UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2009.
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
FOR THE TRANSITION PERIOD FROM ________ TO ________.
COMMISSION FILE NUMBER 000-33151
VOYAGER ENTERTAINMENT INTERNATIONAL, INC.
------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Nevada 54-2110681
------------------------------- -------------------
(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)
Registrant's telephone number, including area code: (702) 221-8070
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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 [ ]
Indicate by check mark whether the registrant has submitted electronically and
posted on its corporate website, if any, every Interactive Data File required to
be submitted and posted pursuant to Rule 405 of Regulation S-T during the
preceding 12 months (or for such shorter period that the registrant was required
to submit and post such files). Yes [ ] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b -2 of the Exchange Act.
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] Smaller reporting company [X]
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).
Yes [ ] No [X]
As of May 12, 2009, there were 135,777,287 outstanding shares of the issuer's
Common Stock, $0.001 par value.
TABLE OF CONTENTS
Page
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 11
Item 3. Quantitative and Qualitative Disclosures About Market Risk 14
Item 4. Controls and Procedures 14
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 16
Item 1A. Risk Factors 16
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 16
Item 3. Defaults Upon Senior Securities 16
Item 4. Submission of Matters to a Vote of Security Holders 16
Item 5. Other Information 16
Item 6. Exhibits 16
SIGNATURES 17
2
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
VOYAGER ENTERTAINMENT INTERNATIONAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
MARCH 31, 2009
3
VOYAGER ENTERTAINMENT INTERNATIONAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, December 31,
2009 2008
------------ ------------
(Unaudited) (Audited)
ASSETS
CURRENT ASSETS
Cash $ 7,194 $ 15,234
Prepaids 1,389 1,862
Deferred financing costs 50,000 50,000
Advances - related party 500,000 500,000
------------ ------------
Total current assets 558,583 567,096
FIXED ASSETS, net of accumulated depreciation of
$44,496 and $43,391, respectively 4,832 5,937
------------ ------------
Total assets $ 563,415 $ 573,033
============ ============
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 1,375,243 $ 1,286,380
Accrued expenses - related party 1,556,000 1,470,000
Notes payable 1,855,000 1,855,000
Due to related parties 409,500 340,000
Loans and settlement payable 878,239 878,239
------------ ------------
Total current liabilities 6,073,982 5,829,619
------------ ------------
Total liabilities 6,073,982 5,829,619
COMMITMENTS & CONTINGENCIES -- --
STOCKHOLDERS' DEFICIT
Preferred stock: $0.001 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: $0.001 par value; authorized 200,000,000 shares;
issued and outstanding:135,777,287 and 132,027,287 respectively 135,777 132,027
Additional paid-in capital 13,009,676 12,937,489
Deferred construction costs paid with common stock (70,312) (84,375)
Loan collateral paid with common stock (750,000) (750,000)
Common stock payable 95,000 135,000
Accumulated deficit during the development stage (17,931,708) (17,627,727)
------------ ------------
Total stockholders' deficit (5,510,567) (5,256,586)
------------ ------------
Total liabilities and
stockholders' deficit $ 563,415 $ 573,033
============ ============
See accompanying notes to these condensed consolidated financial statements.
4
VOYAGER ENTERTAINMENT INTERNATIONAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended From inception
March 31, March 31, March 1, 1997 to
2009 2008 March 31, 2009
------------- ------------- ----------------
Revenues $ -- $ -- $ --
Operating Expenses:
Professional and consulting fees 143,377 143,416 12,876,940
Project costs 50,475 2,777 246,415
Depreciation 1,104 2,210 44,495
Settlement expense & nullification fee expense -- -- 1,025,000
Other expense 43,412 30,601 1,203,533
------------- ------------- -------------
238,368 179,004 15,396,383
Operating loss (238,368) (179,004) (15,396,383)
Other income (expense):
Interest income -- 43,750 132,528
Interest expense (65,613) (65,691) (2,667,853)
------------- ------------- -------------
(65,613) (21,941) (2,535,325)
Net Loss (303,981) (200,945) (17,931,708)
Preferred stock dividends -- -- (130,000)
------------- ------------- -------------
Net loss allocable to common stockholders $ (303,981) $ (200,945) $ (18,061,708)
============= ============= =============
Net loss per common share - basic and
diluted $ (0.00) $ (0.00)
============= =============
Weighted average number of common
shares outstanding 132,571,731 122,170,694
============= =============
See accompanying notes to these condensed consolidated financial statements.
5
VOYAGER ENTERTAINMENT INTERNATIONAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
From inception
March 31, March 31, March 1, 1997 to
2009 2008 March 31, 2009
------------ ------------ ----------------
Cash Flows from Operating Activities:
Net Loss $ (303,981) $ (200,945) $(17,931,708)
Adjustments to reconcile net loss to
net cash used by operating activities:
Depreciation 1,104 2,210 44,495
Issuance of common stock for services 49,500 -- 6,317,815
Issuance of common stock for nullification fee -- -- 375,000
Issuance of common stock for accrued --
bonus -- -- 750,000
Interest expense from the issuance of
common stock -- -- 709,088
Accretion of debt issuance costs -- -- 450,000
Changes in assets and liabilities:
Prepaid expenses 474 420 (1,388)
Accounts payable and accrued expenses 88,863 46,407 1,369,503
Accrued expenses - related party 86,000 70,000 1,556,000
Accrued settlement obligation -- -- 650,000
Net cash used in operating activities (78,040) (81,908) (5,711,195)
------------ ------------ ------------
Cash flows from Investing Activities:
Payments to acquire fixed assets -- -- (49,850)
Proceeds from Note Receivable -- -- (500,000)
------------ ------------ ------------
Net cash used in investing activities -- -- (549,850)
Cash flows from Financing Activities:
Proceeds from notes payable, short term debt -- 25,000 2,103,239
Proceeds from notes payable, due to related parties 69,500 -- 420,000
Payment on notes payable, short term debt -- -- (20,000)
Payment on notes payable, due to related parties -- -- (10,500)
Proceeds from the sale of preferred stock -- -- 150,000
Proceeds from the sale of common stock 500 50,000 3,665,500
Proceeds from common stock payable -- -- 60,000
Payments for loan fees -- -- (50,000)
Payments for deferred financing costs -- -- (50,000)
------------ ------------ ------------
Net cash provided by financing activities 70,000 75,000 6,268,239
Net (decrease) increase in cash (8,040) (6,908) 7,194
Cash, beginning of year 15,234 42,076 --
------------ ------------ ------------
Cash, end of year $ 7,194 $ 35,168 $ 7,194
============ ============ ============
Cash paid for:
Interest $ -- $ -- $ 93,080
Income Taxes $ -- $ -- $ --
See accompanying notes to these condensed consolidated financial statements.
6
VOYAGER ENTERTAINMENT INTERNATIONAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(CONTINUED)
(UNAUDITED)
Supplemental schedule of non-cash Investing
and Financing Activities:
Common stock issued for financing costs $ -- $ -- $ 988,300
Common stock issued for loan collateral $ -- $ -- $ 750,000
Deferred construction costs, adjusted
to fair value $ 14,063 $ (28,125) $ 70,313
Conversion of preferred shares $ -- $ -- $ 12,600
Common stock issued as acquisition deposit $ -- $ -- $ 750,000
Common stock cancelled due to business combination
cancellation $ -- $ 375,000 $ 375,000
Common stock payable $ (40,000) $ 75,000 $ 95,000
See accompanying notes to these condensed consolidated financial statements.
7
VOYAGER ENTERTAINMENT INTERNATIONAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1. Basis of Presentation and Organization and Significant
Accounting Policies
Basis of Presentation and Organization
--------------------------------------
The accompanying Condensed Consolidated Financial Statements of Voyager
Entertainment International, Inc. (the "Company") should be read in conjunction
with the Company's Annual Report on Form 10-K for the year ended December 31,
2008. Significant accounting policies disclosed therein have not changed except
as noted below.
Voyager Entertainment International, Inc., a North Dakota corporation, formerly
known as Dakota Imaging, Inc. and incorporated on January 31, 1991, is in the
entertainment development business with plans to develop the world's tallest
Observation Wheel on 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. 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 had been paid by the parent.
These Condensed Consolidated financial statements include the accounts of the
Company and its subsidiaries. All significant intercompany transactions and
accounts have been eliminated in consolidation.
Basis of Financial Statement Presentation
-----------------------------------------
The accompanying unaudited condensed consolidated financial statements have been
prepared by the Company pursuant to the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted in accordance with such
rules and regulations. The information furnished in the interim condensed
consolidated financial statements includes normal recurring adjustments and
reflects all adjustments, which, in the opinion of management, are necessary for
a fair presentation of such financial statements. Although management believes
the disclosures and information presented are adequate to make the information
not misleading, these interim condensed consolidated financial statements should
be read in conjunction with the Company's most recent audited financial
statements and notes thereto included in its December 31, 2008 Annual Report on
Form 10-K. Operating results for the period ended March 31, 2009 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 2009.
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 $303,981 and $200,945 for the three
months ended March 31, 2009 and 2008, and a working capital deficiency of
$5,515,399 at March 31, 2009. These factors raise substantial doubt about the
Company's ability to continue as a going concern. 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
Fair Value Accounting
---------------------
In September 2006, the Financial Accounting Standards Board ("FASB") issued FASB
Statement No. 157, "Fair Value Measurements" ("FAS 157"). FAS 157 defines fair
value, establishes a framework for measuring fair value in generally accepted
accounting principles, and expands disclosures about fair value measurements.
The provisions of FAS 157 were adopted January 1, 2008. In February 2008, the
FASB staff issued Staff Position No. 157-2 "Effective Date of FASB Statement
8
No. 157" ("FSP FAS 157-2"). FSP FAS 157-2 delayed the effective date of FAS 157
for nonfinancial assets and nonfinancial liabilities, except for items that are
recognized or disclosed at fair value in the financial statements on a recurring
basis (at least annually). The provisions of FSP FAS 157-2 were adopted for the
Company's fiscal year beginning January 1, 2009 and had no significant impact on
our financial statements.
FAS 157 establishes a fair value hierarchy that prioritizes the inputs to
valuation techniques used to measure fair value. The hierarchy gives the highest
priority to unadjusted quoted prices in active markets for identical assets or
liabilities (Level 1 measurements) and the lowest priority to unobservable
inputs (Level 3 measurements). The three levels of the fair value hierarchy
under FAS 157 are described below:
Level 1 Unadjusted quoted prices in active markets that are accessible
at the measurement date for identical, unrestricted assets or
liabilities;
Level 2 Quoted prices in markets that are not active, or inputs that
are observable, either directly or indirectly, for
substantially the full term of the asset or liability;
Level 3 Prices or valuation techniques that require inputs that are
both significant to the fair value measurement and
unobservable (supported by little or no market activity).
New Accounting Pronouncements
-----------------------------
In May 2008, the FASB issued Statement of Financial Accounting Standards No.
162, "The Hierarchy of Generally Accepted Accounting Principles," ("SFAS 162").
SFAS 162 identifies the sources of accounting principles and the framework for
selecting the principles used in the preparation of financial statements of
non-governmental entities that are presented in conformity with generally
accepted accounting principles in the United States of America. SFAS 162 will be
effective 60 days after the Securities and Exchange Commission approves the
Public Company Accounting Oversight Board's amendments to AU Section 411. The
Company does not anticipate the adoption of SFAS 162 will have an impact on its
financial statements.
In May 2008, the FASB issued Statement of Financial Accounting Standards No.
163, "Accounting for Financial Guarantee Insurance Contracts - an interpretation
of FASB Statement No. 60," ("SFAS No. 163"). SFAS 163 requires that an insurance
enterprise recognize a claim liability prior to an event of default (insured
event) when there is evidence that credit deterioration has occurred in an
insured financial obligation. This Statement also clarifies how Statement 60
applies to financial guarantee insurance contracts, including the recognition
and measurement to be used to account for premium revenue and claim liabilities.
Those clarifications will increase comparability in financial reporting of
financial guarantee insurance contracts by insurance enterprises. This Statement
requires expanded disclosures about financial guarantee insurance contracts. The
accounting and disclosure requirements of the Statement will improve the quality
of information provided to users of financial statements. SFAS 163 will be
effective for financial statements issued for fiscal years beginning after
December 15, 2008. The adoption of SFAS 163 does not have a material impact on
our financial condition or results of operation.
In June 2008, the FASB issued FASB Staff Position EITF 03-6-1, "Determining
Whether Instruments Granted in Share-Based Payment Transactions Are
Participating Securities," ("FSP EITF 03-6-1"). FSP EITF 03-6-1 addresses
whether instruments granted in share-based payment transactions are
participating securities prior to vesting, and therefore need to be included in
the computation of earnings per share under the two-class method as described in
FASB Statement of Financial Accounting Standards No. 128, "Earnings per Share."
FSP EITF 03-6-1 is effective for financial statements issued for fiscal years
beginning on or after December 15, 2008 and earlier adoption is prohibited. The
Company was required to adopt FSP EITF 03-6-1 in the first quarter of 2009. FSP
EITF 03-6-1 did not have a material impact on the financial statements.
Note 2. Stockholders' Deficit
The authorized common stock of the Company consists of 200,000,000 shares of
common stock with par value of $0.001 and 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 and 10,000,000 shares of Series B Preferred Stock both
with a par value of $0.001.
In February 2009, the Company issued 25,000 shares of common stock for $500 cash
or $0.02 per share.
In February 2009, the Company issued 225,000 shares of common stock for
professional services rendered for total compensation of $4,500 or $0.02 per
share.
In March 2009, the Company issued 2,000,000 shares of common stock payable or
$0.02 per share. $40,000 cash was received for these shares in 2008.
9
In March 2009, the Company issued 1,500,000 shares of common stock for
professional services rendered for total compensation of $45,000 or $0.03 per
share.
No preferred share transactions occurred during the three months ending March
31, 2009.
Note 3. Related Party Transactions
Synthetic Systems
During the quarters ended March 31, 2009 and 2008, the Company incurred
consulting fees of approximately $37,000 and $35,000 respectively per month to
Synthetic Systems, LLC for a total of $111,000 and $105,000. The Company leased
furniture and equipment from Synthetic Systems for a total of $3,450 or $1,150
per month for the quarters ending March 31, 2009 and 2008. The Company also paid
on behalf of Synthetic Systems, LLC office rent expenses of approximately $8,345
and $9,105, as of March 31, 2009 and 2008, respectively. Synthetic Systems is
jointly owned by our Chief Executive Officer and Secretary.
Western Architectural
---------------------
As previously disclosed in our 2008 Form 10-K, on May 30, 2002, the Company
executed a Contractor Agreement with Western Architectural Services, LLC
("Western") where Western would provide to the Company certain architectural
services for the Las Vegas Observation Wheel Project in exchange for which the
Company issued 2,812,500 shares of restricted common stock to Western. Although
he was not an affiliate of the Company upon execution of the Contractor
Agreement, Western's Chief Executive Officer is currently an executive officer,
director and significant stockholder of the Company. We have accounted for these
shares as Deferred Construction Costs in these financial statements.
Western plans to sell the 2,812,500 shares of common stock at the time before
and during the contract to purchase supplies and to pay subcontractor fees. At
the time the contract was issued the shares of the Company were trading at $6.50
per share, our current stock price is trading significantly below that amount.
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 additional 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
March 31, 2009, 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 period 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 March 31, 2009, we have received advances in the amounts of $199,500 from
Western Architectural Services, LLC. The advances are unsecured, carry no
interest and are due upon demand. As of March 31, 2009, no payments have been
made to Western.
Directors and Officers
----------------------
On occasion, our Officers and Directors will loan funds to the Company so that
operations can continue.
As of March 31, 2009, we have received advances in the amounts of $210,000 from
our Chief Operating Officer. The advances are unsecured, carry no interest and
are due upon demand.
Note 4. Fair Value
In accordance with FAS 157, the table below sets forth the Company's financial
assets and liabilities measured at fair value by level within the fair value
hierarchy. As required by FAS 157, assets and liabilities are classified in
their entirety based on the lowest level of input that is significant to the
fair value measurement.
Fair Value at March 31, 2009
---------------------------------------------
Total Level 1 Level 2 Level 3
---------------------------------------------
Assets:
Deferred construction costs $70,312 $70,312 $ -- $ --
---------------------------------------------
70,312 $70,312 $ -- $ --
=============================================
Liabilities:
None $ -- $ -- $ -- $ --
10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION.
The following discussion and analysis ("MD&A") 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 interim 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.
EXECUTIVE SUMMARY AND OVERVIEW
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, 2008, 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.
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 although we may entertain discussions with any
interested party in other locations. 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.
For additional detailed discussion regarding the Company's business and business
trends affecting the Company and certain risks inherent in the Company's
business, see "Item 7: Management's Discussion and Analysis of Financial
Condition and Results of Operation" in the Company's Annual Report on Form 10-K
for the year ended December 31, 2008.
DEVELOPMENT OF OUR BUSINESS
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.
11
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.
CRITICAL ACCOUNTING POLICIES
The methods, estimates and judgments we use in applying our accounting policies
have a significant impact on the results we report in our financial statements,
which we discuss under the heading "Results of Operations" following this
section of our MD&A. Some of our accounting policies require us to make
difficult and subjective judgments, often as a result of the need to make
estimates of matters that are inherently uncertain. Our most critical accounting
estimates include the assessment of value of our deferred construction costs.
We believe the following critical accounting policy reflects our most
significant estimates and assumptions used in the preparation of our
consolidated financial statements:
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 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.
We do not have any of the following:
* Off-balance sheet arrangements.
* Certain trading activities that include non-exchange traded contracts
accounted for at fair value.
* Relationships and transactions with persons or entities that derive
benefits from any non-independent relationships other than related party
transactions discussed herein.
LIQUIDITY
We plan to focus primarily on the development of the Observation Wheel in Las
Vegas the next twelve months although we may entertain discussions with any
interested party in other locations.
March 31, 2009 December 31, 2008 $ Change % Change
Cash $ 7,194 $ 15,234 $ (8,040) (53%)
Accounts payable and accrued expenses $ 1,375,243 $ 1,286,380 $ 88,863 7%
Due to related parties $ 1,965,500 $ 1,810,000 $ 155,500 9%
Total current liabilities $ 6,073,982 $ 5,829,619 $ 244,363 4%
Cash proceeds from the sale of common stock $ 500 $ 195,000 $ (194,500) (100%)
We have financed our operations during the quarter primarily through the use of
cash on hand, issuance of stock for services, issuance of stock for cash, and
aging of our payables.
Cash on hand decreased $8,040, or 53%, as of March 31, 2009 compared to December
31, 2008. The decrease is a result of the payment of payables in the first
quarter of 2009.
As of March 31, 2009, we had total current liabilities of $6,073,982 compared to
$5,829,619 as of December 31, 2008. The 4% increase in total current liabilities
is primarily a result of expenses and advances incurred that are due to related
parties, which remain unpaid. These items increased as our lack of cash has
resulted in longer aging of payables and need for additional cash infusion.
12
Accounts Payable and Accrued Expenses
-------------------------------------
Our accounts payable increased by approximately $26,000, or 46%, as of March 31,
2009 compared to December 31, 2008 primarily due to incurrence of travel
expenses.
For the year ending 2009, we anticipate to incur normal reoccurring expenses of
approximately $510,000 as a result of related party consulting, furniture and
equipment lease, utilities, accounting, health insurance and rent expense.
Accrued Expenses increased approximately $63,000, or 5%, as of March 31, 2009
compared to December 31, 2008 which consisted primarily of accrued interest.
Until the payment of our loans, and their corresponding interest, can be made,
upon our initial project financing, it is likely that our interest expense will
continue to accumulate steadily throughout 2009.
Due to Related Parties
----------------------
March 31, 2009 December 31, 2008 $ Change % Change
Accrued Expenses - Related Party $1,556,000 $1,470,000 $ 86,000 6%
Due To - Related Party 409,500 340,000 69,500 20%
-----------------------------------------------------
Total Related Party $1,965,500 $1,810,000 $ 155,500 9%
The total amount Due to Related Parties increased $155,500, or 9%, as of March
31, 2009 compared to December 31, 2008. These items increased as our lack of
cash has resulted in longer aging of payables to our related parties and need
for additional cash infusion from our related parties.
Additionally, we received $69,500 in related party loans during the quarter
ended March 31, 2009 compared to $340,000 during the fiscal year ended December
31, 2008. The receipt of funds allowed us to pay our vendors so that we could
continue our operating efforts. Future borrowings may be deemed necessary to
sustain our operations until alternative funding can be received.
As of March 31, 2009, we owe $409,500 in related party loans and $1,556,000 for
professional fees and unpaid bonuses for the fiscal years ending December 31,
2007 and 2006. No bonuses were issued for the fiscal year ending December 31,
2008.
These related party trends are likely to continue throughout 2009 and until
fiscal stability can be reached, either by project funding or through the
generation of operating revenues.
CAPITAL RESOURCES
Cash decreased by $8,040, or 53%, as of March 31, 2009 due to the payment of
some of our payables throughout 2009. Additionally, common stock issuances for
cash decreased by $194,500, or 100%, for the quarter ended March 31, 2009
compared to the year ended December 31, 2008. It is more likely than not that
the issuance of shares for cash will continue to decrease in the next twelve
months as a result of the apprehensions shareholders have towards the volatility
of the stock market. For the quarter ended March 31, 2009, we issued common
stock for $500 cash. The issuance of common stock for cash assists us in
continuing our operating efforts. Should we be unable to issue common stock for
cash sufficient enough to sustain our operations, either alternative capital
raising efforts will proceed or operations will halt until the proper funding
can be obtained.
We had $7,194 cash on hand as of March 31, 2009 compared to $15,234 as of
December 31, 2008. 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. It is possible that
an agreement finalizing the security of a project site and the corresponding
construction of an observation wheel may begin in the next twelve months.
Assuming no such occurrences, our anticipated minimum cash payments for 2009
will be approximately $510,000.
There is no assurance we will be able to obtain additional capital as required,
or obtain the capital on acceptable terms and conditions. Our failure to obtain
sufficient funding may result in our need to halt operations until such funding
can be obtained. A halt in operations could significantly setback the progress
we have made in negotiating a project site and the related financing.
Additionally, during this time, a stronger competitor may prevail with a similar
project.
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
13
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. The acquisition of
sufficient funding presents a challenge in the current economy that we may be
unable to overcome. 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.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2009 COMPARED TO THE
THREE MONTHS ENDED MARCH 31, 2008
Results of operations consist of the following:
March 31, 2009 December 31, 2008 $ Change % Change
Revenue $ -- $ -- $ -- 0%
General and administrative expenses 238,368 179,004 59,364 33%
----------------------------------------------------
Operating loss $ (238,368) $ (179,004) $ (59,364) 33%
As of March 31, 2009, we have not constructed an Observation Wheel and therefore
have not generated revenues.
The increase in general and administrative expenses of 33% is due primarily to
an increase in project costs. In the first quarter of 2009, $50,475 project
costs were incurred compared to $2,777 in the first quarter of 2008. This is
primarily due to the engagement of consultants needed to assess possible project
sites in additional locations outside of the Las Vegas strip area.
Additionally, other general and administrative expenses have increased to
$43,412 as of March 31, 2009 from $30,601 as of March 31, 2008 primarily due to
travel expenses incurred on behalf of our officers and directors as a result of
assessing possible site locations for other Observation Wheel projects. As of
March 31, 2009, we have not settled on any additional Observation Wheel projects
and are continuing to focus primarily on the L.V. Project for the remainder of
2009.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable to smaller reporting companies.
ITEM 4T. CONTROLS AND PROCEDURES.
(a) Disclosure Controls and Procedures
Based on the management's evaluation (with the participation of our President
and Principal Financial Officer), our President and Principal Financial Officer
has concluded that as of March 31, 2009, our disclosure controls and procedures
14
(as defined in Rules 13a - 15(e) and 15d-15(e) under the Securities Exchange of
1934 (the "Exchange Act") are effective to provide reasonable assurance that the
information required to be disclosed in this quarterly report on Form 10-Q is
recorded, processed, summarized and reported within the time period specified in
Securities and Exchange Commission rules and forms, and that such information is
accumulated and communicated to the Company's management, including the Chief
Executive Officer and Principal Financial Officer, as appropriate, to allow for
timely decisions regarding required disclosure.
(b) Internal control over financial reporting
Management's quarterly report on internal control over financial reporting
--------------------------------------------------------------------------
Management is responsible for establishing and maintaining adequate internal
control over financial reporting as defined in Rules 13a- 15(f) and 15d-15(f)
under the Exchange Act. Our internal control over financial reporting is
intended to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in
accordance with U.S. GAAP. Our internal control over financial reporting should
include those policies and procedures that:
o pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of our
assets;
o provide reasonable assurance that transactions are recorded as necessary
to permit preparation of financial statements in accordance with
applicable GAAP, and that receipts and expenditures are being made only in
accordance with authorizations of management and the Board of Directors;
and
o provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of our assets that could have
a material effect on the financial statements.
Under the supervision and with the participation of our management, our Chief
Executive Officer and Principal Financial Officer, we have evaluated the
effectiveness of our internal control over financial reporting and preparation
of our quarterly financial statements as of March 31, 2009 and believe they are
effective. While we believe the present control design and procedures are
effective, future events affecting our business may cause the Company to modify
its controls and procedures.
Attestation report of the registered public accounting firm
-----------------------------------------------------------
This quarterly report does not include an attestation report of the company's
registered public 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 that permit the company to provide only management's
report in this quarterly report.
Changes in internal control over financial reporting
----------------------------------------------------
Based on the evaluation as of March 31, 2009, our Chief Executive Officer and
Principal Financial Officer has concluded that there were no significant changes
in our internal controls over financial reporting or in any other areas that
could significantly affect our internal controls subsequent to the date of his
most recent evaluation and there were no corrective actions during the quarter
with regard to significant deficiencies or material weaknesses.
15
PART II
OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
None.
ITEM 1A. RISK FACTORS
There have been no material changes from the Risk Factors described in our
Annual Report on Form 10-K for the fiscal year ended December 31, 2008.
ITEM 2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
In February 2009, the Company issued 25,000 shares of common stock for $500 cash
or $0.02 per share.
In February 2009, the Company issued 225,000 shares of common stock for
professional services rendered for total compensation of $4,500 or $0.02 per
share.
In March 2009, the Company issued 2,000,000 shares of common stock payable or
$0.02 per share. $40,000 cash was received for these shares in 2008.
In March 2009, the Company issued 1,500,000 shares of common stock for
professional services rendered for total compensation of $45,000 or $0.03 per
share.
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
There have been no material changes from the Defaults Upon Senior Securities
described in our Annual Report on Form 10-K for the fiscal year ended December
31, 2008.
ITEM 4 - SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
None.
ITEM 5 - OTHER INFORMATION
(1) Committees and financial reviews.
The board of directors has not established an audit committee. In addition, we
do not have any other compensation or executive or similar committees. We will
not, in all likelihood, establish an audit committee until such time as we
increase our revenues, of which there can be no assurance. We recognize that an
audit committee, when established, will play a critical role in our financial
reporting system by overseeing and monitoring management's and the independent
auditor's participation in the financial reporting process.
Until such time as an audit committee has been established, the board of
directors will undertake those tasks normally associated with an audit committee
to include, but not by way of limitation, the (i) review and discussion of the
audited financial statements with management, and (ii) discussions with the
independent auditors with respect to the matters required to be discussed by the
Statement On Auditing Standards No. 61, "Communications with Audit Committees",
as may be modified or supplemented.
ITEM 6 - EXHIBITS
(a) The following exhibits are filed with this report.
31.1 Rule 13a-14(a)/15d-14(a) Certifications.
32.1 Section 1350 Certifications.
16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
VOYAGER ENTERTAINMENT INTERNATIONAL, INC.
-----------------------------------------
(Registrant)
Dated May 12, 2009
By: /s/ Richard Hannigan
---------------------------------
Richard Hannigan,
President/Director
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
May 12, 2009
By: /s/ Myong Hannigan
---------------------------------
Myong Hannigan
Secretary/Treasurer/Director
May 12, 2009
By: /s/ Tracy Jones
---------------------------------
Tracy Jones
COO/Director
May 12, 2009
17