U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: December 31, 2007
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to _________
Commission file number: 00-333151
VOYAGER ENTERTAINMENT INTERNATIONAL, INC.
(Name of small business issuer in its charter)
Nevada 45-0420093
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4483 West Reno Avenue, Las Vegas, Nevada 89119
---------------------------------------- ----------
(Address of principal executive offices) (Zip code)
Issuer's Telephone Number: (702) 221-8070
Securities registered under Section 12(b) of the Act: None
Securities registered under Section 12(g) of the Act: Common Stock,
$.001 par value
Check whether the issuer is not required to file reports pursuant to Section 13
or 15(d) of the Exchange Act. [ ]
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). Yes [ ] No [X]
State issuer's revenues for its most recent fiscal year: $0.00
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, as of a
specified date within the past 60 days. As of April 7, 2008, the aggregate
market value of shares held by non-affiliates (based on the close price on that
date of $0.032) was approximately $3,882,428.
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the last practicable date: 120,577,287 shares of common stock and
1,000,000 shares of Preferred Series B stock as confirmed by the Company's
transfer agent on April 7, 2008.
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, 2007
TABLE OF CONTENTS
Page
PART I
Item 1. Description of Business 3
Item 2. Description of Property 8
Item 3. Legal Proceedings 8
Item 4. Submission of Matters to a Vote of Security Holders 8
PART II
Item 5. Market for Common Equity, Related Stockholder Matters and
Small Business Issuer Purchases of Equity Securities 9
Item 6. Management's Discussion and Analysis and Plan of Operation 10
Item 7. Financial Statements F-1
Item 8. Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure 35
Item 8A. Controls and Procedures 35
Item 8B. Other Information 35
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance With Section 16(a) of the Exchange Act 36
Item 10. Executive Compensation 38
Item 11. Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters 39
Item 12. Certain Relationships and Related Transactions 41
Item 13. Exhibits 44
Item 14. Principal Accountant Fees and Services 45
SIGNATURES AND CERTIFICATIONS 46
2
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
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. and, unless the context indicates
otherwise, its consolidated subsidiaries.
PART I
ITEM 1. DESCRIPTION OF BUSINESS
HISTORY
Voyager Entertainment International, Inc. (the "Company"), a North Dakota
corporation formerly known as Dakota Imaging, Inc., was formed on January 31,
1991. The Company is in the entertainment development business with plans to
develop the world's tallest Observation Wheel in the Las Vegas strip area.
During April 2002, the Company changed its name from Dakota Imaging, Inc. to
Voyager Entertainment International, Inc. and adopted a new fiscal year. 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. Voyager Ventures, Inc. has been a dormant company and was
discontinued as of December 31, 2007. All organizational costs have been paid by
the parent.
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,
from25,000,000 shares to 50,000,000 shares.
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.
OUR BUSINESS
Our current business plan is to build multiple observation Ferris wheels
("Observation Wheels"). 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 by a competitor 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.
3
L.V. Voyager Project
--------------------
For the past 7 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.
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 it's
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.
Other "Observation Wheels"
--------------------------
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 ("UAE"). According to the Agreement, Allied Investment House, Inc. will
provide 100% of the financing of an Observation Wheel in the UAE.
The current focus is to find a suitable location. Due to the continuing dynamic
changes to the economic environment in the UAE, the Company may take advantage
of any financing arrangements with other prospective partners which may be more
favorable than the arrangement with Allied.
As of the date of this filing, an adequate site for the Observation Wheel has
not been determined. At this time there have been no funds raised for this
project.
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 we will thus be forced to rely on additional debt
and/or equity financing. Management believes 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, 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 that is better
financed. If this occurs it would make it very difficult for the Company to have
a successful project within the same city.
4
There have been 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 acquiring a
proper location. At this time there have been no other companies successful at
obtaining locations on or off the Las Vegas Strip.
We have a limited operating history, which could make it difficult to evaluate
our business.
RAW MATERIALS AND SUPPLIES
Currently, the Company is a development stage corporation. Until production
planning for the Observation Wheel begins, we have no raw materials or principal
suppliers.
DEPENDENCE ON MAJOR CUSTOMERS
The Company is not currently dependent on one or a few major customers.
PATENTS, TRADEMARKS, LICENSES
Currently there are no patents, trademarks or copyrights filed on behalf of the
Company protecting the current design of the Observation Wheel.
GOVERNMENT APPROVAL
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.
EFFECT OF EXISTING OR PROBABLY GOVERNMENTAL REGULATIONS
The Company's common stock is registered pursuant to Section 12(g) of the
Securities Exchange Act of 1934 ("1934 Act"). As a result of such registration,
the Company is subject to Regulation 14A of the "1934 Act," which regulates
proxy solicitations. Section 14(a) requires all companies with securities
registered pursuant to Section 12(g) thereof to comply with the rules and
regulations of the Commission regarding proxy solicitations, as outlined in
Regulation 14A. Matters submitted to stockholders of the Company at a special or
annual meeting thereof or pursuant to a written consent will require the Company
to provide its stockholders with the information outlined in Schedules 14A or
14C of Regulation 14; preliminary copies of this information must be submitted
to the Commission at least 10 days prior to the date that definitive copies of
this information are forwarded to stockholders.
Aside from required compliance with federal and state securities laws,
regulations and rules, and federal, state and local tax laws, regulations and
rules, the Company is not aware of any other governmental regulations now in
existence or that may arise in the future that would have an effect on the
business of the Company.
RESEARCH AND DEVELOPMENT
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.
COST AND EFFECTS OF COMPLIANCE WITH ENVIRONMENTAL LAWS
The Company is not currently required to comply with any environmental laws.
EMPLOYEES
As of December 31, 2007, 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.
5
RISK FACTORS
Operations
----------
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 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.
Stock
-----
We must comply with penny stock regulations which could affect the liquidity and
price of our stock.
The Securities and Exchange Commission ("SEC")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
the Financial Industry Regulatory Authority ("FINRA"), 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 April 7, 2008, we have 120,572,287 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 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.
6
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.
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 FINRA, 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.
Sarbanes-Oxley Act
------------------
We are required to comply with the provisions of Section 404 of the
Sarbanes-Oxley Act of 2002, which require us to maintain an ongoing evaluation
and integration of the internal controls of our business. We were required to
document and test our internal controls and certify that we are responsible for
maintaining an adequate system of internal control procedures for the year ended
December 31, 2007. In subsequent years, our independent registered public
accounting firm will be required to opine on those internal controls and
management's assessment of those controls. In the process, we may identify areas
requiring improvement, and we may have to design enhanced processes and controls
to address issues identified through this review.
We cannot be certain that we will be able to successfully complete the
procedures, certification and attestation requirements of Section 404 or that
our auditors will not have to report a material weakness in connection with the
presentation of our financial statements. If we fail to comply with the
requirements of Section 404 or if our auditor's report such material weakness,
the accuracy and timeliness of the filing of our annual report may be materially
adversely affected and could cause investors to lose confidence in our reported
financial information, which could have a negative effect on the trading price
of our common stock. In addition, a material weakness in the effectiveness of
our internal controls over financial reporting could result in an increased
chance of fraud and the loss of customers, reduce our ability to obtain
financing and require additional expenditures to comply with these requirements,
each of which could have a material adverse effect on our business, results of
operations and financial condition.
Further, we believe that the out-of-pocket costs, the diversion of management's
attention from running the day-to-day operations and operational changes caused
by the need to comply with the requirements of Section 404 of the Sarbanes-
Oxley Act could be significant. If the time and costs associated with such
compliance exceed our current expectations, our results of operations could be
adversely affected.
Going Concern
-------------
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 L.V. 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.
7
REPORTS TO SECURITY HOLDERS
The Company is required to file annual reports on Form 10-KSB and quarterly
reports on Form 10-QSB with the Securities and Exchange Commission ("SEC") on a
regular basis, and will be required to disclose certain events in a timely
manner, (e.g. changes in corporate control; acquisitions or dispositions of a
significant amount of assets other than in the ordinary course of business; and
bankruptcy) in a Current Report on Form 8-K.
The public may read and copy any materials filed by the Company with the SEC at
the SEC's Public Reference Room at 150 Fifth Street, N.W., Washington, D.C.
20549. The public may obtain information on the operation of the Public
Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an
Internet site that contains reports, proxy and information statements, and other
information regarding issuers that file electronically with the SEC at
http://www.sec.gov.
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 $3,035 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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
8
PART II
ITEM 5. MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS
ISSUER PURCHASES OF EQUITY SECURITIES
MARKET INFORMATION
Our common stock is traded in the over-the-counter securities market through the
Financial Industry Regulatory Authority ("FINRA"), under the symbol "VEII". The
following table sets forth the trading history of the Common Stock for each
quarter of fiscal years ended December 31, 2007 and 2006, as reported by
smallcapcenter.com. The quotations reflect inter- dealer prices, without retail
mark-up, markdown or commission, and may not represent actual transactions.
High Low
---------------
2007
----
First Quarter 0.35 0.03
Second Quarter 0.18 0.09
Third Quarter 0.26 0.10
Fourth Quarter 0.16 0.05
2006
----
First Quarter 0.24 0.09
Second Quarter 0.21 0.1
Third Quarter 0.16 0.08
Fourth Quarter 0.11 0.04
HOLDERS OF COMMON STOCK
As of April 7, 2008, we had approximately 89 stockholders of record (not
including shares held by brokers or in street name), of the 120,577,287 shares
of common stock outstanding. The closing bid stock price on April 7, 2008 was
$0.05.
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 October 2007, the Company sold 100,000 shares of common stock for $10,000 or
$0.10.
In November 2007, the Company issued 500,000 shares of common stock for services
rendered. These shares were valued at the fair value on the date of grant for
total compensation of $50,000 or $0.10.
In December 2007, the Company sold 1,450,000 shares of common stock for $60,000
or $0.04.
In December 2007, the Company issued 200,000 shares of common stock for services
rendered. These shares were valued at the fair value on based on an agreed upon
contract for total compensation of $20,000 or $0.10.
In December 2007, the Company issued 105,775 shares of common stock for interest
which was for the accrued interest at September 30, 2007 for $14,809 relating to
our Diversified Lending Group, Inc. note.
9
ITEM 6. MANAGEMENTS' DISCUSSION AND ANALYSIS AND PLAN OF OPERATION
The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our consolidated financial
statements and related notes included elsewhere in this report. References in
this section to "Voyager Entertainment International, Inc.," the "Company,"
"we," "us," and "our" refer to Voyager Entertainment International, Inc. and our
direct and indirect subsidiaries on a consolidated basis unless the context
indicates otherwise.
This annual report contains forward looking statements relating to our Company's
future economic performance, plans and objectives of management for future
operations, projections of revenue mix and other financial items that are based
on the beliefs of, as well as assumptions made by and information currently
known to, our management. The words "expects, intends, believes, anticipates,
may, could, should" and similar expressions and variations thereof are intended
to identify forward-looking statements. The cautionary statements set forth in
this section are intended to emphasize that actual results may differ materially
from those contained in any forward looking statement.
This annual report does not include an attestation report of the Company's
registered accounting firm regarding internal control over financial reporting.
Management's report was not subject to attestation by the Company's registered
public accounting firm pursuant to temporary rules of the Securities and
Exchange Commission.
Our Management, Discussion and Analysis ("MD&A") is provided as a supplement to
our audited financial statements to help provide an understanding of our
financial condition, changes in financial condition and results of operations.
The MD&A section is organized as follows:
o Executive Summary, Overview and Development of our Business. These sections
provide a general description of the Company's business, as well as recent
developments that we believe are important in understanding our results of
operations as well as anticipating future trends in our operations.
o Critical Accounting Policies. This section provides an analysis of the
significant estimates and judgments that affect the reported amounts of
assets, liabilities, revenues, expenses, and the related disclosure of
contingent assets and liabilities.
o Results of Operations. This section provides an analysis of our results of
operations for the year ended December 31, 2007 compared to the year ended
December 31, 2006. A brief description of certain aspects, transactions and
events is provided, including related-party transactions that impact the
comparability of the results being analyzed.
o Liquidity and Capital Resources. This section provides an analysis of our
financial condition and cash flows as of and for the year ended December 31,
2007.
EXECUTIVE SUMMARY
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.
Voyager Ventures, Inc. has been a dormant company since 2002 and was
discontinued as of December 31, 2007.
Plan of Operations
------------------
During the next 12 months, we are continuing our efforts on the development of
the Observation Wheel in Las Vegas, Nevada; however, actual production will not
commence until we have sufficient capital for construction and marketing. As of
the year ending December 31, 2007, the Company did not have enough cash on hand
to continue operations through the next year. 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.
10
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.
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. 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, additional employees and
continual travel.
We plan to focus primarily on the development of the Observation Wheel in Las
Vegas over the next 12 months. 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.
CRITICAL ACCOUNTING POLICIES
The methods, estimates and judgments we use in applying our accounting policies
have a significant imp act 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.
11
RESULTS OF OPERATIONS
Years Ended December 31, 2007 and December 31, 2006.
December 31, 2007 December 31, 2006 $ Change % Change
Revenue $ - $ - $ - 0%
General and administrative expenses 2,015,286 1,578,779 436,507 28%
-------------------------------------------------------------------
Operating loss $ (2,015,286) $ (1,578,779) $ (436,507) 28%
Revenues
--------
We did not have any revenues for the fiscal years ending December 31, 2007 and
2006. There was no change in revenues from the year ending 2007 versus 2006
because we are still in the development stage and revenues will not be generated
until operations of an Observation Wheel begin.
Blue Prints/Projects Costs
--------------------------
Blue Prints/Project Costs for the year ended December 31, 2007 were $25,638
which is $20,481 less than the $46,119 of project costs incurred for the year
ended December 31, 2006. Project costs are the expenses related to the materials
used to attract investors. These expenses consisted primarily of presentation
and development materials provided to prospective funding sources. The decrease
in 2007 was due to an increase in investors and a decrease in the need to print
additional promotion materials . Our total project costs since inception are
$163,936.
Operating Expenses
------------------
We had operating expenses of $2,015,286 for the year ended December 31, 2007
versus operating expenses of $1,578,779 for the year ended December 31, 2006
which primarily consisted of office rental expenses, legal and accounting fees
and professional expenses. There was an increase in our operating expenses for
the year ending December 31, 2007 of $436,507. The increase in operating
expenses for the year ending December 31, 2007 was primarily due the canceled
business combination with Western Architectural Services, LLC ("Western") where
we expensed a one time charge of $375,000 as an acquisition nullification fee
that was paid with 3,750,000 shares of common stock. We did not incur any
settlement expenses in 2007. If the Company receives funding for the L.V.
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 $1,430,364 for the year ending
December 31, 2007 versus $1,377,970 for the year ending December 31, 2006 that
attributed to an increase of $52,394 or 3.8%.
Our primary expense is the issuance of common stock to consultants for services.
In 2007 we issued shares for services of $532,000 versus $286,500 in 2006. In
2007 we issued more shares to consultants for services than in 2006 as a result
of insufficient funds for payment of services. Consulting services rendered
during the year ending December 31, 2007, consisted primarily of real estate
acquisition and budgeting services related to the Observation Wheel. We also
incurred fees relating to the compliance of the Sarbanes-Oxley Act of 2002.
Additionally, we have expensed professional fees to Synthetic Systems totaling
$420,000. There is currently an accrued unpaid balance of $1,250,000 consisting
of both professional fees and bonuses . Synthetic Systems is jointly controlled
by our Chief Executive Officer and Secretary. The charge from Synthetic Systems
in 2007 equaled the 2006 charge, $420,000 in each year.
Settlement and Nullification Fee Expense
----------------------------------------
In 2007, in association with the canceled business combination with Western we
expensed a one time charge of $375,000 as an acquisition nullification fee that
was paid with 3,750,000 shares of common stock. We did not incur any settlement
expenses in 2007
Interest Expense
----------------
Our interest expense for the year ending December 31, 2007 was $545,647 versus
$309,056 for the year ending December 31, 2006, resulting in an increase in
interest expense of $236,591. The increase was attributable to a full twelve
months of interest being paid on the Diversified Lending note of $1,250,000
bearing an interest rate of 14% per annum. Additionally, the note contained an
anti-dilution provision. The stock issued in accordance with the agreement was
accounted for as interest expense of $49,820 for the year ending December 31,
2007. Amortized loan costs of $303,750 contributed to the increase in interest
expense for the year ending December 31, 2007.
12
LIQUIDITY AND CAPITAL RESOURCES
Years Ended December 31, 2007 and December 31, 2006.
December 31, 2007 December 31, 2006 $ Change % Change
Cash $ 42,076 $ 76,241 $ (34,165) (45)%
Accounts payable and accrued expenses $ 2,377,504 $ 1,667,660 $ 709,844 43%
Cash proceeds from the sale of common stock $ 390,000 $ 50,000 $ 340,000 680%
We have financed our operations during the year primarily through the use of
cash on hand, issuance of stock for services, issuance of stock for cash, and
aging of our payables. As of December 31, 2007, we had total current liabilities
of $5,235,744 compared to $4,400,899 as of December 31, 2006. The increase in
total current liabilities is primarily due to an increase in Accounts Payable of
approximately $25,000, Due to Related Parties $625,000, and Accrued Expenses of
approximately $59,000. Additionally, we received $125,000 in related party
loans. These items increased as our lack of cash has resulted in longer aging of
payables and need for additional cash infusion.
Cash decreased 45% as of December 31, 2007 due to the payment of some of our
payables throughout 2007.
We issued common stock of $390,000 for cash as of December 31, 2007, which has
allowed us to continue our efforts.
We had $42,076 cash on hand as of December 31, 2007 compared to $76,241 as of
December 31, 2006. We will continue to need additional cash during the following
twelve months and these needs will coincide with the cash demands resulting from
our general operations and implementing our business plan. There is no assurance
we will be able to obtain additional capital as required, or obtain the capital
on acceptable terms and conditions.
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.
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.
13
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
$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 Group, Inc. for $1,250,000. The Company is a joint tenant with Western
in this debt which bears interest of 14% and is due within one year from the
date of the note. As of December 31, 2007, Western paid directly to Diversified
Lending Group, Inc. six months of interest for the original loan. We have
accounted for this as both interest income and interest expense of $87,500. As
stated in the agreement, the Company could extend the Maturity Date of the loan
one time for a period of six months, which the Company exercised for a fee of 3%
of the loan amount or $37,500 (Western Architecture paid to the Company $18,750
as their part of the loan extension). As of March 31, 2008, management is
negotiating with the note holder to extend the terms 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 valued at $400,000, 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 their 4% ownership is not diluted. As of
December 31, 2007 and 2006, respectively, our loan fees paid with common stock
have been fully expensed and our loan collateral paid with common stock was
$750,000 at both period end dates.
At December 31, 2006, we accrued an additional $6,260 of interest relating to
the year end dilution calculation which resulted in us issuing an additional
89,438 shares in the first quarter of 2007. At December 31, 2007, we accrued an
additional $6,125 of interest relating to the year end dilution calculation. As
a result, 94,231 additional shares will be issued upon the publication of the
financial statements.
As the loan collateral, loan fees and anti-dilution components of the agreement
(as described above) are dominated in Company's 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 and
recorded an Advance - Related Party on our balance sheet. Our Chief Operating
Officer is also the President of Western Architectural Services, LLC.
14
ITEM 7. FINANCIAL STATEMENTS
VOYAGER ENTERTAINMENT INTERNATIONAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007
DECEMBER 31, 2006
CONTENTS
Page
REPORT OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
ON THE CONSOLIDATED FINANCIAL STATEMENTS F-2
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets F-3
Consolidated Statements of Operations F-4
Consolidated Statement of Stockholders' Deficit F-5
Consolidated Statements of Cash Flows F-9
Notes to Consolidated Financial Statements F-10
F-1
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 sheets of Voyager
Entertainment International, Inc. and subsidiaries as of December 31, 2007 and
December 31, 2006, and the related consolidated statements of operations,
stockholders' deficit, and cash flows for the years then ended and from
Inception (March 1, 1997) to December 31, 2007. 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 audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits 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. and subsidiaries as of December 31, 2007 and
2006, and the results of its operations and cash flows for the years then ended
from Inception (March 1, 1997) to December 31, 2007 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
Henderson, Nevada
April 7, 2008
F-2
VOYAGER ENTERTAINMENT INTERNATIONAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
December 31, 2007 December 31, 2006
----------------- ----------------
ASSETS
CURRENT ASSETS
Cash $ 42,076 $ 76,241
Prepaids 1,793 -
Deferred financing costs 50,000 -
Advances - related party 500,000 500,000
Loan origination costs, net of amortization of
$33,750 and $16,250, respectively - 33,750
----------------- ----------------
Total current assets 593,870 609,991
FIXED ASSETS, net of accumulated depreciation of
$36,211 and $26,505, respectively 10,636 16,147
----------------- ----------------
Total assets $ 604,505 $ 626,138
================= ================
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 1,127,508 $ 1,042,660
Accrued expenses - related party 1,250,000 625,000
Note payable 1,855,000 1,855,000
Due to related parties 125,000 -
Loans and settlement payable 878,239 878,239
----------------- ----------------
Total current liabilities 5,235,747 4,400,899
----------------- ----------------
Total liabilities 5,235,747 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 1,000
Common stock: $.001 par value; authorized 200,000,000 shares;
issued and outstanding:123,577,287 and 113,842,905 respectively 123,577 113,844
Additional paid-in capital 12,991,376 12,043,353
Deferred construction costs paid with common stock (182,813) (196,875)
Loan collateral paid with common stock (750,000) (750,000)
Receivable for return of stock related to canceled acquisition (375,000) (750,000)
Loan fees paid with common stock, net of accretion of
$270,000 and $130,000, respectively - (270,000)
Accumulated deficit during the development stage (16,439,382) (13,966,083)
----------------- ----------------
Total stockholders' deficit (4,631,242) (3,774,761)
----------------- ----------------
Total liabilities and
stockholders' deficit $ 604,505 $ 626,138
================= ================
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 STATEMENTS OF OPERATIONS
From inception
March 1, 1997) to
December 31, 2007 December 31, 2006 December 31, 2007
----------------- ----------------- ----------------
Revenues $ - $ - $ -
Operating Expenses:
Professional and consulting fees 1,430,364 1,377,970 12,090,085
Project costs 25,638 46,119 163,936
Depreciation 9,706 10,143 36,211
Settlement and nullification
expense 375,000 - 1,025,000
Other expense 174,578 144,547 1,030,105
---------------- ---------------- ---------------
2,015,286 1,578,779 14,345,337
Operating loss (2,015,286) (1,578,779) (14,345,337)
Other income (expense):
Interest income 87,636 1,141 88,777
Interest expense (545,647) (309,056) (2,182,822)
---------------- ---------------- ---------------
(458,011) (307,915) (2,094,045)
Net Loss (2,473,297) (1,886,694) (16,439,382)
Preferred stock dividends - - (130,000)
---------------- ---------------- ---------------
Net loss allocable to common stockholders $ (2,473,297) $ (1,886,694) $ (16,569,382)
================ ================ ===============
Net loss per common share - basic and
diluted $ (0.02) $ (0.02)
================ ================
Weighted average number of common
shares outstanding 117,768,874 89,541,635
================ ================
The accompanying notes form an integral part of these
consolidated financial statements.
F-4
VOYAGER ENTERTAINMENT INTERNATIONAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
FROM INCEPTION (MARCH 1, 1997) TO DECEMBER 31, 2007
Additional Deferred
Preferred Preferred paid-in construction
Stock Series A Stock Series B Common stock capital costs
--------------- --------------- ------------------- ------------- ----------
Shares Amount Shares Amount Shares Amount
------ ------ ------ ------ ------ ------
Balance at inception - March 1, 2000
(as restated for reorganization) -- $ -- -- $ -- 15,000,000 $15,000 20,000 --
Net loss for the year ended
December 31, 2001 -- -- -- -- -- -- -- --
------ ------ ------ ------ ---------- ------- ----------- ---------
Balance at December 31, 2001 -- -- -- -- 15,000,000 15,000 20,000 --
Issuance of stock for cash and
services (pre-merger) 2,160,000 2,160 -- -- -- -- 25,840 --
Conversion of preferred stock
to common stock (660,000) (660) -- -- 6,600,000 6,600 (5,940) --
Acquisition of net assets of Dakota -- -- -- -- 11,615,000 11,615 (11,615) --
Issuance of common stock for cash -
February 15, 2002 -- -- -- -- 800,000 800 399,200 --
Issuance of common stock for services -
April 2002 -- -- -- -- 200,000 200 399,800 --
Issuance of common stock for
Architectural agreement - May 2002 -- -- -- -- 2,812,500 2,813 18,138,722 (18,141,535)
Issuance of common stock for cash -
June 2002 -- -- -- -- 50,000 50 149,950 --
Issuance of common stock for
Architectural agreement - October 2002 -- -- -- -- 600,000 600 162,000 (162,000)
Issuance of common stock for
financing costs - November 2002 -- -- -- -- 650,000 650 162,500 --
Issuance of stock for services -
October 2002 -- -- -- -- 325,000 325 74,750 --
Net loss for the year ended
December 31, 2002 -- -- -- -- -- -- -- --
--------- ------- ------ ------ ---------- ------ ---------- -----------
Balance at December 31, 2002 1,500,000 1,500 -- -- 38,652,500 38,653 19,515,207 (18,304,135)
Issuance of common stock for
financing costs - June 2003 -- -- -- -- 2,600,000 2,600 309,400 --
Issuance of preferred stock for cash
June 2003 -- -- 1,000,000 1,000 -- -- 99,000 --
Issuance of preferred stock for cash
August 2003 -- -- 500,000 500 -- -- 49,500 --
Issuance of common stock for cash
September 2003 -- -- -- -- 769,222 769 99,231 --
BCF associated with preferred stock -- -- -- -- -- -- 130,000 --
Amortization of beneficial conversion
feature in a manner similar to
preferred stock dividends -- -- -- -- -- -- (130,000) --
Issuance of common stock for services
September 2003 -- -- -- -- 625,000 625 99,375 --
F-5
Deficit
accumulated
during the Total
Acquisition Loan Loan Stock development stockholders'
Deposit collateral Fee Payable stage deficit
---------- ---------- ----- ------- ------------- -------------
Balance at inception - March 1, 2000
(as restated for reorganization) -- -- -- -- $ (87,193) (52,193)
Net loss for the year ended
December 31, 2001 -- -- -- -- (101,432) (101,432)
---------- --------- ----- ------- ---------- -------------
Balance at December 31, 2001 -- -- -- -- (188,625) (153,625)
Issuance of stock for cash and
services (pre-merger) -- -- -- -- -- 28,000
Conversion of preferred stock
to common stock -- -- -- -- -- --
Acquisition of net assets of Dakota -- -- -- -- -- --
Issuance of common stock for cash -
February 15, 2002 -- -- -- -- -- 400,000
Issuance of common stock for services -
April 2002 -- -- -- -- -- 400,000
Issuance of common stock for
Architectural agreement - May 2002 -- -- -- -- -- --
Issuance of common stock for cash -
June 2002 -- -- -- -- -- 150,000
Issuance of common stock for
Architectural agreement - October 2002 -- -- -- -- -- --
Issuance of common stock for
financing costs - November 2002 -- -- -- -- -- 163,150
Issuance of stock for services -
October 2002 -- -- -- -- -- 75,075
Net loss for the year ended
December 31, 2002 -- -- -- -- (1,754,327) (1,754,327)
--------- --------- ----- ------- ----------- -----------
Balance at December 31, 2002 -- -- -- -- (1,942,952) (691,727)
Issuance of common stock for
financing costs - June 2003 -- -- -- -- -- 312,000
Issuance of preferred stock for cash
June 2003 -- -- -- -- -- 100,000
Issuance of preferred stock for cash
August 2003 -- -- -- -- -- 50,000
Issuance of common stock for cash
September 2003 -- -- -- -- -- 100,000
BCF associated with preferred stock -- -- -- -- -- 130,000
Amortization of beneficial conversion
feature in a manner similar to
preferred stock dividends -- -- -- -- -- (130,000)
Issuance of common stock for services
September 2003 -- -- -- -- -- 100,000
F-5 (continued)
Additional Deferred
Preferred Preferred paid-in construction
Stock Series A Stock Series B Common stock capital costs
--------------- --------------- ------------------- ------------- ----------
Shares Amount Shares Amount Shares Amount
------ ------ ------ ------ ------ ------
Issuance of common stock for cash
December 2003 -- -- -- -- 2,307,692 2,308 297,692 --
Issuance of common stock for cash -
December 2003 -- -- -- -- 1,538,461 1,538 198,462 --
Issuance of common stock for cash -
December 2003 -- -- -- -- 1,538,461 1,538 198,462 --
Issuance of common stock for cash -
December 2003 -- -- -- -- 192,308 192 24,808 --
Issuance of common stock for cash -
December 2003 -- -- -- -- 384,616 385 49,615 --
Issuance of preferred stock for
service RP - December 2003 -- --(2,500,000) (2,500) -- -- 2,347,500 --
Issuance of common stock for services -
December 2003 -- -- -- -- 1,163,000 1,163 847,827 --
Net loss for the year ended 12/31/03 -- -- -- -- -- -- -- --
--------- ------- --------- ------ ---------- ------- ------------ -------------
Balance at December 31, 2003 1,500,000 $ 1,500 4,000,000 $4,000 49,771,260 $49,771 $ 24,136,079 $(18,304,135)
========= ======= ========= ====== ========== ======= ============ =============
Issuance of common stock for cash
January 2004 -- -- -- -- 192,307 192 24,808 --
Issuance of common stock for cash
February 2004 -- -- -- -- 384,614 385 49,615 --
Issuance of common stock for cash
February 2004 -- -- -- -- 250,000 250 99,750 --
Issuance of common stock for cash
February 2004 -- -- -- -- 500,000 500 199,500 --
Issuance of common stock for services
February 2004 -- -- -- -- 425,000 425 318,325 --
Issuance of common stock for services
February 2004 -- -- -- -- 150,000 150 119,850 --
Issuance of common stock for services
February 2004 -- -- -- -- 150,000 150 119,850 --
Conversion of preferred stock to
common stock March 2004 (500,000) (500) -- -- 5,000,000 5,000 (4,500) --
Conversion of preferred stock to
common stock March 2004 (500,000) (500) -- -- 5,000,000 5,000 (4,500) --
Issuance of common stock for cash
March 2004 -- -- -- -- 384,614 385 49,615 --
Issuance of common stock for services
June 2004 -- -- -- -- 650,000 650 322,350 --
Issuance of common stock for cash
September 2004 -- -- -- -- 333,333 333 49,667 --
Issuance of common stock for cash
October 2004 -- -- -- -- 1,000,000 1,000 149,000 --
Issuance of common stock for services
October 2004 -- -- -- -- 500,000 500 54,500 --
Net loss for the year ended
December 31, 2004 -- -- -- -- -- -- -- --
--------- ------- --------- ------ ---------- ------- ----------- -------------
Balance at December 31, 2004 500,000 $ 500 4,000,000 $4,000 64,691,128 $64,691 $25,683,909 $(18,304,135)
========= ======= ========= ====== ========== ======= =========== =============
Issuance of common stock for services
January 2005 -- -- -- -- 500,000 500 74,500 --
Issuance of common stock for cash
February 2005 -- -- -- -- 500,000 500 99,500 --
F-6
Deficit
accumulated
during the Total
Acquisition Loan Loan Stock development stockholders'
Deposit collateral Fee Payable stage deficit
---------- ---------- ----- ------- ------------- -------------
Issuance of common stock for cash
December 2003 -- -- -- -- -- 300,000
Issuance of common stock for cash -
December 2003 -- -- -- -- -- 200,000
Issuance of common stock for cash -
December 2003 -- -- -- -- -- 200,000
Issuance of common stock for cash -
December 2003 -- -- -- -- -- 25,000
Issuance of common stock for cash -
December 2003 -- -- -- -- -- 50,000
Issuance of preferred stock for
service RP - December 2003 -- -- -- -- -- 2,350,000
Issuance of common stock for services -
December 2003 -- -- -- -- (5,943,895) (5,943,895)
Net loss for the year ended 12/31/03 -- -- -- -- -- --
--------- ---------- ------ ------ ------------ -----------
Balance at December 31, 2003 $ -- $ -- -- $ -- $(7,886,847) (1,999,632)
========= ========== ====== ====== ============ ===========
Issuance of common stock for cash
January 2004 -- -- -- -- -- 25,000
Issuance of common stock for cash
February 2004 -- -- -- -- -- 50,000
Issuance of common stock for cash
February 2004 -- -- -- -- -- 100,000
Issuance of common stock for cash
February 2004 -- -- -- -- -- 200,000
Issuance of common stock for services
February 2004 -- -- -- -- -- 318,750
Issuance of common stock for services
February 2004 -- -- -- -- -- 120,000
Issuance of common stock for services
February 2004 -- -- -- -- -- 120,000
Conversion of preferred stock to
common stock March 2004 -- -- -- -- -- --
Conversion of preferred stock to
common stock March 2004 -- -- -- -- -- --
Issuance of common stock for cash
March 2004 -- -- -- -- -- 50,000
Issuance of common stock for services
June 2004 -- -- -- -- -- 323,000
Issuance of common stock for cash
September 2004 -- -- -- -- -- 50,000
Issuance of common stock for cash
October 2004 -- -- -- -- -- 150,000
Issuance of common stock for services
October 2004 -- -- -- -- -- 55,000
Net loss for the year ended
December 31, 2004 -- -- -- -- (2,455,886) (2,455,866)
--------- ---------- ------ ------- ------------- ------------
Balance at December 31, 2004 $ -- $ -- -- $ -- $(10,342,731) (2,893,766)
========= ========== ====== ======= ============= ============
Issuance of common stock for services
January 2005 -- -- -- -- -- 75,000
Issuance of common stock for cash
February 2005 -- -- -- -- -- 100,000
F-6 (continued)
Additional Deferred
Preferred Preferred paid-in construction
Stock Series A Stock Series B Common stock capital costs
--------------- --------------- ------------------- ------------- ----------
Shares Amount Shares Amount Shares Amount
------ ------ ------ ------ ------ ------
Issuance of common stock for services
March 2005 -- -- -- -- 500,000 500 159,500 --
Issuance of common stock for cash
March 2005 -- -- -- -- 375,000 375 74,625 --
Issuance of common stock for cash
June 2005 -- -- -- -- 666,667 667 99,333 --
Issuance of common stock for cash
June 2005 -- -- -- -- 2,000,000 2000 298,000 --
Issuance of common stock for cash
July 2005 -- -- -- -- 200,000 200 69,800 --
Issuance of common stock for cash
July 2005 -- -- -- -- 666,667 667 99,333 --
Issuance of common stock for cash
July 2005 -- -- -- -- 166,666 166 24,834 --
Conversion of preferred stock to common
Stock August 2005 -- --(2,500,000) (2,500) 5,000,000 5,000 (2,500) --
Issuance of common stock for cash
September 2005 -- -- -- -- 100,000 100 32,900 --
Issuance of common stock for cash
September 2005 -- -- -- -- 500,000 500 164,500 --
Issuance of common stock for cash
November 2005 -- -- -- -- 333,333 333 49,667 --
Issuance of common stock for cash
November 2005 -- -- -- -- 800,000 800 119,200 --
Issuance of common stock for cash
November 2005 -- -- -- -- 666,667 667 99,333 --
Issuance of common stock for cash
December 2005 -- -- -- -- 166,667 167 24,833 --
Net loss for the year ended
December 31, 2005 -- -- -- -- -- -- -- --
--------- ------- --------- ------ ----------- ------- ------------ ------------
Balance at December 31, 2005 500,000 $ 500 1,500,000 $1,500 $77,832,795 $77,833 $ 27,171,267 $(18,304,135)
========= ======= ========= ====== =========== ======= ============ =============
Issuance of common stock for cash
February 2006 -- -- -- -- 166,667 167 24,833 --
Conversion of preferred series B stock
To common stock April 2006 -- -- (500,000) (500) 1,000,000 1,000 (500) --
Issuance of common stock for Services
April 2006 -- -- -- -- 950,000 950 141,550 --
Issuance of common stock for Acquisition
Deposit April 2006 -- -- -- -- 3,000,000 3,000 447,000 --
Issuance of common Stock for services
May 2006 -- -- -- -- 100,000 100 15,900 --
Issuance of common stock for services
June 2006 -- -- -- -- 250,000 250 34,750 --
Conversion of Preferred Series A
To common Stock July 2006 (500,000) (500) -- -- 5,000,000 5,000 (4,500) --
Issuance of common stock for loan
August 2006 -- -- -- -- 4,000,000 4,000 396,000 --
Issuance of common Stock for collateral
August 2006 -- -- -- -- 7,500,000 7,500 742,500 --
Issuance of common stock for services
November 2006 -- -- -- -- 9,812,500 9,813 740,188 --
Issuance of common stock as deposit
For acquisition November 2006 -- -- -- -- 2,000,000 2,000 298,000 --
F-7
Deficit
accumulated
during the Total
Acquisition Loan Loan Stock development stockholders'
Deposit collateral Fee Payable stage deficit
---------- ---------- ----- ------- ------------- -------------
Issuance of common stock for services
March 2005 -- -- -- -- -- 160,000
Issuance of common stock for cash
March 2005 -- -- -- -- -- 75,000
Issuance of common stock for cash
June 2005 -- -- -- -- -- 100,000
Issuance of common stock for cash
June 2005 -- -- -- -- -- 300,000
Issuance of common stock for cash
July 2005 -- -- -- -- -- 70,000
Issuance of common stock for cash
July 2005 -- -- -- -- -- 100,000
Issuance of common stock for cash
July 2005 -- -- -- -- -- 25,000
Conversion of preferred stock to common
Stock August 2005 -- -- -- -- -- --
Issuance of common stock for cash
September 2005 -- -- -- -- -- 33,000
Issuance of common stock for cash
September 2005 -- -- -- -- -- 165,000
Issuance of common stock for cash
November 2005 -- -- -- -- -- 50,000
Issuance of common stock for cash
November 2005 -- -- -- -- -- 120,000
Issuance of common stock for cash
November 2005 -- -- -- -- -- 100,000
Issuance of common stock for cash
December 2005 -- -- -- -- -- 25,000
Net loss for the year ended
December 31, 2005 -- -- -- -- (1,736,658) (1,736,658)
-------- --------- ------ -------- ------------- ------------
Balance at December 31, 2005 $ -- $ -- -- $ -- $(12,079,389) (3,132,424)
========= ========== ====== ======== ============= ============
Issuance of common stock for cash
February 2006 -- -- -- -- -- 25,000
Conversion of preferred series B stock
To common stock April 2006 -- -- -- -- -- --
Issuance of common stock for Services
April 2006 -- -- -- -- -- 142,500
Issuance of common stock for Acquisition
Deposit April 2006 (450,000) -- -- -- -- --
Issuance of common Stock for services
May 2006 -- -- -- -- -- 16,000
Issuance of common stock for services
June 2006 -- -- -- -- -- 35,000
Conversion of Preferred Series A
To common Stock July 2006 -- -- -- -- -- --
Issuance of common stock for loan
August 2006 -- -- (400,000) -- -- --
Issuance of common Stock for collateral
August 2006 -- (750,000) -- -- -- --
Issuance of common stock for services
November 2006 -- -- -- -- -- 750,000
Issuance of common stock as deposit
For acquisition November 2006 (300,000) -- -- -- -- --
F-7 (continued)
Additional Deferred
Preferred Preferred paid-in construction
Stock Series A Stock Series B Common stock capital costs
--------------- --------------- ------------------- ------------- ----------
Shares Amount Shares Amount Shares Amount
------ ------ ------ ------ ------ ------
Issuance of common stock for additional
Debt interest December 2006 -- -- -- -- 464,278 464 27,392 --
Issuance of common stock for cash
December 2006 -- -- -- -- 166,667 167 24,833 --
Issuance of common stock for services
December 2006 -- -- -- -- 1,600,000 1,600 91,400 --
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 -- -- -- -- -- -- -- --
Net loss as of December 31, 2006 -- -- -- -- -- -- -- --
------ ------- --------- ------ ----------- -------- ------------ -----------
Balance at December 31, 2006 -- -- 1,000,000 $1,000 113,842,905 $113,843 $ 12,043,353 $ (196,875)
====== ======= ========= ====== =========== ======== ============ ===========
Issuance of common stock for services
March 2007 -- -- -- -- 1,000,000 1,000 97,000 --
Expense of Acquisition Deposit as
Nullification Fee March 2007 -- -- -- -- -- -- -- --
Issuance of common stock for services
April 2007 -- -- -- -- 500,000 500 59,500 --
Issuance of common stock for services
May 2007 -- -- -- -- 1,100,000 1,100 114,400 --
Issuance of common stock for interest
April 2007 -- -- -- -- 89,438 89 6,171 --
Issuance of common stock for Cash July 2007 -- -- -- -- 2,000,000 2,000 198,000 --
Issuance of common stock for interest
July 2007 -- -- -- -- 39,800 40 7,124 --
Issuance of common stock for services
August 2007 -- -- -- -- 1,300,000 1,300 187,200 --
Issuance of common stock for cash
August 2007 -- -- -- -- 1,200,000 1,200 118,800 --
Issuance of common stock for interest
August 2007 -- -- -- -- 149,369 149 21,438 --
Issuance of common stock for cash
October 2007 -- -- -- -- 100,000 100 9,900 --
Issuance of common stock for services
November 2007 -- -- -- -- 500,000 500 49,500 --
Issuance of common stock for cash
December 2007 -- -- -- -- 1,450,000 1,450 58,550 --
Issuance of common stock for services
December 2007 -- -- -- -- 200,000 200 19,800 --
Issuance of common stock for interest
December 2007 -- -- -- -- 105,775 106 14,703 --
Fair market adjustment to stock for
Deferred Construction Costs, December 2007 -- -- -- -- -- -- (14,063) 14,063
Accretion of loan costs to interest expense
December 2007 -- -- -- -- -- -- -- --
Net loss as of December 31, 2007 -- -- -- -- -- -- -- --
------ ------- --------- ------ ----------- -------- ----------- ----------
Balance at December 31, 2007 -- $ -- 1,000,000 $1,000 123,577,287 $123,577 $12,991,376 $(182,813)
====== ======= ========= ====== =========== ======== =========== ==========
F-8
Deficit
accumulated
during the Total
Acquisition Loan Loan Stock development stockholders'
Deposit collateral Fee Payable stage deficit
---------- ---------- ----- ------- ------------- -------------
Issuance of common stock for additional
Debt interest December 2006 -- -- -- -- -- 27,857
Issuance of common stock for cash
December 2006 -- -- -- -- -- 25,000
Issuance of common stock for services
December 2006 -- -- -- -- -- 93,000
Fair market adjustment to stock for
Deferred Construction Costs, December 2006 -- -- -- -- -- --
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 $(750,000) $(750,000) $(270,000) $ -- $(13,966,083) (3,774,761)
========== ========== ========== ======= ============= =============
Issuance of common stock for services
March 2007 -- -- -- -- -- 98,000
Expense of Acquisition Deposit as
Nullification Fee March 2007 375,000 -- -- -- -- 375,000
Issuance of common stock for services
April 2007 -- -- -- -- -- 60,000
Issuance of common stock for services
May 2007 -- -- -- -- -- 115,500
Issuance of common stock for interest
April 2007 -- -- -- -- -- 6,260
Issuance of common stock for Cash July 2007 -- -- -- -- -- 200,000
Issuance of common stock for interest
July 2007 -- -- -- -- -- 7,164
Issuance of common stock for services
August 2007 -- -- -- -- -- 188,500
Issuance of common stock for cash
August 2007 -- -- -- -- -- 120,000
Issuance of common stock for interest
August 2007 -- -- -- -- -- 21,587
Issuance of common stock for cash
October 2007 -- -- -- -- -- 10,000
Issuance of common stock for services
November 2007 -- -- -- -- -- 50,000
Issuance of common stock for cash
December 2007 -- -- -- -- -- 60,000
Issuance of common stock for services
December 2007 -- -- -- -- -- 20,000
Issuance of common stock for interest
December 2007 -- -- -- -- -- 14,809
Fair market adjustment to stock for
Deferred Construction Costs, December 2007 -- -- -- -- -- --
Accretion of loan costs to interest expense
December 2007 -- -- 270,000 -- -- 270,000
Net loss as of December 31, 2007 -- -- -- -- (2,473,297) (2,473,297)
---------- ---------- -------- ------- ------------- ------------
Balance at December 31, 2007 $(375,000) $(750,000) $ -- $ -- $(16,439,382) $(4,631,242)
========== ========== ======== ======= ============= ============
The accompanying notes form an integral part of these
consolidated financial statements.
F-8 (continued)
VOYAGER ENTERTAINMENT INTERNATIONAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
From inception
(March 1, 1997) to
December 31, 2007 December 31, 2006 December 31, 2007
----------------- ----------------- -------------------
Cash Flows from Operating Activities:
Net Loss $ (2,473,297) $ (1,886,694) $ (16,439,382)
Adjustments to reconcile net loss to
net cash used by operating activities:
Depreciation 9,706 10,143 36,211
Issuance of common stock for services 532,000 286,500 6,050,315
Issuance of common stock nullification
fee 375,000 - 375,000
Issuance of common stock for accrued
bonus - 750,000 750,000
Interest expense from the issuance of
common stock 49,820 34,118 559,088
Accretion of debt issuance costs 303,750 146,250 450,000
Changes in assets and liabilities:
Prepaid expenses (1,793) - (1,793)
Accounts payable and accrued expenses 84,844 47,876 1,121,766
Accrued expenses - related party 625,000 (160,000) 1,250,000
Accrued settlement obligation - - 650,000
--------------- ---------------- -----------------
Net cash used in operating
activities (494,970) (771,807) (5,198,795)
Cash flows used in Investing Activities:
Payments to acquire fixed assets (4,195) (10,504) (47,369)
Proceeds from note receivable - (500,000) (500,000)
--------------- ---------------- -----------------
Net cash used in investing activities (4,195) (510,504) (547,369)
Cash flows provided by Financing Activities:
Proceeds from notes payable, short term debt 145,000 1,250,000 2,228,239
Payment on notes payable, short term debt (20,000) - (20,000)
Proceeds from the sale of preferred stock - - 150,000
Proceeds from the sale of common stock 390,000 50,000 3,530,000
Payments for loan fees - (50,000) (50,000)
Payments for deferred financing costs (50,000) - (50,000)
Net cash provided by financing
activities 465,000 1,250,000 5,788,239
Net (decrease) increase in cash (34,165) (32,311) 42,076
Cash, beginning of year 76,241 108,552 -
--------------- ---------------- -----------------
Cash, end of year $ 42,076 $ 76,241 $ 42,076
=============== ================ =================
Cash paid for:
Interest $ 32,997 $ 60,000 $ 92,997
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 $ (14,063) $ (18,107,260) $ 182,813
Conversion of preferred shares $ - $ 1,000 $ 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-9
VOYAGER ENTERTAINMENT INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2007
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., was organized on January 31,
1991. The Company is in the 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
of December 31. On June 11, 2003, the Company became a Nevada Corporation.
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. Voyager
Ventures, Inc. has been a dormant company and was discontinued as of December
31, 2007. All organizational costs have been paid by the parent.
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.
This annual report does not include an attestation report of the Company's
registered accounting firm regarding internal control over financial reporting.
Management's report was not subject to attestation by the Company's registered
public accounting firm pursuant to temporary rules of the Securities and
Exchange Commission.
GOING CONCERN
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, which contemplate continuation of the
Company as a going concern. However, the Company has not begun generating
revenue, is considered a development stage company, has experienced recurring
net operating losses, had a net loss of $2,473,297 and $1,886,694 for the years
ended December 31, 2007 and 2006, and a working capital deficiency of $4,641,877
at December 31, 2007. These factors raise substantial doubt about the Company's
ability to continue as a going concern. 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 L.V.
Project, as well as other projects, and continually seek funding opportunities.
These financial statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts, or amounts and
classification of liabilities that might result from this uncertainty.
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, 2007 or 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, 2007 and December 31, 2006,
the Company did not have any accounts in excess of $100,000.
F-10
Due to the uniqueness of the Observation Wheel, we may encounter concentrations
with certain vendors who specialize in this type of construction. As of December
31, 2007 and 2006, construction activities had not started.
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 SFAS No. 109 "Accounting for Income Taxes," and clarified by FIN
48, "Accounting for Uncertainty in Income Taxes--an interpretation of FASB
Statement No. 109." 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, 2007 and 2006
were $0 and $6,029, 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 to the
debt on our balance sheet in accrued expenses.
NEW ACCOUNTING PRONOUNCEMENTS
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
F-11
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 SFAS No. 159, "The Fair Value Option for
Financial Assets and Financial Liabilities, including an amendment of FASB
Statement No. 115" ("SAS 159"). SFAS 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.
In December 2007, the FASB issued SFAS No. 160, "Noncontrolling Interests in
Consolidated Financial Statements--an amendment of ARB No. 51" ("SFAS 160").
SFAS 160 requires companies with noncontrolling interests to disclose such
interests clearly as a portion of equity but separate from the parent's equity.
The noncontrolling interest's portion of net income must also be clearly
presented on the Income Statement. SFAS 160 is effective for financial
statements issued for fiscals years beginning after December 15, 2008 and will
be adopted by the Company in the first quarter of fiscal year 2009. We do not
expect that the adoption of SFAS 160 will have a material impact on our
financial condition or results of operation.
In December 2007, the FASB issued SFAS No. 141 (R), "Business Combinations
(revised 2007)" ("SFAS 141 (R)"). SFAS 141 (R) applies the acquisition method
of accounting for business combinations established in SFAS 141 to all
acquisitions where the acquirer gains a controlling interest, regardless of
whether consideration was exchanged. Consistent with SFAS 141, SFAS 141 (R)
requires the acquirer to fair value the assets and liabilities of the acquiree
and record goodwill on bargain purchases, with main difference the application
to all acquisitions where control is achieved. SFAS 141 (R) is effective for
financial statements issued for fiscal years beginning after December 15, 2008
and will be adopted by the Company in the first quarter of fiscal year 2009. We
do not expect that the adoption of SFAS 141 will have a material impact on our
financial condition or results of operation.
In March 2008, the FASB issued SFAS No. 161, "Disclosures about Derivative
Instruments and Hedging Activities", an amendment of SFAS No. 133. SFAS 161
applies to all derivative instruments and nonderivative instruments that are
designated and qualify as hedging instruments pursuant to paragraphs 37 and 42
of SFAS 133 and related hedged items accounted for under SFAS 133. SFAS 161
requires entities to provide greater transparency through additional disclosures
about how and why an entity uses derivative instruments, how derivative
instruments and related hedged items are accounted for under SFAS 133 and its
related interpretations, and how derivative instruments and related hedged items
affect an entity's financial position, results of operations, and cash flows.
SFAS 161 is effective as of the beginning of an entity's first fiscal year that
begins after November 15, 2008. We do not expect that the adoption of SFAS 161
will have a material impact on our financial condition or results of operation.
NOTE 2. ADVANCES - RELATED PARTY
In 2006, the Company entered into a note with Diversified Lending, see Note 6.
From the proceeds of the debt facility we issued $500,000 to Western
Architectural Services, LLC ("Western") and recorded an Advance - Related Party
on our balance sheet. Our Chief Operating Officer is also the President of
Western.
F-12
NOTE 3. FIXED ASSETS
Fixed assets and accumulated depreciation consists of the following:
December 31, December 31,
2007 2006
--------------------------------
Computer equipment $ 46,847 $ 42,652
Accumulated depreciation (36,211) (26,505)
--------------------------------
$ 10,636 $ 16,147
================================
NOTE 4. ACCRUED EXPENSES
Accrued expenses consist of the following:
December 31, December 31,
2007 2006
--------------------------------
Accounts Payable $ 125,535 $ 100,000
Accrued Interest 1,001,970 942,660
--------------------------------
$ 1,127,505 $ 1,042,660
================================
NOTE 5. LOAN AND SETTLEMENT 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 $390,845 as of December 31, 2007 and
$319,413 as of December 31, 2006.
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, 2007, the total obligation included loans of $228,239 in
principal and the settlement obligation of $650,000, plus total accrued interest
of $390,845 amounting to an aggregate of $1,269,084. One half of this amount, or
$634,542 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, 2007. 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.
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 a 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 was 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, 2007 and 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
F-13
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
in this debt which bears interest of 14% and is due within one year from the
date of the note. As of December 31, 2007, Western paid directly to Diversified
Lending Group, Inc. six months of interest for the original loan. We have
accounted for this as both interest income and interest expense of $87,500. As
stated in the agreement, the Company could extend the Maturity Date of the loan
one time for a period of six months, which the Company exercised for a fee of 3%
of the loan amount or $37,500 (Western Architecture paid to the Company $18,750
as their part of the loan extension). As of March 31, 2008, management is
negotiating with the note holder to extend the terms 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 valued at $400,000, 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 their 4% ownership is not diluted. As of
December 31, 2007 and 2006, respectively, our loan fees paid with common stock
have been fully expensed and our loan collateral paid with common stock was
$750,000 at both period end dates.
At December 31, 2006, we accrued an additional $6,260 of interest relating to
the year end dilution calculation which resulted in us issuing an additional
89,438 shares in the first quarter of 2007. At December 31, 2007, we accrued an
additional $6,125 of interest relating to the year end dilution calculation. As
a result, 94,231additional shares will be issued upon the publication of the
financial statements.
As the loan collateral, loan fees and anti-dilution components of the agreement
(as described above) are dominated in Company's 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 and
recorded an Advance - Related Party on our balance sheet.
Year Ended December 31,
2008 $ 1,250,000
Thereafter -
-------------
Total $ 1,250,000
=============
NOTE 7. RELATED PARTY TRANSACTIONS AND ACQUISITION
Related Party Transactions
--------------------------
During February 2004, the Company paid $300,000 in cash to Western, an entity
owned by the Company's Chief Operating Officer and director of the Company
pursuant to a Contractor Agreement between Western and the Company to design and
build a car for the Voyager project and conduct a feasibility study. As site
locations have been modified for the project, the feasibility study has been
modified by Western under this contract.
As of December 31, 2007, the Company had accrued expenses to related parties of
$1,250,000. During the years ended December 31, 2007 and 2006, 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, 2007,
accrued expenses - related party consists of the $760,000 unpaid bonus balance,
which includes the bonuses disclosed above plus $490,000 in unpaid consulting
fees to Synthetic Systems discussed below..
During the years ended December 31, 2007 and 2006, 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 $35,957 and $34,694 and furniture and equipment lease of
$13,800 or $1,150 per month as of December 31, 2007 and 2006, respectively.
On May 30, 2002, the Company executed a Contractor Agreement with Western where
Western will provide to the Company certain architectural services for the L.V.
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, Western's Chief Executive Officer is
currently our Chief Operating Officer, a director and significant stockholder of
the Company. We have accounted for these shares as Deferred Construction Costs
in these financial statements.
F-14
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 $0.05 to $0.15. 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, Tracy Jones, 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
is debited to additional-paid in capital due to the deferred construction cost
nature of these shares. As of December 31, 2007 and 2006, respectively, the
value of the deferred construction costs was $182,813 and $196,875,
respectively.
In 2006, the Company entered into a note with Diversified Lending, see Note 6.
From the proceeds of the debt facility we issued $500,000 to Western and
recorded an Advance - Related Party on our balance sheet.
In March 2007, we borrowed $100,000 from Western. The amount is unsecured,
carries no interest and is due upon demand.
In December 2007, we borrowed $25,000 from Western. The amount is unsecured,
carries no interest and is due upon demand.
Acquisition
-----------
On April 10, 2006, Voyager entered into a Unit Purchase (Buy-Sell) Agreement
("Agreement") to acquire all the outstanding units of Western in exchange for a
total of 5,000,000 shares of Voyager's common stock. 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
canceled 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 are to be returned to the Company for cancellation and returned to the
treasury. The remaining 2,500,000 shares were accounted for as a fee for the
nullification in our statement of operations as of December 31, 2007. The shares
were valued at fair value of $0.15 per shares for a total value of $375,000.
In 2006, we issued a certificate for 2,000,000 shares and a separate certificate
for 3,000,000 shares for the total 5,000,000 shares required under the
agreement. On February 7, 2008, the share certificate for 3,000,000 shares was
sent to the Company as part of the 2,500,000 shares required to be returned
under the March 30, 2007 nullification agreement. We have accounted for the
500,000 excess shares as a common stock payable due to Western at March 31,
2008.
NOTE 8. COMMITMENTS AND CONTINGENCIES
The Company shares office space with Synthetic Systems as previously disclosed
in Note 7. The lease is a month to month sublease. The Company has no other
commitments.
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 preferred stock. For
our preferred stock we have designated two series: 1,500,000 shares of Series A
Preferred Stock with a par value of $0.001 and 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 conversion of Dakota Imaging Inc. and Voyager
Entertainment International, Inc., the Company issued 2,160,000 shares of
convertible preferred stock as consideration for cash and services, of which
660,000 shares were
F-15
immediately converted to shares of common stock, resulting in the Company having
3,660,000 shares of common stock outstanding.
In February 2002, upon the conversion of Dakota Imaging Inc. and Voyager
Entertainment International, Inc., 2,160,000 shares of the Series A convertible
preferred stock were immediately converted into 21,600,000 shares of common
stock, resulting in a balance of 1,500,000 shares of convertible preferred stock
designated.
On March 5, 2004, Richard Hannigan, 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, 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, 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.
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 where
Western will provide to be determined architectural services to the Company for
its Las Vegas Observation Wheel Project. The Company issued
F-16
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 there under.
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: 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, 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, 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 there under.
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 there under.
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.
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.
F-17
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 there under.
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 there under.
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.
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.
F-18
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.
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 $98,000 or $0.098.
In April 2007, the Company issued 500,000 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 $60,000 or $0.12.
In April 2007, the Company issued 89,438 shares of common stock for interest
which was accrued at December 31, 2006 for $6,260 or $0.07 per share, relating
to our Diversified Lending Group, Inc. note.
In May 2007, the Company issued 1,100,000 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 $115,500 or $0.105.
In July 2007, the Company issued 2,000,000 shares of common stock as a result of
shares purchased through a private placement offering for $200,000 or $0.10.
In July 2007, the Company issued 39,800 shares of common stock for the accrued
$7,164 or $0.18 per share in interest accrued at June 30, 2007 for charges
relating to the Diversified Lending Group, Inc. note.
In August 2007, the Company issued 1,300,000 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 $188,500 or $0.145.
In August 2007, the Company issued 1,200,000 shares of common stock as a result
of shares purchased through a private placement offering for $120,000 or $0.01.
In August 2007, the Company issued 149,369 shares of common stock for interest
which was for the accrued interest at September 30, 2007 for $21,587 or $0.14
per share relating to our Diversified Lending Group, Inc. note.
In October 2007, the Company issued 100,000 shares of common stock as a result
of shares purchased through a private placement offering for $10,000 or $0.01.
In November 2007, the Company issued 500,000 shares of common stock for
professional services rendered. These shares were valued at the fair value on
the date of grant for total compensation of $50,000 or $0.10.
In December 2007, the Company issued 1,450,000 shares of common stock as a
result of shares purchased through a private placement offering for $$60,000 or
$0.04.
In December 2007, the Company issued 200,000 shares of common stock for
professional services rendered. These shares were valued at the fair value on
the date of grant for total compensation of $20,000 or $0.10.
F-19
In December 2007, the Company issued 105,775 shares of common stock for interest
which was for the accrued interest at September 30, 2007 for $14,809 or $0.14
per share relating to our Diversified Lending Group, Inc. note.
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, 2007, no options have been issued under
this plan.
NOTE 11. INCOME TAXES
During the year ended December 31, 2007, the Company adopted Financial
Accounting Standards Board (FASB) Interpretation No. 48, "Accounting for
Uncertainty in Income Taxes" (FIN 48), which supplements SFAS No. 109,
"Accounting for Income Taxes," by defining the confidence level that a tax
position must meet in order to be recognized in the financial statements. The
Interpretation requires that the tax effects of a position be recognized only if
it is "more -likely- than-not" to be sustained based solely on its technical
merits as of the reporting date. The more-likely-than-not threshold represents a
positive assertion by management that a company is entitled to the economic
benefits of a tax position. If a tax position is not considered
more-likely-than-not to be sustained based solely on its technical merits no
benefits of the tax position are to be recognized. Moreover, the more
-likely-than-not threshold must continue to be met in each reporting period to
support continued recognition of a benefit. With the adoption of FIN 48,
companies are required to adjust their financial statements to reflect only
those tax positions that are more-likely-than-not to be sustained. Any necessary
adjustment would be recorded directly to retained earnings and reported as a
change in accounting principle.
The components of the Company's deferred tax asset as of December 31, 2007 and
2006 are as follows:
2007 2006
----------- -----------
Net operating loss carry forward $ 5,423,600 $ 4,557,900
Valuation allowance (5,423,600) (4,557,900)
----------- -----------
Net deferred tax asset $ - $ -
=========== ===========
A reconciliation of income taxes computed at the statutory rate to the income
tax amount recorded is as follows:
2007 2006
----------- -----------
Tax at statutory rate (35%) (35%)
Change in valuation allowance 35% 35%
----------- -----------
Effective income tax rate 0% 0%
=========== ===========
F-20
Upon adoption of FIN 48 as of January 1, 2007, the Company had no gross
unrecognized tax benefits that, if recognized, would favorably affect the
effective income tax rate in future periods. At December 31, 2007, the amount of
gross unrecognized tax benefits before valuation allowances and the amount that
would favorably affect the effective income tax rate in future periods after
valuation allowances were $0. These amounts consider the guidance in FIN 48-1,
"Definition of Settlement in FASB Interpretation No. 48". The Company has not
accrued any additional interest or penalties as a result of the adoption of FIN
48.
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 Company files income tax returns in the United States federal jurisdiction.
With a few exceptions, the Company is no longer subject to U.S. federal, state
or non-U.S. income tax examination by tax authorities on tax returns filed
before January 31, 2004. The Company will file its U.S. federal return for the
year ended December 31, 2007 upon the issuance of this filing. These U.S.
federal returns are considered open taxyears as of the date of these
consolidated financial statements. No tax returns are currently under
examination by any tax authorities.
NOTE 12. SUBSEQUENT EVENTS
On February 7, 2008, the share certificate for 3,000,000 shares was returned to
the Company under the March 30, 2007 agreement for with the failed Western
acquisition. We have accounted for the 500,000 excess shares as a common stock
payable due to Western at March 31, 2008.
Our note with Diversified Lending became due as of March 31, 2008. Although
management has ongoing negotiations to extend the terms of the agreement,
technically per the agreement we are in default.
F-21
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 8A. CONTROLS AND PROCEDURES
The management of Voyager Entertainment International, Inc. is responsible for
establishing and maintaining adequate internal control over financial reporting.
Internal control over financial reporting is defined in Rule 13a-15(f) or
15d-15(f) promulgated under the Securities Exchange Act of 1934 as a process
designed by, or under the supervision of, the company's principal executive and
principal financial officers and effected by the company's board of directors,
management and other personnel, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with accounting principles generally
accepted in the United States of America and includes those policies and
procedures that:
- Pertain to the maintenance of records that in reasonable detail
accurately and fairly reflect the transactions and dispositions of the
assets of the company;
- Provide reasonable assurance that transactions are recorded as necessary
to permit preparation of financial statements in accordance with
accounting principles generally accepted in the United States of America
and that receipts and expenditures of the company are being made only in
accordance with authorizations of management and directors of the
company; and
- Provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of the company's assets
that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate. All internal control systems,
no matter how well designed, have inherent limitations. Therefore, even those
systems determined to be effective can provide only reasonable assurance with
respect to financial statement preparation and presentation. Because of the
inherent limitations of internal control, there is a risk that material
misstatements may not be prevented or detected on a timely basis by internal
control over financial reporting. However, these inherent limitations are known
features of the financial reporting process. Therefore, it is possible to design
into the process safeguards to reduce, though not eliminate, this risk.
Management assessed the effectiveness of the Company's internal control over
financial reporting as of December 31, 2007. In making this assessment,
management used the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission in Internal Control-Integrated
Framework.
Based on its assessment, management concluded that, as of December 31, 2007, the
Company's internal control over financial reporting is effective based on those
criteria.
ITEM 8B. OTHER INFORMATION
None.
15
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 59 President, CEO and Director
Tracy Jones 56 Chief Operating Officer and Director
Myong Hannigan 61 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 position at the Company, Mr. Jones can take this same approach
to developing the Observation Wheels. Mr. Jones brings 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 from1979-1981, which was relocated from
Bloomington, Illinois (1976-1979). This company specialized in design,
manufacturing, installation and retail/wholesale products.
SIGNIFICANT EMPLOYEES
None.
FAMILY RELATIONSHIPS
Ms. Hannigan is the wife of Richard Hannigan, President, Chief Executive Officer
and Director of the Company.
16
INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
During the past five years, no present director, executive officer or person
nominated to become a director or an executive officer of the Company:
1. had a petition under the federal bankruptcy laws or any state
insolvency law filed by or against, or a receiver, fiscal agent or
similar officer appointed by a court for the business or property of
such person, or any partnership in which he was a general partner at or
within two years before the time of such filing, or any corporation or
business association of which he was an executive officer at or within
two years before the time of such filing;
2. was convicted in a criminal proceeding or subject to a pending criminal
proceeding (excluding traffic violations and other minor offenses);
3. was subject to any order, judgment or decree, not subsequently
reversed, suspended or vacated, of any court of competent jurisdiction,
permanently or temporarily enjoining him from or otherwise limiting his
involvement in any of the following activities:
(i) Acting as a futures commission merchant, introducing
broker, commodity trading advisor, commodity pool
operator, floor broker, leverage transaction merchant,
any other person regulated by the Commodity Futures
Trading Commission, or an associated person of any of the
foregoing, or as an investment adviser, underwriter,
broker or dealer in securities, or as an affiliated
person, director or employee of any investment company,
bank, savings and loan association or insurance company,
or engaging in or continuing any conduct or practice in
connection with such activity;
(ii) Engaging in any type of business practice; or
(iii) Engaging in any activity in connection with the purchase
or sale of any security or commodity or in connection
with any violation of federal or state securities laws or
federal commodities laws; or
4. was the subject of any order, judgment or decree, not subsequently
reversed, suspended or vacated, of a federal or state authority
barring, suspending or otherwise limiting for more than 60 days the
right of such person to engage in any activity described in paragraph
(3) (i), above, or to be associated with persons engaged in any such
activity; or
5. was found by a court of competent jurisdiction (in a civil action), the
Securities and Exchange Commission or the Commodity Futures Trading
Commission to have violated a federal or state securities or
commodities law, and for which the judgment has not been reversed,
suspended or vacated.
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.
COMMITTEES OF THE BOARD OF DIRECTORS
Currently, the Company's Board of Directors does not have any standing audit,
nominating or compensation committees, or committees performing similar
functions. Richard Hannigan, President, oversees the compensation of our
executive officers.
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 2007, all reports were filed timely as
required.
17
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, 2007.
SUMMARY COMPENSATION TABLE
Long Term Compensation
-----------------------------------------------------
Annual Compensation Awards Payouts
------------------------------------------------------------------------------------------------------
Other Restricted Securities
Name Annual Stock Underlying LTIP All Other
and Compensation Award(s) Options/ Payouts Compensation
Principal Salary
Position Year ($) Bonus ($) ($) ($) SARs (#) ($) ($)
--------------------------------------------------------------------------------------------------------------------------------
Richard Hannigan
President/CEO/Director 2007 - 190,000 210,000 - - - -
Tracy Jones
COO/Director 2007 - - - - - - -
Myong Hannigan
Secretary 2007 - 190,000 210,000 - - - -
Richard Hannigan
President/CEO/Director 2006 - 190,000 210,000 - - - -
Tracy Jones
COO/Director 2006 - - - - - - -
Myong Hannigan
Secretary 2006 - 190,000 210,000 - - - -
Richard Hannigan
President/CEO/Director 2005 - 190,000 210,000 - - - -
Tracy Jones
COO/Director 2005 - - - - - - -
Myong Hannigan
Secretary 2005 - 190,000 210,000 - - - -
(1) 2006-2007 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/CEO, and Myong Hannigan,
our Secretary. The total bonus of $760,000 will be issued to Synthetic
Systems at the appropriate time when the Company deems it practicable.
However, the Company has the option of retiring the accrued bonuses by
issuing shares of our common stock.
(2) 2005-2007: Other Annual Compensation 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).
(3) Myong Hannigan is the wife of Richard Hannigan, Sr.
18
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 AND
RELATED STOCKHOLDER MATTERS
EQUITY COMPENSATION PLAN INFORMATION
Plan Category Number of securities to Weighted-average Number of securities remaining
be issued upon exercise exercise price of available for future issuance
of outstanding options, outstanding options, under equity compensation plans
warrants and rights warrants and rights (excluding securities reflected in
column (a))
(a) (b) (c)
Equity
compensation
plans approved - - 5,000,000
by security
holders
Equity
compensation
plans not - - -
approved by
security holders
Total - - 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.
There were no stock options issued to any employee or consultants for the year
ending December 31, 2007 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.
19
The following table sets forth information as of December 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.
(1) (2) (3) (4)
Amount and
Name and Address of Nature of Percent of
Title of Class Beneficial Owner Beneficial Owner Class
----------------------------------------------------------------------------------------------------------------------
Common Stock Gregg Giuffria (4)
8761 Rainbow Ridge Dr
Las Vegas, NV 89117 10,000,000 8.3%
Don and Nancy Tyner (4)
9807 Highridge
Las Vegas, NV 89134 7,450,694 6.2%
Richard Hannigan (5)
President, CEO
4483 West Reno Avenue
Las Vegas, NV 89118 34,947,500 29.0%
Myong Hannigan (5)
Secretary
4483 West Reno Avenue
Las Vegas, NV 89118 24,197,500 20.1%
Tracy Jones (6)
COO/Director
4483 West Reno Avenue
Las Vegas, NV 89118 6,217,500 5.2%
All Directors & Officers as a Group 65,362,500 54.2%
Series A Preferred stock Richard Hannigan
President, CEO - -
Myong Hannigan
Secretary - -
Tracy Jones
COO/Director - -
All Directors & Officers as a Group - -
Series B Preferred Stock
Dan and Jill Fugal (3)
1216 N 600 W
Pleasant Grove, UT 84062 1,000,000 100%
Richard Hannigan
President, CEO - -
Myong Hannigan
Secretary - -
Tracy Jones
COO/Director - -
All Directors & Officers as a Group 8) - -
20
(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 120,572,287 shares of common stock, and
1,000,000 shares of Series B Convertible Preferred Stock, as applicable,
outstanding as of April 7, 2008. 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.
(6) Mr. Jones is the direct owner of 3,070,000 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 nor 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
Synthetic Systems
-----------------
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. Hannigan's spouse. We
are obligated to pay to Synthetic $35,000 per month for management and
consulting fees.
During 2007 and 2006, bonuses were 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 from prior years. At December 31,
2007, bonuses for 2007 and 2006 remained unpaid.
We also currently lease 2,100 square feet of office space on a month-to-month
basis from Synthetic for $3,035 per month and paid as of December 31, 2007 an
aggregate of $35,957.
In addition, the Company leases office furniture and equipment from Synthetic at
a monthly rental rate of $1,150. During 2007 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.
21
As of December 31, 2007, our accounts payable due to related parties was
$1,250,000 as compared to $625,000 at December 31, 2006. For the year ending
December 31, 2007, the Company had paid a total of $188,800 to Synthetic Systems
for professional and consulting fees and the lease of furniture and equipment.
The unpaid balance consists of unpaid bonuses in 2007 and 2006 of $760,000 and
unpaid consulting and professional fees of $490,000.
Western Architectural
---------------------
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 L.V. 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, Western's Chief Executive Officer is currently our Chief Operating
Officer, a 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 $0.05 to $0.15. 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, 2007, 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. As of
December 31, 2007 and 2006, respectively, the value of the deferred construction
costs was $182,813 and $196,875, respectively.
During February 2004, the Company paid $300,000 in cash to Western, an entity
owned by the Company's Chief Operating Officer and director of the Company
pursuant to a Contractor Agreement between Western and the Company to design and
build a car for the Voyager project and conduct a feasibility study. As site
locations have been modified for the project, the feasibility study has been
modified by Western under this contract.
Preferred Stock
---------------
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.
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 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 Tracy Jones our COO/Director is a
minority owner, 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 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.
22
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
canceled 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 are to be returned to the Company for cancellation and returned to the
treasury. The remaining 2,500,000 shares were accounted for as a fee for the
nullification in our statement of operations as of December 31, 2007. The shares
were valued at fair value of $0.15 per shares for a total value of $375,000.
In 2006, we issued a certificate for 2,000,000 shares and a separate certificate
for 3,000,000 shares for the total 5,000,000 shares required under the
agreement. On February 7, 2008, the share certificate for 3,000,000 shares was
sent to the Company as part of the 2,500,000 shares required to be returned
under the March 30, 2007 nullification agreement. We have accounted for the
500,000 excess shares as a common stock payable due to Western at March 31,
2008.
Other
-----
In 2006, the Company entered into a note with Diversified Lending, see Note 6.
From the proceeds of the debt facility we issued $500,000 to Western and
recorded an Advance - Related Party on our balance sheet. Our Chief Operating
Officer is also the President of Western.
In March 2007, we borrowed $100,000 from Western. The amount is unsecured,
carries no interest and is due upon demand.
In December 2007, we borrowed $25,000 from Western. The amount is unsecured,
carries no interest and is due upon demand.
23
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).
2.4 Completion of Acquisition of Western Architectural Services LLC by
the Company (incorporated by reference to exhibit 2.1 to the
Company's Current Report on Form 8-K filed on September 12, 2006).
2.5 Completion of Disposition of Western Architectural Services LLC by
the Company (incorporated by reference to exhibit 2.1 to the
Company's Current Report on Form 8-K filed on March 30, 2007).
3.1 Nevada Articles of Incorporation (incorporated by reference to
Exhibit .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 10-QSB 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).
24
10.6 Settlement and General Release Agreement (incorporated by reference
as exhibit 10.6 as filed with the 10-QSB for the Quarter Ending
September 30, 2004 and filed on November 23, 2004).
10.7 Secured Promissory Note between the Company and Diversified Lending
Group, Inc. dated September 5, 2006 (incorporated by reference as
exhibit 10.1 filed with the 8K filed on September 12, 2006)
10.8 Extension of repayment of Secured Promissory Note between the
Company and Diversified Lending Group, Inc. dated September 5, 2006
(incorporated by reference as exhibit 10.3 filed with the 8k filed
on November 6, 2007)
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 November 5, 2007, the Company filed with the SEC a
Current Report pursuant to Item 2.03 and 9.01of Form
8-K, "Creation of a Direct Financial Obligation or an
Obligation Under an Off-Balance Sheet Arrangement of a
Registrant."
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Audit Fees
----------
The aggregate fees billed for professional services rendered by our principal
accountants for the audit of our financial statements, for the reviews of the
financial statements included in our annual report on Form 10-KSB, and for other
services normally provided in connection with statutory filings were $46,000 and
$46,684, respectively, for the years ended December 31, 2007 and December 31,
2006.
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 for the fiscal years ended
December 31, 2007 and 2006.
25
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 15, 2008
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 15, 2008
By: /s/ Myong Hannigan
----------------------------
Myong Hannigan
Secretary/Treasurer/Director
April 15, 2008
By: /s/Tracy Jones
----------------------------
Tracy Jones
COO/Director
April 15, 2008
26