<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 June 30, 1999
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)
<TABLE>
<S> <C>
DELAWARE 22-3283541
(State or Other Jurisdiction of Incorporation or Organization) (I.R.S. Employer Identification No.)
</TABLE>
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 July 31, 1999, 3,901,431 shares of Common Stock, par value $.001 per
share, were outstanding.
Transitional Small Business Disclosure Format: Yes [ ] No [X]
================================================================================
<PAGE>
MEDJET INC.
(A Development Stage Company)
Condensed Interim Balance Sheet
June 30, 1999
(Unaudited)
<TABLE>
<S> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 42,724
Prepaid expenses 47,348
-----------
Total Current Assets 90,072
-----------
Property and Equipment - less accumulated depreciation of $290,714 144,531
Patents and Trademarks - less accumulated amortization of $23,359 162,621
Deferred tax asset 594,209
Security deposits 4,837
-----------
Total Assets $ 996,270
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued liabilities $ 347,984
Deferred revenues 175,000
Income taxes payable 150
-----------
Total Liabilities 523,134
-----------
Stockholders' Equity:
Common stock, $.001 par value, 7,000,000 shares authorized,
3,935,220 shares issued and 3,901,431 shares outstanding 3,935
Preferred stock, $.01 par value, 1,000,000 shares authorized,
no shares issued -
Additional paid-in capital 6,066,036
Accumulated deficit (including deficit accumulated during development
stage of $7,099,805 of which $1,556,204 was applied to additional
paid-in capital upon conversion from an "S" to a "C" corporation) (5,595,135)
Less: Treasury stock, 33,789 shares, at cost (1,700)
-----------
Total Stockholders' Equity 473,136
-----------
Total Liabilities and Stockholders' Equity $ 996,270
===========
</TABLE>
See Notes to the Condensed Interim Financial Statements.
<PAGE>
MEDJET INC.
(A Development Stage Company)
Condensed Interim Statements of Operations
For The Three and Six Months Ended June 30, 1999 and 1998
And The Period From December 16, 1993 (Date of Inception), to June 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended Period from
June 30, June 30, December 16,
-------------------------- -------------------------- 1993 (Inception) to
1999 1998 1999 1998 June 30, 1999
---------- ---------- ---------- ----------- -------------------
<S> <C> <C> <C> <C> <C>
Revenues:
License fee income $ 55,000 $ - $ 175,000 $ - $ 675,000
---------- ---------- ---------- ----------- -----------
Total revenues 55,000 - 175,000 - 675,000
---------- ---------- ---------- ----------- -----------
Expenses:
Research, development,
general and administrative 390,916 719,205 731,171 1,448,825 8,639,225
---------- ---------- ---------- ----------- -----------
Total expenses 390,916 719,205 731,171 1,448,825 8,639,225
---------- ---------- ---------- ----------- -----------
Loss from Operations (335,916) (719,205) (556,171) (1,448,825) (7,964,225)
Other Income (Expense):
Net interest income 1,613 14,593 4,205 29,118 271,061
---------- ---------- ---------- ----------- -----------
Loss Before Income Tax (334,303) (704,612) (551,966) (1,419,707) (7,693,164)
Income tax 200 200 200 200 (593,359)
---------- ---------- ---------- ----------- -----------
Net Loss (334,503) (704,812) (552,166) (1,419,907) (7,099,805)
Dividends on Preferred Stock - - - - 184,923
---------- ---------- ---------- ----------- -----------
Net Loss Attributable to
Common Shareholders $ (334,503) $ (704,812) $ (552,166) $(1,419,907) $(7,284,728)
========== ========== ========== =========== ===========
Net Loss Per Share $ (0.09) $ (0.19) $ (0.14) $ (0.39) $ (2.36)
========== ========== ========== =========== ===========
Weighted average common and
equivalent shares outstanding 3,891,855 3,686,280 3,886,536 3,681,168 3,088,500
========== ========== ========== =========== ===========
</TABLE>
See Notes to the Condensed Interim Financial Statements.
<PAGE>
MEDJET INC.
(A Development Stage Company)
Condensed Interim Statements of Cash Flows
For The Six Months Ended June 30, 1999 and 1998
And The Period From December 16, 1993 (Date of Inception), to June 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
For the Six Months Ended Period from
June 30, December 16, 1993
------------------------------------ (Inception) to
1999 1998 June 30, 1999
---------------- ---------------- ----------------
<S> <C> <C> <C>
Cash Flows from Operating Activities $(297,620) $(1,200,758) $(6,855,967)
Cash Flows from Investing Activities (3,250) (168,583) (674,243)
Cash Flows from Financing Activities - 1,117,748 7,572,934
---------------- ---------------- ----------------
Net Increase (Decrease) in Cash and Cash Equivalents (300,870) (251,593) 42,724
Cash and Cash Equivalents - Beginning of Period 343,594 1,491,040 -
---------------- ---------------- ----------------
Cash and Cash Equivalents - End of Period $ 42,724 $ 1,239,447 $ 42,724
=============== =============== ===============
Supplemental Disclosures of Cash Flow Information:
Cash paid for:
Income taxes $ 200 $ 200 $ 600
=============== =============== ===============
Interest expense $ 168 $ 183 $ 13,689
=============== =============== ===============
</TABLE>
See Notes to the Condensed Interim Financial Statements.
<PAGE>
MEDJET INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE
CONDENSED INTERIM FINANCIAL STATEMENTS
NOTE A - NATURE OF ORGANIZATION AND BASIS OF PRESENTATION:
(1) Nature of Organization:
----------------------
Medjet Inc. (the "Company") was incorporated in the State of Delaware
on December 16, 1993 and is in the development stage. The Company is
engaged in research and development of medical technology, with a
current emphasis on ophthalmic surgical technology and equipment.
(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 as permitted by such rules
and regulations.
The Condensed Interim Financial Statements included herein reflect, in
the opinion of management, all adjustments (consisting only of normal
recurring adjustments) necessary to present fairly the results for the
interim periods. The results of operations for the three and six
month periods ended June 30, 1999 are not necessarily indicative of
results to be expected for the entire year ending December 31, 1999.
NOTE B - NET LOSS PER SHARE:
Net loss per share, in accordance with the provisions of Financial
Accounting Standards No. 128, "Earnings Per Share," is computed by
dividing net loss by the weighted average number of shares of Common
Stock outstanding during the period. Common stock equivalents have
not been included in this computation as the effect would be anti-
dilutive.
NOTE C - LICENSE AGREEMENT:
In July 1998, the Company entered into an agreement with Nestle S.A.
("Nestle") granting Nestle and its wholly-owned subsidiary, Alcon
Laboratories, Inc. ("Alcon"), an exclusive, worldwide license for the
use
<PAGE>
of the Company's proprietary microjet technology for corneal
refractive surgery. Under the terms of the agreement, Alcon will
register, manufacture, promote and market refractive microjet devices
and consumables developed by the Company.
In connection with the execution of the agreement, a payment in the
amount of $500,000 was made by Alcon to the Company. The agreement
provides for future payments and royalties based on the attainment of
certain milestones and upon sales by Alcon of the Company's products.
Item 2. MANAGEMENT'S DISCUSSION AND
ANALYSIS OR PLAN OF OPERATION
This Quarterly Report on Form 10-QSB, including any documents that are
incorporated by reference, 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. Generally, such
statements are indicated by words or phrases such as "anticipate," "expect,"
"intend," "management believes" and similar words and phrases. Such statements
are based on the Company's current expectations and are subject to risks,
uncertainties and assumptions. Certain of these risks are described or referred
to below and in the introduction to Part I of the Company's Annual Report on
Form 10-KSB for the fiscal year ended December 31, 1998 on file with the
Securities and Exchange Commission and are incorporated herein by this
reference. Should one or more of these risks or uncertainties materialize, or
should underlying assumptions prove incorrect, actual results may vary
materially from those anticipated, expected, intended or believed.
GENERAL
The Company is engaged in 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
based on microjets. The Company expects, during the remainder of 1999, to
continue its research and development activities, focusing principally on
ophthalmic surgical technology and equipment, and to commence early exploratory
work on dental applications of its microjet 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 sales revenues during the three or six months ended June 30, 1999. Under the
terms of the license agreement with Nestle (as described under "License
Agreement" in Note C of Notes to the Condensed Interim Financial Statements), a
total of $350,000 was paid by Alcon to the Company during the six months ended
June 30, 1999. This amount has been
<PAGE>
reflected as License Fee Income and Deferred Revenues in the accompanying
Condensed Interim Financial Statements.
Total expenses during the three months ended June 30, 1999 decreased by $328,289
(45.6%) to $390,916 from $719,205 for the comparable period of 1998. This was
primarily due to a net decrease in staff (to seven full-time employees and one
part-time employee from twenty full-time employees) and a decrease in consulting
and professional fees as the Company continued to curtail several operational
activities in order to husband and stretch its existing capital. (See
"Liquidity and Capital Resources" below). Expenses were also higher during the
1998 period due to increased purchases for materials, testing and analysis and
other higher costs associated with the higher level of activity.
During the six months ended June 30, 1999, total expenses decreased by $717,654
(49.5%) to $731,171 from $1,448,825 for the comparable period of 1998, generally
for the same reasons as during the three-month period.
Other income/expense consists of interest income, interest expense and finance
charges. Net interest income for the three months ended June 30, 1999 decreased
by $12,980 (88.9%) to $1,613 from $14,593 for the comparable period of 1998.
This decrease principally results from income earned on the Company's short-term
investments which were lower in the 1999 period, reflecting the utilization of
these funds to continue the Company's research and development activities.
For the six months ended June 30, 1999, net interest income decreased by $24,913
(85.6%) to $4,205 from $29,118 for the comparable period of 1998 for the same
reason as during the three-month period.
LIQUIDITY AND CAPITAL RESOURCES
In April 1998, the Company sold and issued 110,000 shares of its Convertible
Preferred Stock for an aggregate price of $1,100,000, the net proceeds of which
were added to the Company's working capital. On October 8, 1998, these shares
were converted into 182,724 shares of Common Stock and the Company paid the
applicable dividend on the Convertible Preferred Stock by issuing a total of
12,154 shares of Common Stock.
Throughout the second half of 1998, the Company had been seeking additional
capital to finance its 1999 business plan. Pending obtaining additional
financing, the Company made the decision to curtail several operational
activities and to downsize its employee base in order to husband and stretch its
existing capital. In October and November 1998, the Company dismissed nine of
its nineteen employees. It also significantly reduced the salary of the
management group, in some cases by up to 50%. The specific goal was to reduce
the Company's monthly expenditures by 60%, to approximately $100,000. The
Company currently is focused on fulfilling its commitments with respect to the
agreement with Alcon, although the Company may seek to license the
HydroBrush(TM) Keratome to a third party at some future date. The Company will
also consider submitting
<PAGE>
proposals to the government and to industrial organizations to fund some of the
costs of the study of other potential medical applications of its technology
platform. Finally, as its financial resources permit, the Company will continue
explorations and analyses of potential new medical applications of its microjet
technology.
In January 1998, the State of New Jersey enacted legislation allowing emerging
technology and/or biotechnology companies to sell their unused New Jersey Net
Operating Loss ("NOL") Carryover and Research and Development Tax Credits ("R&D
Credits") to corporate taxpayers in New Jersey. The Company retained a third
party broker to identify a buyer for the Company's NOL Carryover and R&D
Credits. The anticipated net proceeds of this transaction ($594,209) have been
recorded as a non-current deferred tax asset in the accompanying condensed
interim financial statements. There can be no assurances, however, that this
proposed sale will occur. To the extent that the NOL Carryover and R&D Credits
are sold, they will be unavailable to the Company to offset future New Jersey
state taxes.
During March 1999, Dr. Gordon agreed to make available to the Company a loan of
up to $250,000. Under the terms of this arrangement, the Company has issued to
Dr. Gordon warrants to purchase a total of 50,000 shares of the Company's Common
Stock at a price per share of $.89 and will pay interest on the amounts borrowed
at the rate of 8.27% per annum. During July 1999, Dr. Gordon advanced a total of
$100,000 to the Company under this arrangement.
The Company anticipates that its cash on hand, together with the payments to be
received by the Company in connection with the license agreement, plus the loan
from Dr. Gordon and the sale of its New Jersey State NOL Carryover and R&D
Credits, will be sufficient to meet the Company's 1999 working capital and
planned capital expenditure requirements. If, however, the Company incurs
unexpected expenses, or if the New Jersey NOL Carryover and R&D Credits are not
sold as anticipated, the Company may require additional financing prior to the
end of 1999 in order to maintain its current operations. Assuming FDA marketing
clearance is obtained, minimum royalty payments under the licensing agreement
are anticipated to begin in early 2000. However, if the Company and Alcon fail
to obtain FDA clearance of the Company's HydroBlade(TM) Keratome device or
Alcon's manufacturing and marketing of the device is otherwise delayed, the
Company will need to raise additional capital to maintain its current scope of
operations beyond the second quarter of 2000. The Company currently has no
commitment or arrangement for any capital, and there can be no assurance whether
or on what terms it will be able to obtain any needed capital. If additional
financing is not available, the Company would be materially adversely affected
and be required to further curtail or cease altogether its current operations.
The Company's current strategy is to exclusively license its products. As of
the date of filing of this quarterly report on Form 10-QSB, the Company has
entered into one such agreement, the Alcon Agreement, covering corneal
refractive surgery. Later, it may undertake the marketing and sale of its own
products. In such event, the Company would
<PAGE>
be subject to the risks and uncertainties described under "Additional Factors
That May Affect Future Results - No Manufacturing Experience; Dependence on
Third Parties," in the Company's Annual Report on Form 10-KSB, which information
is incorporated herein by reference.
ADDITIONAL FACTORS THAT MAY AFFECT FUTURE RESULTS
The Company's current strategy is to selectively license its ophthalmology
products when appropriate. To date, the Company has entered into one such
agreement to license its proprietary microjet technology for corneal refractive
surgery only. If the Company is unable or elects not to enter into additional
license agreements with respect to its other products, it may undertake the
manufacture and marketing of such products directly. If manufactured
internally, the Company's proposed products must be produced in commercial
quantities in compliance with regulatory requirements at acceptable costs.
Production in clinical or commercial-scale quantities will involve scale-up
challenges for the Company. The Company currently has no volume manufacturing
capacity or experience in manufacturing medical devices or any other products.
If the Company elects to manufacture certain of its potential products, it would
be required to establish its own manufacturing capabilities, which would require
significant scale-up expenses and additions to facilities and personnel. There
can be no assurance that the Company would be able to obtain the necessary
regulatory approvals on a timely basis, or at all, and delays in receipt of, 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 enter into agreements with third parties with
respect to the manufacture of any products or develop its own manufacturing
capability at an acceptable cost.
The Company's dependence on 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 additional license or distribution
arrangements with respect to its products other than those related to its
proprietary microjet technology for corneal refractive surgery, it may 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 capabilities 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
<PAGE>
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.
OTHER MATTERS
The Company has been assessing its "Year 2000" computer readiness and exposure
to Year 2000 issues. In connection with such assessment, the Company initiated
a review of all information technology systems utilized by the Company. The
Company uses no internally-developed systems, only those available from
commercial software vendors. As part of its review, the Company has received
confirmation from its principal software vendors that such systems are Year 2000
compliant. Based on its review to date, the Company believes there are no major
Year 2000 compliance issues with respect to its information technology systems,
and, therefore, the Company has not and does not intend to prepare a contingency
plan for these systems. The Company anticipates that the total cost for its
Year 2000 compliance efforts will not exceed $5,000.
In addition, although the Company has not yet initiated commercial production of
any of its products, the list of component parts used in those products was
reviewed and it was determined that multiple vendors, parts suppliers or
contract manufacturers are available to the Company for all of the critical
component parts of these products. Although there are no vendors currently
engaged by the Company for products to be manufactured, when engaging vendors,
the Company will ascertain that they are compliant. Based on its review to
date, the Company believes, in the most likely worst case scenario, that Year
2000 issues would have only a minimal impact on the Company.
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
New Jersey Institute of Technology
On April 21, 1998, the Company was served with a complaint by the New Jersey
Institute of Technology ("NJIT") commencing a lawsuit in the United States
District Court for the District of New Jersey ("U.S. District Court"). Each of
the Company, Eugene I. Gordon, Ph.D. (the Company's Chairman and Chief Executive
Officer), a former employee of the Company, certain patent law firms and an
individual patent attorney were named as defendants. The complaint alleged that
the defendants, with deceptive intent, failed to name an NJIT professor and/or
NJIT research associate as a co-inventor on the Company's U.S. Patent No.
5,556,406 on the "Lamellar Surgical Device and Procedure" (the "Patent") and
breached fiduciary duties and contractual obligations owed to NJIT. The
complaint sought monetary damages from the Company and an order directing that
the Company's Patent (and corresponding foreign patents and patent applications)
be assigned and transferred to NJIT. It further sought an order that NJIT has
not infringed
<PAGE>
any claims of such Patent and a declaratory judgment that all of the Company's
claims under such Patent are invalid and unenforceable against NJIT.
NJIT submitted a patent application relating to a different refractive
corrective procedure based on the use of an isotonic waterjet to the U.S. Patent
and Trademark Office. That patent has recently been allowed. The three
inventors of the subject of such patent application, one of which was Dr.
Gordon, had assigned such patent application to NJIT as part of a dispute
settlement in which NJIT agreed to grant an exclusive license to the Company of
the patent rights under such patent application. That license was terminated by
the Company because the Company found that the device did not operate as claimed
and could be harmful to the patient. In its court pleas, NJIT claims, without
being specific, that the Company's Patent emanates from the earlier invention.
Prior to being served with the complaint by NJIT, the Company and Dr. Gordon
filed a complaint, on March 27, 1998, against NJIT in the Superior Court of the
State of New Jersey, Middlesex County, seeking a declaratory judgment that NJIT
had no ownership or other interest in the patent rights to the Company's Patent
and seeking payment for damages. NJIT removed the Company's lawsuit to the U.S.
District Court, seeking to have it consolidated with its lawsuit. The Company
moved to have its suit remanded to state court and to have the NJIT lawsuit
dismissed on the grounds that the federal court lacked jurisdiction over either
action, and that NJIT had not been harmed by the Company's Patent and therefore
could not challenge its validity.
During October 1998, the lawsuit brought in U.S. District Court by NJIT was
dismissed on jurisdictional grounds. In addition, the U.S. District Court also
held that NJIT improperly removed the Company's state court action and ordered
that action remanded to the state court. NJIT appealed the remand action and
appealed the dismissal of its lawsuit brought in U.S. District Court. These
appeals have been dismissed. On April 26, 1999, NJIT commenced a second action
in U.S. District Court. NJIT alleged that the defendants failed to name a NJIT
professor and/or a NJIT research associate as co-inventors of the Patent and
breached fiduciary duties and contractual obligations owed to NJIT. As in the
first federal court action, NJIT sought monetary damages, an order directing
that the Company's Patent, foreign patents and patent applications be assigned
and transferred to NJIT, a declaratory judgment that all of the claims of the
Company's Patent are invalid and unenforceable against NJIT and an order
amending the named inventors of the Company's Patent to include the NJIT
professor and/or the NJIT research associate. Briefing to the federal court on
the motion to dismiss the action against the Company, Dr. Gordon and the former
employee of the Company is complete. On or about September 13, 1999, the court
is scheduled to hear the motion to dismiss the second federal action.
With respect to the Company's lawsuit against NJIT, NJIT has asserted
counterclaims and/or third party claims against each of the Company, Dr. Gordon,
a former employee of the Company and certain patent law firms. Beginning in
November 1998, the Company and Dr. Gordon requested discovery from NJIT in the
state court action. NJIT produced very few responsive and/or relevant documents
to the Company and refused to answer
<PAGE>
certain of the Company's interrogatories, which requested support for NJIT's
alleged claims of ownership of or an interest in the Company's Patent. In mid-
1999, the Company and Dr. Gordon moved to compel the production of documents
from NJIT and to compel NJIT's answers to the interrogatories. On July 19, 1999,
the state court ordered NJIT to provide additional responsive and/or relevant
documents, if any, that the Company requested and answer certain interrogatories
that NJIT previously refused to answer. Pursuant to the court order, NJIT
provided answers to the interrogatories and certified that it undertook a
reasonable search for and produced all documents that the Company requested.
While the state court action is still in the discovery phase and NJIT has
advised the Company that it is not prepared to go forward with depositions on
dates noticed by the Company, the Company believes that its Patent is valid and
enforceable and that the Company has valid defenses to each of NJIT's claims.
The Company believes the probability of an unfavorable outcome is extremely low,
and therefore no amounts have been accrued with respect to this lawsuit.
Other
On April 16, 1999, the Company was served with a complaint commencing a lawsuit
in the United States District Court for the District of New Jersey by Robert G.
Donovan, a former officer and director, seeking payment of $129,500 for
undocumented services alleged to have been performed for the Company. A
compensation package offered by the Company for documented services had been
rejected by Mr. Donovan previously. Although the Company believes the
probability of a significant unfavorable outcome is remote, this matter is
currently in the preliminary stages and no prediction can be made of the
ultimate outcome.
Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None
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
<PAGE>
10 Employment Agreement between the Registrant and
Eugene I. Gordon, dated as of April 9,1999
11 Statement regarding computation of per share
earnings
27.1 Financial Data Schedule
27.2 Financial Data Schedule (Restated)
(b) Reports on Form 8-K
None
<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: August 12, 1999 MEDJET INC.
/s/ Eugene I. Gordon
--------------------------------------------
Eugene I. Gordon, Ph.D.
Chairman of the Board and
Chief Executive Officer
/s/ Thomas M. Handschiegel
--------------------------------------------
Thomas M. Handschiegel
Vice President - Finance and
Human Resources
(Principal financial and accounting officer)
<PAGE>
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION
10 Employment Agreement between the Registrant and
Eugene I. Gordon, dated as of April 9,1999
11 Statement regarding computation of per share earnings
27.1 Financial Data Schedule
27.2 Financial Data Schedule (Restated)
<PAGE>
Exhibit 10
EMPLOYMENT AGREEMENT
AGREEMENT made as of the 9th day of April, 1999 between MEDJET INC. (the
"Company"), a Delaware corporation having an office at 1090 King Georges Post
Road, Suite 301, Edison, New Jersey 08837 and EUGENE I. GORDON ("Executive"),
residing at 1535 Coles Avenue, Mountainside, New Jersey 07092.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Executive has served as Chairman, Chief Executive Officer, and
Chief Technical Officer of the Company since its inception;
WHEREAS, the Company desires to continue to receive the benefit of
Executive services and Executive is willing to continue to provide such services
to the Company, upon the terms and conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set
forth, the parties agree as follows:
1. Employment.
1.01 Term. The Company hereby employs Executive, and Executive hereby
----
accepts employment with the Company with the duties hereinafter set forth, for a
period commencing on March 16, 1999 and ending March 15, 2002 subject, however,
to earlier termination in accordance with the provisions of this Agreement (the
"Employment Period").
2. Duties; Chairman and Chief Executive Officer.
2.01 Duties. During the Employment Period, Executive shall serve as
------
Chairman, Chief Executive Officer and Chief Technical Officer of the Company in
accordance with the provisions of the Company by-laws or such other executive
position determined by the Board of Directors of the Company in accordance with
Section 2.02 and shall perform such duties as may from time to time be
reasonably assigned to him by the Company's Board of Directors, consistent with
such position, taking into account those duties currently performed by him.
Executive agrees that, during the term of this
<PAGE>
Agreement, he will devote his full time, skills and efforts to the performance
of his duties hereunder and to the furtherance of the interests of the business
of the Company.
2.02 Titles. When elected annually by the Board of Directors,
------
Executive shall serve as Chairman and Chief Executive Officer of the Company.
If Executive is not reelected as a director of the Company or if the Board of
Directors chooses to remove Executive from the offices of Chairman, Chief
Executive Officer and/or Chief Technical Officer, Executive agrees to serve in
such other executive capacity as the Board of Directors shall determine.
3. Compensation and Related Matters.
3.01 Base Salary. As compensation for Executive's services, the
-----------
Company shall pay Executive during the Employment Period, a base salary of
$170,000 per annum (the "Base Salary"), commencing March 16, 1999, payable semi-
monthly or in accordance with the Company's customary practice from time to
time. The Base Salary may be increased in the sole discretion of the Company's
Board of Directors from time to time, provided, however, that Executive shall
not participate in such determination. The Company and the Executive may, from
time to time, agree in writing that the Executive shall forego all or a portion
of his Base Salary for a specified period and receive in lieu thereof that
number of unregistered shares of the Company's Common Stock, $.001 par value per
share ("Common Stock") having an aggregate Fair Market Value (as that term is
hereinafter defined) equal to the portion of the Base Salary otherwise due to
him during the period specified in such written agreement.
3.02 Bonuses. For each twelve (12) month period commencing March 16,
-------
1999 during the Employment Period ("Agreement Year"), Executive shall receive,
in addition to his Base Salary, a bonus of $20,000 ("Bonus") upon the occurrence
of each one of any three events defined by the Company's Board of Directors from
time to time (the "Bonus Events"), up to an aggregate of $60,000 during any
Agreement Year. Each Bonus earned by Executive shall be paid in 12 equal
payments over one year after the Bonus Event for which it was earned, provided,
however, that in the event the foregoing would require the payment of more than
$60,000 in Bonuses in any Agreement Year, the additional Bonus(es) may be
deferred at the Company's option, until the first day of the
<PAGE>
next Agreement Year, or, if this Agreement shall have terminated, upon the
termination of this Agreement. In the event that the Company's Board of
Directors determines that the Company's financial condition makes it infeasible
to pay these Bonuses in cash, they will be paid in unregistered shares of the
Company's Common Stock as specified in Section 3.01 of this Agreement.
3.03 Stock Options. Executive shall be granted stock options to
-------------
purchase 150,000 shares of the Company's Common Stock. Such stock options shall
be either incentive stock options or non-qualified stock options for the
purposes of the Internal Revenue Code of 1986, as amended, at the option of
Executive. The exercise price of such stock options shall be the Fair Market
Value of the Company's Common Stock on the date of this Agreement unless such
stock options shall be incentive stock options, in which event the exercise
price shall be 110% of such Fair Market Value. Such stock options shall be
exercisable to the extent of one-third on the first anniversary of the date of
the grant and an additional one-third on each of the succeeding two
anniversaries of date of grant provided Executive remains an employee of the
Company as of such date and shall terminate on the tenth anniversary of such
grant unless such stock options shall be incentive stock options, in which event
the termination date shall be the fifth anniversary of the date of grant or such
earlier date as may be required by law. The stock options shall be evidenced by
an agreement substantially in the form of Exhibit A (incentive stock options) or
Exhibit B (nonqualified stock options) attached hereto. The Company shall take
all steps as shall be necessary to effectuate the foregoing including, without
limitation, proposing a new stock option plan for approval by the Company's
stockholders and reserving a sufficient number of authorized but unissued shares
to permit the purchase of the shares pursuant to the stock options to be granted
to Executive.
3.04 Fair Market Value. For the purpose of any computation under this
-----------------
Agreement, the Fair Market Value per share of Common Stock at any time shall
mean:
(a) If the principal market for the Common Stock is a national
securities exchange, the Nasdaq National Market or the Nasdaq SmallCap Market,
the
<PAGE>
closing sales price of the Common Stock on such day as reported by such exchange
or market, or on a consolidated tape reflecting transactions on such exchange or
market; or
(b) If the principal market for the Common Stock is not a national
securities exchange, the Nasdaq National Market or the Nasdaq SmallCap Market,
the closing mean between the highest bid and lowest asked price for the Common
Stock on the date in question, as reported by the National Quotation Bureau,
Inc. ("NQB") or at least two market makers in the Common Stock if quotations are
not available from NQB but are available from market makers; or
(c) If the Fair Market Value can not be determined in accordance with
subsections (a) or (b), Fair Market Value shall be determined by the Company's
Board of Directors, whose decision shall be final and binding, provided,
however, that Executive shall not participate in such determination.
3.05 Expenses. The Company shall pay or reimburse Executive for all
--------
reasonable business expenses (including automobile, hotel, business
entertainment and other travel (other than commuting) expenses) incurred in the
performance of Executive's duties, upon submission of appropriate vouchers and
other supporting data.
3.06 Benefits. Executive shall be entitled to (i) participate in all
--------
general pension, profit-sharing, life, medical, disability and other insurance
and executive benefit plans at any time in effect for executives of the Company,
and (ii) twenty (20) days paid vacation during each Agreement Year at mutually
agreeable times.
4. Termination; Disability; Death.
4.01 Termination. The Company shall have the right to terminate the
-----------
employment of Executive hereunder at any time for any reason upon written
notice. If termination is "for cause", such cause shall include and be limited
exclusively to the occurrence of any of the following acts or events by or
relating to Executive: (i) any material breach of any obligations of Executive
under this Agreement or the Company's Proprietary Information, Inventions, Non-
Competition and Non-Solicitation Agreement executed by the Executive on February
28, 1996 (the "Proprietary Info Agreement") which remains uncured for more than
thirty (30) days after written notice thereof by the Company to Executive; (ii)
continued, habitual intoxication or performance under the
<PAGE>
influence of controlled substances during working hours, after the Company shall
have provided written notice to Executive and given Executive thirty (30) days
within which to commence rehabilitation with respect thereto, and the Employee
shall have failed to commence such rehabilitation; (iii) theft or embezzlement
from the Company or any other material acts of dishonesty in the course of
Executive's duties hereunder which significantly injures the Company; or (iv)
conviction by a court of competent jurisdiction of a felony or conviction in
respect of any dishonest or fraudulent act relating to the Executive's duties as
an executive officer of the Company or which significantly injures the Company
or its reputation (other than traffic violations and minor misdemeanors). In the
event that during the Employment Period, the Company discharges Executive for
any reason other than for cause, death or disability, Executive shall be
entitled to receive a severance payment (the "Severance Payment") equal to the
lesser of (a) the amount of Base Salary payable to Executive for the balance of
the Employment Period (as if such Employment Period had not been terminated),
payable semi-monthly or in accordance with the Company's customary payroll
practices for the balance of the Employment Period or (b) the amount of the Base
Salary and Bonuses earned during the one year period immediately prior to such
termination. If Executive is discharged for death or disability, the Company
shall pay to Executive or his designated beneficiaries a payment
("Death/Disability Payment") equal to the amount set forth in (b) above;
provided further that any payments to Executive under any disability insurance
or plan maintained by the Company shall be applied against and shall reduce the
amount of the Death/Disability Payment. In the event Executive shall have
received a portion of his Base Salary in Common Stock in accordance with Section
3.01, for purposes of the calculation of the Severance Payment or
Death/Disability Payment under clause (b) above, Executive's Base Salary shall
include the amount he would have received in cash had he not received payment in
Common Stock. The Death/Disability Payment or the Severance Payment (only if
calculated under clause (b) above) shall be due and payable to Executive in 12
equal monthly payments over the ensuing one year period. If the Company breaches
this Agreement, Executive shall have the option to treat it as termination
without cause and to receive the Severance Payment after Executive shall have
given the Company written
<PAGE>
notice thereof and the Company has failed to cure such breach within thirty (30)
days thereafter.
4.02 Disability. If Executive, by reason of illness, mental or
----------
physical incapacity (as determined by a physician chosen by the Company) or
other disability, is unable to perform his regular duties hereunder for any
consecutive period of 180 days or more from its commencement or for non-
consecutive periods aggregating 180 days in any consecutive twelve-month period,
then, in any such event, the Company may terminate this Agreement at any time
thereafter upon ten days' written notice to Executive.
4.03 Death. In the event of Executive's death, the Employment Period
-----
shall terminate effective as of the date of death.
4.04 No Salary Continuation For Cause. In the event of termination of
--------------------------------
this Agreement or the Employment Period "for cause" under Section 4.01,
Executive's Base Salary shall cease as of the date of termination and the
Company shall pay Executive any Bonuses then earned and unpaid, in accordance
with Section 3.02.
4.05 Transfer of Assets. If during the Employment Period, a sale of
------------------
all or substantially all the assets of the Company occurs, Executive's remaining
unvested stock options granted under Section 3.03 will immediately vest.
5. Miscellaneous.
5.01 Notices. All notices under this Agreement shall be in writing
-------
and shall be deemed to have been duly given if personally delivered or if mailed
by first class registered or certified mail, return receipt requested, addressed
to the Company or to Executive, as the case may be, at their respective
addresses set forth on the first page of this Agreement, or to such other person
or address as may be designated by like notice hereunder. Any such notice shall
be deemed to have been given on the day delivered, if personally delivered, or
on the third day after the date of mailing if mailed in accordance with the
above.
5.02 Parties in Interest. This Agreement shall be binding upon and
-------------------
inure to the benefit of and be enforceable by the parties hereto and their
respective heirs, legal representatives, successors and, in the case of the
Company, assigns, but no other
<PAGE>
person shall acquire or have any rights under or
by virtue of this Agreement, and the obligations of Executive under this
Agreement may not be assigned or delegated.
5.03 Governing Law; Severability. This Agreement shall be governed by
---------------------------
and construed and enforced in accordance with the laws and decisions of the
State of New Jersey applicable to contracts made and to be performed therein
without giving effect to the principles of conflict of laws. The invalidity or
unenforceability of any other provision of this Agreement, or the application
thereof to any person or circumstance, in any jurisdiction shall in no way
impair, affect or prejudice the balance of this Agreement, which shall remain in
full force and effect, or the application thereof to other persons and
circumstances.
5.04 Survival. The provisions of Section 5 shall survive the
--------
expiration or termination of this Agreement for any reason.
5.05 Entire Agreement; Modification; Waiver; Interpretation. This
-------------------------------------- --------------
Agreement, together with the Proprietary Info Agreement, contain the entire
agreement and understanding between the parties with respect to the subject
matter hereof and thereof and supersede all prior negotiations and oral
understandings, if any. Neither this Agreement nor any of its provisions may be
modified, amended, waived, discharged or terminated, in whole or in part, except
in writing signed by the party to be charged. No waiver of any such provision or
any breach of or default under this Agreement shall be deemed or shall
constitute a waiver of any other provision, breach or default. All pronouns and
words used in this Agreement shall be read in the appropriate number and gender,
the masculine, feminine and neuter shall be interpreted interchangeably and the
singular shall include the plural and vice versa, as the circumstances may
require.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first above written.
MEDJET INC. Executive
By /s/ Thomas M. Handschiegel By /s/ Eugene I. Gordon
--------------------------- ---------------------
Name: Thomas M. Handschiegel Eugene I. Gordon
Title: Vice President - Finance and
Human Resources
<PAGE>
Exhibit 11
COMPUTATION OF NET LOSS PER COMMON SHARE
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
NET LOSS PER SHARE
Loss from Operations applicable to
Common Stock $ (334,503) $ (704,812) $ (552,166) $(1,419,907)
========== ========== ========== ===========
Weighted Average Common and
Equivalent Shares Outstanding 3,891,855 3,686,280 3,886,536 3,681,168
---------- ---------- ---------- -----------
Net Loss Per Share $ (0.09) $ (0.19) $ (0.14) $ (0.39)
========== ========== ========== ===========
NET LOSS PER SHARE -
ASSUMING DILUTION (See "NOTE")
Loss from Operations applicable to
Common Stock $ (334,503) $ (704,812) $ (552,166) $(1,419,907)
========== ========== ========== ===========
Weighted Average Common and
Equivalent Shares Outstanding 3,891,855 3,686,280 3,886,536 3,681,168
Add: (A) Assuming Exercise of Stock Options 114,111 37,917 80,224 44,765
(B) Assuming Exercise of Warrants - 49,251 - 50,755
---------- ---------- ---------- -----------
Weighted Average Common Shares
Outstanding - As Adjusted 4,005,966 3,773,448 3,966,760 3,776,688
========== ========== ========== ===========
Net Loss Per Share - Assuming Dilution $ (0.08) $ (0.19) $ (0.14) $ (0.38)
========== ========== ========== ===========
</TABLE>
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 1999, the dilutive options (i.e., the average market price is greater
than the exercise price), assume that options are exercised and proceeds
realized as indicated below. Next, using the treasury stock method with the
average market price per share during each period and the total shares assumed
to be reacquired as of the beginning of each period, the additional shares
included as outstanding are indicated below.
<TABLE>
<CAPTION>
Period Ended June 30, 1999
Three Months Six Months
------------ ----------
<S> <C> <C>
Options assumed exercised 229,050 207,550
Proceeds assumed realized $221,643 $188,443
Shares assumed reacquired:
- During three months ($221,643/$1.92) 115,439
- During six months ($188,443/$1.48) 127,326
Net additional shares assumed outstanding 114,111 80,224
</TABLE>
<PAGE>
COMPUTATION OF NET LOSS PER COMMON SHARE - CONTINUED
For 1998, the dilutive options (i.e., the average market price is greater than
the exercise price), assume that options are exercised and proceeds realized as
indicated below. Next, using the treasury stock method with the average market
price per share during each period and the total shares assumed to be reacquired
as of the beginning of each period, the additional shares included as
outstanding are indicated below.
<TABLE>
<CAPTION>
Period Ended June 30, 1998
Three Months Six Months
------------ ----------
<S> <C> <C>
Options assumed exercised 257,050 257,050
Proceeds assumed realized $1,494,488 $1,494,488
Shares assumed reacquired:
- During three months ($1,494,488/$6.82) 219,133
- During six months ($1,494,488/$7.04) 212,285
Net additional shares assumed outstanding 37,917 44,765
</TABLE>
(B) - For 1999, the dilutive warrants (i.e., the average market price is greater
than the exercise price), assume that warrants are exercised and proceeds
realized as indicated below. Next, using the treasury stock method with the
average market price per share during each period and the total shares assumed
to be reacquired as of the beginning of each period, the additional shares
included as outstanding are indicated below.
<TABLE>
<CAPTION>
Period Ended June 30, 1999
Three Months Six Months
------------ ----------
<S> <C> <C>
Warrants assumed exercised - -
Proceeds assumed realized $ - $ -
Shares assumed reacquired:
- During three months ($ 0/$1.92) -
- During six months ($ 0/$1.48) -
Net additional shares assumed outstanding - -
</TABLE>
For 1998, the dilutive warrants (i.e., the average market price is greater than
the exercise price), assume that warrants are exercised and proceeds realized as
indicated below. Next, using the treasury stock method with the average market
price per share during each period and the total shares assumed to be reacquired
as of the beginning of each period, the additional shares included as
outstanding are indicated below.
<TABLE>
<CAPTION>
Period Ended June 30, 1998
Three Months Six Months
------------ ----------
<S> <C> <C>
Warrants assumed exercised 97,389 97,389
Proceeds assumed realized $328,300 $328,300
Shares assumed reacquired:
- During three months ($328,300/$6.82) 48,138
- During six months ($328,300/$7.04) 46,634
Net additional shares assumed outstanding 49,251 50,755
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE JUNE 30,
1999 (UNAUDITED) FINANCIAL STATEMENTS OF MEDJET INC. AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 42,724
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 90,072
<PP&E> 435,245
<DEPRECIATION> 290,714
<TOTAL-ASSETS> 996,270
<CURRENT-LIABILITIES> 523,134
<BONDS> 0
0
0
<COMMON> 3,935
<OTHER-SE> 469,201
<TOTAL-LIABILITY-AND-EQUITY> 996,270
<SALES> 0
<TOTAL-REVENUES> 175,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 731,171
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 168
<INCOME-PRETAX> (551,966)
<INCOME-TAX> 200
<INCOME-CONTINUING> (552,166)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (552,166)
<EPS-BASIC> (.14)
<EPS-DILUTED> (.14)
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS RESTATED SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
JUNE 30, 1998 (UNAUDITED) FINANCIAL STATEMENTS OF MEDJET INC. AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 1,239,447
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,268,280
<PP&E> 310,161
<DEPRECIATION> 222,538
<TOTAL-ASSETS> 1,694,755
<CURRENT-LIABILITIES> 380,829
<BONDS> 0
1,100
0
<COMMON> 3,720
<OTHER-SE> 1,309,106
<TOTAL-LIABILITY-AND-EQUITY> 1,694,755
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,449,025
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 183
<INCOME-PRETAX> (1,419,707)
<INCOME-TAX> 200
<INCOME-CONTINUING> (1,419,907)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,419,907)
<EPS-BASIC> (.39)
<EPS-DILUTED> (.38)
</TABLE>
