------------- ------------- -----------------
Net loss $ (1,226,676) $ (1,475,173) $ (5,817,067)
============= ============= =================
Net loss per share (0.16) (0.26) (1.71)
============= ============= =================
Weighted average shares outstanding 7,811,809 5,784,697 3,410,283
============= ============= =================
The accompanying notes are an integral part of these financial statements.
3
VISIJET, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF SHAREHOLDERS' DEFICIT
Deficit
Accumulated
Common Stock Preferred A Preferred B during the Restated
------------------------ ------------------- --------------------- Development Shareholders'
Shares Amount Shares Amount Shares Amount Stage Deficit
----------- ---------- -------- --------- -------- ----------- ------------ ------------
Inception, February 2, 1996 -- $ -- -- $ -- -- $ -- $ -- $ --
Net loss -- -- -- -- -- -- -- --
----------- ---------- -------- --------- -------- ----------- ------------ ------------
Balance, December 31, 1996 -- -- -- -- -- -- -- --
Net loss -- -- -- -- -- -- -- --
----------- ---------- -------- --------- -------- ----------- ------------ ------------
Balance, December 31, 1997 -- -- -- -- -- -- -- --
Issuance of stock for cash 5,125,500 25,500 127,550 500,000 -- -- -- 525,500
Net loss -- -- -- -- -- -- (580,192) (580,192)
----------- ---------- -------- --------- -------- ----------- ------------ ------------
Balance, December 31, 1998 5,125,500 25,500 127,550 500,000 -- -- (580,192) (54,692)
Cancelled stock (5,100,000) (25,500) -- -- -- -- -- (25,500)
Spin-off from affiliated entity 4,133,195 -- -- -- -- -- -- --
Issuance of stock for cash 26,834 107,334 12,756 50,000 57,911 318,500 -- 475,834
Issuance of stock for services 62,227 12,383 -- -- -- -- -- 12,383
Exercise of stock options 927,382 184,549 -- -- -- -- -- 184,549
Net loss -- -- -- -- -- -- (1,198,506) (1,198,506)
----------- ---------- -------- --------- -------- ----------- ------------ ------------
Balance, December 31,1999 5,175,138 304,266 140,306 550,000 57,911 318,500 (1,778,698) (605,932)
Issuance of stock for cash 55,252 221,008 -- -- 147,315 756,000 -- 977,008
Issuance of stock for services 17,842 3,551 -- -- -- -- -- 3,551
Net loss -- -- -- -- -- -- (1,336,520) (1,336,520)
----------- ---------- -------- --------- -------- ----------- ------------ ------------
Balance, December 31, 2000 5,248,232 528,825 140,306 550,000 205,226 1,074,500 (3,115,218) (961,893)
Issuance of stock for cash -- -- -- -- 158,720 833,588 -- 833,588
Issuance of stock for
assets and services 2,425,169 79,936 -- -- -- -- -- 79,936
Net loss (restated) -- -- -- -- -- -- (1,475,173) (1,475,173)
----------- ---------- -------- --------- -------- ----------- ------------ ------------
The accompanying notes are an integral part of these financial statements.
4
VISIJET, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF SHAREHOLDERS' DEFICIT (CONTINUED)
Deficit
Accumulated
Common Stock Preferred A Preferred B during the Restated
------------------------ ------------------- --------------------- Development Shareholders'
Shares Amount Shares Amount Shares Amount Stage Deficit
----------- ---------- -------- --------- -------- ----------- ------------ ------------
Balance, December 31, 2001,
(restated) 7,673,401 608,761 140,306 550,000 363,946 1,908,088 (4,590,391) (1,523,542)
Issuance of stock for services 324,334 6,487 -- -- -- -- -- 6,487
Net loss -- -- -- -- -- -- (1,226,676) (1,226,676)
----------- ---------- -------- --------- -------- ----------- ------------ ------------
Balance, December 31, 2002 7,997,735 $ 615,248 140,306 $550,000 363,946 $1,908,088 $(5,817,067) $(2,743,731)
=========== ========== ======== ========= ======== =========== ============ ============
The accompanying notes are an integral part of these financial statements.
5
VISIJET, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
Restated
Years Ended December 31, For the period
------------------------------- February 2, 1996
Restated (inception) to
2002 2001 December 31, 2002
------------- ------------- -----------------
Cash flows from operating activities:
Net loss $ (1,226,676) (1,475,173) $ (5,817,067)
Adjustment to reconcile net loss to net cash
used in operating activities:
Depreciation 13,627 70,846 288,362
Loss from disposition of fixed assets 48,104 -- 48,104
Non cash compensation 6,487 -- 102,357
Changes in assets and liabilities:
Accounts payable 134,633 (41,399) 196,985
Accrued expenses (167,805) (16,356) 800
Accrued judgment -- -- 129,669
Accrued interest 42,389 40,898 160,837
Royalties payable 60,000 -- 60,000
Compensation settlement agreement 291,651 -- 700,000
------------- ------------- -----------------
Net cash used in operating activities (797,590) (1,421,184) (4,129,953)
------------- ------------- -----------------
Cash flows from investing activities:
Acquisition of property and equipment (4,633) (47,000) (383,909)
------------- ------------- -----------------
Net cash used in investing activities (4,633) (47,000) (383,909)
------------- ------------- -----------------
Cash flows from financing activities:
Advance from shareholders and related parties 830,665 528,880 1,571,325
Repayment of advance from shareholders and related parties (27,482) -- (27,482)
Proceeds from issuance of common stock, net -- 48,152 512,891
Proceeds from issuance of preferred stock -- 833,588 2,458,088
------------- ------------- -----------------
Net cash provided by financing activities 803,183 1,410,620 4,514,822
------------- ------------- -----------------
Net increase (decrease) in cash 960 (57,564) 960
Cash, beginning of period -- 57,564 --
------------- ------------- -----------------
Cash, end of period $ 960 $ -- $ 960
============= ============= =================
The accompanying notes are an integral part of these financial statements.
6
VISIJET, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - NATURE OF OPERATIONS
-----------------------------
VisiJet, Inc. (the Company), a California corporation in the
development stage, was incorporated on February 2, 1996, to develop and
distribute medical products. The Company is developing a line of
surgical equipment for use in the field of ophthalmology based on
waterjet technology. Potential customers include physicians, surgical
centers and hospitals.
Prior to 1999, the Company was a wholly owned subsidiary of SurgiJet,
Inc. In May 1999, the Company spun its operations off from SurgiJet,
Inc. SurgiJet, Inc. distributed shares of VisiJet, Inc. common stock to
its shareholders. Upon the completion of this distribution, SurgiJet,
Inc. had no ownership interest in VisiJet, Inc. Certain operating
assets and liabilities were assumed by VisiJet, Inc. in connection with
this spin-off.
The Company is in the development stage and its efforts through
December 31, 2002, have been principally devoted to organizational
activities, raising capital and research and development efforts.
Management intends to continue developing and testing its waterjet
technologies. The Company received approval in October 2000 from the
Food and Drug Administration (FDA) for one of its products. To date,
the Company has not received any revenues from product sales.
GOING CONCERN
The Company has incurred net operating losses since inception, has
generated no revenue, and has working capital and stockholders'
deficits. The Company is likely to incur substantial and increasing
operating losses as it continues its research and development efforts
until such time, if ever, as product sales, royalties, license and
development and other fees can generate sufficient revenue to fund its
continuing operations. The Company's future capital requirements will
depend on many factors, including but not limited to the Company's
ability to successfully market its waterjet technology to third
parties, overall product development costs including the cost of
clinical trials and competing technological and market developments.
MERGER
On February 11, 2003, the Company completed its pending merger with
Ponte Nossa Acquisition Corp., ("PNAC"). As a result of this
transaction, the Company became a wholly owned subsidiary of PNAC.
Since this transaction resulted in the shareholders of the Company
acquiring control of PNAC, for financial reporting purposes the
business combination was accounted for as a recapitalization of PNAC (a
reverse acquisition with the Company as the accounting acquirer).
Subsequently, PNAC changed its name to VisiJet, Inc.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
---------------------------------------------------
RESEARCH AND DEVELOPMENT COSTS
Research and development costs are charged to expense as incurred.
Certain corporate overhead expenses, such as professional fees,
salaries, rent and travel are allocated to research and development
based on estimates made by management.
7
VISIJET, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
---------------------------------------------------
STOCK-BASED COMPENSATION
The Company accounts for equity instruments issued to employees for
services based on the fair value of the equity instruments issued and
accounts for equity instruments issued to other than employees based on
the fair value of the consideration received or the fair value of the
equity instruments, whichever is more reliably measurable. The Company
accounts for stock based compensation in accordance with SFAS 123,
"Accounting for Stock-Based Compensation." The provisions of SFAS 123
allow companies to either expense the estimated fair value of stock
options or to continue to follow the intrinsic value method set forth
in APB Opinion 25, "Accounting for Stock Issued to Employees" (APB 25)
but disclose the pro forma effects on net income (loss) had the fair
value of the options been expensed. The Company has elected to continue
to apply APB 25 in accounting for its stock option incentive plans.
DEPRECIATION
Depreciation of property and equipment is computed using the
straight-line method over estimated useful lives ranging from three to
five years.
USE OF ESTIMATES
The preparation of the financial statements in conformity with
accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
IMPAIRMENT OF LONG-LIVED ASSETS
The Company reviews long-lived assets and certain identifiable
intangibles for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable.
Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to the future net cash
flows expected to be generated by the asset. If such assets are
considered to be impaired, the impairment to be recognized is measured
by the amount by which the carrying amount of the assets exceeds the
fair value of the assets. Assets to be disposed of are reported at the
lower of the carrying amount or fair value less costs to sell.
RECLASSIFICATIONS
Certain reclassifications have been made to the financial statements of
the prior year and for the period February 2, 1996 (inception) to
December 31, 2001 in order to conform to current year presentation.
8
VISIJET, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
---------------------------------------------------
INCOME TAXES
The Company utilizes the asset and liability method of accounting for
income taxes. Under this method, deferred tax assets and liabilities
are recognized for the estimated future tax consequences attributable
to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax basis and
operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax assets
and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In July 2001, the Financial Accounting Standards Board issued SFAS No.
141, BUSINESS COMBINATIONS and SFAS No. 142, GOODWILL AND OTHER
INTANGIBLE ASSETS. SFAS No. 141 provides guidance on the accounting for
a business combination at the date a business combination is completed.
The statement requires the use of the purchase method of accounting for
all business combinations initiated after June 30, 2001, thereby
eliminating the use of the pooling-of-interests method. The Company
adopted SFAS No. 141 on July 1, 2001. The adoption did not have an
effect on the financial statements. SFAS No. 142 provides guidance on
how to account for goodwill and intangible assets after an acquisition
is completed. The most substantive change is that goodwill will no
longer be amortized but instead will be tested periodically for
impairment. The Company adopted SFAS No. 142 as of the beginning of
fiscal 2002 and the effect of adoption did not have an effect on the
financial statements.
In June 2001, the Financial Accounting Standards Board issued SFAS No.
143, ACCOUNTING FOR ASSET RETIREMENT OBLIGATIONS. SFAS No. 143
addresses financial accounting and reporting for obligations associated
with the retirement of tangible long lived assets and the associated
asset retirement costs. The Company is currently analyzing this
statement and has not yet determined its impact on the financial
statements. This Statement will be effective for fiscal 2003.
In October 2001, the Financial Accounting Standards Board issued SFAS
No. 144, ACCOUNTING FOR THE IMPAIRMENT OR DISPOSAL OF LONG-LIVED
ASSETS, which replaces SFAS No. 121, ACCOUNTING FOR THE IMPAIRMENT OF
LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF. Although
SFAS No. 144 retains the basic requirements of SFAS No. 121 regarding
when and how to measure an impairment loss, it provides additional
implementation guidance. SFAS No. 144 also supercedes the provisions of
APB Opinion No. 30, Reporting Results of Operations, pertaining to
discontinued operations. Separate reporting of discontinued operations
is still required, but SFAS No. 144 expands presentation to include a
component of an entity, rather than strictly a business segment. The
Company is currently analyzing this statement and has not yet
determined its impact on the financial statements. This statement will
be effective for fiscal 2003.
In April 2002, the Financial Accounting Standards Board issued SFAS No.
145, RESCISSION OF FASB STATEMENTS NO.4, 44, 64, AMENDMENT OF FASB NO.
13, AND TECHNICAL CORRECTIONS. Among other provisions, SFAS No. 145
rescinds SFAS No.4, REPORTING GAINS AND LOSSES FROM
9
VISIJET, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
---------------------------------------------------
EXTINGUISHMENT OF DEBT. Accordingly, gains or losses from
extinguishment of debt shall not be reported as extraordinary items
unless the extinguishment qualifies as an extraordinary item under the
criteria of APB No. 30. Gains or losses from extinguishment of debt
that do not meet the criteria of APB No. 30 should be reclassified to
income from continuing operations in all prior periods presented. This
statement will be effective for fiscal 2003. The Company does not
expect the adoption of SFAS 145 to have a material impact on its
financial position or results of operations.
In June 2002, the FASB issued SFAS No. 146, ACCOUNTING FOR COSTS
ASSOCIATED WITH EXIT OR DISPOSAL ACTIVITIES. SFAS No. 146 requires
companies to recognize costs associated with exit or disposal
activities when they are incurred rather than at the date of a
commitment to an exit or disposal plan. Examples of costs covered by
the standard include lease termination costs and certain employee
severance costs that are associated with a restructuring, discontinued
operation, plant closing, or other exit or disposal activities. SFAS
No. 146 is effective prospectively for exit or disposal activities
initiated after December 31, 2002, with earlier adoption encouraged.
The Company elected not to adopt the provisions of SFAS No. 146 until
the adoption date and since there are no planned exit or disposal
activities for the periods after the adoption date, management does not
believe that the adoption of SFAS No. 146 will have a material impact
on the financial statements.
The Emerging Issues Task Force "EITF" recently reached a consensus on
its tentative conclusions for EITF 00-21, REVENUE ARRANGEMENTS WITH
MULTIPLE DELIVERABLES. EITF 00-21 provides accounting guidance for
customer solutions where delivery or performance of products, services
and/or performance may occur at different points in time or over
different periods of time. Companies are required to adopt this
consensus for fiscal periods beginning after June 15, 2003. The Company
believes the adoption of EITF 00-21 will not have a material impact on
the Company's financial position, results of operations, or liquidity.
In November 2002, FASB issued FASB Interpretation No. 45 GUARANTOR'S
ACCOUNTING AND DISCLOSURE REQUIREMENTS FOR GUARANTEES, INCLUDING
INDIRECT GUARANTEES OF INDEBTEDNESS OF OTHERS ("FIN 45"). FIN 45
elaborates on the disclosures to be made by a guarantor in its interim
and annual financial statements about its obligations under certain
guarantees that it has issued. FIN 45 also clarifies that a guarantor
is required to recognize a liability for the fair value, or market
value, of the obligation undertaken in issuing a guarantee at the
inception of the guarantee. The provisions of FIN 45 relating to
liability recognition do not apply to certain obligations such as
product warranties and guarantees accounted for as derivatives. The
initial recognition and measurement provisions apply on a prospective
basis to guarantees issued or modified subsequent to December 31, 2002.
The disclosure requirements of FIN 45 are effective for interim or
annual financial statement periods ending after December 15, 2002. The
Company does not expect the adoption of the recognition and measurement
provisions of FIN 45 will have a significant impact on its financial
position or results of operations.
In December 2002, FASB issued SFAS No. 148, ACCOUNTING FOR STOCK-BASED
COMPENSATION, TRANSITION AND DISCLOSURE ("SFAS 148"). SFAS 148 amends
the disclosure requirements of SFAS No. 123 "Accounting for Stock-Based
Compensation" ("SFAS 123") to require prominent
10
VISIJET, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
---------------------------------------------------
disclosures in both interim and annual financial statements about the
method of accounting for stock-based employee compensation and the
effect of the method used on reported results. SFAS 148 also amends
SFAS 123 to provide alternative methods of transition for a voluntary
change to the fair value based method of accounting for stock-based
employee compensation. The Company will commence quarterly footnote
disclosure of the fair value based method of accounting for stock-based
employee compensation beginning in the first quarter ending March 31,
2003. As the Company has decided not to voluntarily adopt the SFAS 123
fair value method of accounting for stock-based employee compensation,
the new transition alternatives of SFAS 148 will not have a material
impact on its financial position or results of operations.
On January 17, 2003, the FASB issued FASB Financial Interpretation No.
46, CONSOLIDATION OF VARIABLE INTEREST Entities which requires
extensive disclosures (including disclosures that are applicable to
December 31, 2002 financial statements) and will require companies to
evaluate variable interest entities created after January 31, 2003 and
existing entities to determine whether to apply the Interpretation's
consolidation approach to them. Companies must apply the Interpretation
to entities with which they are involved if the entity's equity has
specified characteristics. If it is reasonably possible that a company
will have a significant variable interest in a variable interest entity
at the date the Interpretation's consolidation requirements become
effective, the company must disclose the nature, purpose, size and
activities of the variable interest entity and the consolidated
enterprise's maximum exposure to loss resulting from its involvement
with the variable interest entity in all financial statements issued
after January 31, 2003 (as well as December 31, 2002 financial
statements) regardless of when the variable interest entity was
created. Since the Company has no interest in any variable interest
entity, the Company believes that the adoption of this interpretation
will not have a material impact on its financial position or results of
operations.
NOTE 3 - PROPERTY AND EQUIPMENT
-------------------------------
At December 31, property and equipment consist of:
2002 2001
---------- ----------
Computer and test equipment $ 21,833 $ 316,207
Furniture and fixtures 16,067 16,067
Trade show equipment 47,002 47,002
---------- ----------
84,902 379,276
Less: Accumulated depreciation (37,459) (274,735)
---------- ----------
$ 47,443 $ 104,541
========== ==========
Depreciation expense for the years ended December 31, 2002 and 2001
amounted to $13,627 and $70,846, respectively . Depreciation expense
for the period from February 2, 1996 (inception) to December 31, 2002
was $288,362.
11
VISIJET, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOTE 4 - NOTES PAYABLE - RELATED PARTIES
----------------------------------------
PONTE NOSSA ACQUISITION CORPORATION
During 2002, the Company entered into various loan agreements with
Ponte Nossa Acquisition Corporation ("PNAC") to provide funding to
facilitate transactions contemplated by the pending merger with PNAC.
Principal and accrued interest on the notes are due on the earlier of
i) the date on which the closing of the transactions of the merger
agreement by and between the Company and PNAC, ii) termination of the
merger agreement, iii) sale of the Company or iv) the maturity date.
The notes are collateralized by a security interest in certain assets
and common stock of the Company.
At December 31, 2002, notes payable to PNAC consist of the following:
Note payable - PNAC
Senior secured promissory notes,
interest at 3% per annum, due May 2003 $ 236,000
Note payable - PNAC
Working capital note, interest at 10% per annum,
due August 2003 309,752
Note payable - PNAC
Milestone note payable,
interest at 10% per annum, due August 2003 97,606
--------------
$ 643,358
==============
At December 31, 2002, accrued interest payable on the above notes is
$12,354. As a result of the merger (see Note 11), these notes payable
eliminate during the consolidation with PNAC.
SURGIJET, INC.
On October 23, 1998, in connection with a Trademark, Technology and
Patent License Agreements entered into with SurgiJet, Inc., a company
related through common shareholders, the Company issued a demand
promissory note in the amount of $400,000 in favor of SurgiJet, Inc.,
in connection with the reimbursement of expenses incurred by SurgiJet
in the development of the related technology. The terms of the note
were amended on February 3, 2003 to establish payment requirements and
to increase the interest rate to 10% per annum. Under the amended note,
the first payment, in the amount of $30,000, is payable on February 11,
2003, the date of merger with PNAC. Thereafter, the note is payable in
equal monthly installments of $15,000, including interest on the first
of each month until paid in full. As of December 31, 2002 and 2001, no
payments had been made on the note.
Until the note is paid in full, interest on this note accrues on the
unpaid principal at a variable interest rate based on the prime rate,
which was 4.25% at December 31, 2002. Accrued interest on the note at
December 31, 2002 and 2001, was $137,149 and $118,448, respectively.
Pursuant the merger agreement, the loan is due and payable upon
successful completion of an independent audit of the Company's 2002
financial statements. At April 24, 2003, the balances are under
negotiation with the involved parties.
12
VISIJET, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOTE 4 - NOTES PAYABLE - RELATED PARTIES (CONTINUED)
----------------------------------------
DENTAJET, INC.
During 2002, the Company entered into a promissory note for a principal
sum of $91,000, plus interest at the rate of 10% per annum with
DentaJet Inc., a Nevada corporation ("DentaJet"), related through
common shareholders. DentaJet continued to provide funding in 2002
totaling an aggregate loan amount of $161,000. Loan payments were made
against this note in 2002 totaling $27,482 leaving an outstanding
principal balance at December 31, 2002 of $133,518. Accrued interest of
$9,567 was incurred during the year bringing the outstanding balance to
$143,086. Pursuant to the merger agreement, the loan is due and payable
upon successful completion of an independent audit of the Company's
2002 financial statements. At April 24, 2003, the balances are under
negotiation with the involved parties.
DUE TO AND FROM AFFILIATE
The Company shares its facility, operating equipment and personnel with
SurgiJet, Inc. Rent, equipment and personnel expenditures are allocated
to each entity based on the nature of the expense, current operations
and square footage of the facility. Certain expenses incurred by the
Company are paid for by SurgiJet, Inc. At December 31, 2001, the
Company had $4,430 in notes receivable from SurgiJet, Inc. related to
these expenditures.
SHAREHOLDERS
During 2002, the Company entered into a promissory note with Lance
Doherty, a shareholder of the Company, for a principal sum of $19,000
plus interest to accrue at a rate of 10% per annum. Total accrued
interest on the note is $1,767 at December 31, 2002. In addition, the
Company recorded as a note payable with no interest certain expenses
paid by Rex Doherty, the principal shareholder of the Company, in the
amount of $2,967 due and payable as of December 31, 2002.
FINANCIAL ENTREPRENEURS, INC. ("FEI")
Pursuant to an agreement entered into in connection with the merger
with PNAC, the Company entered into a note agreement with FEI, a
significant investor of PNAC. The note is due on demand and bears no
interest. The total amount due at December 31, 2002 and 2001 is
$345,000. As a result of the merger, in February 2003, FEI converted
the promissory note held by it into 378,997 shares of the Company's
common stock at a conversion rate of $1.00 per share. There was no
beneficial conversion feature on this note.
NOTE 5 - COMMITMENTS
--------------------
OPERATING LEASES
The Company's primary facility is leased through a property management
group. Rent expense was $62,160 and 94,250 for the years ended December
31, 2002 and 2001, respectively. Rent expense for the period from
February 2, 1996 (inception) to December 31, 2002 was $293,848.
13
VISIJET, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOTE 5 - COMMITMENTS (CONTINUED)
--------------------
The minimum annual lease payments as of December 31, 2002 are as
fo1lows:
Year Ending December 31,
2003 $ 94,188
2004 36,736
------------
$ 130,924
============
NOTE 6 - CONTINGENCY
--------------------
During 2001, judgments totaling $129,669 were entered against the
Company's former parent, SurgiJet, Inc. for failure to make scheduled
payments on equipment capital leases. These capital leases were
transferred and assumed by the Company as of January 1, 1999. The
Company provided SurgiJet, Inc with monthly payments of approximately
$8,000, including interest ranging from 19% to 30%. SurgiJet, Inc.
defaulted on two of the leases due to the Company's failure to make
payments. The Company's management has committed to pay the judgment on
SurgiJet's behalf. At December 31, 2002 and 2001, $129,669 is recorded
as an accrued liability.
NOTE 7 - SHAREHOLDERS' DEFICIT
------------------------------
COMMON STOCK - RELATED PARTIES
The Company issued 140,000 and 1,629,430 shares of common stock to
officers and directors valued at $2,800 and $32,589, respectively, for
commissions and consulting services for the years ended December 31,
2002 and 2001, respectively.
PREFERRED STOCK
During 1998, the Company raised $500,000 from the sale of 127,550
shares of Series A Preferred Stock priced at $3.92 per share to a small
group of private investors. In 1999, the Company raised an additional
$50,000 from the sale of 12,756 shares of Series A Preferred Stock.
During 1999, the Company raised $318,500 from the sale of 57,911 shares
of Series B Preferred Stock priced at $5.50 per share to a small group
of private investors.
During 2000, the Company issued 147,315 shares of Series B Preferred
Stock in exchange for services valued at $756,000.
During 2001, the Company raised $833,588 (net of issuance costs) from
the sale of 158,720 shares of Series B Preferred Stock priced at $5.50
per share to a small group of private investors.
Dividends, when declared are payable at a rate of $0.196 and $0.275 per
share per annum on each outstanding share of Series A and Series B
Preferred Stock, respectively, payable quarterly. Such dividends are
not cumulative.
14
VISIJET, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOTE 7 - STOCKHOLDERS' EQUITY (DEFICIT) (CONTINUED)
---------------------------------------
Each share of Series A and B Preferred Stock shall be convertible into
Common Stock as determined by dividing $3.92 and $5.50 for each share
of Series A and B Preferred Stock, respectively, surrendered for
conversion. Each share of Preferred Stock will automatically be
converted at the conversion price upon the earlier of a) a public
offering which results in gross proceeds of at least $5,000,000, b) the
consent of a majority of Preferred Stockholders.
The Series A and B Preferred Stock have the right to one vote for each
share of common stock into which they can be converted. The Series A
and B Preferred Stock have certain liquidation and conversion price
adjustments for certain dilutive issuances, splits and combinations and
are not redeemable.
STOCK OPTIONS
In 1998, the Board of Directors approved the adoption of a stock option
plan ("1998 Plan") pursuant to which directors, officers, key
employees, consultants or associates are eligible to receive stock
options for common stock as defined in the 1998 Plan. The Company is
authorized to issue up to 500,000 shares of common stock under the 1998
Plan. All unexercised options terminate five years from the adoption
date of the 1998 Plan.
In 1999, the Board of Directors approved the adoption of a stock option
plan ("1999 Plan") pursuant to which directors, officers, key
employees, consultants, and scientific advisors and other personnel
working directly with the Company are eligible to receive stock options
for common stock as defined in the 1999 Plan. The Company is authorized
to issue up to 796,132 shares of common stock under the 1999 Plan. All
unexercised options terminate five years from the adoption date of the
1999 Plan.
During 1999, the Company has granted 927,382 common stock options to
employees and consultants. Of these grants, 927,382 stock options have
been exercised at their exercise price of $0.20 per share as of
December 31, 1999. The weighted average fair value of options granted
during 1999 is $0.20. There were no stock options granted after 1999.
NOTE 8 - INCOME TAXES
---------------------
The provision for income taxes consist of the following for the years
ended December 31:
2002 2001
--------- ---------
Current:
Federal $ -- $ --
State 800 800
--------- ---------
Total provision $ 800 $ 800
========= =========
15
VISIJET, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOTE 8 - INCOME TAXES (CONTINUED)
---------------------
The components of the net deferred income tax assets are as follows as
of December 31:
2002 2001
------------ ------------
Deferred income tax assets:
Net operating loss carry forward $ 2,398,000 $ 1,908,000
Other temporary timing adjustments 257,000 212,000
------------ ------------
2,655,000 2,120,000
Deferred tax liability:
State taxes (191,000) (149,000)
------------ ------------
Deferred income tax asset, net before
Valuation allowance 2,464,000 1,971,000
Less: valuation allowance (2,464,000) (1,971,000)
------------ ------------
Deferred income tax asset, net $ -- $ --
============ ============
Since 1996, the company has generated a net operating loss (NOL) of
approximately $5,674,000. The total carry forward amounts are available
to offset future taxable income and expire in various years through
2022. The ability to use some or all of this carryforward is limited by
future events such as a failure to generate positive taxable income or
a change in ownership as stated under the rules of Internal Revenue
Code Section 382.
The net deferred tax asset is primarily associated with its net
operating loss carryforwards, state taxes and other timing adjustments.
The Company has recorded a valuation allowance for the entire amount
due to the uncertainty surrounding the likelihood of the Company
generating sufficient taxable income in the future.
NOTE 9 - SETTLEMENT AGREEMENTS AND LOAN PAYABLE
-----------------------------------------------
On November 4, 2002, the Company entered into settlement agreements
with two consultants for past due consulting services. The total
amounts due at December 31, 2002 and 2001 were $700,000 and $408,349,
respectively.
The amounts due related to these settlements will be payable as
follows: $250,000 will be payable over one to two years at a 3.5%
annual interest rate, with the remaining $450,000 convertible to shares
of the merged company based upon the closing price of the merged
Company's stock on the day the merger with Ponte Nossa Acquisition
Corp. is completed (Note 11).
NOTE 10 - RESTATEMENT
---------------------
During the 2002 audit, it was discovered that certain accounting
matters related to the financial statements for the year ended December
31, 2001 required restatement. The Company's prior management
overstated expenses in 2001 by recording $93,595 of accrued personal
expense of the Company's prior management, as general and
administrative and research and development
16
VISIJET, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOTE 10 - RESTATEMENT (CONTINUED)
---------------------
expenses. The financial statements for the year ended December 31, 2001
have been restated to decrease operating expenses by $93,595. In
addition, it was discovered that certain general and administrative
expenses and research and development expenses related to the period
ended December 31, 2001 were included in the financial statements for
the year ended December 31, 2002. The financial statements for the year
ended December 31, 2001 have been restated for this error by increasing
operating expenses by $129,166. The net effect of these adjustments was
to increase net loss $35,571 for the year ended December 31, 2001.
As Reported As Restated
----------- -----------
General and administrative expenses $ 436,122 $ 458,773
Research and development expenses 944,745 957,665
----------- -----------
Total operating expenses $1,380,867 $1,416,438
=========== ===========
Net loss $1,439,602 $1,475,173
=========== ===========
NOTE 11 - SUBSEQUENT EVENTS
---------------------------
MERGER
On December 20, 2002, the Company entered into a Second Amended and
Restated Agreement and Plan of Merger with Ponte Nossa Acquisition
Corp., ("PNAC") a Delaware corporation, for the merger of the two
companies into a single company. The merger was consummated as a
reverse merger on February 11, 2003.
Under the terms of the agreement and Plan of Merger, 12,128,491 shares
of PNAC common stock were issued to the shareholders of the Company. In
addition, warrants to purchase an additional 4,528,481 shares or common
stock were issued to certain investors for cash concurrently with the
consummation of the merger.
As a result of this transaction, the Company became a wholly owned
subsidiary of PNAC. The transaction resulted in the shareholders of the
Company acquiring control of PNAC. For financial reporting purposes,
the business combination was accounted for as a recapitalization of the
PNAC (a reverse acquisition with the Company as the accounting
acquirer), whereby PNAC changed its name to VisiJet, Inc.
LITIGATION
On February 5, 2003, a claim was filed against the Company by an
outside consultant stating that the consultant is entitled to a
commission arising out of the merger between PNAC and the Company. The
complaint alleges that the plaintiff is entitled to 105,000 shares of
the Company's
17
VISIJET, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOTE 11 - SUBSEQUENT EVENTS (CONTINUED)
---------------------------
common stock. The Company denies the material allegations of the
complaint and plans to vigorously contest the action.
18