<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------
FORM 10-QSB
(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, 1998
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the transition period from to
Commission File Number: 1-11765
MEDJET INC.
(Exact name of Small Business Issuer as Specified in its Charter)
DELAWARE 22-3283541
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
1090 KING GEORGES POST ROAD, SUITE 301
EDISON, NEW JERSEY 08837
(Address of Principal Executive Offices)
(732) 738-3990
(Registrant's Telephone Number, Including Area Code)
----------------------------------------------------------------
(Former Name, Former Address and Former Fiscal
Year, if Changed Since Last Report
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 |_|
As of March 31, 1998, 3,686,280 shares of Common Stock, par value $.001
per share, were outstanding.
Transitional Small Business Disclosure Format: Yes |_| No |X|
<PAGE>
MEDJET INC.
INDEX
-----
PAGE NO.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS:
Condensed Interim Balance Sheet as of March 31, 1998
(Unaudited)..............................................
Condensed Interim Statements of Operations for the three
months ended March 31, 1998 and 1997 and for the period
from December 16, 1993 (date of inception) to March 31,
1998 (Unaudited).........................................
Condensed Interim Statements of Cash Flows for the three
months ended March 31, 1998 and 1997 and for the period
from December 16, 1993 (date of inception) to March 31,
1998 (Unaudited).........................................
Notes to Condensed Interim Financial Statements
(Unaudited)..............................................
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS........................................
ITEM 2 CHANGES IN SECURITIES AND USE OF PROCEEDS ...............
ITEM 3. DEFAULTS UPON SENIOR SECURITIES..........................
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS......
ITEM 5. OTHER INFORMATION........................................
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.........................
SIGNATURES.........................................................
<PAGE>
PART I - FINANCIAL INFORMATION
MEDJET INC.
(A Development Stage Company)
Condensed Interim Balance Sheet
March 31, 1998
(Unaudited)
<TABLE>
<CAPTION>
ASSETS
CURRENT ASSETS:
- ---------------
<S> <C>
Cash and cash equivalents $ 788,291
Prepaid expenses 51,742
------------
840,033
------------
PROPERTY, PLANT & EQUIPMENT -
- -----------------------------
Less accumulated depreciation of $198,318 268,229
------------
ORGANIZATION COSTS -
- --------------------
Less accumulated amortization of $29,483 7,904
------------
PATENTS AND TRADEMARKS -
- ------------------------
Less accumulated amortization of $10,573 104,905
------------
SECURITY DEPOSITS 7,050
- ----------------- ============
Total Assets $ 1,228,121
============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
- --------------------
Accounts payable $267,251
Income taxes payable 150
------------
Total Liabilities 267,401
------------
STOCKHOLDERS' EQUITY:
- ---------------------
Preferred stock, $.01 par value, 1,000,000
shares authorized, no shares issued -
Common stock, $.001 par value, 7,000,000
shares authorized, 3,720,069 shares
issued and 3,686,280 shares outstanding 3,720
Additional paid-in capital 4,934,692
Accumulated deficit (including deficit accumulated
during development stage of $5,532,196 of which
$1,556,204 was applied to additional paid-in
capital upon conversion from an "S" to a "C"
corporation) (3,975,992)
Less: Treasury stock, 33,789 shares, at cost (1,700)
------------
Total Stockholders' Equity 960,720
Total Liabilities and Stockholders' Equity 1,228,121
============
</TABLE>
See Notes to the Condensed Interim Financial Statements.
<PAGE>
MEDJET INC.
(A Development Stage Company)
Condensed Interim Statements of Operations
For The Three Months Ended March 31, 1998 and 1997
And The Period From December 16, 1993 (Date of Inception), to March 31, 1998
(Unaudited)
<TABLE>
<CAPTION>
Period from
Three Months Ended December 16,
March 31, 1993 (Inception) to
1998 1997 March 31, 1998
----------- ----------- -------------------
REVENUES:
- ---------
<S> <C> <C> <C>
Net Sales $ - $ - $ -
Cost of Sales - - -
----------- ----------- -------------------
Gross Profit - - -
----------- ----------- -------------------
EXPENSES:
- ---------
Research, development,
general and administrative 729,620 589,937 5,757,504
----------- ----------- -------------------
Total costs and expenses 729,620 589,937 5,757,504
----------- ----------- -------------------
Loss from operations (729,620) (589,937) (5,757,504)
OTHER INCOME (EXPENSE):
- -----------------------
Interest income 14,627 49,140 264,161
Interest expense (102) (3,268) (38,003)
----------- ----------- -------------------
14,525 45,872 226,158
----------- ----------- -------------------
LOSS BEFORE PROVISION
FOR (BENEFIT FROM)
INCOME TAX (715,095) (544,065) (5,531,346)
Provision for (Benefit from)
income tax - (139,500) 850
NET LOSS $(715,095) $(404,565) $ (5,532,196)
============== ============== =====================
Net Loss Per Share $ (0.19) $ (0.11) $ (1.93)
============== ============== =====================
Weighted Average Common
Shares Outstanding 3,676,001 3,648,666 2,868,916
============== ============== =====================
</TABLE>
See Notes to the Condensed Interim Financial Statements.
<PAGE>
MEDJET INC.
(A Development Stage Company)
Condensed Interim Statements of Cash Flows
For The Three Months Ended March 31, 1998 and 1997
And The Period From December 16, 1993 (Date of Inception), to March 31, 1998
(Unaudited)
<TABLE>
<CAPTION>
Period from
For the Three Months Ended December 16,1993
March 31, (Inception) to
1998 1997 March 31, 1998
------------ ------------ -------------------
<S> <C> <C> <C>
Cash Flows from Operating Activities $ (638,066) $ (590,500) $ (5,078,163)
Cash Flows from Investing Activities (102,431) (34,592) 626,462
Cash Flows from Financing Activities 37,748 - 6,492,916
------------ ------------ -------------------
Net Increase (Decrease) in Cash and Cash Equivalents (702,749) (625,092) 788,291
Cash and Cash Equivalents - Beginning of Period 1,491,040 4,241,985 -
------------ ------------ -------------------
Cash and Cash Equivalents - End of Period $ 788,291 $ 3,616,893 $ 788,291
============ ============ ===================
</TABLE>
See Notes to the Condensed Interim Financial Statements.
<PAGE>
NOTES TO THE
CONDENSED INTERIM FINANCIAL STATEMENTS
NOTE A - NATURE OF ORGANIZATION AND BASIS OF PRESENTATION:
(1) NATURE OF ORGANIZATION:
Medjet Inc. (the "Company") is a development stage company
incorporated in the State of Delaware on December 16, 1993. The
Company was organized as a medical device company with the goal of
developing, manufacturing and selling new cutting, drilling, layer
removal and shaping tools for a variety of surgical procedures. The
core technology is based on small-diameter, fluid or ice microjets
moving at high speeds. The Company believes that such jets will
bring new surgical capability and performance to the clinic or
operating room. The initial product area is devices for surgical use
in ophthalmology.
(2) BASIS OF PRESENTATION:
The Condensed Interim Financial Statements included herein have been
prepared by the Company, without audit, 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 pursuant to such rules and
regulations.
The Condensed Interim Financial Statements included herein reflect,
in the opinion of management, all adjustments (consisting primarily
only of normal recurring adjustments) necessary to present fairly
the results for the interim periods. The results of operations for
the three months ended March 31, 1998 are not necessarily indicative
of results to be expected for the entire year ending December 31,
1998.
NOTE B - INITIAL PUBLIC OFFERING:
On August 14, 1996, the Company consummated its initial public
offering (the "Offering") and, accordingly, issued and sold to the
public 1,071,429 Units (the "Units"), each Unit consisting of one
share of common stock, $.001 par value, of the Company (the "Common
Stock"), and one redeemable Common Stock Purchase Warrant (the
"Warrants") to purchase one share of Common Stock at $10.00 for a
period of 24 months commencing on November 6, 1996. The Units became
separable on November 6, 1996 and the Common Stock and the Warrants
began trading on November 8, 1996. See Note D Subsequent Event.
In conjunction with an option granted to the underwriter of the
Offering to purchase additional Units solely to cover
over-allotments from the Offering, the Company issued and sold an
additional 160,714 Units on September 13, 1996.
The proceeds from these transactions (amounting to approximately $6
million) were used, in part, to repay outstanding indebtedness of
approximately $550,000 and legal, accounting and other expenses
(totaling approximately $500,000) associated with the Offering; the
balance (to be used to fund future operations, research and
development) was invested in short-term money market instruments.
In connection with the Offering, the Company increased the number of
shares of Common Stock it is authorized to issue to 7,000,000 and,
immediately prior to the Offering, effected a 1.987538926-to-1 stock
split of the then outstanding Common Stock.
<PAGE>
NOTE C - NET LOSS PER SHARE:
Net loss per share is computed by dividing net loss by the weighted
average number of shares of Common Stock outstanding during the
period, after giving effect to the 1.987538926-to-1 stock split of
the Common Stock explained above. Common stock equivalents have not
been included in this computation as the effect would be
anti-dilutive.
NOTE D - SUBSEQUENT EVENT:
In connection with a private placement of the Company's preferred
stock, as of the date of filing this Quarterly Report on Form
10-QSB, the Company has raised approximately $1,100,000 (before
commissions and placement expenses). These funds were escrowed and
released to the Company following a closing in April 1998.
Additionally, in connection with the private placement, the Company
agreed to extend the expiration date of the Warrants for an
additional 12 month period. As a result, the period during which the
Warrants may be exercised has been extended until November 6, 1999.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
THIS QUARTERLY REPORT ON FORM 10-QSB CONTAINS FORWARD-LOOKING STATEMENTS WITHIN
THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED, AND
SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. ACTUAL RESULTS,
EVENTS AND CIRCUMSTANCES COULD DIFFER MATERIALLY FROM THOSE SET FORTH IN SUCH
STATEMENTS DUE TO VARIOUS FACTORS.
GENERAL
The Company, founded in December 1993, is engaged in the research and
development of medical technology, with a current emphasis on ophthalmic
surgical technology and equipment and has developed a proprietary technology and
derivative devices for corneal surgery. The Company expects, during 1998, to
continue its research and development activities focusing principally on
ophthalmic surgical technology and equipment and to commence early exploratory
work on orthopedic applications of waterjet technology.
The Company is a development stage company.
RESULTS OF OPERATIONS
The Company has not yet initiated sales of its products and, consequently, had
no revenues during the three months ended March 31, 1998.
Total costs and expenses during the three months ended March 31, 1998 increased
by $139,683 (23.7%) to $729,620 from $589,937 for the comparable period of 1997.
This was primarily due to the net increase in staff (from fifteen full-time
employees to twenty full-time employees) and an increase in professional fees as
the Company continued its research and development activities.
Other income/expense consists of interest income and interest expense and
finance charges. Interest income for the three months ended March 31, 1998
decreased by $34,513 (70.2%) to $14,627 from $49,140 for the comparable period
of 1997. This decrease principally results from income earned on the Company's
short-term investments which were lower in the 1998 period, reflecting the
utilization of previously invested funds in connection with the Company's
research and development activities. Interest expense for the three months ended
March 31, 1998 decreased by $3,166 (96.9%) to $102 from $3,268 for the
comparable period of 1997. This decrease is principally the result of a
reduction in interest charges on short-term borrowings made by the Company
during 1996 which were repaid during the third quarter of 1996 and the second
quarter of 1997.
LIQUIDITY AND CAPITAL RESOURCES
From its inception until the consummation of the Offering, the Company's
liquidity requirements were met through private sales of Common Stock and
short-term borrowings from affiliates of the Company, including Dr. Eugene I.
Gordon. All such loans were repaid utilizing proceeds of the Offering. The
Company has no long-term indebtedness.
<PAGE>
As a result of the Offering, the Company's liquidity position improved
significantly. However, as a result of operating losses incurred subsequent to
the Offering, the Company's working capital was reduced to $572,632 at March 31,
1998.
In connection with a private placement of its preferred stock, commenced in the
first quarter of 1998, as of the date of filing this Quarterly Report on Form
10-QSB, the Company has raised approximately $1,100,000 (before commissions and
placement expenses). These funds were escrowed and released to the Company
following a closing in April 1998. The Company anticipates that the remaining
net proceeds from the Offering together with net proceeds realized to date from
the private placement will be sufficient to meet the Company's 1998 working
capital and planned capital expenditure requirements.
The Company's current strategy is to license its ophthalmology products. As of
the date of filing this Quarterly Report on Form 10-QSB, the Company has not
entered into any agreement to license or otherwise commercially market any of
its products. If the Company does not enter into such licensing arrangements, it
will need to engage in the manufacture and marketing of its products. The
Company has no volume manufacturing capacity or experience in manufacturing
medical devices or other products. To be successful, the Company's proposed
products must be manufactured in commercial quantities in compliance with
regulatory requirements at acceptable costs. Production in clinical or
commercial-scale quantities will involve technical challenges for the Company.
If the Company is unable to or elects not to pursue collaborative or
subcontracting arrangements with other companies to manufacture certain of its
potential products, the Company would be required to establish manufacturing
capabilities. Establishing its own manufacturing capabilities would entail
significant scale-up expenses and require additions to facilities and personnel.
There can be no assurance that the Company would be able to obtain necessary
regulatory approvals on a timely basis or at all. Delays in receipt or failure
to receive such approvals or loss of previously received approvals would have a
material adverse effect on the Company. There can be no assurance that the
Company will be able to develop clinical or commercial-scale manufacturing
capabilities at acceptable costs or enter into agreements with third parties
with respect to these activities.
The Company's dependence upon third parties for the manufacture of its products
may adversely affect the Company's profit margins and its ability to develop and
deliver such products on a timely basis. Moreover, there can be no assurance
that such third parties will perform adequately, and any failures by third
parties may delay the submission of products for regulatory approval, impair the
Company's ability to deliver products on a timely basis, or otherwise impair the
Company's competitive position and any such failure could have a material
adverse effect on the Company.
If the Company does not enter into any licensing arrangements, it will undertake
the marketing and sale of its own products. In such event, the Company intends
to market and sell its products in the United States and certain foreign
countries, if and when regulatory approval is obtained, through a direct sales
force or a combination of a direct sales force and distributors. The Company
currently has no marketing organization and has never sold a product.
Establishing sufficient marketing and sales capability will require significant
resources. There can be no assurance that the Company will be able to recruit
and retain skilled sales management, direct salespersons or distributors, or
that the Company's marketing or sales efforts will be successful. To the extent
that the Company enters into distribution arrangements for the sale of its
products, the Company will be dependent on the efforts of third parties. There
can be no assurance that such efforts will be successful.
If the Company is unable to realize cash flow from the licensing or marketing of
its products during its current fiscal year, the Company will be required to
seek debt or additional equity financing to fund its operations thereafter.
There can be no assurance that such additional financing will be available to
the Company on commercially reasonable terms, if at all. If required additional
financing is not available, the Company would be materially adversely affected
and would become unable to maintain its current operations or otherwise carry
out its business plan.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2 CHANGES IN SECURITIES AND USE OF PROCEEDS
(a) In connection with a private placement of its preferred
stock, the Company agreed to extend the period during which
the redeemable Common Stock Purchase Warrants, issued in
connection with the Company's initial public offering of
Units, may be exercised. As a result, the expiration date of
such warrants has been extended until November 6, 1999.
(b) Not applicable
(c) None
(d) Since the consummation of the Offering in August 1996 through
March 31, 1998, the Company has applied net proceeds realized
in the Offering (in the aggregate approximate amount of
$5,600,000) in the following manner: $296,000 for the purchase
and installation of machinery and equipment; $715,000 for the
repayment of indebtedness; $1,101,000 for working capital;
$56,000 for patent and trademark filings; and $2,710,000 for
research and development and human clinical trials (which
includes compensation expense attributable to employees
performing solely research and development functions in the
amount of $926,000); $788,000 for temporary investments, of
which $514,000 is intended for research and development and
human clinical trials and $274,000 for working capital, and
all of which has been invested in short-term money market
instruments. Other than repayment of indebtedness, in the
aggregate amount of $415,000, none of such payments were made
to directors, officers, general partners of the Company or
their associates, to persons owning 10% or more of any class
of equity securities of the Company, or to affiliates of the
Company.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
11 Statement regarding computation of per share earnings
27 Financial Data Schedule
(b) REPORTS ON FORM 8-K
No Report on Form 8-K was filed during the quarter for which this
Quarterly Report on Form 10-QSB is filed.
<PAGE>
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.
Dated: May 15, 1998 MEDJET INC.
/S/ EUGENE I. GORDON
-------------------------------------
Eugene I. Gordon
President -Technology Development and
Chairman of the Board
/S/ THOMAS M. HANDSCHIEGEL
-------------------------------------
Thomas M. Handschiegel
Chief Financial Officer and
Chief Accounting Officer
<PAGE>
MEDJET INC.
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION
11 Statement regarding computation of per share earnings
27 Financial Data Schedule
<PAGE>
MEDJET INC.
EXHIBIT 11
COMPUTATION OF NET (LOSS) PER COMMON SHARE
Three Months Ended March 31,
1998 1997
---- ----
NET (LOSS) PER COMMON SHARE (Unaudited)
(Loss) from Operations $ (715,095) $ (404,565)
Weighted Average Common Shares Outstanding 3,676,001 3,648,666
Net (Loss) Per Common Share $ (0.19) $ (0.11)
========== ==========
NET (LOSS) PER COMMON SHARE - Assuming Dilution
(see "NOTE")
(Loss) from Operations $ (715,095) $ (404,565)
========== ==========
Weighted Average Common Shares Outstanding 3,676,001 3,648,666
(A) Assuming Exercise of Stock Options 19,563 74,772
(B) Assuming Exercise of Warrants 52,120 59,041
---------- ----------
Weighted Average Common Shares
Outstanding - as Adjusted 3,747,684 3,782,479
========== ==========
Net (Loss) Per Common Share - Assuming Dilution $ (0.19) $ (0.11)
========== ==========
<PAGE>
MEDJET INC.
EXHIBIT 11
COMPUTATION OF NET (LOSS) PER COMMON SHARE, CONTINUED
NOTE:
The calculation for Net (Loss) Per Common Share - Assuming Dilution is submitted
in accordance with Securities Exchange Act of 1934 Release No. 9083 although not
required by Financial Accounting Standards Board No. 128 "Earnings Per Share"
("FASB 128") since the results are anti-dilutive.
(A) - For 1998, the dilutive options (i.e., the average market price is greater
than the exercise price), assume that options for 159,668 shares are exercised,
resulting in proceeds of $1,015,758. Next, using the treasury stock method with
the quarterly average market price of $7.25 per share, a total of 140,105 shares
($1,015,758/$7.25= 140,105 shares) are assumed to be reacquired as of the
beginning of the year, resulting in an additional 19,563 shares outstanding.
For 1997, the dilutive options (i.e., the average market price is greater than
the exercise price), assume that options for 234,663 shares are exercised,
resulting in proceeds of $1,319,102. Next, using the treasury stock method with
the yearly average market price of $8.25 per share, a total of 159,891 shares
($1,319,102/$8.25= 159,891 shares) are assumed to be reacquired as of the
beginning of the year, resulting in an additional 74,772 shares outstanding.
(B) - For 1998, the dilutive warrants (i.e., the average market price is greater
than the exercise price), assume that warrants for 97,389 shares are exercised,
resulting in proceeds of $328,201. Next, using the treasury stock method with
the quarterly average market price of $7.25 per share, a total of 45,269 shares
($328,201/$7.25= 45,269 shares) are assumed to be reacquired as of the beginning
of the year, resulting in an additional 52,120 shares outstanding.
For 1997, the dilutive warrants (i.e., the average market price is greater than
the exercise price), assume that warrants for 101,853 shares are exercised,
resulting in proceeds of $353,199. Next, using the treasury stock method with
the yearly average market price of $8.25 per share, a total of 42,812 shares
($353,199/$8.25= 42,812 shares) are assumed to be reacquired as of the beginning
of the year, resulting in an additional 59,041 shares outstanding.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE MARCH
31, 1998 (UNAUDITED) FINANCIAL STATEMENTS OF MEDJET INC. AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 788,291
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 840,033
<PP&E> 268,229
<DEPRECIATION> 198,318
<TOTAL-ASSETS> 1,228,121
<CURRENT-LIABILITIES> 267,401
<BONDS> 0
0
0
<COMMON> 3,720
<OTHER-SE> 957,000
<TOTAL-LIABILITY-AND-EQUITY> 1,228,121
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 729,620
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 102
<INCOME-PRETAX> (715,095)
<INCOME-TAX> 0
<INCOME-CONTINUING> (715,095)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (715,095)
<EPS-PRIMARY> (.19)
<EPS-DILUTED> (.19)
</TABLE>
