UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the fiscal year ended: December 31, 2010
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: 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 89118
---------------------------------------- ----------
(Address of principal executive offices) (Zip code)
Registrant's Telephone Number: (702) 221-8070
Securities registered under Section 12(b) of the Act: None
Securities registered under Section 12(g) of the Act:
Common Stock, $0.001 par value
Indicate by check mark if the registrant is a well-known seasoned issuer,
as defined in Rule 405 of the Securities Act. Yes [ ] No [X]
Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or 15(d) of the Act. Yes [ ] No [X]
Indicate by check mark whether the registrant (1) 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 Web site, 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 if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
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 [X] Smaller reporting company
Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [ ]
As of June 30, 2010, the aggregate market value of shares held by
non-affiliates (based on the close price of $0.0031 on that date) was
approximately $375,123.
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date: 172,127,287 shares
of common stock as of March 25, 2011.
VOYAGER ENTERTAINMENT INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
FOR THE FISCAL YEAR ENDED
DECEMBER 31, 2010
TABLE OF CONTENTS
Page
PART I
Item 1. Business 4
Item 1A. Risk Factors 7
Item 1B. Unresolved Staff Comments 10
Item 2. Properties 10
Item 3. Legal Proceedings 10
Item 4. [Removed and Reserved] 10
PART II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and
Issuer Purchases of Equity Securities 11
Item 6. Selected Financial Data 12
Item 7. Management's Discussion and Analysis of Financial Condition and 12
Results of Operation
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 19
Item 8. Financial Statements and Supplementary Data F-1
Item 9. Changes in and Disagreements With Accountants on Accounting and 49
Financial Disclosure
Item 9A. Controls and Procedures 49
Item 9B. Other Information 50
PART III
Item 10. Directors and Executive Officers and Corporate Governance 51
Item 11. Executive Compensation 53
Item 12. Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters 55
Item 13. Certain Relationships and Related Transactions, and Director Independence 57
Item 14. Principal Accountant Fees and Services 58
PART IV
Item 15. Exhibits and Financial Statement Schedules 59
SIGNATURES 61
2
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This Form 10-K contains forward-looking statements within the meaning of the
federal securities laws. These forward-looking statements are based on certain
assumptions and are subject to significant risks and uncertainties. These
forward-looking statements are based on management's expectations as of the date
hereof, and the Company does not undertake any responsibility to update any of
these statements in the future. Actual future performance and results could
differ from that contained in or suggested by these forward-looking statements
as a result of factors set forth in this Form 10-K (including those sections
hereof incorporated by reference from other filings with the Securities and
Exchange Commission), in particular as set forth in the "Plan of Operation"
under Item 7.
In this filing references to "Company," "we," "our," and/or "us," refers to
Voyager Entertainment International, Inc. and, unless the context indicates
otherwise, its consolidated subsidiaries.
PART I
ITEM 1. BUSINESS.
HISTORY
Voyager Entertainment International, Inc. (the "Company"), a North Dakota
corporation formerly known as Dakota Imaging, Inc., was formed on January 31,
1991. The Company is in the entertainment development business with plans to
develop the world's tallest Observation Wheel within the Las Vegas strip area.
During April 2002, the Company changed its name from Dakota Imaging, Inc. to
Voyager Entertainment International, Inc. and adopted a new fiscal year. The
Company's wholly-owned subsidiaries include Outland Development, LLC
("Outland"), a Nevada Limited Liability Corporation, Voyager Entertainment
Holdings, Inc. ("VEHI"), a Nevada corporation, and Voyager Viridian, LLC
("Viridian"), a Nevada Limited Liability Corporation. Outland Development, LLC
was a dormant company and was discontinued as of June 30, 2009. Voyager
Entertainment Holdings, Inc. has been a dormant company and was discontinued as
of June 30, 2010. Voyager Viridian LLC, was formed on August 3, 2009. All
organizational costs were paid by the parent.
By written consent dated April 23, 2003, a majority of the Company's
stockholders elected to reincorporate the Company in the State of Nevada,
pursuant to a reincorporation merger between the Company and its then
wholly-owned subsidiary, Voyager Entertainment International, Inc. The
reincorporation became effective on June 23, 2003. In connection with the
reincorporation, the Company increased its authorized $0.001 par value common
stock from 100,000,000 shares to 200,000,000 shares and its authorized Preferred
Stock, $0.001 par value, from 25,000,000 shares to 50,000,000 shares.
As the result of a reverse triangular merger that was completed in 2002, the
financial statements are reflected from the period of inception of Outland
Development in 1997.
OUR BUSINESS
Our current business plan is to build an observation ferris wheel ("Observation
Wheel"). The Company is currently evaluating locations in Las Vegas, Nevada
where the Observation Wheel could be constructed by the Company. If the Company
is unsuccessful in obtaining a site and negotiating terms acceptable to both
Voyager and a prospective property owner for a Las Vegas location, the Company
will be required to identify a location outside of Las Vegas. An observation
wheel could be constructed by a competitor before Voyager's Observation Wheel
could be built in Las Vegas, forcing our management to focus its efforts
elsewhere for a significant amount of time. While there are several locations
outside of Las Vegas which are currently proposed, there can be no guarantees
that the Company will obtain financing or any definitive agreements for any
other locations.
L.V. Voyager Project
--------------------
For the past 9 years, the Company has extensively planned and/or evaluated the
available locations on the Las Vegas Strip as well as other off-strip locations
in Las Vegas, Nevada for the construction of the L.V. Voyager Project - an
observation ferris wheel.
The L.V. Voyager Project is intended to be designed as a visual icon and
experience overlooking the "Las Vegas Strip". The L.V. Voyager Project will have
a wheel that towers 600 feet high and contains 32 cabins known as "Orbitors."
Each Orbitor will sit twenty-five guests and one team member known as the
"Navigator," with 800 capacity per revolution. The Navigator will be a
multipurpose employee whose team functions include guest attendant, security
guard, and host to the guests during each voyage.
The Orbitors will offer each guest a roomy, comfortable, exhilarating view. Once
inside the Orbitor, guests will feel comfortable in a futuristic-style seat with
soft molded lines. There will be several themed Orbitors such as the wedding
3
chapel Orbitor. The spacious Orbitors will be air-conditioned with an amenities
bar. In summary, guests will receive an experience unlike any other observation
ride in the world. Each Orbitor can be designed for reconfiguration to
accommodate a multitude of groups, such as a cocktail party, conference group,
wedding party, etc. The state-of-the-art Orbitor will have wireless
communication access and surveillance cameras for additional on-board
protection. Interior lighting and surround-sound music will be choreographed to
the ascending view to intensify the experience. The glass-surrounded cabin will
capture the spectacular views and the lighted interior will make the revolving
Orbitor glow in the night sky.
The shape of the Orbitor is aerodynamic and minimizes eccentric loads from wind
gusts. The slow rotation speed of 0.2917 meters/second (approximately 27 minutes
for a complete rotation) provides ample time to be immersed in the spectacular
Las Vegas skyline. The Orbitors revolve at more than 600 feet in the air and, at
this elevation; a solid and spacious cabin is essential to a protective and
comfortable environment. The ride experience is a new and totally different
adventure. No other ride venue in the world has the same comfort, style and
level of excitement.
An observation viewing platform at the 610 feet level, will offer guests a
magnificent view without riding the wheel. At this level, guests can watch the
wheel glide below their feet while taking in one of the most incredible skylines
in the world. The most unique feature of the new L.V. Voyager Project is the
"Light Wings". Located on both sides of the superstructure will be two
"articulating" wings that will open and close displaying LED video entertainment
or commercial messages. The Project will also contain retail and restaurant
venues for all guests in the low rise.
The Company is evaluating several locations to successfully launch the project.
The L.V. Voyager Project will be owned by a project company ("NEWCO") that has
yet to be formed by the Company. NEWCO will design, develop, build and operate
the project upon completion. NEWCO will be responsible for managing the project
pursuant to a performance-based contract between NEWCO and the Company. All
covenants, restrictions and protocols will be detailed in the performance-based
contract.
As the management company, NEWCO will be responsible for the design,
development, construction, and operation of the L.V. Voyager Project, and will
provide the following: concept development, project design, location assessment
and acquisition, strategic alliances in both entertainment and gaming, business
plans and budgets, financial oversight and management during both construction
and operation, marketing plans, insurance procurement and risk management,
senior operational management including development of policies and procedures,
and overall strategic focus for the L.V. Voyager Project.
The L.V. Voyager Project is fundamentally an entertainment attraction, and it's
operational and maintenance requirements are very similar to those found in the
theme park industry. In addition, Las Vegas is a unique marketplace, and each
visitor, when placed in the environment, is also unique. The ability to
understand each visitor, and successfully attract customers to the L.V. Voyager
Project will come as a result of clearly understanding the marketing strategies
of the gaming industry. NEWCO will employ highly skilled individuals from the
entertainment and construction industry and combine their specialized skills
with those from the gaming industry.
Voyager Viridian Development, LLC ("Viridian") was formed as a wholly owned
subsidiary of Voyager Entertainment International, Inc. ("VEII"). The formation
of Viridian is designed to incorporate all the latest technologies within the
renewable energy industry into the design and construction of the Voyager
Observation wheels, as well as, advancing those technologies into separate
development projects.
Viridian is also exploring wind, solar and geothermal projects within Nevada and
neighboring states. All three technologies are being considered for a project in
Northern Nevada. These renewable energy technologies used, in particular
geothermal, are currently under financial and project cost analysis. Viridian
has commissioned a Member of Appraisal Institute ("MAI") appraisal to verify
land cost of the targeted project location.
Upon completion of that appraisal and project analysis a decision will be made
on whether to proceed with the project. All future Viridian "green" projects are
subject to successful project financing.
Other "Observation Wheels"
--------------------------
The Company has initiated efforts to build a 600 foot Observation Wheel in the
United Arab Emirates ("UAE"). The current focus is to find a suitable location.
Due to the continuing dynamic changes to the economic environment in the UAE,
the Company may take advantage of any favorable financing arrangements with
prospective partners. As of the date of this filing, an adequate site for the
Observation Wheel has not been determined. At this time there have been no funds
raised for this project.
4
MARKET OVERVIEW
Management believes that, in the foreseeable future, cash generated from
operations will be inadequate to support full marketing roll out and ongoing
product development, and we will thus be forced to rely on additional debt
and/or equity financing. Management believes it can identify sources and obtain
adequate amounts of such financing. We intend to enter into a cooperative
arrangement with distributors or vendors, whereby we will receive marketing and
sales benefits from the professional staff of such distributors or vendors. To
date, we have not established any such arrangements. In the event we are
unsuccessful in generating equity capital, the Company will be unable to
continue with product development and/or marketing. The lack of equity capital
may in turn cause the Company to become insolvent.
COMPETITION
We compete with numerous other hospitality and entertainment companies. Many of
these competitors have substantially greater resources than we do. Should a
larger and better financed company decide to directly compete with us, and be
successful in its competitive efforts, our business could be adversely affected.
While this does create a challenge for the Company it will not deter our efforts
to have a successful project within Las Vegas.
There have been other companies that have announced to the public plans to build
an observation wheel in Las Vegas. If any of these companies are successful it
would diminish the possibility of the Company obtaining financing or acquiring a
proper location.
We have a limited operating history, which could make it difficult to evaluate
our business.
RAW MATERIALS AND SUPPLIES
Currently, the Company is a development stage corporation. Until production
planning for the Observation Wheel begins, we have no raw materials or principal
suppliers.
DEPENDENCE ON MAJOR CUSTOMERS
The Company is not currently dependent on one or a few major customers.
PATENTS, TRADEMARKS, LICENSES
Currently there are no patents, trademarks or copyrights filed on behalf of the
Company protecting the current design of the Observation Wheel.
GOVERNMENT APPROVAL
We currently do not have a site for the Observation Wheel. However, when a
proper site is obtained, the Company will be required to obtain proper
permitting and government approvals unless that site is currently approved for
the construction of an Observation Wheel. There can be no guarantees that the
Company will be successful in securing a suitable site or the appropriate
approvals needed.
EFFECT OF EXISTING OR PROBABLE GOVERNMENTAL REGULATIONS
The Company's common stock is registered pursuant to Section 12(g) of the
Securities Exchange Act of 1934 ("1934 Act"). As a result of such registration,
the Company is subject to Regulation 14A of the 1934 Act, which regulates proxy
solicitations. Section 14(a) requires all companies with securities registered
pursuant to Section 12(g) thereof to comply with the rules and regulations of
the Commission regarding proxy solicitations, as outlined in Regulation 14A.
Matters submitted to stockholders of the Company at a special or annual meeting
thereof or pursuant to a written consent will require the Company to provide its
stockholders with the information outlined in Schedules 14A or 14C of Regulation
14; preliminary copies of this information must be submitted to the Commission
at least 10 days prior to the date that definitive copies of this information
are forwarded to stockholders.
Aside from required compliance with federal and state securities laws,
regulations and rules, and federal, state and local tax laws, regulations and
rules, the Company is not aware of any other governmental regulations now in
existence or that may arise in the future that would have an effect on the
business of the Company.
5
RESEARCH AND DEVELOPMENT
We are not the traditional Company that has the standard research and
development expenses. As a result, most of our research and development expenses
consist of presentation materials and architectural designs. Upon funding of the
project the initial expense will be engineering and architectural.
COST AND EFFECTS OF COMPLIANCE WITH ENVIRONMENTAL LAWS
The Company is not currently required to comply with any environmental laws.
EMPLOYEES
As of December 31, 2010, we only had Officers and Directors. We are dependent
upon Richard Hannigan, President, CEO and a Director of the Company; Tracy
Jones, COO and Director, and Myong Hannigan, Secretary/Treasurer and a Director.
We do not have any employees at this time and do not anticipate the need to hire
any employees until such time as we have been sufficiently capitalized.
Our future success also depends on our ability to attract and retain other
qualified personnel, for which competition is intense. The loss of Mr. Hannigan,
Mr. Jones or our inability to attract and retain other qualified employees could
have a material adverse effect on us.
FINANCIAL INFORMATION ABOUT GEOGRAPHIC AREAS
We have initiated efforts to build a Voyager Project in the UAE, however there
has been no activity relating to this project since inception.
Voyager has no transactions with foreign countries and operates solely in Las
Vegas, Nevada.
AVAILABLE INFORMATION
The Company is required to file annual reports on Form 10-K and quarterly
reports on Form 10-Q with the Securities and Exchange Commission ("SEC") on a
regular basis, and will be required to disclose certain events in a timely
manner, (e.g. changes in corporate control; acquisitions or dispositions of a
significant amount of assets other than in the ordinary course of business; and
bankruptcy) in a Current Report on Form 8-K.
The public may read and copy any materials filed by the Company with the SEC at
the SEC's Public Reference Room at 100 F Street, NE, Washington, DC 20549, on
official business days during the hours of 10:00 am to 3:00 pm. The public may
obtain information on the operation of the Public Reference Room by calling the
SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains reports,
proxy and information statements, and other information regarding issuers that
file electronically with the SEC at http://www.sec.gov.
Voyager Entertainment International, Inc.'s Internet website is available for
public viewing at http://www.voyager-ent.com.
REPORTS TO SECURITY HOLDERS
Security holders may obtain our annual and quarterly reports directly from the
SEC Internet website. These reports are reviewed by an independent public
accountant quarterly. Our annual reports filed on form 10-K contain financial
information that has been examined and reported on, with an opinion expressed by
an independent public accountant.
ITEM 1A. RISK FACTORS.
Operations
----------
We have yet to establish any history of profitable operations. Although some of
our affiliates have been engaged in the acquisition and administration of
various industries for several years, we have a limited operating history. As a
result, we may not be able to successfully achieve profitability. The likelihood
of our success must be considered in light of the problems, expenses and
complications frequently encountered in connection with the development of a
project this size and the competitive environment in which we operate.
Accordingly, our limited operating history makes an effective evaluation of our
potential success difficult. Our viability and continued operation depend on
future profitability, our ability to generate cash flows and our successful
6
development and management of other business opportunities. There can be no
assurance that we will be able to successfully implement our business plan or
that if implemented, it will be profitable.
We may be unable to obtain the appropriate funding to run our Company.
We do not presently have sufficient financial resources and have no assurance
that sufficient funding will be available to us to build our project. There can
be no assurance that we will be able to obtain adequate financing in the future
or that the terms of such financing will be favorable. Failure to obtain such
additional financing could result in delay or indefinite postponement of
constructing an Observation Wheel.
Stock
-----
We must comply with penny stock regulations which could affect the liquidity and
price of our stock.
The Securities and Exchange Commission ("SEC") has adopted rules that regulate
broker-dealer practices in connection with transactions in "penny stocks." Penny
stocks generally are equity securities with a price of less than $5.00, other
than securities registered on certain national securities exchanges or quoted on
the Financial Industry Regulatory Authority ("FINRA"), provided that current
price and volume information with respect to transactions in such securities is
provided by the exchange or system. Prior to a transaction in a penny stock, a
broker-dealer is required to: Deliver a standardized risk disclosure document
prepared by the SEC; Provide the customer with current bid and offers quotations
for the penny stock; Explain the compensation of the broker-dealer and its
salesperson in the transaction; Provide monthly account statements showing the
market value of each penny stock held in the customer's account; Make a special
written determination that the penny stock is a suitable investment for the
purchaser and Provide a written agreement to the transaction. These requirements
may have the effect of reducing the level of trading activity in the secondary
market for our stock. Because our shares are subject to the penny stock rules,
you may find it more difficult to sell your shares.
We may in the future issue additional shares of our common stock which would
reduce investors' percentage ownership and may dilute our share value.
Our articles of incorporation authorize the issuance of 200,000,000 shares of
$0.001 par value common stock. As of March 7, 2011, we have 172,127,287 shares
of our common stock issued and outstanding. We are also authorized to issue
50,000,000 shares of preferred stock and have designated 1,500,000 shares of
Series A Preferred stock at par value $0.001 with no face value, convertible to
common stock at 10 to 1 and 10,000,000 shares of Preferred B Stock at par value
$0.001 with a face value of $0.10 convertible to common stock at 2 to 1. The
future issuance of all or part of our remaining authorized common stock,
preferred stock or any combination of either, may result in substantial dilution
in the percentage of our common stock held by our then existing shareholders.
The issuance of common stock for future services or acquisitions or other
corporate actions will have the effect of diluting the value of the shares held
by our investors, and might have an adverse effect on any trading market for our
common stock.
We are a development stage company and have minimal operating history, which
makes an evaluation of us extremely difficult. At this stage of our business
operations, even with our good faith efforts, potential investors have a high
probability of losing their investment.
Since our reorganization in 2002, we have yet to generate revenues from
operations and have been focused on organizational, start-up, market analysis
and fund raising activities. Although we have a project to market, there is
nothing at this time on which to base an assumption that our business operations
will prove to be successful or that we will ever be able to operate profitably.
Our future operating results will depend on many factors, including our ability
to raise adequate working capital, demand and acceptance of our project, the
level of our competition and our ability to attract and maintain key management
and employees.
Our auditor's report reflects the fact that without realization of additional
capital, it would be unlikely for us to continue as a going concern. If we are
unable to continue as a going concern, it is unlikely that we will continue in
business.
As a result of our deficiency in working capital and other factors, our auditors
have included a paragraph in their report regarding substantial doubt about our
ability to continue as a going concern. Our plans in this regard are to seek
additional funding through future equity private placements or debt facilities.
Without funding for one of our projects the Company would have to rely primarily
on raising capital through investors. There can be no guarantee that we are
capable of continuing to raise additional capital.
There is a limited public market for our common stock.
Although our common stock is listed on the over-the-counter bulletin board,
there is a limited volume of sales, thus providing a limited liquidity into the
market for our shares. During the fiscal years ending December 31, 2010 and
2009, our common stock sold at an average high of $0.02 and $0.02 respectively.
7
The stock market in general has experienced volatility that has often been
unrelated to the operating performance of individual companies. These broad
market fluctuations may adversely affect the trading price of our common stock,
regardless of our actual performance, and could enhance the effect of any
fluctuations that do relate to our operating results. As a result of the
foregoing, stockholders may be unable to liquidate their shares for any reason.
Global Economy
--------------
Current and future conditions in the global economy and global capital markets
may adversely affect our results of operations, financial condition and cash
flow.
Our business and operating results have been and will continue to be affected by
worldwide economic conditions. As a result of slowing global economic growth,
the credit market crisis, declining consumer and business confidence,
fluctuating commodity prices, and other challenges currently affecting the
global economy, our investors and potential investors may experience
deterioration of their businesses, cash flow shortages, and difficulty obtaining
financing. As a result, existing or potential investors may delay or cancel
plans to invest in our Company. Further, our vendors may be experiencing similar
conditions, which may impact their ability to fulfill their obligations to us.
If the global economic slowdown continues for significant periods or
deteriorates significantly, our results of operations, financial condition, and
cash flows could be materially adversely affected.
Operating in Foreign Countries
------------------------------
We have initiated efforts to build a Voyager Project in the UAE. Operating in a
foreign country provides additional risks such as, permitting and licensing can
be more difficult to obtain, obtaining personnel for the daily operations could
present significant challenges, and if the local government were to become
unstable, our results could be severely affected.
Since its inception, there has been no activity relating to the UAE project.
Acts of Terrorism
-----------------
Because the Voyager Project will depend upon tourism, if there is a terrorist
attack in the city or country where the project is located, the anticipated
results could be dramatically affected, including complete closure of the
project.
Sarbanes-Oxley Act
------------------
We are required to comply with the provisions of Section 404(a) of the
Sarbanes-Oxley Act of 2002, which require us to maintain an ongoing evaluation
and integration of the internal controls of our business. We are required to
document and test our internal controls and certify that we are responsible for
maintaining an adequate system of internal control procedures for the year ended
December 31, 2010. In the process, we may identify areas requiring improvement,
and we may have to design enhanced processes and controls to address issues
identified through this review.
We cannot be certain that we will be able to successfully complete the
procedures, certification and attestation requirements of Section 404(a) we will
not have to report a material weakness in connection with the presentation of
our financial statements. If we fail to comply with the requirements of Section
404(a) or if we report such material weakness, the accuracy and timeliness of
the filing of our annual report may be materially adversely affected and could
cause investors to lose confidence in our reported financial information, which
could have a negative effect on the trading price of our common stock. In
addition, a material weakness in the effectiveness of our internal controls over
financial reporting could result in an increased chance of fraud and the loss of
potential customers, reduce our ability to obtain financing and require
additional expenditures to comply with these requirements, each of which could
have a material adverse effect on our business, results of operations and
financial condition.
Further, if we begin production of an observation wheel, we believe that the
out-of-pocket costs, the diversion of management's attention from running the
day-to-day operations and operational changes caused by the need to comply with
the requirements of Section 404(a) of the Sarbanes-Oxley Act could be
significant. If the time and costs associated with such compliance exceed our
current expectations, our results of operations could be adversely affected.
Going Concern
-------------
The Company has limited operations and is still in the development stage. The
Company will need to raise a substantial amount of capital in order to continue
its business plan. Management intends to initiate their business plan and will
continue to seek out joint venture partners, attempt to locate the appropriate
location for the L.V. Project as well as other projects and continually seek
funding opportunities.
Management intends to use borrowings and security sales to mitigate the effects
of its cash position. However, no assurance can be given that debt or equity
financing, if and when required, will be available. The consolidated financial
statements do not include any adjustments relating to the recoverability and
classification of recorded assets and classification of liabilities that might
be necessary should the Company be unable to continue existence.
8
ITEM 1B. UNRESOLVED STAFF COMMENTS.
None.
ITEM 2. PROPERTIES
We currently lease 2,100 square feet of office space in Las Vegas, Nevada from
Synthetic Systems, Inc., of which our President is the owner. We lease the
office space at cost with no mark-up for approximately $3,036 per month on a
month-to-month basis. We believe that the property leased from Synthetic
Systems, Inc., is in reasonably good condition and is suitable for our current
and anticipated needs for the near future. As Synthetic Systems, Inc. does not
own the office space directly, all rental payments are made to the independent
third party property owner.
ITEM 3. LEGAL PROCEEDINGS.
None.
ITEM 4. [REMOVED AND RESERVED].
9
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES.
MARKET INFORMATION
Our common stock is traded in the over-the-counter bulletin board through the
Financial Industry Regulatory Authority ("FINRA"), under the symbol "VEII". The
following table sets forth the trading history of the Common Stock for each
quarter of fiscal years ended December 31, 2010 and 2009, as reported by
stockhouse.com. The quotations reflect inter-dealer prices, without retail
mark-up, markdown or commission, and may not represent actual transactions.
High Low
------- ---------
2010
----
First Quarter 0.009 0.0023
Second Quarter 0.01 0.0021
Third Quarter 0.01 0.003
Fourth Quarter 0.04 0.009
2009
----
First Quarter 0.035 0.0001
Second Quarter 0.03 0.01
Third Quarter 0.019 0.01
Fourth Quarter 0.016 0.005
HOLDERS OF COMMON STOCK
As of March 25, 2011, we had approximately 119 active stockholders on record
(not including shares held by brokers or in street name), of the 172,127,287
shares of common stock outstanding. The closing bid stock price on March 25,
2011 was $0.02.
DIVIDENDS
We have never declared or paid dividends on our common stock. We intend to
follow a policy of retaining earnings, if any, to finance the growth of the
business and do not anticipate paying any cash dividends in the foreseeable
future. The declaration and payment of future dividends on the common stock will
be at the sole discretion of the Board of Directors and will depend on our
profitability and financial condition, capital requirements, statutory and
contractual restrictions, future prospects and other factors deemed relevant by
the Board.
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
The Company's stockholders approved the 2002 Stock Option Plan on April 2, 2002
at the Company's annual meeting. The plan authorizes the Company to issue
5,000,000 shares of common stock for issuance upon exercise of options.
The plan is intended to encourage directors, officers, employees and consultants
of the Company to acquire ownership of common stock. Officers (including
officers who are members of the Board of Directors), directors (other than
members of the Stock Option Committee (the "Committee") to be established to
administer the Stock Option Plan) and other employees and consultants of the
Company and its subsidiaries (if established) will be eligible to receive
options under the planned Stock Option Plan. The Committee will administer the
Stock Option Plan and will determine those persons to whom options will be
granted, the number of options to be granted, the provisions applicable to each
grant and the time periods during which the options may be exercised. No options
may be granted more than ten years after the date of the adoption of the Stock
Option Plan.
Unless the Committee, in its discretion, determines otherwise, non-qualified
stock options will be granted with an option price equal to the fair market
value of the shares of common stock to which the non-qualified stock option
relates on the date of grant. In no event may the option price with respect to
an incentive stock option granted under the Stock Option Plan be less than the
fair market value of such common stock to which the incentive stock option
relates on the date the incentive stock option is granted. Each option granted
under the Stock Option Plan will be exercisable for a term of not more than ten
years after the date of grant. Certain other restrictions will apply in
connection with this Plan when some awards may be exercised.
10
In the event of a change of control (as defined in the Stock Option Plan), the
date on which all options outstanding under the Stock Option Plan may first be
exercised will be accelerated. Generally, all options terminate 90 days after a
change of control. As of December 31, 2010, no options have been issued under
this plan.
RECENT SALES OF UNREGISTERED SECURITIES AND USE OF PROCEEDS
Equity securities that were sold by the Company for the fiscal year ending
December 31, 2010 that were not registered under the Securities Act and were not
previously included in a Quarterly Report filed on Form 10-Q or in a Current
Report on Form 8-K are as follows:
In December 2010, the Company sold 350,000 shares of common stock valued at
$7,000 or $0.02 per share. Proceeds from the sale of shares were used for
operating expenses.
On January 21, 2011, the Company received $7,000 through a private placement
offering for 350,000 shares of common stock or $0.02 per share. As of March 29,
2011, these shares have not been issued. Proceeds from the sale of shares were
used for operating expenses.
On March 4, 2011, the Company received $10,000 through a private placement
offering for 500,000 shares of common stock or $0.02 per share. As of March 29,
2011, these shares have not been issued. Proceeds from the sale of shares were
used for operating expenses.
ITEM 6. SELECTED FINANCIAL DATA.
Not applicable to smaller reporting companies.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION.
The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our consolidated financial
statements and related notes included elsewhere in this report. References in
this section to "Voyager Entertainment International, Inc.," the "Company,"
"we," "us," and "our" refer to Voyager Entertainment International, Inc. and our
direct subsidiaries on a consolidated basis unless the context indicates
otherwise.
This annual report contains forward looking statements relating to our Company's
future economic performance, plans and objectives of management for future
operations, projections of revenue mix and other financial items that are based
on the beliefs of, as well as assumptions made by and information currently
known to, our management. The words "expects, intends, believes, anticipates,
may, could, should" and similar expressions and variations thereof are intended
to identify forward-looking statements. The cautionary statements set forth in
this section are intended to emphasize that actual results may differ materially
from those contained in any forward looking statement.
This annual report does not include an attestation report of the Company's
registered accounting firm regarding internal control over financial reporting.
Management's report was not subject to attestation by the Company's registered
public accounting firm pursuant to temporary rules of the Securities and
Exchange Commission.
Our Management, Discussion and Analysis ("MD&A") is provided as a supplement to
our audited financial statements to help provide an understanding of our
financial condition, changes in financial condition and results of operations.
The MD&A section is organized as follows:
o Executive Summary, Overview and Development of our Business. These sections
provide a general description of the Company's business, as well as recent
developments that we believe are important in understanding our results of
operations as well as anticipating future trends in our operations.
o Critical Accounting Policies. This section provides an analysis of the
significant estimates and judgments that affect the reported amounts of
assets, liabilities, revenues, expenses, and the related disclosure of
contingent assets and liabilities.
o Results of Operations. This section provides an analysis of our results of
operations for the year ended December 31, 2010 compared to the year ended
December 31, 2009. A brief description of certain aspects, transactions and
events is provided, including related-party transactions that impact the
comparability of the results being analyzed.
o Liquidity and Capital Resources. This section provides an analysis of our
financial condition and cash flows as of and for the year ended December
31, 2010.
11
EXECUTIVE SUMMARY
Voyager Entertainment International, Inc., formerly named Dakota Imaging, Inc.,
was incorporated in North Dakota on January 31, 1991. Effective February 8,
2002, the Company completed a reverse triangular merger between Dakota
Subsidiary Corp. ("DSC"), a wholly-owned subsidiary of the Company, and Voyager
Ventures, Inc., a Nevada Corporation ("Ventures"), whereby the Company issued
3,660,000 shares of its Series A preferred stock in exchange for 100% of
Ventures' outstanding common stock. Pursuant to the terms of the merger, DSC
merged with and into Ventures and ceased to exist, and Ventures became a
wholly-owned subsidiary of the Company. As a result of the merger, Ventures was
deemed to be the purchaser and surviving company for accounting purposes.
On January 30, 2002, Ventures entered into an agreement and Plan of
Reorganization (the "Reorganization") with Outland Development, LLC ("Outland"),
a limited liability company formed under the laws of the State of Nevada on
March 1, 1997. Pursuant to the Reorganization, Ventures issued 15,000,000 shares
of its common stock in exchange for 100% of Outland's membership interest.
This transaction was accounted for in the consolidated financial statements as a
reverse acquisition. As a result of this transaction, the former members of
Outland acquired or exercised control over a majority of the shares of the
Company before and after the reorganization. Accordingly, the transaction was
treated for accounting purposes as a recapitalization of Outland. Therefore,
these consolidated financial statements represent a continuation of Outland, not
Ventures.
The consolidated financial statements presented include the accounts of Outland
from its inception (March 1, 1997) through December 31, 2010.
On April 2, 2002, we amended our Certificate of Incorporation to change our name
from Dakota Imaging, Inc. to Voyager Entertainment International, Inc.
In June 2003, the Company reincorporated in the State of Nevada. The
reincorporation became effective in the states of North Dakota and Nevada on
June 23, 2003, the date the Certificate of Merger was issued by the Secretary of
State of North Dakota.
Voyager Ventures, Inc. has been a dormant company since 2002 and was
discontinued as of December 31, 2007. Outland Development, LLC has been a
dormant company and was discontinued as of June 30, 2009. Voyager Viridian LLC,
a wholly-owned subsidiary, was formed on August 3, 2009.
Plan of Operations
------------------
During the next 12 months, we are continuing our efforts on the development of
an 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, 2010, the Company did not have enough cash on hand
to continue operations through the next year. From time-to-time the officers of
the Company loan funds to provide for operations however, there can be no
guarantees that the Company's officers and directors will continue to loan funds
to the Company on an ongoing basis. We will continue to seek alternative funding
sources, 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 significant expenses for the
Company consist of consulting fees that are primarily paid by the issuance of
our common stock and the costs of being a public company and remaining current
with our periodic filings.
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 for 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.
12
We will face considerable risk in each of our business plan steps, such as
difficulty of hiring competent personnel within our budget and a shortfall of
funding due to our inability to raise capital in the equity securities market.
If no funding is received during the next twelve months, we will be forced to
rely on existing cash in the bank. As stated above, our current cash reserves
are not sufficient to fund operations for the next twelve months.
We have no operating history, no significant current operations, minimum cash on
hand, and no profit. Because of these factors, our auditors have issued an audit
opinion for us which includes a statement describing doubts about our ability to
continue as a going concern status. This means there is substantial doubt about
our ability to continue as a going concern. While we believe we have made good
faith estimates of our ability to secure additional capital in the future to
reach our goals, there is no guarantee that we will receive sufficient funding
to implement any future business plan steps. In the event that we do not receive
additional financing, we will not be able to continue our operations.
The timing of most of our capital expenditures is discretionary. Currently there
are no material long-term commitments associated with our capital expenditure
plans. Consequently, we have a significant degree of flexibility to adjust the
level of such expenditures as circumstances warrant. The level of our capital
expenditures will vary in future periods depending on market conditions and
other related economic factors.
CRITICAL ACCOUNTING ESTIMATES
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 accounting policies are described in Note 1 to the consolidated financial
statements. We set forth below those material accounting policies that we
believe are the most critical to an investor's understanding of our financial
results and condition and that require complex management judgment.
Advances - Related Party Allowance
----------------------------------
We report receivables at the net realizable value. Based on the facts and
circumstances of the $500,000 advance issued to Western Architectural Services,
LLC, and the current economic recession, it is uncertain whether the advance
will be repaid in full as the repayment of the advance is contingent upon our
beginning production of an observation wheel. As of December 31, 2010 and 2009,
we have allowed for $500,000 and $250,000 of the advance. Should we be
successful in our business plan, a reversal of this allowance may be deemed
necessary.
Fair Value Accounting
---------------------
As required by the Fair Value Measurements and Disclosures Topic of the FASB
Accounting Standards Codification ("ASC"), fair value is measured based on a
three-tier fair value hierarchy, which prioritizes the inputs used in measuring
fair value as follows: (Level 1) observable inputs such as quoted prices in
active markets; (Level 2) inputs, other than the quoted prices in active
markets, that are observable either directly or indirectly; and (Level 3)
unobservable inputs in which there is little or no market data, which require
the reporting entity to develop its own assumptions. Assets and liabilities are
classified in their entirety based on the lowest level of input that is
significant to the fair value measurement.
We have equity assets and liabilities that are realizable at the fair market
value of our common stock based on the closing price at the period end date.
Common Shares December 31, 2010 December 31, 2009
----------------------------------------------------
Deferred Construction Costs 2,812,500 $ 45,000 $ 21,093
Loan Collateral Costs 7,500,000 120,000 750,000
Common Stock Payable - Related Party 500,000 (8,000) (75,000)
----------------------------------------------------
10,812,500 $ 157,000 $ 696,093
----------------------------------------------------
The valuation of these assets and liabilities are expected to fluctuate in
accordance with the market rate of our common stock.
Stock Based Compensation
------------------------
Stock based compensation is accounted for using the Equity-Based Payments to
Non-Employees Topic of the FASB ASC, which establishes standards for the
accounting for transactions in which an entity exchanges its equity instruments
for goods or services. It also addresses transactions in which an entity incurs
liabilities in exchange for goods or services that are based on the fair value
of the entity's equity instruments or that may be settled by the issuance of
those equity instruments. We determine the value of stock issued at the date of
grant. We also determine at the date of grant the value of stock at fair market
13
value or the value of services rendered (based on contract or otherwise)
whichever is more readily determinable. Shares issued to non-employees are
expensed when incurred.
As a result of limited capital resources, we regularly issue shares of common
stock to non-employees for compensation. For the years ended December 31, 2010
and 2009, we issued 21,875,000 shares valued at $169,539 and 12,375,000 shares
valued at $243,750, respectively for goods and services. We anticipate
continuing to issue shares for non-employee compensation until adequate capital
resources can be obtained. The valuation of these issuances will be dependent on
the trading value of our common stock.
RESULTS OF OPERATIONS
As of December 31, 2010, we have not constructed an Observation Wheel and
therefore have not generated revenues. Our officers and directors have assessed
possible site locations for other Observation Wheel projects outside of Las
Vegas, Nevada. As of December 31, 2010, we have not settled on any additional
Observation Wheel projects and are continuing to focus on the L.V. Project in
2011.
Results of operations for the year ended December 31, 2010 compared to the year
ended December 31, 2009 consist of the following:
Twelve Months Ended December 31, 2010 December 31, 2009 $ Change % Change
---------------------------------------------------------------------------------------------------------
Revenue $ -- $ -- $ -- 0%
Professional and consulting fees .. 552,105 627,041 (74,936) (12)%
Project costs (68,109) 134,857 (202,966) (151)%
General and administrative expenses 361,121 380,788 (19,667) (5)%
-----------------------------------------------
Operating loss $ (845,117) $(1,142,686) $ 297,569 (26)%
We had operating expenses of $845,117 for the year ended December 31, 2010
versus operating expenses of $1,142,686 for the year ended December 31, 2009.
During 2010, expenses primarily consisted of professional and consulting fees of
$552,105 and bad debt expense of $250,000. The 12% decrease in professional and
consulting fees and the 151% decrease in project costs for the year ended
December 31, 2010 as compared to the year ended December 31, 2009 are due to
costs incurred in 2009 for the execution of our project and for the assessment
of alternative projects outside of the Las Vegas area. No such costs were
incurred in 2010 and unfulfilled contracts entered into in 2009 were revised and
reversed in the fourth quarter of 2010. As of December 31, 2010, we have not
settled on any additional Observation Wheel projects. We are continuing to focus
on the L.V. Project for the remainder of 2011.
In general, we are reducing costs where able in an attempt to prolong our cash
reserves. If the Company receives funding for the L.V. Project, we expect our
expenses to increase substantially, including support for employees that will be
required and other operating expenses related to the construction of the
project. Additionally, we anticipate issuing bonuses to management for services
rendered at a time when the Company is more fiscally able.
Professional and Consulting Fees
--------------------------------
We incurred professional and consulting fees of $552,105 for the year ending
December 31, 2010 versus $627,041 for the year ending December 31, 2009.
Professional and consulting fees are primarily satisfied by the issuance of
common stock as a result of insufficient cash for payment for services. In 2010
we issued shares for services of $169,539 versus $243,750 in 2009.
We have expensed professional fees to Synthetic Systems, Inc. totaling $444,000
in each of the years ended December 31, 2010 and December 31, 2009. We
anticipate incurring comparable professional fees for the next twelve months
ending December 31, 2011. Although the Company incurs related party consulting
fees on a monthly basis, cash payments are not made to Synthetic Systems, Inc.
unless there is sufficient cash on hand to meet the operating needs of the
Company. As of December 31, 2010, there is an accrued unpaid balance of
$2,087,000 consisting of professional fees of $1,778,000 and bonuses in lieu of
salaries of $760,000 that were incurred for the fiscal years ending 2007 and
2006. There have been no bonuses issued subsequent to December 31, 2007.
Synthetic Systems, Inc. is jointly controlled by our Chief Executive Officer and
Secretary. See Note 8 of our financial statements.
Other professional fees recognized include fees associated to the preparation,
review, and filing of our financial statements with the Securities and Exchange
Commission of approximately $66,000 in 2010 compared to $68,000 in 2009.
During 2010, we incurred consulting expenses of approximately $42,000 compared
to $115,000 in 2009. During 2009, we engage consultants to assist us in
analyzing possible business prospects inside and outside of the Las Vegas area
and to assess the real estate needed in connection with the project. During
2010, consulting efforts were focused solely in the Las Vegas area. These
14
engagements allow us to focus our efforts on the progress of our project. As of
December 31, 2010, we have identified locations for the L.V. Project but have
yet to agree upon a definitive site. In the event that a project site is
secured, we anticipate incurring consulting fees relating to the construction of
the project.
Blue Prints/Project Costs
-------------------------
Blue Prints/Project Costs for the year ended December 31, 2010 were decreased
$202,966, or 151%, compared to the $134,857 of project costs incurred for the
year ended December 31, 2009. Project costs are the expenses related to the
materials used to attract investors. These expenses consisted primarily of
presentation and development materials provided to prospective funding sources.
In 2009, we entered into a consulting agreement worth $75,000 relating to
project costs. As of December 31, 2009, the agreement was unpaid, project costs
in the amount of the contract had been recognized, and the terms of the contract
were unfulfilled by the vendor. In 2010, we entered into a revised consulting
agreement with the vendor, which resulted in the vendor's dismissal of accounts
payable of $75,000 and a corresponding decrease in project costs.
Our total project costs since inception are $262,688. We anticipate that we will
incur project costs as a result of seeking business opportunities for our
Observation Wheel, should we be able to continue our planning efforts.
Bad Debts
---------
At December 31, 2010, we analyzed the collectability of our advance of $500,000
to a related party. The repayment of this advance is predicated upon the
production of our project. Based on current economic conditions, we have
determined that an allowance of $500,000 of the advance is appropriate. It is
unknown whether we will be able to secure a site and begin construction on the
project in the next twelve months, facilitating repayment of the advance. In the
event that we secure a project site and sufficient project funding, the
allowance against the advance will be reversed in reevaluation for realizable
collectability. We have recognized bad debt expense of $250,000 for each of the
years ending December 31, 2010 and 2009.
LIQUIDITY
We plan to focus primarily on the development of the Observation Wheel in Las
Vegas during the next twelve months although we may entertain discussions with
any interested party in other locations.
Years Ended December 31, 2010 and December 31, 2009.
December 31, 2010 December 31, 2009 $ Change % Change
---------------------------------------------------------------
Cash $ 851 $ 7,488 $ (6,637) (89)%
Accounts payable and accrued expenses 1,821,251 1,638,121 183,130 11%
Due to related parties 2,946,000 2,354,000 592,000 25%
Total current liabilities 7,500,490 6,725,360 775,130 12%
Cash proceeds from the sale of common stock 7,000 90,000 (83,000) (92)%
We have financed our operations during the year primarily through the use of
cash on hand, issuance of stock for services, issuance of stock for cash, and
aging of our payables.
Cash on hand decreased $6,637, or 89%, as of December 31, 2010 compared to
December 31, 2009. The decrease is a result of the payment of payables during
the year.
As of December 31, 2010, we had total current liabilities of $7,500,490 compared
to $6,725,360 as of December 31, 2009. The 12% increase in total current
liabilities is primarily a result of expenses 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.
Accounts Payable
----------------
Our accounts payable decreased by $68,658, or 45%, as of December 31, 2010
compared to December 31, 2009 due a vendor's dismissal of payables of $75,000 in
2010.
For the year ending 2011, we anticipate to incur normal reoccurring expenses of
approximately $600,000 as a result of related party consulting, furniture and
equipment lease, office cleaning, utilities, accounting, health insurance and
rent expense.
Accrued Expenses
----------------
Accrued Expenses increased $251,788, or 17%, as of December 31, 2010 compared to
December 31, 2009 which consisted primarily of accrued interest. Payment of our
loans and their corresponding interest will be made upon our first initial
project financing. Until such time, it is likely that our interest expense will
continue to accumulate at a steady rate.
15
Due to Related Parties
----------------------
December 31, 2010 December 31, 2009 $ Change % Change
---------------------------------------------------------------
Accrued Expenses - Related Party $2,087,000 $1,778,000 $ 309,000 17%
Due To - Related Party 859,000 576,000 283,000 49%
-------------------------------------------------------
Total Related Party $2,946,000 $2,354,000 $ 592,000 25%
Our total related party liabilities increased $592,000, or 25%, as of December
31, 2010 compared to December 31, 2009. 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.
We received $283,000 in related party loans during the fiscal year ended
December 31, 2010 compared to $236,000 during the fiscal year ended December 31,
2009. 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 December 31, 2010, we owe $859,000 in related party loans and $2,087,000
for professional fees and unpaid bonuses. No bonuses were issued for the fiscal
year ending December 31, 2010 or 2009.
The Company incurs related party consulting fees on a monthly basis however cash
payments are not made unless there is sufficient cash on hand to meet the
operating needs of the Company. These related party trends are likely to
continue throughout 2011 and until fiscal stability can be reached, either by
project funding or through the generation of operating revenues.
CAPITAL RESOURCES
Cash decreased by $6,637, or 89%, as of December 31, 2010 due to the payment of
some of our payables throughout 2010. Additionally, common stock issuances and
subscriptions for cash decreased by $83,000, or 92%, for the year ended December
31, 2010 compared to the year ended December 31, 2009. It is more likely than
not that the issuance of shares for cash will continue to be minimal in the next
twelve months as a result of the apprehensions shareholders have towards the
volatility of the stock market. For the year ended December 31, 2010, we issued
common stock for $7,000 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 $851 cash on hand as of December 31, 2010 compared to $7,488 as of
December 31, 2009. 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 unlikely that
an agreement finalizing the security of a project site and the corresponding
construction of an observation wheel will begin in the next twelve months.
Assuming no such occurrences, our anticipated minimum cash payments for 2011
will be approximately $600,000.
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
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
16
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.
NOTES PAYABLE
December 31, 2010 December 31, 2009 $ Change % Change
-------------------------------------------------------------
Related Party $ 859,000 $ 576,000 $ 283,000 49%
Line of Credit 605,000 605,000 -- 0%
Diversified 1,250,000 1,250,000 -- 0%
Settlement Payable 878,239 878,239 -- 0%
------------------------------------------------------
Total Debt $3,592,239 $3,309,239 $ 283,000 9%
As of December 31, 2010, we have debt of $3,592,239 compared to $3,309,239 as of
December 31, 2009. The increase of $283,000 is a result of related party loans
as indicated above.
Our remaining debt obligations consist of loans due as a result of notes that,
upon renegotiations with our creditors, are not considered in default and are to
be paid upon our initial substantial project fundings. As of December 31, 2010,
the total project funding required to repay our principal payments is
$2,733,239. Per the terms of the modifications of the debts, the principal
balance will not vary from this balance until payments have begun. However,
certain obligations will continue to accrue interest until payment is made as
discussed below.
Line of Credit
--------------
On November 15, 2002, we entered into a loan and security agreement with Mr. Dan
Fugal, an unaffiliated individual, whereby Mr. Fugal was to provide us with a
credit facility in the form of a secured line of credit not to exceed $2.5
million.
On February 15, 2003, we executed an amendment to the Loan and Security
Agreement to amend the term date from February 15, 2003 to April 15, 2003. As of
the year ending December 31, 2005, Mr. Fugal has loaned $605,000 to the Company.
The loan and security agreement with Mr. Fugal has expired and requires the
Company to repay $605,000 to Mr. Fugal as well as a one time interest payment of
$605,000. Any agreements or amendments for Mr. Fugal to provide additional funds
have been canceled, and the Company is obligated to repay a total of $1,210,000.
As a requirement of the Agreement, the Company is obligated to repay Mr. Fugal
when an adequate amount of funding is received. At this time, unless funding is
received, it is likely that the Company will be unable to repay the debt. As
collateral for the Loan and Security Agreement with Mr. Fugal, Mr. Fugal filed a
UCC-1 against the assets and intellectual property of the Company which would
give Mr. Fugal the right to institute foreclosure proceedings toward the
Company. Mr. Fugal could institute foreclosure proceedings at any time if he
believes that he will not be repaid. As of this date Mr. Fugal has not indicated
any intentions to institute foreclosure proceedings. However, we can not
guarantee that Mr. Fugal will not attempt to institute foreclosure proceedings
against the Company. This credit facility is deemed closed and will not
increase.
Diversified Lending
-------------------
On September 5, 2006, the Company entered into a note payable with Diversified
Lending Group, Inc. for $1,250,000. The Company is a joint tenant with Western
Architectural Services, LLC ("Western") in this debt which bears interest of 14%
and is due upon our first substantial project funding. As of December 31, 2007,
Western paid directly to Diversified Lending Group, Inc. six months of interest
for the original loan. We have accounted for this as both interest income and
interest expense of $87,500 for the fiscal year ended December 31, 2007. As
stated in the agreement, the Company could extend the Maturity Date of the loan
one time for a period of six months, which the Company exercised for a fee of 3%
of the loan amount or $37,500 (Western paid to the Company $18,750 as their part
of the loan extension). We accounted for Western's three months of interest due
to the extension as both interest income and interest expense of $43,750 for the
fiscal year ended December 31, 2008.
In February 2009, management and the note holder negotiated an amendment to the
note payable, effective February 5, 2008, to extend the terms of the note. Per
the amended agreement, the note is not in default and interest is to continue to
17
be accrued on the principal balance of $1,250,000 at the original rate of 14%
per annum. An original maturity date of one year from the issuance was amended
so that the unpaid interest and principal balances are due sixty days pursuant
to our first substantial project funding that exceeds $15,000,000. As of
December 31, 2010, an aggregate balance of $1,731,250 remained unpaid.
As consideration for the loan, the Company was required to pay $50,000 and issue
4,000,000 shares of its common stock, both of which have been completed. Also,
to collateralize the loan, the Company was required to issue 7,500,000 shares of
its common stock. The promissory note also holds an anti-dilution clause where
the Company is required to issue additional shares of its common stock to the
debt holder so their 4% ownership is not diluted. As of December 31, 2010 and
2009, respectively, our loan fees paid with common stock have been fully
expensed. As of December 31, 2010, we have marked these shares to market using
the period end closing price of our stock. Our loan collateral paid with common
stock was $120,000 and $750,000 at December 31, 2010 and 2009, respectively.
At December 31, 2010 and December 31, 2009, we accrued an additional $10,277 and
$12,585 respectively, of interest relating to the year end dilution calculation.
As a result, 2,136,431 additional shares are to be issued upon the publication
of the financial statements.
As the loan collateral, loan fees and anti-dilution components of the agreement
(as described above) are dominated in the Company's common stock, the Company
maintains the full risk of loss and we have recorded the full debt component on
our balance sheet.
From the proceeds of the debt facility we issued $500,000 to Western and
recorded an Advance - Related Party on our balance sheet. Our Chief Operating
Officer is also the Chief Executive Officer of Western Architectural Services,
LLC.
Settlement Payable
------------------
Our loans and settlement payable have no stated interest rate, are due on demand
and are unsecured. Interest has been accrued at an estimated market interest
rate of 8%, is included in accrued expenses, and totaled $600,449 as of December
31, 2010 and $533,709 as of December 31, 2009.
The original loan balance was $228,239. The proceeds were received and used for
operating capital during the year ended December 31, 2002. In March 2003, a
claim of $1,460,000 was asserted by the lender. Although management believed the
claims were frivolous, due to the additional resources needed by management to
defend against these claims and the likely distraction of management's efforts
from moving forward with the Company's business plan, a settlement agreement was
executed with the lender in August 2003. Pursuant to the Settlement Agreement,
the Company agreed to pay a settlement amount of an additional $650,000, without
claiming any fault or wrong doing.
As of December 31, 2010, the total obligation included loans of $228,239 in
principal and the settlement obligation of $650,000, plus total accrued interest
of $600,449 amounting to an aggregate of $1,478,688. One half of this amount, or
$739,344 is due and payable at the closing of the first round of project funding
and the remaining balance is due and payable at the closing of any subsequent
project funding, neither of which have occurred as of December 31, 2010. Since
the loan payable does not have a maturity date, the entire balance has been
presented as a current liability. The debt holder is a shareholder in our
Company and owns approximately 7.4 million shares of our common stock.
OFF BALANCE SHEET ARRANGEMENTS
The Company does not have any off-balance sheet arrangements and does not
participate in non-exchange traded contracts requiring fair value accounting
treatment.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable to smaller reporting companies.
18
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
VOYAGER ENTERTAINMENT INTERNATIONAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010
DECEMBER 31, 2009
CONTENTS
Page
REPORT OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
ON THE CONSOLIDATED FINANCIAL STATEMENTS F-2
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets F-3
Consolidated Statements of Operations F-4
Consolidated Statement of Stockholders' Deficit F-5
Consolidated Statements of Cash Flows F-11
Notes to Consolidated Financial Statements F-14
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
-------------------------------------------------------
To the Board of Directors and Shareholders
Voyager Entertainment International Inc. and Subsidiaries
We have audited the accompanying balance sheets of Voyager Entertainment
International, Inc. and Subsidiaries (a Development Stage Company) as of
December 31, 2010 and 2009, and the related statements of operations,
stockholders' deficit, and cash flows for the years then ended and from
inception (March 1, 1997) through December 31, 2010. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Voyager Entertainment
International, Inc. and Subsidiaries as of December 31, 2010 and 2009, and the
results of its operations and cash flows for the years then ended and from
inception (March 1, 1997) through December 31, 2010 in conformity with U.S.
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note 1 to the financial
statements, the Company has suffered recurring losses from operations, which
raise substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note 1. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
De Joya Griffith & Company, LLC
/s/ De Joya Griffith & Company, LLC
Henderson, NV
March 18, 2011
F-2
VOYAGER ENTERTAINMENT INTERNATIONAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
December 31, December 31,
2010 2009
------------ ------------
ASSETS
CURRENT ASSETS
Cash $ 851 $ 7,488
Prepaids 68,570 1,874
Advances - related party, net allowance
of $500,000 and $250,000, respectively -- 250,000
------------ ------------
Total current assets 69,421 259,362
FIXED ASSETS, net of accumulated depreciation of
$3,642 and $42,214, respectively 2,779 4,976
OTHER ASSETS, website development costs, net of accumulated
amortization of $9,416 and $0, respectively 31,178 --
------------ ------------
Total assets $ 103,378 $ 264,338
============ ============
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 1,821,251 $ 1,638,121
Accrued expenses - related party 2,087,000 1,778,000
Note payable 1,855,000 1,855,000
Due to related parties 859,000 576,000
Loans and settlement payable 878,239 878,239
------------ ------------
Total current liabilities 7,500,490 6,725,360
------------ ------------
Total liabilities 7,500,490 6,725,360
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, none outstanding -- --
Series C - 10,000,000 designated, none outstanding -- --
Common stock: $0.001 par value; authorized 200,000,000 shares;
issued and outstanding: 172,127,287 and 151,402,287 respectively 172,127 151,402
Additional paid-in capital 12,771,304 13,199,583
Deferred construction costs paid with common stock (45,000) (21,093)
Loan collateral paid with common stock (120,000) (750,000)
Common stock payable, net of receivable $0 and $75,000, respectively 28,000 50,000
Accumulated deficit during the development stage (20,203,543) (19,090,914)
------------ ------------
Total stockholders' deficit (7,397,112) (6,461,022)
------------ ------------
Total liabilities and stockholders' deficit $ 103,378 $ 264,338
============ ============
The accompanying notes form an integral part of these consolidated
financial statements.
F-3
VOYAGER ENTERTAINMENT INTERNATIONAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
Twelve Months Ended From inception
December 31, December 31, March 1, 1997 to
2010 2009 December 31, 2010
------------------------------- -----------------
Revenues $ -- $ -- $ --
Operating Expenses:
Professional and consulting fees 552,105 627,041 13,912,709
Project costs (68,109) 134,857 262,688
Bad debt expense 250,000 250,000 500,000
Depreciation 11,063 3,270 57,724
Settlement expense & nullification fee expense -- -- 1,025,000
Other expense 100,058 127,518 1,387,697
------------- ------------- -------------
845,117 1,142,686 17,145,818
Operating loss (845,117) (1,142,686) (17,145,818)
Other income (expense):
Interest income -- -- 132,528
Interest expense (252,131) (259,264) (3,113,635)
Finance fees (14,830) (59,008) (73,838)
Loss on disposal of fixed assets (551) (2,229) (2,780)
------------- ------------- -------------
(267,512) (320,501) (3,057,725)
Net Loss (1,112,629) (1,463,187) (20,203,543)
Preferred stock dividends -- -- (130,000)
------------- ------------- -------------
Net loss allocable to common stockholders $ (1,112,629) $ (1,463,187) $ (20,333,543)
============= ============= =============
Net loss per common share - basic $ (0.01) $ (0.01)
============= =============
Weighted average number of common
shares outstanding 154,911,534 141,635,849
============= =============
The accompanying notes form an integral part of these consolidated
financial statements.
F-4
VOYAGER ENTERTAINMENT INTERNATIONAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
FROM INCEPTION (MARCH 1, 1997) TO DECEMBER 31, 2010
Additional Deferred
Preferred Preferred Paid-in Construction
Stock Series A Stock Series B Common Stock Capital Costs
--------------- --------------- ------------------- ------------- ----------
Shares Amount Shares Amount Shares Amount
------ ------ ------ ------ ------ ------
Balance at inception - March 1, 2000
(as restated for reorganization) -- $ -- -- $ -- 15,000,000 $15,000 $ 20,000 $ --
Net loss for the year ended
December 31, 2001 -- -- -- -- -- -- -- --
------ ------ ------ ------ ---------- ------- ----------- ---------
Balance at December 31, 2001 -- $ -- -- $ -- 15,000,000 $15,000 $ 20,000 $ --
====== ====== ====== ====== ========== ======= =========== =========
Issuance of stock for cash and
services (pre-merger) 2,160,000 2,160 -- -- -- -- 25,840 --
Conversion of preferred stock
to common stock (660,000) (660) -- -- 6,600,000 6,600 (5,940) --
Acquisition of net assets of Dakota -- -- -- -- 11,615,000 11,615 (11,615) --
Issuance of common stock for cash
February 15, 2002 -- -- -- -- 800,000 800 399,200 --
Issuance of common stock for services
April 2002 -- -- -- -- 200,000 200 399,800 --
Issuance of common stock for
Architectural agreement - May 2002 -- -- -- -- 2,812,500 2,813 18,138,722 (18,141,535)
Issuance of common stock for cash
June 2002 -- -- -- -- 50,000 50 149,950 --
Issuance of common stock for
Architectural agreement - October 2002 -- -- -- -- 600,000 600 162,000 (162,600)
Issuance of common stock for
financing costs - November 2002 -- -- -- -- 650,000 650 162,500 --
Issuance of stock for services
October 2002 -- -- -- -- 325,000 325 74,750 --
Net loss for the year ended
December 31, 2002 -- -- -- -- -- -- -- --
--------- ------- ------ ------ ---------- ------- ----------- -------------
Balance at December 31, 2002 1,500,000 $ 1,500 -- $ -- 38,652,500 $38,653 $19,515,207 $(18,304,135)
========= ======= ====== ====== ========== ======= =========== =============
Issuance of common stock for
financing costs - June 2003 -- -- -- -- 2,600,000 2,600 309,400 --
Issuance of preferred stock for cash
June 2003 -- -- 1,000,000 1,000 -- -- 99,000 --
Issuance of preferred stock for cash
August 2003 -- -- 500,000 500 -- -- 49,500 --
Issuance of common stock for cash
September 2003 -- -- -- -- 769,222 769 99,231 --
BCF associated with preferred stock -- -- -- -- -- -- 130,000 --
Deficit
Accumulated
During the Total
Acquisition Loan Loan Stock Development Stockholders'
Deposit Collateral Fee Payable Stage Deficit
---------- ---------- ----- ------- ------------- -------------
Balance at inception - March 1, 2000
(as restated for reorganization) $ -- $ -- $ -- $ -- $ (87,193) $ (52,193)
Net loss for the year ended
December 31, 2001 -- -- -- -- (101,432) (101,432)
---------- --------- ----- ------- ------------ -------------
Balance at December 31, 2001 $ -- $ -- $ -- $ -- $ (188,625) $ (153,625)
========== ========= ===== ======= ============ =============
Issuance of stock for cash and
services (pre-merger) -- -- -- -- -- 28,000
Conversion of preferred stock
to common stock -- -- -- -- -- --
Acquisition of net assets of Dakota -- -- -- -- -- --
Issuance of common stock for cash
February 15, 2002 -- -- -- -- -- 400,000
Issuance of common stock for services
April 2002 -- -- -- -- -- 400,000
Issuance of common stock for
Architectural agreement - May 2002 -- -- -- -- -- --
Issuance of common stock for cash
June 2002 -- -- -- -- -- 150,000
Issuance of common stock for
Architectural agreement - October 2002 -- -- -- -- -- --
Issuance of common stock for
financing costs - November 2002 -- -- -- -- -- 163,150
Issuance of stock for services
October 2002 -- -- -- -- -- 75,075
Net loss for the year ended
December 31, 2002 -- -- -- -- (1,754,327) (1,754,327)
--------- --------- ----- ------- ------------ -----------
Balance at December 31, 2002 $ -- $ -- $ -- $ -- $(1,942,952) $ (691,727)
========= ========= ===== ======= ============ ===========
Issuance of common stock for
financing costs - June 2003 -- -- -- -- -- 312,000
Issuance of preferred stock for cash
June 2003 -- -- -- -- -- 100,000
Issuance of preferred stock for cash
August 2003 -- -- -- -- -- 50,000
Issuance of common stock for cash
September 2003 -- -- -- -- -- 100,000
BCF associated with preferred stock -- -- -- -- -- 130,000
F-5
Additional Deferred
Preferred Preferred Paid-in Construction
Stock Series A Stock Series B Common Stock Capital Costs
--------------- --------------- ------------------- ------------- ----------
Shares Amount Shares Amount Shares Amount
------ ------ ------ ------ ------ ------
Amortization of beneficial conversion
feature in a manner similar to
preferred stock dividends -- -- -- -- -- -- (130,000) --
Issuance of common stock for services
September 2003 -- -- -- -- 625,000 625 99,375 --
Issuance of common stock for cash
December 2003 -- -- -- -- 2,307,692 2,308 297,692 --
Issuance of common stock for cash
December 2003 -- -- -- -- 1,538,461 1,538 198,462 --
Issuance of common stock for cash
December 2003 -- -- -- -- 1,538,461 1,538 198,462 --
Issuance of common stock for cash
December 2003 -- -- -- -- 192,308 192 24,808 --
Issuance of common stock for cash
December 2003 -- -- -- -- 384,616 385 49,615 --
Issuance of preferred stock for
service RP - December 2003 -- -- 2,500,000 2,500 -- -- 2,347,500 --
Issuance of common stock for services
December 2003 -- -- -- -- 1,163,000 1,163 847,827 --
Net loss for the year ended 12/31/03 -- -- -- -- -- -- -- --
--------- ------- --------- ------ ---------- ------- ------------ -------------
Balance at December 31, 2003 1,500,000 $ 1,500 4,000,000 $4,000 49,771,260 $49,771 $ 24,136,079 $(18,304,135)
========= ======= ========= ====== ========== ======= ============ =============
Issuance of common stock for cash
January 2004 -- -- -- -- 192,307 192 24,808 --
Issuance of common stock for cash
February 2004 -- -- -- -- 384,614 385 49,615 --
Issuance of common stock for cash
February 2004 -- -- -- -- 250,000 250 99,750 --
Issuance of common stock for cash
February 2004 -- -- -- -- 500,000 500 199,500 --
Issuance of common stock for services
February 2004 -- -- -- -- 425,000 425 318,325 --
Issuance of common stock for services
February 2004 -- -- -- -- 150,000 150 119,850 --
Issuance of common stock for services
February 2004 -- -- -- -- 150,000 150 119,850 --
Conversion of preferred stock to
common stock March 2004 (500,000) (500) -- -- 5,000,000 5,000 (4,500) --
Conversion of preferred stock to
common stock March 2004 (500,000) (500) -- -- 5,000,000 5,000 (4,500) --
Issuance of common stock for cash
March 2004 -- -- -- -- 384,614 385 49,615 --
Issuance of common stock for services
June 2004 -- -- -- -- 650,000 650 322,350 --
Deficit
Accumulated
During the Total
Acquisition Loan Loan Stock Development Stockholders'
Deposit Collateral Fee Payable Stage Deficit
---------- ---------- ----- ------- ------------- -------------
Amortization of beneficial conversion
feature in a manner similar to
preferred stock dividends -- -- -- -- -- (130,000)
Issuance of common stock for services
September 2003 -- -- -- -- -- 100,000
Issuance of common stock for cash
December 2003 -- -- -- -- -- 300,000
Issuance of common stock for cash
December 2003 -- -- -- -- -- 200,000
Issuance of common stock for cash
December 2003 -- -- -- -- -- 200,000
Issuance of common stock for cash
December 2003 -- -- -- -- -- 25,000
Issuance of common stock for cash
December 2003 -- -- -- -- -- 50,000
Issuance of preferred stock for
service RP - December 2003 -- -- -- -- -- 2,350,000
Issuance of common stock for services
December 2003 -- -- -- -- -- 848,990
Net loss for the year ended 12/31/03 -- -- -- -- (5,943,895) (5,943,895)
--------- ---------- ------ ------ ------------ ------------
Balance at December 31, 2003 $ -- $ -- -- $ -- $(7,886,847) $(1,999,632)
========= ========== ====== ====== ============ ============
Issuance of common stock for cash
January 2004 -- -- -- -- -- 25,000
Issuance of common stock for cash
February 2004 -- -- -- -- -- 50,000
Issuance of common stock for cash
February 2004 -- -- -- -- -- 100,000
Issuance of common stock for cash
February 2004 -- -- -- -- -- 200,000
Issuance of common stock for services
February 2004 -- -- -- -- -- 318,750
Issuance of common stock for services
February 2004 -- -- -- -- -- 120,000
Issuance of common stock for services
February 2004 -- -- -- -- -- 120,000
Conversion of preferred stock to
common stock March 2004 -- -- -- -- -- --
Conversion of preferred stock to
common stock March 2004 -- -- -- -- -- --
Issuance of common stock for cash
March 2004 -- -- -- -- -- 50,000
Issuance of common stock for services
June 2004 -- -- -- -- -- 323,000
F-6
Additional Deferred
Preferred Preferred Paid-in Construction
Stock Series A Stock Series B Common Stock Capital Costs
--------------- --------------- ------------------- ------------- ----------
Shares Amount Shares Amount Shares Amount
------ ------ ------ ------ ------ ------
Issuance of common stock for cash
September 2004 -- -- -- -- 333,333 333 49,667 --
Issuance of common stock for cash
October 2004 -- -- -- -- 1,000,000 1,000 149,000 --
Issuance of common stock for services
October 2004 -- -- -- -- 500,000 500 54,500 --
Net loss for the year ended
December 31, 2004 -- -- -- -- -- -- -- --
--------- ------- --------- ------ ---------- ------- ----------- -------------
Balance at December 31, 2004 500,000 $ 500 4,000,000 $4,000 64,691,128 $64,691 $25,683,909 $(18,304,135)
========= ======= ========= ====== ========== ======= =========== =============
Issuance of common stock for services
January 2005 -- -- -- -- 500,000 500 74,500 --
Issuance of common stock for cash
February 2005 -- -- -- -- 500,000 500 99,500 --
Issuance of common stock for services
March 2005 -- -- -- -- 500,000 500 159,500 --
Issuance of common stock for cash
March 2005 -- -- -- -- 375,000 375 74,625 --
Issuance of common stock for cash
June 2005 -- -- -- -- 666,667 667 99,333 --
Issuance of common stock for cash
June 2005 -- -- -- -- 2,000,000 2,000 298,000 --
Issuance of common stock for cash
July 2005 -- -- -- -- 200,000 200 69,800 --
Issuance of common stock for cash
July 2005 -- -- -- -- 666,667 667 99,333 --
Issuance of common stock for cash
July 2005 -- -- -- -- 166,666 166 24,834 --
Conversion of preferred stock to common
stock August 2005 -- --(2,500,000) (2,500) 5,000,000 5,000 (2,500) --
Issuance of common stock for cash
September 2005 -- -- -- -- 100,000 100 32,900 --
Issuance of common stock for cash
September 2005 -- -- -- -- 500,000 500 164,500 --
Issuance of common stock for cash
November 2005 -- -- -- -- 333,333 333 49,667 --
Issuance of common stock for cash
November 2005 -- -- -- -- 800,000 800 119,200 --
Issuance of common stock for cash
November 2005 -- -- -- -- 666,667 667 99,333 --
Issuance of common stock for cash
December 2005 -- -- -- -- 166,667 167 24,833 --
Deficit
Accumulated
During the Total
Acquisition Loan Loan Stock Development Stockholders'
Deposit Collateral Fee Payable Stage Deficit
---------- ---------- ----- ------- ------------- -------------
Issuance of common stock for cash
September 2004 -- -- -- -- -- 50,000
Issuance of common stock for cash
October 2004 -- -- -- -- -- 150,000
Issuance of common stock for services
October 2004 -- -- -- -- -- 55,000
Net loss for the year ended
December 31, 2004 -- -- -- -- (2,455,886) (2,455,886)
--------- ---------- ------ ------- ------------- ------------
Balance at December 31, 2004 $ -- $ -- -- $ -- $(10,342,731) $(2,893,766)
========= ========== ====== ======= ============= ============
Issuance of common stock for services
January 2005 -- -- -- -- -- 75,000
Issuance of common stock for cash
February 2005 -- -- -- -- -- 100,000
Issuance of common stock for services
March 2005 -- -- -- -- -- 160,000
Issuance of common stock for cash
March 2005 -- -- -- -- -- 75,000
Issuance of common stock for cash
June 2005 -- -- -- -- -- 100,000
Issuance of common stock for cash
June 2005 -- -- -- -- -- 300,000
Issuance of common stock for cash
July 2005 -- -- -- -- -- 70,000
Issuance of common stock for cash
July 2005 -- -- -- -- -- 100,000
Issuance of common stock for cash
July 2005 -- -- -- -- -- 25,000
Conversion of preferred stock to common
stock August 2005 -- -- -- -- -- --
Issuance of common stock for cash
September 2005 -- -- -- -- -- 33,000
Issuance of common stock for cash
September 2005 -- -- -- -- -- 165,000
Issuance of common stock for cash
November 2005 -- -- -- -- -- 50,000
Issuance of common stock for cash
November 2005 -- -- -- -- -- 120,000
Issuance of common stock for cash
November 2005 -- -- -- -- -- 100,000
Issuance of common stock for cash
December 2005 -- -- -- -- -- 25,000
F-7
Additional Deferred
Preferred Preferred Paid-in Construction
Stock Series A Stock Series B Common Stock Capital Costs
--------------- --------------- ------------------- ------------- ----------
Shares Amount Shares Amount Shares Amount
------ ------ ------ ------ ------ ------
Net loss for the year ended
December 31, 2005 -- -- -- -- -- -- -- --
--------- ------- --------- ------ ----------- ------- ------------ ------------
Balance at December 31, 2005 500,000 $ 500 1,500,000 $1,500 77,832,795 $77,833 $ 27,171,267 $(18,304,135)
========= ======= ========= ====== =========== ======= ============ =============
Issuance of common stock for cash
February 2006 -- -- -- -- 166,667 167 24,833 --
Conversion of preferred series B stock
to common stock April 2006 -- -- (500,000) (500) 1,000,000 1,000 (500) --
Issuance of common stock for Services
April 2006 -- -- -- -- 950,000 950 141,550 --
Issuance of common stock for Acquisition
Deposit April 2006 -- -- -- -- 3,000,000 3,000 447,000 --
Issuance of common Stock for services
May 2006 -- -- -- -- 100,000 100 15,900 --
Issuance of common stock for services
June 2006 -- -- -- -- 250,000 250 34,750 --
Conversion of Preferred Series A
to common Stock July 2006 (500,000) (500) -- -- 5,000,000 5,000 (4,500) --
Issuance of common stock for loan
August 2006 -- -- -- -- 4,000,000 4,000 396,000 --
Issuance of common Stock for collateral
August 2006 -- -- -- -- 7,500,000 7,500 742,500 --
Issuance of common stock for services
November 2006 -- -- -- -- 9,812,500 9,813 740,188 --
Issuance of common stock as deposit
for acquisition November 2006 -- -- -- -- 2,000,000 2,000 298,000 --
Issuance of common stock for additional
debt interest December 2006 -- -- -- -- 464,278 464 27,392 --
Issuance of common stock for cash
December 2006 -- -- -- -- 166,667 167 24,833 --
Issuance of common stock for services
December 2006 -- -- -- -- 1,600,000 1,600 91,400 --
Fair market adjustment to stock for
Deferred Construction Costs,
December 2006 -- -- -- -- -- -- (18,107,260) --
Accretion of loan costs to interest
expense, December 2006 -- -- -- -- -- -- -- --
Net loss as of December 31, 2006 -- -- -- -- -- -- -- --
------ ------- --------- ------ ----------- -------- ------------ -----------
Balance at December 31, 2006 -- -- 1,000,000 $1,000 113,842,905 $113,843 $ 12,043,353 $ (196,875)
====== ======= ========= ====== =========== ======== ============ ===========
Issuance of common stock for services
March 2007 -- -- -- -- 1,000,000 1,000 97,000 --
Expense of Acquisition Deposit as
Nullification Fee March 2007 -- -- -- -- -- -- -- -- 375,000
Deficit
Accumulated
During the Total
Acquisition Loan Loan Stock Development Stockholders'
Deposit Collateral Fee Payable Stage Deficit
---------- ---------- ----- ------- ------------- -------------
Net loss for the year ended
December 31, 2005 -- -- -- -- (1,736,658) (1,736,658)
--------- ---------- ------ -------- ------------- ------------
Balance at December 31, 2005 $ -- $ -- -- $ -- $(12,079,389) $(3,132,424)
========= ========== ====== ======== ============= ============
Issuance of common stock for cash
February 2006 -- -- -- -- -- 25,000
Conversion of preferred series B stock
to common stock April 2006 -- -- -- -- -- --
Issuance of common stock for Services
April 2006 -- -- -- -- -- 142,500
Issuance of common stock for Acquisition
Deposit April 2006 (450,000) -- -- -- -- --
Issuance of common Stock for services
May 2006 -- -- -- -- -- 16,000
Issuance of common stock for services
June 2006 -- -- -- -- -- 35,000
Conversion of Preferred Series A
to common Stock July 2006 -- -- -- -- -- --
Issuance of common stock for loan
August 2006 -- -- (400,000) -- -- --
Issuance of common Stock for collateral
August 2006 -- (750,000) -- -- -- --
Issuance of common stock for services
November 2006 -- -- -- -- -- 750,000
Issuance of common stock as deposit
for acquisition November 2006 (300,000) -- -- -- -- --
Issuance of common stock for additional
debt interest December 2006 -- -- -- -- -- 27,857
Issuance of common stock for cash
December 2006 -- -- -- -- -- 25,000
Issuance of common stock for services
December 2006 -- -- -- -- -- 93,000
Fair market adjustment to stock for
Deferred Construction Costs,
December 2006 18,107,260 -- -- -- -- --
Accretion of loan costs to interest
expense, December 2006 -- -- 130,000 -- -- 130,000
Net loss as of December 31, 2006 -- -- -- -- (1,886,694) (1,886,694)
---------- ---------- ---------- ------- ------------- -------------
Balance at December 31, 2006 $(750,000) $(750,000) $(270,000) $ -- $(13,966,083) $ (3,774,762)
========== ========== ========== ======= ============= =============
Issuance of common stock for services
March 2007 -- -- -- -- -- 98,000
Expense of Acquisition Deposit as
Nullification Fee March 2007 -- -- -- -- -- 375,000
F-8
Additional Deferred
Preferred Preferred Paid-in Construction
Stock Series A Stock Series B Common Stock Capital Costs
--------------- --------------- ------------------- ------------- ----------
Shares Amount Shares Amount Shares Amount
------ ------ ------ ------ ------ ------
Issuance of common stock for services
April 2007 -- -- -- -- 500,000 500 59,500 --
Issuance of common stock for services
May 2007 -- -- -- -- 1,100,000 1,100 114,400 --
Issuance of common stock for interest
April 2007 -- -- -- -- 89,438 89 6,171 --
Issuance of common stock for Cash
July 2007 -- -- -- -- 2,000,000 2,000 198,000 --
Issuance of common stock for interest
July 2007 -- -- -- -- 39,800 40 7,124 --
Issuance of common stock for services
August 2007 -- -- -- -- 1,300,000 1,300 187,200 --
Issuance of common stock for cash
August 2007 -- -- -- -- 1,200,000 1,200 118,800 --
Issuance of common stock for interest
August 2007 -- -- -- -- 149,369 149 21,438 --
Issuance of common stock for cash
October 2007 -- -- -- -- 100,000 100 9,900 --
Issuance of common stock for services
November 2007 -- -- -- -- 500,000 500 49,500 --
Issuance of common stock for cash
December 2007 -- -- -- -- 1,450,000 1,450 58,550 --
Issuance of common stock for services
December 2007 -- -- -- -- 200,000 200 19,800 --
Issuance of common stock for interest
December 2007 -- -- -- -- 105,775 106 14,703 --
Fair market adjustment to stock for
Deferred Construction Costs,
December 2007 -- -- -- -- -- -- (14,063) 14,063
Accretion of loan costs to interest
expense December 2007 -- -- -- -- -- -- -- --
Net loss as of December 31, 2007 -- -- -- -- -- -- -- --
------ ------- --------- ------ ----------- -------- ----------- ----------
Balance at December 31, 2007 -- $ -- 1,000,000 $1,000 123,577,287 $123,577 $12,991,376 $(182,813)
====== ======= ========= ====== =========== ======== =========== ==========
Cancellation of shares in relation
to Architecture Acquisition Rescission -- -- -- -- (3,000,000) (3,000) (447,000) --
Issuance of common stock for cash,
March 2008 -- -- -- -- 1,000,000 1,000 49,000 --
Issuance of common stock for cash,
April 2008 -- -- -- -- 625,000 625 24,375 --
Issuance of common stock for services,
April 2008 -- -- -- -- 2,375,000 2,375 95,625 --
Issuance of common stock for cash, May 2008 -- -- -- -- 1,000,000 1,000 29,000 --
Issuance of common stock for cash, June 2008 -- -- -- -- 1,000,000 1,000 29,000 --
Deficit
Accumulated
During the Total
Acquisition Loan Loan Stock Development Stockholders'
Deposit Collateral Fee Payable Stage Deficit
---------- ---------- ----- ------- ------------- -------------
Issuance of common stock for services
April 2007 -- -- -- -- -- 60,000
Issuance of common stock for services
May 2007 -- -- -- -- -- 115,500
Issuance of common stock for interest
April 2007 -- -- -- -- -- 6,260
Issuance of common stock for Cash
July 2007 -- -- -- -- -- 200,000
Issuance of common stock for interest
July 2007 -- -- -- -- -- 7,164
Issuance of common stock for services
August 2007 -- -- -- -- -- 188,500
Issuance of common stock for cash
August 2007 -- -- -- -- -- 120,000
Issuance of common stock for interest
August 2007 -- -- -- -- -- 21,587
Issuance of common stock for cash
October 2007 -- -- -- -- -- 10,000
Issuance of common stock for services
November 2007 -- -- -- -- -- 50,000
Issuance of common stock for cash
December 2007 -- -- -- -- -- 60,000
Issuance of common stock for services
December 2007 -- -- -- -- -- 20,000
Issuance of common stock for interest
December 2007 -- -- -- -- -- 14,809
Fair market adjustment to stock for
Deferred Construction Costs,
December 2007 -- -- -- -- -- --
Accretion of loan costs to interest
expense December 2007 -- -- 270,000 -- -- 270,000
Net loss as of December 31, 2007 -- -- -- -- (2,473,297) (2,473,297)
---------- ---------- -------- ------- ------------- ------------
Balance at December 31, 2007 $(375,000) $(750,000) $ -- $ -- $(16,439,382) $(4,631,242)
========== ========== ======== ======= ============= ============
Cancellation of shares in relation
to Architecture Acquisition Rescission 375,000 -- -- 75,000 -- --
Issuance of common stock for cash,
March 2008 -- -- -- -- -- 50,000
Issuance of common stock for cash,
April 2008 -- -- -- -- -- 25,000
Issuance of common stock for services,
April 2008 -- -- -- -- -- 98,000
Issuance of common stock for cash, May 2008 -- -- -- -- -- 30,000
Issuance of common stock for cash, June 2008 -- -- -- -- -- 30,000
F-9
Additional Deferred
Preferred Preferred Paid-in Construction
Stock Series A Stock Series B Common Stock Capital Costs
--------------- --------------- ------------------- ------------- ----------
Shares Amount Shares Amount Shares Amount
------ ------ ------ ------ ------ ------
Issuance of common stock for interest
expense and services, June 2008 -- -- -- -- 5,200,000 5,200 254,800 --
Issuance of common stock for cash,
August 2008 -- -- -- -- -- -- -- --
Issuance of common stock for services,
October 2008 -- -- -- -- 250,000 250 9,750 --
Issuance of common stock for cash,
December 2008 -- -- -- -- -- -- -- --
Fair market value adjustment to stock
for Deferred Construction Costs,
December 2008 -- -- -- -- -- -- (98,438) 98,438
Net loss as of December 31, 2008 -- -- -- -- -- -- -- --
------ ------- --------- ------ ----------- -------- ----------- ----------
Balance at December 31, 2008 -- $ -- 1,000,000 $1,000 132,027,287 $132,027 $12,937,489 $ (84,375)
====== ======= ========= ====== =========== ======== =========== ==========
Issuance of common stock for services,
February 2009 -- -- -- -- 250,000 250 4,750 --
Issuance of common stock for services,
March 2009 -- -- -- -- 1,500,000 1,500 43,500 --
Issuance of common stock for cash,
March 2009 -- -- -- -- 2,000,000 2,000 38,000 --
Issuance of common stock for services,
April 2009 -- -- -- -- 375,000 375 7,125 --
Issuance of common stock for services,
May 2009 -- -- -- -- 3,000,000 3,000 72,000 --
Issuance of common stock for services,
August 2009 -- -- -- -- 7,250,000 7,250 104,000 --
Issuance of common stock for cash,
August 2009 -- -- -- -- 3,000,000 3,000 57,000 --
Conversion of preferred series B stock
to common stock, September 2009 -- -- (1,000,000) (1,000) 2,000,000 2,000 (1,000) --
Issuance of common stock for cash,
December 2009 -- -- -- -- -- -- -- --
Common stock returned to treasury,
December 2009 -- -- -- -- -- -- -- --
Fair market value adjustment to stock
for Deferred Construction Costs,
December 2009 -- -- -- -- -- -- (63,282) 63,282
Net loss as of December 31, 2009 -- -- -- -- -- -- -- --
------ ------- --------- ------ ----------- -------- ----------- ----------
Balance at December 31, 2009 -- $ -- -- $ -- 151,402,287 $151,402 $13,199,583 $ (21,093)
====== ======= ========= ====== =========== ======== =========== ==========
Issuance of common stock against Stock
Payable, February 2010 -- -- -- -- 1,500,000 1,500 28,500 --
Common stock returned to treasury,
March 2010 -- -- -- -- (3,000,000) (3,000) (72,000) --
Deficit
Accumulated
During the Total
Acquisition Loan Loan Stock Development Stockholders'
Deposit Collateral Fee Payable Stage Deficit
---------- ---------- ----- ------- ------------- -------------
Issuance of common stock for interest
expense and services, June 2008 -- -- -- -- -- 260,000
Issuance of common stock for cash,
August 2008 -- -- -- 20,000 -- 20,000
Issuance of common stock for services,
October 2008 -- -- -- -- -- 10,000
Issuance of common stock for cash,
December 2008 -- -- -- 40,000 -- 40,000
Fair market value adjustment to stock
for Deferred Construction Costs,
December 2008 -- -- -- -- -- --
Net loss as of December 31, 2008 -- -- -- -- (1,188,347) (1,188,347)
---------- ---------- -------- -------- ------------- ------------
Balance at December 31, 2008 $ -- $(750,000) $ -- $135,000 $(17,627,727) $(5,256,586)
========== ========== ======== ======== ============= ============
Issuance of common stock for services,
February 2009 -- -- -- -- -- 5,000
Issuance of common stock for services,
March 2009 -- -- -- -- -- 45,000
Issuance of common stock for cash,
March 2009 -- -- -- (40,000) -- --
Issuance of common stock for services,
April 2009 -- -- -- -- -- 7,500
Issuance of common stock for services,
May 2009 -- -- -- -- -- 75,000
Issuance of common stock for services,
August 2009 -- -- -- -- -- 111,250
Issuance of common stock for cash,
August 2009 -- -- -- -- -- 60,000
Conversion of preferred series B stock
to common stock, September 2009 -- -- -- -- -- --
Issuance of common stock for cash,
December 2009 -- -- -- 30,000 -- 30,000
Common stock returned to treasury,
December 2009 -- -- -- (75,000) -- (75,000)
Fair market value adjustment to stock
for Deferred Construction Costs,
December 2009 -- -- -- -- -- --
Net loss as of December 31, 2009 -- -- -- -- (1,463,187) (1,463,187)
---------- ---------- -------- -------- ------------- ------------
Balance at December 31, 2009 $ -- $(750,000) $ -- $ 50,000 $(19,090,914) $(6,461,022)
========== ========== ======== ======== ============= ============
Issuance of common stock against Stock
Payable, February 2010 -- -- -- (30,000) -- --
Common stock returned to treasury,
March 2010 -- -- -- 75,000 -- --
F-10
Additional Deferred
Preferred Preferred Paid-in Construction
Stock Series A Stock Series B Common Stock Capital Costs
--------------- --------------- ------------------- ------------- ----------
Shares Amount Shares Amount Shares Amount
------ ------ ------ ------ ------ ------
Common stock payable for website
development, March 2010 -- -- -- -- -- -- -- --
Issuance of common stock for services,
May 2010 -- -- -- -- 2,100,000 2,100 6,300 --
Issuance of common stock for website
development, June 2010 -- -- -- -- 2,029,700 2,030 38,564 --
Issuance of common stock for prepaid
services, June 2010 -- -- -- -- 169,750 170 3,225 --
Issuance of common stock for services,
June 2010 -- -- -- -- 225,550 225 4,285 --
Issuance of common stock for services,
July 2010 -- -- -- -- 200,000 200 440 --
Issuance of common stock for services,
August 2010 -- -- -- -- 500,000 500 1,100 --
Issuance of common stock for prepaid
services, August 2010 -- -- -- -- 4,500,000 4,500 9,900 --
Issuance of common stock for services,
October 2010 -- -- -- -- 1,000,000 1,000 9,000 --
Issuance of common stock for services,
December 2010 -- -- -- -- 6,150,000 6,150 29,850 --
Issuance of common stock for prepaid
services, December 2010 -- -- -- -- 5,000,000 5,000 45,000 --
Issuance of common stock for cash,
December 2010 -- -- -- -- 350,000 350 6,650 --
Fair market value adjustment to stock
for Deferred Construction Costs,
December 2010 -- -- -- -- -- -- 23,907 (23,907)
Fair market value adjustment to stock
for Loan Collateral, December 2010 -- -- -- -- -- -- (630,000) --
Fair market value adjustment to stock
for Common Stock Payable, December 2010 -- -- -- -- -- -- 67,000 --
Net loss as of December 31, 2010 -- -- -- -- -- -- -- --
------ ------- --------- ------ ----------- -------- ----------- ----------
Balance at December 31, 2010 -- $ -- -- $ -- 172,127,287 $172,127 $12,771,304 $ (45,000)
====== ======= ========= ====== =========== ======== =========== ==========
Deficit
Accumulated
During the Total
Acquisition Loan Loan Stock Development Stockholders'
Deposit Collateral Fee Payable Stage Deficit
---------- ---------- ----- ------- ------------- -------------
Common stock payable for website
development, March 2010 -- -- -- 24,250 -- 24,250
Issuance of common stock for services,
May 2010 -- -- -- -- -- 8,400
Issuance of common stock for website
development, June 2010 -- -- -- (24,250) -- 16,344
Issuance of common stock for prepaid
services, June 2010 -- -- -- -- -- 3,395
Issuance of common stock for services,
June 2010 -- -- -- -- -- 4,510
Issuance of common stock for services,
July 2010 -- -- -- -- -- 640
Issuance of common stock for services,
August 2010 -- -- -- -- -- 1,600
Issuance of common stock for prepaid
services, August 2010 -- -- -- -- -- 14,400
Issuance of common stock for services,
October 2010 -- -- -- -- -- 10,000
Issuance of common stock for services,
December 2010 -- -- -- -- -- 36,000
Issuance of common stock for prepaid
services, December 2010 -- -- -- -- -- 50,000
Issuance of common stock for cash,
December 2010 -- -- -- -- -- 7,000
Fair market value adjustment to stock
for Deferred Construction Costs,
December 2010 -- -- -- -- -- --
Fair market value adjustment to stock
for Loan Collateral, December 2010 -- 630,000 -- -- -- --
Fair market value adjustment to stock
for Common Stock Payable, December 2010 -- -- -- (67,000) -- --
Net loss as of December 31, 2010 -- -- -- -- (1,112,629) (1,112,629)
---------- ---------- -------- -------- ------------- ------------
Balance at December 31, 2010 $ -- $(120,000) $ -- $ 28,000 $(20,203,543) $(7,397,112)
========== ========== ======== ======== ============= ============
The accompanying notes form an integral part of these consolidated
financial statements
F-11
VOYAGER ENTERTAINMENT INTERNATIONAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
From inception
December 31, December 31, March 1, 1997 to
2010 2009 December 31, 2010
------------ ------------ -----------------
Cash Flows from Operating Activities:
Net Loss $ (1,112,629) $ (1,463,187) $(20,203,543)
Adjustments to reconcile net loss to
net cash used by operating activities:
Bad debt expense 250,000 250,000 500,000
Depreciation and amortization 11,063 3,270 57,724
Loss on disposal of fixed assets 551 2,229 2,780
Issuance of common stock for services 61,150 243,750 6,573,215
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 -- 50,000 500,000
Changes in assets and liabilities:
Prepaid expenses 1,098 (12) (776)
Accounts payable and accrued expenses 183,130 276,742 1,740,512
Accrued expenses - related party 309,000 308,000 2,087,000
Accrued settlement obligation -- -- 650,000
------------ ------------ ------------
Net cash used in operating activities (296,637) (329,208) (6,259,000)
Cash flows from Investing Activities:
Payments to acquire fixed assets -- (4,538) (54,388)
Proceeds from Advances - Related Party -- -- (500,000)
------------ ------------ ------------
Net cash used in investing activities -- (4,538) (554,388)
Cash flows from Financing Activities:
Proceeds from notes payable, short term debt -- -- 2,103,239
Proceeds from notes payable, due to related parties 283,000 238,000 871,500
Payment on notes payable, short term debt -- -- (20,000)
Payment on notes payable, due to related parties -- (2,000) (12,500)
Proceeds from the sale of preferred stock -- -- 150,000
Proceeds from the sale of common stock 7,000 60,000 3,732,000
Proceeds from common stock payable -- 30,000 90,000
Payments for loan fees -- -- (50,000)
Payments for deferred financing costs -- -- (50,000)
------------ ------------ ------------
Net cash provided by financing activities 290,000 326,000 6,814,239
Net (decrease) increase in cash (6,637) (7,746) 851
Cash, beginning of year 7,488 15,234 --
------------ ------------ ------------
Cash, end of year $ 851 $ 7,488 $ 851
============ ============ ============
Cash paid for:
Interest $ -- $ 132 $ 93,212
Income Taxes $ -- $ -- $ --
The accompanying notes form an integral part of these consolidated
financial statements.
F-12
VOYAGER ENTERTAINMENT INTERNATIONAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(CONTINUED)
From inception
December 31, December 31, March 1, 1997 to
2010 2009 December 31, 2010
------------ ------------ -----------------
Supplemental schedule of non-cash Investing and
Financing Activities:
Disposal of fixed assets $ 40,219 $ 4,447 $ 44,666
Common stock issued for financing costs $ -- $ -- $ 988,300
Common stock issued for loan collateral, adjusted
to fair value $(630,000) $ -- $ 120,000
Deferred construction costs, adjusted
to fair value $ 23,907 $ 63,282 $ 45,000
Conversion of preferred shares $ -- $ 2,000 $ 14,600
Common stock issued as acquisition deposit $ -- $ -- $ 750,000
Common stock cancelled due to business combination
cancellation $ -- $ -- $ 375,000
Common stock receivable $ 75,000 $ (75,000) $ --
Common stock issued to satisfy common stock payable $ 30,000 $ (40,000) $ 95,000
Common stock payable, adjusted to fair value $ (67,000) $ -- $ (67,000)
Common stock issued for website development $ 40,594 $ -- $ 40,594
Common stock issued for prepaid services $ 67,795 $ -- $ 67,795
The accompanying notes form an integral part of these consolidated
financial statements.
F-13
VOYAGER ENTERTAINMENT INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010 AND 2009
NOTE 1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION AND ORGANIZATION
Voyager Entertainment International, Inc. (the "Company"), a Delaware
corporation formerly known as Dakota Imaging, Inc., was organized on January 31,
1991. The Company is in the entertainment development business with plans to
develop the world's tallest Observation Wheel on the Las Vegas strip area. As
the result of a reverse triangular merger that was completed in 2002, the
financial statements are reflected from the period of inception of Outland
Development in 1997. During April 2002, the Company changed its name from Dakota
Imaging, Inc. to Voyager Entertainment International, Inc. and adopted a new
fiscal year of December 31. On June 11, 2003, the Company became a Nevada
Corporation.
As used in these Notes to the Consolidated Financial Statements, the terms the
"Company", "we", "us", "our" and similar terms refer to Voyager Entertainment
International, Inc. and, unless the context indicates otherwise, its
consolidated subsidiaries. The Company's wholly-owned subsidiaries include
Outland Development, LLC ("Outland"), a Nevada Limited Liability Corporation,
Voyager Entertainment Holdings, Inc. ("VEHI"), a Nevada corporation, and Voyager
Viridian, LLC ("Viridian"), a Nevada Limited Liability Corporation. Outland
Development, LLC was discontinued as of June 30, 2009. Voyager Viridian LLC, a
wholly-owned subsidiary, was formed on August 3, 2009. Voyager Entertainment
Holdings, Inc. has been a dormant company and was discontinued as of June 30,
2010.
The Company is considered a development stage company. The accompanying
financial statements have been prepared in accordance with authoritative
guidance for development stage entities. A development stage entity is one in
which planned principal operations has not commenced or if its operations have
commenced, there has been no significant revenues there from.
The consolidated financial statements include the accounts of the Company and
its subsidiaries. All significant intercompany transactions and accounts have
been eliminated in consolidation.
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 $1,112,629 and $1,463,187 for the years
ended December 31, 2010 and 2009, and a working capital deficiency of $7,431,069
at December 31, 2010. These factors raise substantial doubt about the Company's
ability to continue as a going concern. The Company will need to raise a
substantial amount of capital in order to continue its business plan. Management
intends to initiate their business plan and will continue to seek out joint
venture partners, attempt to locate the appropriate location for the L.V.
Project, as well as other projects, and continually seek funding opportunities.
These financial statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts, or amounts and
classification of liabilities that might result from this uncertainty.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Estimates
---------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Cash
----
For the Statements of Cash Flows, all highly liquid investments with maturity of
three months or less are considered to be cash equivalents. There were no cash
equivalents as of December 31, 2010 or December 31, 2009.
Concentrations
--------------
The Company maintains cash balances at a financial institution in Nevada.
Accounts at this institution are insured by the Federal Deposit Insurance
Corporation ("FDIC") up to $250,000. From time to time the Company's cash
balance may exceed the FDIC limits. At December 31, 2010 and December 31, 2009,
F-14
the Company did not have any accounts in excess of the FDIC limits.
Due to the uniqueness of the Observation Wheel, we may encounter concentrations
with certain vendors who specialize in this type of construction. As of December
31, 2010 and 2009, construction activities had not started.
Fixed Assets
------------
Furniture, fixtures and equipment are stated at cost less accumulated
depreciation. Depreciation is provided for in amounts sufficient to relate the
cost of depreciable assets to operations over their estimated service lives,
principally on a straight-line basis. Estimated service lives of property and
equipment is 3 years.
Website Development Costs
-------------------------
Costs incurred in developing and maintaining a website are charged to expense
when incurred for the planning, content population, and administration or
maintenance of the website. All development costs for the application,
infrastructure, and graphics development are capitalized and subsequently
reported at the lower of unamortized cost or net realizable value. Capitalized
costs are amortized using straight-line basis over a three year estimated
economic life of the product.
Income Taxes
------------
Income taxes are provided for using the liability method of accounting in
accordance with the Income Taxes Topic of the Financial Accounting Standards
Board ("FASB") Accounting Standards Codification ("ASC"). Deferred tax assets
and liabilities are determined based on differences between the financial
reporting and tax basis of assets and liabilities and are measured using the
enacted tax rates and laws that will be in effect when the differences are
expected to reverse. A valuation allowance is established when necessary to
reduce deferred tax assets to the amount expected to be realized. Deferred tax
assets are reduced by a valuation allowance when, in the opinion of management,
it is more likely than not that some portion or all of the deferred tax assets
will not be realized. The computation of limitations relating to the amount of
such tax assets, and the determination of appropriate valuation allowances
relating to the realizing of such assets, are inherently complex and require the
exercise of judgment. As additional information becomes available, we
continually assess the carrying value of our net deferred tax assets.
Stock Based Compensation
------------------------
Stock based compensation is accounted for using the Equity-Based Payments to
Non-Employees Topic of the FASB ASC, which establishes standards for the
accounting for transactions in which an entity exchanges its equity instruments
for goods or services. It also addresses transactions in which an entity incurs
liabilities in exchange for goods or services that are based on the fair value
of the entity's equity instruments or that may be settled by the issuance of
those equity instruments. We determine the value of stock issued at the date of
grant. We also determine at the date of grant the value of stock at fair market
value or the value of services rendered (based on contract or otherwise)
whichever is more readily determinable.
Shares issued to employees are expensed upon issuance.
Stock based compensation for employees is account for using the Stock Based
Compensation Topic of the FASB ASC. We use the fair value method for equity
instruments granted to employees and will use the Black Scholes model for
measuring the fair value of options, if issued. The stock based fair value
compensation is determined as of the date of the grant or the date at which the
performance of the services is completed (measurement date) and is recognized
over the vesting periods.
Net Loss Per Common Share
-------------------------
Earnings per share is calculated in accordance with the Earnings per Share Topic
of the FASB ASC. The weighted-average number of common shares outstanding during
each period is used to compute basic earnings (loss) per share. Diluted earnings
per share is computed using the weighted average number of shares plus dilutive
potential common shares outstanding. Potentially dilutive common shares consist
of employee stock options, warrants, and other convertible securities, and are
excluded from the diluted earnings per share computation in periods where the
Company has incurred net loss. During the years ended December 31, 2010 and
2009, respectively, the Company incurred a net loss, resulting in no potentially
dilutive common shares.
Fair Value of Financial Instruments
-----------------------------------
The carrying amounts reflected in the consolidated balance sheets for cash,
accounts payable and accrued expenses approximate the respective fair values due
to the short maturities of these items. The Company does not hold any
investments that are available-for-sale.
F-15
Advertising
-----------
Advertising costs are charged to operations as incurred. No advertising costs
for the years ended December 31, 2010 and 2009 were incurred.
Fair Value Accounting
---------------------
As required by the Fair Value Measurements and Disclosures Topic of the FASB
ASC, fair value is measured based on a three-tier fair value hierarchy, which
prioritizes the inputs used in measuring fair value as follows: (Level 1)
observable inputs such as quoted prices in active markets; (Level 2) inputs,
other than the quoted prices in active markets, that are observable either
directly or indirectly; and (Level 3) unobservable inputs in which there is
little or no market data, which require the reporting entity to develop its own
assumptions.
The three levels of the fair value hierarchy 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).
RECENTLY ADOPTED AND RECENTLY ISSUED ACCOUNTING GUIDANCE
Adopted
-------
In June 2009, the Financial Accounting Standards Board ("FASB") issued
authoritative guidance for "Accounting for Transfers of Financial Assets," which
eliminates the concept of a "qualifying special-purpose entity," changes the
requirements for derecognizing financial assets, and requires additional
disclosures in order to enhance information reported to users of financial
statements by providing greater transparency about transfers of financial
assets, including securitization transactions, and an entity's continuing
involvement in and exposure to the risks related to transferred financial
assets. This guidance is effective for fiscal years beginning after November 15,
2009. The Company adopted this guidance for the period ended March 31, 2010. It
does not have a material impact on the consolidated financial statements.
In June 2009, the FASB issued authoritative guidance amending existing guidance.
The amendments include: (1) the elimination of the exemption for qualifying
special purpose entities, (2) a new approach for determining who should
consolidate a variable-interest entity, and (3) changes to when it is necessary
to reassess who should consolidate a variable-interest entity. This guidance is
effective for the first annual reporting period beginning after November 15,
2009 and for interim periods within that first annual reporting period. The
Company adopted this guidance for the period ended March 31, 2010. It does not
have a material impact on the consolidated financial statements.
In January 2010, the FASB issued guidance to amend the disclosure requirements
related to recurring and nonrecurring fair value measurements. The guidance
requires new disclosures on the transfers of assets and liabilities between
Level 1 (quoted prices in active market for identical assets or liabilities) and
Level 2 (significant other observable inputs) of the fair value measurement
hierarchy, including the reasons and the timing of the transfers. The guidance
became effective for the Company beginning January 1, 2010. The adoption of this
guidance did not have a material impact on the Company's consolidated financial
statements.
In February 2010, the FASB issued amended guidance on subsequent events to
alleviate potential conflicts between FASB guidance and SEC requirements. Under
this amended guidance, SEC filers are no longer required to disclose the date
through which subsequent events have been evaluated in originally issued and
revised financial statements. This guidance was effective immediately and we
adopted these new requirements for the period ended March 31, 2010. The adoption
of this guidance did not have a material impact on our financial statements.
Issued
------
In October 2009, the FASB issued changes to revenue recognition for
multiple-deliverable arrangements. These changes require separation of
consideration received in such arrangements by establishing a selling price
hierarchy (not the same as fair value) for determining the selling price of a
deliverable, which will be based on available information in the following
order: vendor-specific objective evidence, third-party evidence, or estimated
selling price; eliminate the residual method of allocation and require that the
F-16
consideration be allocated at the inception of the arrangement to all
deliverables using the relative selling price method, which allocates any
discount in the arrangement to each deliverable on the basis of each
deliverable's selling price; require that a vendor determine its best estimate
of selling price in a manner that is consistent with that used to determine the
price to sell the deliverable on a standalone basis; and expand the disclosures
related to multiple-deliverable revenue arrangements. These changes become
effective on January 1, 2011. The Company has determined that the adoption of
these changes will not have an impact on the consolidated financial statements,
as the Company does not currently have any such arrangements with its customers.
In January 2010, the FASB issued guidance to amend the disclosure requirements
related to recurring and nonrecurring fair value measurements. The guidance
requires a roll forward of activities on purchases, sales, issuance, and
settlements of the assets and liabilities measured using significant
unobservable inputs (Level 3 fair value measurements). The guidance will become
effective for the Company with the reporting period beginning July 1, 2011. The
adoption of this guidance will not have a material impact on the Company's
consolidated financial statements.
Other recent accounting pronouncements issued by the FASB (including its
Emerging Issues Task Force), the AICPA, and the SEC did not, or are not believed
by management to, have a material impact on the Company's present or future
consolidated financial statements.
NOTE 2. ADVANCES - RELATED PARTY
In 2006, the Company entered into a note with Diversified Lending, see Note 6.
From the proceeds of the debt facility we issued $500,000 to Western
Architectural Services, LLC ("Western") and recorded an Advance - Related Party
on our balance sheet. Our Chief Operating Officer is also the Chief Executive
Officer of Western. The repayment of this advance is contingent upon the
production of the project. We have analyzed the collectability of this note as
of December 31, 2010 and concluded that, with current economic conditions, it is
unknown whether production can be secured within the next twelve months. The
Company has recognized an allowance of $500,000 as of December 31, 2010. In the
event that the Company secures a project site and sufficient project funding,
the allowance against the advance will be reversed in reevaluation for
realizable collectability. The Company recognized an allowance of $250,000 at
December 31, 2009.
NOTE 3. FIXED ASSETS
Fixed assets and accumulated depreciation consists of the following:
December 31, December 31,
2010 2009
-----------------------------
Computer equipment $ 6,421 $ 47,190
Accumulated depreciation (3,642) (42,214)
-----------------------------
$ 2,779 $ 4,976
=============================
Fixed assets of $40,770 that were no longer in use, and their related
accumulated depreciation of $40,219 have been removed from the accounting
records during 2010. A loss on disposal of fixed assets of $551 has been
recognized for the disposition of assets that have not been fully depreciated as
of December 31, 2010. The disposed of assets consist of outdated computer
equipment which have not been replaced as of December 31, 2010.
NOTE 4. WEBSITE DEVELOPMENT COSTS
Costs of $40,594 relating to the application, infrastructure, and graphics
development of the Company's website have been capitalized during 2010. These
costs are being amortized over a three year period upon the launch of the
website on April 21, 2010. As of December 31, 2010, amortization of $9,416 has
been recognized.
F-17
NOTE 5. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consist of the following:
December 31, December 31,
2010 2009
-----------------------------
Accounts Payable $ 82,663 $ 151,320
Accrued Interest 1,738,588 1,486,801
-----------------------------
$ 1,821,251 $ 1,638,121
=============================
In 2009, the Company entered into a consulting agreement worth $75,000 relating
to project costs. As of December 31, 2009, the agreement was unpaid, project
costs in the amount of the contract had been recognized, and the terms of the
contract were unfulfilled by the vendor. In 2010, upon entering into a revised
consulting agreement with the Company, the vendor dismissed accounts payable of
$75,000. In the fourth quarter of 2010, the payable was reversed and the
corresponding project costs were decreased.
NOTE 6. NOTES PAYABLE
Line of Credit
--------------
On November 19, 2002, the Company entered into a line of credit financing
agreement which entitled the Company to borrow from a creditor up to an
aggregate of $2,500,000. Advances under this line of credit were based on
achievement of certain milestones pursuant to the agreement. Upon the receipt of
funds, the Company was required to issue up to 1,500,000 shares of its common
stock on a pro rata basis.
The Company borrowed $605,000 against this line of credit and issued 1,500,000
shares. The balance payable under this line of credit was due on April 15, 2003
and was secured by all of the Company's assets.
The original line of credit bore interest at the rate of 12% per annum. This
line of credit has expired and no principal or accrued interest has been paid
back. Consequently, during the year ended December 31, 2003, the Company agreed
to pay 100% interest related to this line of credit. Interest of $605,000 has
been accrued and included in accrued expenses in the accompanying consolidated
financial statements.
As of December 31, 2010 and 2009, the total obligation including loans of
$605,000, and accrued interest of $605,000, amounted to $1,210,000. The debt
holder has agreed to be repaid from those funds received by the Company at its
next project funding. If the Company does not receive significant project
funding it will not be able to repay the debt. As collateral for the Loan and
Security Agreement the debt holder filed a UCC-1 against the assets and
intellectual property of the Company giving the debt holder the right to
institute foreclosure proceedings against the Company. Foreclosure proceedings
could be instituted at any time if the debt holder believes that he will not be
repaid. As of the date of these financial statements the debt holder has not
indicated any intentions to institute foreclosure proceedings.
This line of credit, in addition to our other debt obligations, is to be repaid
upon our initial project funding.
Diversified Lending
-------------------
On September 5, 2006, the Company entered into a note payable with Diversified
Lending Group, Inc. for $1,250,000. The Company is a joint tenant with Western
Architectural Services, LLC ("Western") in this debt which bears interest of 14%
and is due upon our first substantial project funding. As of December 31, 2007,
Western paid directly to Diversified Lending Group, Inc. six months of interest
for the original loan. We accounted for this as both interest income and
interest expense of $87,500 for the fiscal year ended December 31, 2008. As
stated in the agreement, the Company could extend the Maturity Date of the loan
one time for a period of six months, which the Company exercised for a fee of 3%
of the loan amount or $37,500 (Western paid to the Company $18,750 as their part
of the loan extension). We accounted for Western's three months of interest due
to the extension as both interest income and interest expense of $43,750 for the
fiscal year ended December 31, 2008.
In February 2009, management and the note holder negotiated an amendment to the
note payable, effective February 5, 2008, to extend the terms of the note. Per
the amended agreement, the note is not in default and interest is to continue to
be accrued on the principal balance of $1,250,000 at the original rate of 14%
per annum. An original maturity date of one year from the issuance was amended
F-18
so that the unpaid interest and principal balances are due sixty days after our
first substantial project funding exceeding $15,000,000. As of December 31,
2010, an aggregate balance of $1,731,250 remained unpaid.
This loan, in addition to our other debt obligations, is to be repaid upon our
initial project funding.
As consideration for the loan, the Company was required to pay $50,000 and issue
4,000,000 shares of its common stock, both of which have been completed. Also,
to collateralize the loan, the Company was required to issue 7,500,000 shares of
its common stock. The promissory note also holds an anti-dilution clause where
the Company is required to issue additional shares of its common stock to the
debt holder so their 4% ownership is not diluted. As of December 31, 2010 and
2009, respectively, our loan fees paid with common stock have been fully
expensed. As of December 31, 2010, we have marked these shares to market using
the period end closing price of our stock. Our loan collateral paid with common
stock was $120,000 and $750,000 at December 31, 2010 and 2009, respectively.
At December 31, 2010 and December 31, 2009, we accrued an additional $10,277 and
$12,585 respectively, of interest relating to the year end dilution calculation.
As a result, 2,136,431 additional shares are to be issued upon the publication
of the financial statements.
As the loan collateral, loan fees and anti-dilution components of the agreement
(as described above) are dominated in Company's common stock, the Company
maintains the full risk of loss and we have recorded the full debt component on
our balance sheet.
From the proceeds of the debt facility we issued $500,000 to Western and
recorded an Advance - Related Party on our balance sheet, see Note 2.
NOTE 7. LOAN AND SETTLEMENT PAYABLE
Our loans and settlement payable have no stated interest rate, are due on demand
and are unsecured. Interest has been accrued at an estimated market interest
rate of 8%, is included in accrued expenses, and totaled $600,449 as of December
31, 2010 and $533,709 as of December 31, 2009.
The original loan balance was $228,239 and the proceeds were received and used
for operating capital during the year ended December 31, 2002. In March 2003, a
claim of $1,460,000 was asserted by the lender. Although management believed the
claims were frivolous, due to the additional resources needed by management to
defend against these claims and the likely distraction of management's efforts
from moving forward with the Company's business plan, a settlement agreement was
executed with the lender in August 2003. Pursuant to the Settlement Agreement,
the Company agreed to pay a settlement amount of an additional $650,000, without
claiming any fault or wrong doing.
As of December 31, 2010, the total obligation included loans of $228,239 in
principal and the settlement obligation of $650,000, plus total accrued interest
of $600,449 amounting to an aggregate of $1,478,688. One half of this amount, or
$705,974 is due and payable at the closing of the first round of project funding
and the remaining balance is due and payable at the closing of any subsequent
project funding, neither of which have occurred as of December 31, 2010. Since
the loan payable does not have a maturity date, the entire balance has been
presented as a current liability. The debt holder is a shareholder in our
Company and owns approximately 7.4 million shares of our common stock.
This settlement, in addition to our other debt obligations, is to be repaid upon
our initial project fundings.
NOTE 8. RELATED PARTY TRANSACTIONS AND ACQUISITION
December 31, 2010 December 31, 2009 $ Change % Change
Accrued Expenses - Related Party
Bonuses $ 760,000 $ 760,000 $ -- -%
Consulting Fees 1,327,000 1,018,000 309,000 30%
-----------------------------------------------------
2,087,000 1,778,000 309,000 17%
Due to Related Party
Western Loans 859,000 576,000 283,000 49%
-----------------------------------------------------
859,000 576,000 283,000 49%
-----------------------------------------------------
Total Related Party Liability $2,946,000 $2,354,000 $ 592,000 25%
====================================================
F-19
As of December 31, 2010, the Company had accrued expenses due to related parties
of $2,087,000 and loans due to related parties of $859,000. We have a total
liability to related parties of $2,946,000 as of December 31, 2010 compared to
$2,354,000 as of December 31, 2009. The increase of $592,000, or 25%, is
primarily due to the lack of funds to pay our related parties and our other
creditors. As a result of the lack of funds, our related parties have provided
loans to the Company throughout the operating year.
Synthetic Systems, Inc.
-----------------------
During each of the years ended December 31, 2007 and 2006, the Company awarded a
bonus of $380,000 payable to Synthetic Systems, Inc., an entity jointly owned by
its Chief Executive Officer and Secretary. No bonuses have been issued in
subsequent years. As of December 31, 2010, these bonuses remain unpaid.
During the years ended December 31, 2010 and 2009, the Company incurred
consulting fees of approximately $37,000 per month to Synthetic Systems, Inc.,
for a total of $444,000 in each years then ending. Although the Company incurs
related party consulting fees on a monthly basis, cash payments are not made to
Synthetic Systems, Inc. unless there is sufficient cash on hand to meet the
operating needs of the Company.
The Company paid furniture and equipment lease of $13,800, or $1,150 per month,
as of December 31, 2010 and 2009 to Synthetic Systems, Inc. The Company also
paid on behalf of Synthetic Systems Inc., office rent expenses of $36,052 and
$34,122 for the fiscal years ending December 31, 2010 and 2009, respectively.
At December 31, 2010, accrued expenses - related party consists of the $760,000
unpaid bonus balance plus $1,327,000 in unpaid consulting fees to Synthetic
Systems discussed above.
Western Architectural Services, LLC
-----------------------------------
During February 2004, the Company paid $300,000 in cash to Western, an entity
owned by the Company's Chief Operating Officer and director of the Company
pursuant to a Contractor Agreement between Western and the Company to design and
build a car for the Voyager project and conduct a feasibility study. As site
locations have been modified for the project, the feasibility study has been
modified by Western under this contract.
On May 30, 2002, the Company executed a Contractor Agreement with Western where
Western will provide to the Company certain architectural services for the L.V.
Project in exchange for which the Company issued 2,812,500 shares of restricted
common stock to Western. Although he was not an affiliate of the Company upon
execution of the Contractor Agreement, Western's Chief Executive Officer is
currently our Chief Operating Officer, a director and significant stockholder of
the Company. We have accounted for these shares as Deferred Construction Costs
in these financial statements.
Western plans to sell the amount of common stock at the time, before, and during
the contract to purchase supplies and pay subcontractors. At the time the
contract was issued the shares of the Company were trading at $6.50 per share.
The current stock price of the Company has a trading range of $0.001 to $0.035.
If at the time Western performs the services contracted and the share price is
below $6.50 per share, the Company will be required to issue new shares to
Western in order for the contract to be fulfilled. Western's Chief Executive
Officer, Tracy Jones, is currently an affiliate of the Company which will also
limit the amount of shares that can be sold based on the trading volume and
shares outstanding in accordance with Rule 144 of the Securities Act of 1933. As
of December 31, 2010, we have marked these shares to market in accordance with
authoritative guidance, using the year end closing price of our stock. The
change in valuation adjusts additional-paid in capital due to the deferred
construction cost nature of these shares. As of December 31, 2010 and 2009, the
value of the deferred construction costs was $45,000and $21,093, respectively.
In 2006, the Company entered into a note with Diversified Lending, see Note 6.
From the proceeds of the debt facility we issued $500,000 to Western and
recorded an Advance - Related Party on our balance sheet with an allowance of
$500,000 and $250,000 as of December 31, 2010 and 2009, respectively. In the
event that the Company secures a project site and sufficient project funding,
the allowance against the advance will be reversed in reevaluation for
realizable collectability.
During 2007, we borrowed $125,000 from Western. The amounts are unsecured, carry
no interest and are due upon demand.
During 2008, we borrowed $215,000 from Western. The amounts are unsecured, carry
no interest and are due upon demand.
As an incentive for the borrowed funds, the Company issued the COO 3,000,000
shares of common stock valued at $0.05 per share on June 13, 2008. The issuance
of common stock resulted in a $150,000 increase in interest expense.
During 2009, we borrowed $236,000 from Western. The amounts are unsecured, carry
F-20
no interest and are due upon demand. During 2010, we borrowed $283,000 from
Western. The amounts are unsecured, carry no interest and are due upon demand.
As of December 31, 2010, an aggregate of $859,000 payable to Western remained.
Acquisition
-----------
On April 10, 2006, Voyager entered into a Unit Purchase (Buy-Sell) Agreement
("Agreement") to acquire all the outstanding units of Western in exchange for a
total of 5,000,000 shares of Voyager's common stock. On September 11, 2006,
Voyager believed it had fully completed the necessary due diligence pursuant to
the Agreement and consequently delivered the Shares consideration as required
for the final closing. Upon further evaluation of Voyager's due diligence of
Western pursuant to Section 2.02 of the Agreement, it was determined that the
existing limited liability company ("LLC") operating agreement of Western would
need to be modified in order for Voyager to continue the existing operations of
Western.
On March 30 2007, Voyager and Western were not able to come to acceptable terms
with regards to the needed changes to the LLC operating agreement and therefore
canceled the Agreement since the transaction did not meet all the requirements
of Section 2.02 of the Agreement and was deemed as if the acquisition
transaction was never closed.
As a result, the acquisition was nullified effective March 30, 2007. As a result
of the nullification of the acquisition transaction, 2,500,000 shares of common
stock were to be returned to the Company for cancellation and returned to the
treasury. The remaining 2,500,000 shares were accounted for as a fee for the
nullification in our statement of operations as of December 31, 2007. The shares
were valued at fair value of $0.15 per share for a total value of $375,000. On
February 7, 2008, the share certificate for 3,000,000 shares was returned to the
Company under the March 30, 2007 agreement. We have accounted for the 500,000
excess shares as a common stock payable due to Western. As of December 31, 2010,
we have marked these shares to market using the period end closing price of our
stock. As of December 31, 2010 and 2009, the value of the common stock payable
was $8,000 and $75,000, respectively.
NOTE 9. COMMITMENTS AND CONTINGENCIES
The Company shares office space with Synthetic Systems as previously disclosed
in Note 8. The lease is a month to month sublease. The Company has no other
commitments.
NOTE 10. STOCKHOLDERS' EQUITY
The authorized stock of the Company consists of 200,000,000 shares of $0.001 par
value common stock and 50,000,000 shares of $0.001 par value 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.
PREFERRED STOCK
Convertible Preferred Stock - Series A
--------------------------------------
The Series A convertible preferred stock carries the following rights and
preferences:
o 10 to 1 voting rights per share
o Each share has 10 for 1 conversion rights to shares of common stock
o No redemption rights
During 2002, prior to the conversion of Dakota Imaging Inc. and Voyager
Entertainment International, Inc., the Company issued 2,160,000 shares of
convertible preferred stock as consideration for cash and services, of which
660,000 shares were immediately converted to shares of common stock, resulting
in the Company having 3,660,000 shares of common stock outstanding.
In February 2002, upon the conversion of Dakota Imaging Inc. and Voyager
Entertainment International, Inc., 2,160,000 shares of the Series A convertible
preferred stock were immediately converted into 21,600,000 shares of common
stock, resulting in a balance of 1,500,000 shares of convertible preferred stock
designated.
On March 5, 2004, Richard Hannigan, the Company's CEO, converted 500,000 Series
A Preferred shares into 5,000,000 shares of common stock of the Company.
On March 31, 2004, a former officer and director converted 500,000 Series A
Preferred shares into 5,000,000 shares of common stock of the Company. In
September 2006, 500,000 Series A Preferred shares were converted into 5,000,000
shares of common stock of the Company by a non-officer.
F-21
Convertible Preferred Stock - Series B
--------------------------------------
The Series B convertible preferred stock carries the following rights and
preferences:
o 2 to 1 voting rights per share
o Each share has 2 for 1 conversion rights to shares of common stock
o No redemption rights
o Preferential liquidation rights to Series A preferred stock and common
stock
o Anti-dilution clauses in the event of a reverse split
In June 2003, the Company sold 1,000,000 of the Series B Preferred Stock Shares
for total cash consideration of $100,000 to one investor at $0.10 per share. The
Company recognized a beneficial conversion feature of $80,000 accounted for as a
preferred stock dividend during the year. Since these shares are immediately
convertible into common stock of the Company, the Company recognized the
dividend immediately.
In August 2003, the Company sold 500,000 of the Series B Preferred Stock Shares
for total cash consideration of $50,000 to one investor at $0.10 per share. The
Company recognized a beneficial conversion feature of $50,000 accounted for as a
preferred stock dividend during the year. Since these shares are immediately
convertible into common stock of the Company, the Company recognized the
dividend immediately.
In December 2003, the Company issued 2,500,000 of the Series B Preferred Stock
Shares for total consideration valued at $2,350,000, or $0.94 per share, to its
officer-stockholders. The fair value of the services received was determined
based on the fair value of the underlying trading common stock.
In August 2005, the Company's CEO converted 1,000,000 Series B Preferred shares
into 2,000,000 shares of common stock of the Company.
In August 2005, the Company's Secretary converted 1,000,000 Series B Preferred
shares into 2,000,000 shares of common stock of the Company.
In August 2005, an entity controlled by an officer and director of the Company
converted 500,000 Series B Preferred shares into 1,000,000 shares of common
stock of the Company.
In May 2006, an officer and director of the Company converted 500,000 Series B
Preferred Shares into 1,000,000 shares of common stock of the Company.
In September 2009, an investor converted 1,000,000 Series B Preferred shares
into 2,000,000 shares of common stock of the Company.
Convertible Preferred Stock - Series C
--------------------------------------
Effective March 21, 2011, the Company amended it Articles of Incorporation to
designated 10,000,000 shares of Series C convertible preferred stock. The Series
C convertible preferred stock carries the following rights and preferences:
o 2 to 1 voting rights per share
o Each share has 2 for 1 conversion rights to shares of common stock
o No redemption rights
o Preferential liquidation rights to Series B preferred stock and common
stock
o Anti-dilution clauses in the event of a reverse split
No preferred shares were issued as of December 31, 2010.
Common Stock Issuances
----------------------
On February 15, 2002, the Company sold 800,000 restricted shares of common stock
at a price of $0.50 per share for $400,000, which represented the fair market
value of the common stock on date of issuance.
F-22
On April 5, 2002, the Company issued 200,000 restricted shares of common stock
in exchange for services performed totaling $200,000. The fair market value of
the common stock on the date of issuance totaled $400,000. Therefore, the
Company has recognized stock discount expense of $200,000.
On May 30, 2002, the Company executed a Contractor Agreement with Western where
Western will provide to be determined architectural services to the Company for
its Las Vegas Observation Wheel Project. The Company issued 2,812,500 shares of
restricted common stock in consideration for Western's contract sum of
$18,141,533 classified as deferred construction costs. See Note 8 above.
During June 2002, the Company sold 50,000 restricted shares of common stock at a
price of $3.00 per share solely to accredited investors for cash consideration
totaling $150,000, which represents the fair market value of the common stock on
date of issuance. Since the cash consideration received was from unrelated
parties, it was determined to best represent the fair market value of the shares
on the transaction date.
On October 28, 2002, the Company entered into a professional architectural
services agreement with an architect firm in exchange for 600,000 shares of
common stock. The Company's stock must be issued within 10 days of the
agreement. In addition, the Company is responsible for reimbursement of
expenses.
On November 19, 2002, the Company entered into a line of credit financing in the
amount of $1,000,000 in exchange for 650,000 shares of common stock. The fair
market value of the trading common stock on the date of issuance totaled
$163,150.
On December 9, 2002, the Company entered into a consulting agreement in exchange
for 325,000 shares of common stock. The fair market value of the trading common
stock on the date of issuance totaled $75,075.
In September 2003, the Company sold 769,222 shares of common stock for total
cash consideration of $100,000 to one investor, which represents the fair market
value of the common stock on date of issuance. Since the cash consideration
received was from unrelated parties, it was determined to best represent the
fair market value of the shares on the transaction date. The common stock was
offered in reliance upon the private offering exemptions contained in Sections
3(b) and 4(2) of the Securities Act of 1933, as amended, and Rule 506 of
Regulation D promulgated there under.
In September 2003, the Company also issued 625,000 shares of restricted common
stock to two individuals for consulting services rendered. These shares were
valued at the trading fair market value of $0.16 per share or total compensation
cost of $100,000.
In December 2003, an investor entered into an agreement to purchase 1,346,154
additional shares of common stock for cash proceeds of $175,000. These shares
were purchase and issued as follows: In January 2004, $25,000 was received from
the sale of 192,307 shares of common stock pursuant to a purchase agreement from
December 2003, In February 2004, $50,000 was received from the sale of 384,614
shares of common stock pursuant to a purchase agreement from December 2003, In
March 2004, $100,000 was received from the sale of 769,228 shares of common
stock pursuant to a purchase agreement from December 2003.
The common stock above was offered in reliance upon the private offering
exemptions contained in Sections 3(b) and 4(2) of the Securities Act of 1933, as
amended, and Rule 506 of Regulation D promulgated there under.
In February 2004, $300,000 was received for 750,000 shares of common stock. The
common stock was offered in reliance upon the private offering exemptions
contained in Sections 3(b) and 4(2) of the Securities Act of 1933, as amended,
and Rule 506 of Regulation D promulgated there under.
During February 2004, the Company also issued 725,000 shares of restricted
common stock to three consultants for services rendered. These shares were
valued at the fair market value ranging from $0.75 to $0.80 per share for total
consideration of $558,750.
On March 5, 2004, the Company's CEO converted 500,000 Series A Preferred shares
into 5,000,000 shares of common stock of the Company.
On March 31, 2004, a former officer and director converted 500,000 Series A
Preferred shares into 5,000,000 shares of common stock of the Company.
F-23
On June 17, 2004, the Company initiated negotiations to potentially purchase a
parcel of property in Las Vegas, Nevada. At that time, the Company issued
500,000 shares of common stock as an incentive to the owner of that property
which will not be recovered regardless of whether the Company completes the
transaction. The shares were valued at the fair market value of $0.49 per share
for a total of $245,000.
On June 30, 2004, the Company issued 150,000 shares of common stock to an
individual for services rendered. These shares were valued at the fair market
value of $0.52 per share for total consideration of $78,000.
In September 2004, $50,000 was received for 333,333 shares of common stock. The
common stock was offered in reliance upon the private offering exemptions
contained in Sections 3(b) and 4(2) of the Securities Act of 1933, as amended,
and Rule 506 of Regulation D promulgated there under.
In October 2004, $150,000 was received for 1,000,000 shares of common stock. The
common stock was offered in reliance upon the private offering exemptions
contained in Sections 3(b) and 4(6) of the Securities Act of 1933, as amended,
and Rule 506 of Regulation D promulgated there under.
In October 2004, the Company issued 500,000 shares of common stock to an
individual for services rendered. These shares were valued at the fair market
value of $0.11 per share for total consideration of $55,000.
In January 2005, the Company issued 500,000 shares of common stock for
consulting services rendered in the first quarter of 2005. These shares were
valued at the fair value of $0.15 per share for total compensation of $75,000.
In February 2005, $100,000 was received for 500,000 shares of common stock at
$0.20 per share.
In March 2005, $75,000 was received for 375,000 shares of common stock at $0.20
per share.
In March 2005, the Company issued 500,000 shares of common stock for consulting
services rendered. These shares were valued at the fair value of $0.32 per share
for total compensation of $160,000.
In June 2005, $400,000 was received for 2,666,667 shares of common stock at
$0.15 per share.
In July 2005, $125,000 was received for 833,333 shares of common stock at $0.15
per share.
In July 2005, the Company issued 200,000 shares of common stock for consulting
services rendered. These shares were valued at the fair value of $0.35 per share
for total compensation of $70,000.
In August 2005, the Company's CEO converted 1,000,000 Series B Preferred shares
into 2,000,000 shares of common stock of the Company.
In August 2005, the Company's Secretary converted 1,000,000 Series B Preferred
shares into 2,000,000 shares of common stock of the Company.
In August 2005, an entity controlled by an officer and director of the Company
converted 500,000 Series B Preferred shares into 1,000,000 shares of common
stock of the Company.
In September 2005, the Company issued 600,000 shares of common stock for
consulting services rendered. These shares were valued at the fair value of
$0.33 per share for total compensation of $198,000.
In November 2005, $25,000 was received for 166,667 shares of common stock at
$0.15 per share.
In December 2005, $270,000 was received for 1,800,000 shares of common stock at
$0.15 per share.
In February 2006, $25,000 was received for 166,667 shares of common stock at
$0.15 per share.
In April 2006, the Company issued 3,000,000 shares of common stock in
anticipation of the Western merger, see Note 8. These shares were valued at fair
value of $0.15 per share or $450,000.
In April 2006, the Company issued 950,000 shares of common stock for consulting
services rendered. These shares were valued at the fair value on the date of
grant of $0.15 per share for total compensation of $142,500.
F-24
In May 2006, an officer and director of the Company converted 500,000 Series B
Preferred Shares into 1,000,000 shares of common stock of the Company.
In May 2006, the Company issued 100,000 shares of common stock for consulting
services rendered. These shares were valued at the fair value of $0.16 per share
on the date of grant for total compensation of $16,000.
In June 2006, the Company issued 250,000 shares of common stock for consulting
services rendered. These shares were valued at the fair value per share of $0.14
per share on the date of grant for total compensation of $35,000.
In September 2006, 500,000 Series A Preferred shares were converted into
5,000,000 shares of common stock of the Company by a non-officer.
In August 2006, the Company issued 4,000,000 and 7,500,000 shares of common
stock in association with loan origination costs and collateral for the loan,
valued at fair value on the issuance date at $0.10 per share for a total value
of $400,000 and $750,000, respectively.
In November 2006, the Company issued 9,812,500 shares of common stock for
consulting services rendered. These shares were valued at the fair value of
$0.08 per share on the date of grant for total compensation of $750,000.
In November 2006, the Company issued 2,000,000 shares of common stock in
anticipation of the Western merger, see Note 8. These shares were valued at fair
value of $0.15 per share for a total value of $300,000.
In December 2006, the Company issued 464,278 shares of common stock due to the
anti-dilution clause in our debt agreement, see Note 6 above. The shares were
valued at the fair value of $0.06 per share
In December 2006, $25,000 was received for 166,667 shares of common stock at
$0.15 per share.
In December 2006, the Company issued 1,000,000 shares of common stock for
consulting services rendered. 1, 000,000 shares were valued at the fair value of
$.058 per share on the date of grant for total compensation of $58,000 and
600,000 shares were valued at the fair value of $0.06 per share for a total
value of $36,000.
In March 2007, the Company issued 1,000,000 shares of common stock for
consulting services rendered. These shares were valued at the fair value on the
date of grant for total compensation of $98,000 or $0.098.
In April 2007, the Company issued 500,000 shares of common stock for consulting
services rendered. These shares were valued at the fair value on the date of
grant for total compensation of $60,000 or $0.12.
In April 2007, the Company issued 89,438 shares of common stock for interest
which was accrued at December 31, 2006 for $6,260 or $0.07 per share, relating
to our Diversified Lending Group, Inc. note.
In May 2007, the Company issued 1,100,000 shares of common stock for consulting
services rendered. These shares were valued at the fair value on the date of
grant for total compensation of $115,500 or $0.105.
In July 2007, the Company issued 2,000,000 shares of common stock as a result of
shares purchased through a private placement offering for $200,000 or $0.10.
In July 2007, the Company issued 39,800 shares of common stock for the accrued
$7,164 or $0.18 per share in interest accrued at June 30, 2007 for charges
relating to the Diversified Lending Group, Inc. note.
In August 2007, the Company issued 1,300,000 shares of common stock for
consulting services rendered. These shares were valued at the fair value on the
date of grant for total compensation of $188,500 or $0.145.
In August 2007, the Company issued 1,200,000 shares of common stock as a result
of shares purchased through a private placement offering for $120,000 or $0.01.
In August 2007, the Company issued 149,369 shares of common stock for interest
which was for the accrued interest at September 30, 2007 for $21,587 or $0.14
per share relating to our Diversified Lending Group, Inc. note.
F-25
In October 2007, the Company issued 100,000 shares of common stock as a result
of shares purchased through a private placement offering for $10,000 or $0.01.
In November 2007, the Company issued 500,000 shares of common stock for
professional services rendered. These shares were valued at the fair value on
the date of grant for total compensation of $50,000 or $0.10.
In December 2007, the Company issued 1,450,000 shares of common stock as a
result of shares purchased through a private placement offering for $60,000 or
$0.04.
In December 2007, the Company issued 200,000 shares of common stock for
professional services rendered. These shares were valued at the fair value on
the date of grant for total compensation of $20,000 or $0.10.
In December 2007, the Company issued 105,775 shares of common stock for interest
which was for the accrued interest at September 30, 2007 for $14,809 or $0.14
per share relating to our Diversified Lending Group, Inc. note.
In March 2008, the Company issued 1,000,000 shares of common stock as a result
of shares purchased through a private placement offering for $50,000 cash or
$0.05.
In April 2008, the Company issued 625,000 shares of common stock as a result of
shares purchased through a private placement offering for $25,000 cash or $0.04.
In April 2008, the Company issued 2,375,000 shares of common stock for
professional services rendered. These shares were valued at the fair value on
the date of grant for total compensation of $98,000 or $0.04.
In May 2008, the Company issued 1,000,000 shares of common stock as a result of
shares purchased through a private placement offering for $30,000 cash or $0.03.
In June 2008, the Company issued 1,000,000 shares of common stock as a result of
shares purchased through a private placement offering for $30,000 cash or $0.03.
In June 2008, the Company issued 5,200,000 shares of common stock for
professional services rendered and interest expense incurred. These shares were
valued at the fair value on the date of grant for total compensation of $260,000
or $0.05.
In October 2008, the Company issued 250,000 shares of common stock for services
rendered. These shares were valued at fair value on the date of grant for total
compensation of $10,000 or $0.04.
In February 2009, the Company issued 250,000 shares of common stock for
professional services rendered for total compensation of $5,000 or $0.02 per
share.
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.
In March 2009, the Company issued 2,000,000 shares of common stock payable or
$0.02 per share for which, $40,000 cash was received in 2008.
In April 2009, the Company issued 375,000 shares of common stock for
professional services rendered for total compensation of $7,500 or $0.02 per
share.
In May 2009, the Company issued 3,000,000 shares of common stock for
professional services rendered for total compensation of $75,000 or $0.03 per
share. As of December 31, 2009, the vendor has chosen to accept cash at a later
date when financing has been secured. The shares were returned to treasury on
March 2, 2010. In December 2010, the payable was dismissed by the vendor.
In August 2009, the Company issued 7,250,000 shares of common stock for
professional services rendered for total compensation of $111,250 or $0.02 per
share.
In August 2009, the Company issued 3,000,000 shares of common stock for $60,000
cash or $0.02 per share.
F-26
In February, 2010, the Company issued 1,500,000 shares of common stock that were
purchased for $30,000 on December 17, 2009.
In May 2010, the Company issued 2,100,000 shares of common stock, valued at
$8,400, or $0.004 per share, for services performed.
In June 2010, the Company issued 2,425,000 shares of common stock, valued at
$48,500, or $0.02 per share, for website development costs. $40,594 has been
capitalized (see Note 4). As of December 31, 2010, $2,609 of this issuance has
been recognized as a prepaid expense for ongoing maintenance costs over the life
of the website.
In July 2010, the Company issued 200,000 shares of common stock, valued at $640,
or $0.003 per share, for services performed.
In August 2010, the Company issued 5,000,000 shares of common stock, valued at
$16,000, or $0.003 per share, for services. As of December 31, 2010,
approximately 10% of the contracted services have been performed. The Company
has recognized a prepaid expense for the remaining $14,400 worth of shares
issued.
In October 2010, the Company issued 1,000,000 shares of common stock, valued at
$10,000 or $0.01 per share, for services performed.
In December 2010, the Company issued 6,150,000 shares of common stock, valued at
$36,000 or $0.005 per share for services performed.
In December 2010, the Company issued 5,000,000 shares of common stock, valued at
$50,000 or $0.01 per share for services to be performed. As of December 31,
2010, the Company has recognized a prepaid expense of $50,000 for this issuance.
In December 2010, the Company issued 350,000 shares of common stock as a result
of shares purchased through a private placement offering for $7,000 or $0.02.
Common stock payable, net consists of:
o 500,000 shares payable to an Officer of the Company, valued at $8,000,
relating to the 2008 Western Acquisition Rescission. We have marked
these shares to market using the period end closing price of our
stock. The change in valuation was applied to additional-paid-in
capital.
o $20,000 payable relating to 2008 investor who has not completed
investment paperwork so that management can release the shares.
Stock Option Plan
-----------------
The Company's stockholders approved the 2002 Stock Option Plan on April 2, 2002
at the Company's annual meeting. The plan authorizes the Company to issue
5,000,000 shares of common stock for issuance upon exercise of options.
The plan is intended to encourage directors, officers, employees and consultants
of the Company to acquire ownership of common stock. Officers (including
officers who are members of the Board of Directors), directors (other than
members of the Stock Option Committee (the "Committee") to be established to
administer the Stock Option Plan) and other employees and consultants of the
Company and its subsidiaries (if established) will be eligible to receive
options under the planned Stock Option Plan. The Committee will administer the
Stock Option Plan and will determine those persons to whom options will be
granted, the number of options to be granted, the provisions applicable to each
grant and the time periods during which the options may be exercised. No options
may be granted more than ten years after the date of the adoption of the Stock
Option Plan.
Unless the Committee, in its discretion, determines otherwise, non-qualified
stock options will be granted with an option price equal to the fair market
value of the shares of common stock to which the non-qualified stock option
relates on the date of grant. In no event may the option price with respect to
an incentive stock option granted under the Stock Option Plan be less than the
fair market value of such common stock to which the incentive stock option
relates on the date the incentive stock option is granted. Each option granted
under the Stock Option Plan will be exercisable for a term of not more than ten
years after the date of grant. Certain other restrictions will apply in
connection with this Plan when some awards may be exercised.
F-27
In the event of a change of control (as defined in the Stock Option Plan), the
date on which all options outstanding under the Stock Option Plan may first be
exercised will be accelerated. Generally, all options terminate 90 days after a
change of control. As of December 31, 2010, no options have been issued under
this plan.
NOTE 11. INCOME TAXES
We did not provide any current or deferred U.S. federal income tax provision or
benefit for the period presented because we have experienced operating losses
since inception. Per authoritative guidance pursuant to accounting for income
tax and uncertainty in income taxes, when it is more likely than not that a tax
asset cannot be realized through future income, the Company must allow for this
future tax benefit. We provided a full valuation allowance on the net deferred
tax asset, consisting of net operating loss carry forwards, because management
has determined that it is more likely than not that we will not earn income
sufficient to realize the deferred tax assets during the carry forward period.
The components of the Company's deferred tax asset as of December 31, 2010 and
2009 are as follows:
2010 2009
----------- -----------
Net operating loss carry forward $ 6,745,900 $ 6,356,500
Valuation allowance (6,745,900) (6,356,500)
----------- -----------
Net deferred tax asset $ -- $ --
=========== ===========
A reconciliation of income taxes computed at the statutory rate to the income
tax amount recorded is as follows:
2010 2009 Since Inception
----------- ----------- ---------------
Tax at statutory rate (35%) $ 389,400 $ 512,100 $ 6,745,900
Increase in valuation allowance (389,400) (512,100) (6,745,900)
----------- ----------- -----------
Net deferred tax asset $ -- $ -- $ --
=========== =========== ===========
The Company had no gross unrecognized tax benefits that, if recognized, would
favorably affect the effective income tax rate in future periods. The Company
has not accrued any additional interest or penalties. No tax benefit has been
reported in connection with the net operating loss carry forwards in the
consolidated financial statements as the Company believes it is more likely than
not that the net operating loss carry forwards will expire unused. Accordingly,
the potential tax benefits of the net operating loss carry forwards are offset
by a valuation allowance of the same amount. Net operating loss carry forwards
start to expire in 2019.
The Company files income tax returns in the United States federal jurisdiction.
With a few exceptions, the Company is no longer subject to U.S. federal, state
or non-U.S. income tax examination by tax authorities on tax returns filed
before January 31, 2006. The Company will file its U.S. federal return for the
year ended December 31, 2010 upon the issuance of this filing. These U.S.
federal returns are considered open tax years as of the date of these
consolidated financial statements. No tax returns are currently under
examination by any tax authorities.
NOTE 12. FAIR VALUE
As required by the Fair Value Measurements and Disclosures Topic of the FASB
ASC, fair value is measured based on a three-tier fair value hierarchy, which
prioritizes the inputs used in measuring fair value as follows: (Level 1)
observable inputs such as quoted prices in active markets; (Level 2) inputs,
other than the quoted prices in active markets, that are observable either
directly or indirectly; and (Level 3) unobservable inputs in which there is
little or no market data, which require the reporting entity to develop its own
assumptions.
The three levels of the fair value hierarchy 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;
F-28
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).
In accordance with authoritative guidance, the table below sets forth the
Company's financial assets and liabilities measured at fair value by level
within the fair value hierarchy. 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 December 31, 2010
--------------------------------------------
Total Level 1 Level 2 Level 3
--------------------------------------------
Assets:
Deferred Construction Costs $ 45,000 $ 45,000 $-- $--
Loan Collateral 120,000 120,000
-------- -------- ---- ----
$165,000 $165,000 $-- $--
======== ======== ==== ====
Liabilities:
Common Stock Payable - Related Party $ 8,000 $ 8,000 $-- $--
Fair Value at December 31, 2009
--------------------------------------------
Total Level 1 Level 2 Level 3
--------------------------------------------
Assets:
Deferred Construction Costs $ 21,093 $ 21,093 $-- $--
Loan Collateral 750,000 750,000
-------- -------- ---- ----
$771,093 $771,093 $-- $--
======== ======== ==== ====
Liabilities:
Common Stock Payable - Related Party $ 75,000 $ 75,000 $-- $--
The valuation of these assets and liabilities are expected to fluctuate in
accordance with the market rate of the Company's common stock.
NOTE 13. SUBSEQUENT EVENTS
Management evaluated all activity of the Company through March 29, 2011 (the
issue date of the Financial Statements).
On January 11, 2011, the Company borrowed $10,000 from Western. The amount is
unsecured, carries no interest and is due upon demand.
On January 21, 2011, the Company received $7,000 through a private placement
offering for 350,000 shares of common stock or $0.02 per share. As of March 29,
2011, these shares have not been issued.
On February 10, 2011, the Company borrowed $10,000 from Western. The amount is
unsecured, carries no interest and is due upon demand.
On March 4, 2011, the Company received $10,000 through a private placement
offering for 500,000 shares of common stock or $0.02 per share. As of March 29,
2011, these shares have not been issued.
F-29
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
ITEM 9A. CONTROLS AND PROCEDURES.
We maintain "disclosure controls and procedures," as such term is defined in
Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the
"Exchange Act"), that are designed to ensure that information required to be
disclosed by us in reports that we file or submit under the Exchange Act is
recorded, processed, summarized, and reported within the time periods specified
in Securities and Exchange Commission rules and forms, and that such information
is accumulated and communicated to our management, including our Chief Executive
Officer and Principal Financial Officer, as appropriate, to allow timely
decisions regarding required disclosure. In designing and evaluating our
disclosure controls and procedures, management recognized that disclosure
controls and procedure, no matter how well conceived and operated, can provide
only reasonable, not absolute, assurance that the objectives of the disclosure
controls and procedures are met. Additionally, in designing disclosure controls
and procedures, our management was required to apply its judgment in evaluating
the cost-benefit relationship of possible disclosure controls and procedures.
The design of any disclosure controls and procedures also is based in part upon
certain assumptions about the likelihood of future events, and there can be no
assurance that any design will succeed in achieving its stated goals under all
potential future conditions.
As of December 31, 2010, we carried out an evaluation, under the supervision and
with the participation of our Chief Executive Officer and Principal Financial
Officer, of the effectiveness of the design and operation of our disclosure
controls and procedures. Based on this evaluation, our Chief Executive Officer
and Principal Financial Officer concluded that our disclosure controls and
procedures were ineffective to ensure that information required to be disclosed
by us in our periodic reports is recorded, processed, summarized and reported,
within the time periods specified for each report and that such information is
accumulated and communicated to our management, including our Chief Executive
and Principal Financial Officers, or persons performing similar functions, as
appropriate to allow timely decisions regarding required disclosure.
MANAGEMENT'S ASSESSMENT
The management of Voyager Entertainment International, Inc. is responsible for
establishing and maintaining adequate internal control over financial reporting.
Internal control over financial reporting is defined in Rule 13a-15(f) or
15d-15(f) promulgated under the Securities Exchange Act of 1934 as a process
designed by, or under the supervision of, the company's Chief Executive and
Principal Financial officers and effected by the Company's Board of Directors,
management and other personnel, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with accounting principles generally
accepted in the United States of America and includes those policies and
procedures that:
- Pertain to the maintenance of records that in reasonable detail
accurately and fairly reflect the transactions and dispositions of the
assets of the company;
- Provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance
with accounting principles generally accepted in the United States of
America and that receipts and expenditures of the company are being
made only in accordance with authorizations of management and
directors of the company; and
- Provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use or disposition of the company's
assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate. All internal control systems,
no matter how well designed, have inherent limitations. Therefore, even those
systems determined to be effective can provide only reasonable assurance with
respect to financial statement preparation and presentation. Because of the
inherent limitations of internal control, there is a risk that material
misstatements may not be prevented or detected on a timely basis by internal
control over financial reporting. However, these inherent limitations are known
features of the financial reporting process. Therefore, it is possible to design
into the process safeguards to reduce, though not eliminate, this risk.
49
Management assessed the effectiveness of the Company's internal control over
financial reporting as of December 31, 2010. In making this assessment,
management used the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission in Internal Control-Integrated
Framework.
Based on its assessment, management concluded that, as of December 31, 2010, the
Company's internal control over financial reporting is ineffective due to the
verbal changes in contractual obligations not being properly communicated
throughout the Company.
CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING
During the quarter ended December 31, 2010, there were no changes to our
internal control over financial reporting identified in connection with the
evaluation required by paragraph (d) of Rule 13(a)-15 or Rule 15(d)-15(f) that
has materially affected, or is reasonably likely to materially affect our
internal control over financial reporting.
ITEM 9B. OTHER INFORMATION.
None.
50
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
The following table sets forth the names and positions of our executive officers
and directors. Directors will be elected at our annual meeting of stockholders
and serve for one year or until their successors are duly elected and qualified.
Officers are elected by the Board and their terms of office are, except to the
extent governed by employment contract, at the discretion of the Board.
Name Age Positions and Offices Held
------------------- --- ------------------------------------
Richard Hannigan 62 President, CEO and Director
Tracy Jones 59 Chief Operating Officer and Director
Myong Hannigan 64 Secretary, Treasurer and Director
SIGNIFICANT EMPLOYEES
None.
FAMILY RELATIONSHIPS
Myong Hannigan is the wife of Richard Hannigan, President, Chief Executive
Officer and Director of the Company.
BUSINESS EXPERIENCE AND DIRECTORSHIPS
President, CEO
--------------
Richard L. Hannigan, Sr., has been the Company's President and a director since
February 8, 2002 and Chief Executive Officer since April 2003. Mr. Hannigan also
serves as a managing member of Voyager Viridian ("Viridian"), our wholly-owned
subsidiary. Mr. Hannigan has been President of a design and construction
company, Synthetic Systems, Inc., since 1991. This Company specializes in custom
designs for interior and exterior casino construction. Under Mr. Hannigan's
control, Synthetic Systems, Inc. has been involved in several casino projects in
Las Vegas, including the Luxor Hotel Casino, its interior themed areas and
exterior main entry Sphinx. Prior to forming Synthetic Systems, Inc., Mr.
Hannigan owned and operated two consulting and construction companies from
1983-1991. These companies, Architectural Services, Inc. and Architectural
Systems, Inc., respectively, have been responsible for construction projects
located in Las Vegas, Palm Springs, Los Angeles and Salt Lake City. Mr. Hannigan
has also consulted for exterior glazing and exotic fenestrations on commercial
as well as casino companies in Las Vegas.
Chief Operating Officer
-----------------------
Tracy Jones has been the Company's Chief Operating Officer and became a Board
member, on May 26, 2003. Mr. Jones formed Western Architectural Services, LLC
("Western") in 1982, as an architectural design and fabrication company. Over
the past 20 years Mr. Jones has been instrumental in the development of "themed"
environments for the Hotel/Casino, Restaurant, and Theme Park industry. At
Western, Mr. Jones has revolutionized the use of digitized computer enhancement
for the replication of historical features.
Mr. Jones created methods that reduced the time to produce large-scale projects
such as the Statue of Liberty at the New York - New York Hotel and Casino in Las
Vegas. Previously, this project would have taken almost 1-1/2 years to recreate.
However, with methods developed at Western, this project was fabricated in just
over 6 months.
Mr. Jones has a history of producing the most difficult projects on time, and on
budget. With his position at the Company, Mr. Jones can take this same approach
to developing the Observation Wheels. Mr. Jones brings his expertise of
manufacturing to this world class project. Mr. Jones will focus on product
development, quality control, safety, state and federal regulations, freight
issues, and on-time production and overall construction review.
Secretary, Treasurer
--------------------
Myong Hannigan has served as Secretary of the Company, and a Board member, since
April 4, 2004. Ms. Hannigan also serves as a managing member of Viridian. Ms.
Hannigan attended college at Seoul University in Seoul, South Korea for general
studies and business management. Ms. Hannigan has been a managing partner of a
design and construction company, Synthetic Systems, Inc., since 1991. This
Company specializes in custom design for interior and exterior casino
construction. Prior to Synthetic Systems, Inc., Ms. Hannigan was a managing
partner for Architectural Services, Inc. and Architectural Systems, Inc., from
51
1983-1991.This company specialized in design and installation of custom glass
and glazing systems. Prior to Architectural Services, Inc. and Architectural
Systems, Ms. Hannigan owned and managed Antiqua Stain Glass Company in Honolulu,
Hawaii from 1979-1981, which was relocated from Bloomington, Illinois
(1976-1979). This company specialized in design, manufacturing, installation and
retail/wholesale products.
INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
During the past five years, no present director, executive officer or person
nominated to become a director or an executive officer of the Company:
1. had a petition under the federal bankruptcy laws or any state insolvency
law filed by or against, or a receiver, fiscal agent or similar officer
appointed by a court for the business or property of such person, or any
partnership in which he was a general partner at or within two years before
the time of such filing, or any corporation or business association of
which he was an executive officer at or within two years before the time of
such filing;
2. was convicted in a criminal proceeding or subject to a pending criminal
proceeding (excluding traffic violations and other minor offenses);
3. was subject to any order, judgment or decree, not subsequently reversed,
suspended or vacated, of any court of competent jurisdiction, permanently
or temporarily enjoining him from or otherwise limiting his involvement in
any of the following activities:
(i) Acting as a futures commission merchant, introducing broker, commodity
trading advisor, commodity pool operator, floor broker, leverage
transaction merchant, any other person regulated by the Commodity
Futures Trading Commission, or an associated person of any of the
foregoing, or as an investment adviser, underwriter, broker or dealer
in securities, or as an affiliated person, director or employee of any
investment company, bank, savings and loan association or insurance
company, or engaging in or continuing any conduct or practice in
connection with such activity;
(ii) Engaging in any type of business practice; or
(iii) Engaging in any activity in connection with the purchase or sale of
any security or commodity or in connection with any violation of
federal or state securities laws or federal commodities laws; or
4. was the subject of any order, judgment or decree, not subsequently
reversed, suspended or vacated, of a federal or state authority barring,
suspending or otherwise limiting for more than 60 days the right of such
person to engage in any activity described in paragraph (3) (i), above, or
to be associated with persons engaged in any such activity; or
5. was found by a court of competent jurisdiction (in a civil action), the
Securities and Exchange Commission or the Commodity Futures Trading
Commission to have violated a federal or state securities or commodities
law, and for which the judgment has not been reversed, suspended or
vacated.
PROMOTERS AND CONTROL PERSONS
None.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), requires our executive officers and directors, and persons who
beneficially own more than ten percent of our common stock, to file initial
reports of ownership and reports of changes in ownership with the SEC. Executive
officers, directors and greater than ten percent beneficial owners are required
by SEC regulations to furnish us with copies of all Section 16(a) forms they
file. Based upon a review of the copies of such forms furnished to us, and
written representations from our executive officers and directors, our belief is
that during and prior to the year ended 2008, all reports were not filed timely
as required.
As of March 25, 2011, a Form 5 is pending for the change in ownership due to the
return and the issuance of 3,000,000 shares of our common stock during the
fiscal year ending December 31, 2008 for our Chief Operating Officer, Tracy
Jones.
52
CODE OF ETHICS
The Company has adopted a code of ethics that applies to our principal executive
officer, principal financial officer, directors, and potential employees.
CORPORATE GOVERNANCE
As of December 31, 2010, there have been no material changes to the procedures
by which security holders may recommend nominees to the Company's Board of
Directors.
Committees of the Board of Directors
------------------------------------
Currently, the Company's Board of Directors does not have any standing audit,
nominating or compensation committees, or committees performing similar
functions. Richard Hannigan, President, oversees the compensation of our
executive officers.
Audit Committee and Financial Expert
------------------------------------
The Board of Directors does not have a separate Audit Committee; rather the
Board as a whole performs all functions of an Audit Committee. The Board
currently does not have an "audit committee financial expert" as defined by the
Securities and Exchange Commission Regulation S-K, Item 407(d)(5). The Board
believes that, given the developmental stage of the Company, the Company is not
currently in a position to attract the services of a Board member who does
qualify as a financial expert. However, the Board will continue its search for
an individual who would qualify as a financial expert.
ITEM 11. EXECUTIVE COMPENSATION.
The following table sets forth the compensation for the fiscal period(s) for the
past three years for our Executive Officers who served in those positions, and
the remaining two executive officers of the Company who were serving as
executive officers as of December 31, 2010.
SUMMARY COMPENSATION TABLE
Long Term Compensation
---------------------------------------------
Annual Compensation Awards Payouts
----------------------------------------------------------------------------------
Name Other Restricted Securities
and Annual Stock Underlying LTIP All Other
Principal Compensation Award(s) Options/ Payouts Compensation
Position Year Salary ($) Bonus ($) ($) ($) SARs (#) ($) ($)
---------------------- ---- ---------- --------- ------------ ---------- ---------- ------- ------------
Richard Hannigan
President/CEO/Director 2010 - - 222,000 - - - -
Tracy Jones
COO/Director 2010 - - - - - - -
Myong Hannigan
Secretary 2010 - - 222,000 - - - -
Richard Hannigan
President/CEO/Director 2009 - - 222,000 - - - -
Tracy Jones
COO/Director 2009 - - - - - - -
Myong Hannigan
Secretary 2009 - - 222,000 - - - -
53
Long Term Compensation
---------------------------------------------
Annual Compensation Awards Payouts
----------------------------------------------------------------------------------
Name Other Restricted Securities
and Annual Stock Underlying LTIP All Other
Principal Compensation Award(s) Options/ Payouts Compensation
Position Year Salary ($) Bonus ($) ($) ($) SARs (#) ($) ($)
---------------------- ---- ---------- --------- ------------ ---------- ---------- ------- ------------
Richard Hannigan
President/CEO/Director 2008 - - 210,000 - - - -
Tracy Jones
COO/Director 2008 - - - - - - -
Myong Hannigan
Secretary 2008 - - 210,000 - - - -
(1) 2006-2007 Bonus: The Company awarded a cash bonus of $380,000 payable to
Synthetic Systems, Inc. for each respective year. Synthetic Systems, Inc. is
jointly owned equally by Richard L. Hannigan Sr., our President/CEO, and Myong
Hannigan, our Secretary. No bonuses were issued for 2010, 2009 or 2008. As of
December 31, 2010, the total bonus of $760,000 remains unpaid by the Company.
The bonus will be issued to Synthetic Systems at the appropriate time when the
Company deems it practicable. However, the Company has the option of retiring
the accrued bonuses by issuing shares of our common stock.
(2) 2008-2010: Other Annual Compensation includes (i) $444,000 for the years
ended December 31, 2010 and 2009 and $420,000 for each of the year ended
December 31, 2008 in professional consulting fees paid by the Company to
Synthetic Systems, Inc., an entity owned by Richard and Myong Hannigan. As of
December 31, 2010, $1,327,000 of the cumulative salaries remains unpaid by the
Company.
(3) Myong Hannigan is the wife of Richard Hannigan, Sr.
COMPENSATION PURSUANT TO PLANS
None.
PENSION BENEFITS
None.
OTHER COMPENSATION
None.
COMPENSATION OF DIRECTORS
None.
54
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS.
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLAN
Number of securities
Plan Category Number of securities remaining available for
to be issued upon Weighted-average future issuance under
exercise of exercise price of equity compensation
outstanding options, outstanding options, plans (excluding securities
warrants and rights warrants and rights reflected in column (a))
(a) (b) (c)
Equity compensation
plans approved by
security holders - - 5,000,000
Equity compensation
plans not approved by
security holders - - -
Total - - 5,000,000
(1) On April 2, 2002, the Company's stockholders approved the 2002 Stock Option
Plan, authorizing the issuance of up to 5,000,000 shares of common stock under
the Plan.
There were no stock options issued to any employee or consultants for the year
ending December 31, 2010 and there have not been any options issued since
inception. The Board of Directors determines on an individual basis as to
whether the Company should issue stock for services. There are no current plans
to issue additional stock for services. However, as the Company conducts
business there may be situations from time to time where the Company may elect
to issue stock for services.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of March 25, 2011 with respect to
the beneficial ownership of the Company's common stock, Series A Convertible
Preferred Stock and Series B Convertible Preferred Stock by (i) each person who,
to the knowledge of the Company, beneficially owned or had the right to acquire
more than 5% of the outstanding common stock, Series A Convertible Preferred
Stock and Series B Convertible Preferred Stock, (ii) each director and executive
officer of the Company and (iii) all executive officers and directors of the
Company as a group.
(1) (2) (3) (4)
Title of Class Name and Address of Beneficial Owner Amount and Nature Percent of Class
of Beneficial Owner
----------------------------------------------------------------------------------------------------------------------------
Common Stock Cede & Co. (7)
PO Box 20
Bowling Green Station
New York, NY 10004 47,601,672 28%
55
Diversified Lending Group, Inc. (7)
15260 Ventura Blvd, Ste 1240
Sherman Oaks, CA 91403 12,348,660 7%
Richard Hannigan (5)
President, CEO
4483 West Reno Avenue
Las Vegas, NV 89118 24,412,500 14%
Myong Hannigan (5)
Secretary
4483 West Reno Avenue
Las Vegas, NV 89118 24,197,500 14%
Tracy Jones (6)
COO/Director
4483 West Reno Avenue
Las Vegas, NV 89118 9,217,500 6%
All Directors & Officers as a Group (7) 33,630,000 20%
Series A Preferred stock Richard Hannigan
President, CEO - -
Myong Hannigan
Secretary - -
Tracy Jones
COO/Director - -
All Directors & Officers as a Group (7) - -
(1) (2) (3) (4)
Title of Class Name and Address of Beneficial Owner Amount and Nature Percent of Class
of Beneficial Owner
----------------------------------------------------------------------------------------------------------------------------
Series B Preferred Stock Richard Hannigan
President, CEO - -
Myong Hannigan
Secretary - -
Tracy Jones
COO/Director - -
All Directors & Officers as a Group (7) - -
(1) Pursuant to the rules of the Securities and Exchange Commission, shares
shown as "beneficially" owned include those shares over which the individual has
voting power, including power to vote, or direct the voting of, such security,
and/or investment power, including the power to dispose or direct the
disposition of such security, and includes all shares the individual has the
56
right to acquire beneficial ownership of within 60 days, including, but not
limited to, any right to acquire shares (a) through the exercise of any options,
warrants, or other right, (b) through conversion of a security, (c) pursuant to
the power to revoke a trust, discretionary account or similar arrangement, and
(d) pursuant to the automatic termination of a trust, discretionary account or
similar arrangement. This information is not necessarily indicative of
beneficial ownership for any other purpose. The directors and executive officers
of the Company have sole voting and investment power over the shares of the
Company's common stock, Series A Convertible Preferred Stock and Series B
Convertible Preferred Stock held in their names, except as noted in the
following footnotes.
(2) Calculations are based on 172,127,287 shares of common stock outstanding as
of March 7, 2011.
(4) Includes all shares beneficially owned as reported on most recent Form 4.
(5) Richard Hannigan and Myong Hannigan are husband and wife, Richard Hannigan
directly owns 12,135,000 shares of common stock and has voting power over an
additional 215,000 shares. Myong Hannigan is the direct owner of 12,062,500
shares of common stock.
(6) Mr. Jones is the direct owner of 6,335,000 shares of common stock and 70,000
shares of common stock owned by the Tracy Jones Charitable Remainder Trust. In
addition, Mr. Jones (i) is the sole owner of Western Architectural Services, LLC
("Western") and deemed to beneficially own the 2,812,500 shares of common stock
owned by Western.
(7) Includes all shares beneficially owned as reported by the Company's transfer
agent Nevada Agency and Trust Company.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE.
TRANSACTIONS WITH RELATED PERSONS
Synthetic Systems
-----------------
We have numerous related party transactions with Synthetic Systems, Inc.
("Synthetic"). Synthetic is a company owned jointly by Richard L. Hannigan, Sr.,
our President and CEO and Myong Hannigan, Secretary, Mr. Hannigan's spouse. We
are obligated to pay to Synthetic $37,000 per month for management and
consulting fees.
During 2007 and 2006, bonuses were awarded to Synthetic in the amount of
$380,000. In November 2006, the Company issued shares of our common stock in
order to retire the accrued salary and bonuses from prior years. At December 31,
2010, bonuses for 2007 and 2006 remained unpaid. No bonuses were awarded during
2010 or 2009.
We currently lease 2,100 square feet of office space on a month-to-month basis
from Synthetic for approximately $3,036 per month and paid as of December 31,
2010 an aggregate of $36,052.
In addition, the Company leases office furniture and equipment from Synthetic at
a monthly rental rate of $1,150. During 2010 and 2009, the Company paid an
aggregate of $13,800 to Synthetic for the lease of this office furniture and
equipment.
As of December 31, 2010, our accounts payable due to related parties was
$2,087,000 as compared to $1,778,000 at December 31, 2009. For the year ending
December 31, 2010, the Company had paid a total of $148,800 to Synthetic Systems
for professional and consulting fees and the lease of furniture and equipment.
Although the Company incurs related party consulting fees on a monthly basis,
cash payments are not made to Synthetic Systems, Inc. unless there is sufficient
cash on hand to meet the operating needs of the Company. The unpaid balance
consists of unpaid bonuses in 2007 and 2006 of $760,000 and unpaid consulting
and professional fees of $1,327,000. See Note 8 to our financial statements.
Western Architectural Services, LLC
-----------------------------------
During 2007, we borrowed $125,000 from Western. The amounts are unsecured, carry
no interest and are due upon demand.
During 2008, we borrowed $215,000 from Western. The amounts are unsecured, carry
no interest and are due upon demand.
As an incentive for the borrowed funds, the Company issued the COO 3,000,000
shares of common stock valued at $0.05 per share on June 13, 2008. The issuance
of common stock resulted in a $150,000 increase in interest expense.
During 2009, we borrowed $236,000 from Western. The amounts are unsecured, carry
no interest and are due upon demand.
During 2010, we borrowed $283,000 from Western. The amounts are unsecured, carry
no interest and are due upon demand. As of December 31, 2010, an aggregate of
$859,000 payable to Western remained.
57
Officers and Directors
----------------------
On occasion, our Officers and Directors will loan funds to the Company so that
we can continue our operations.
During 2008, we borrowed and repaid $10,500 from our Secretary. In addition to
the loans, we paid $83 in interest expense.
During 2009, we borrowed and repaid $2,000 from our Secretary. In addition to
the loans, we paid $9 in interest expense.
As of December 31, 2010, there were no loans payable to Officers and Directors
of the Company.
Acquisition
-----------
On April 10, 2006, Voyager entered into a Unit Purchase (Buy-Sell) Agreement
("Agreement") to acquire all the outstanding units of Western in exchange for a
total of 5,000,000 shares of Voyager's common stock ("Shares"). On September 11,
2006, Voyager believed it had fully completed the necessary due diligence
pursuant to the Agreement and consequently delivered the Shares consideration as
required for the final closing. Upon further evaluation of Voyager's due
diligence of Western pursuant to Section 2.02 of the Agreement, it was
determined that the existing limited liability company ("LLC") operating
agreement of Western would need to be modified in order for Voyager to continue
the existing operations of Western.
On March 30 2007, Voyager and Western were not able to come to acceptable terms
with regards to the needed changes to the LLC operating agreement and therefore
canceled the Agreement since the transaction did not meet all the requirements
of Section 2.02 of the Agreement and was deemed as if the acquisition
transaction was never closed.
As a result, the acquisition was nullified effective March 30, 2007. As a result
of the nullification of the acquisition transaction, 2,500,000 shares of common
stock were to be returned to the Company for cancellation and returned to the
treasury. The remaining 2,500,000 shares were accounted for as a fee for the
nullification in our statement of operations as of December 31, 2007. The shares
were valued at fair value of $0.15 per share for a total value of $375,000. As
March 31, 2008, 3,000,000 shares were returned to the Company under the March
30, 2007 agreement. We have accounted for the 500,000 excess shares as a common
stock payable due to Western. As of December 31, 2010, we have marked these
shares to market using the period end closing price of our stock. As of December
31, 2010 and 2009, the value of the common stock payable was $8,000 and $75,000,
respectively.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Audit Fees
----------
The aggregate fees billed for the fiscal years ending December 31, 2010 and 2009
were $24,500 and $23,500 respectively, for professional services rendered by our
principal accountant for the audit of our annual financial statements and review
of financial statements included in our Form 10-Q or services that are normally
provided by the accountant in connection with statutory and regulatory filings
or engagements for those fiscal years.
Audit-Related Fees
------------------
For the fiscal years ending December 31, 2010 and 2009, we did not incur any
additional audit-related fees, as defined by the Securities and Exchange
Commission, for assurance and related services by our principal accountant that
were not included in our usual audit fees.
Tax Fees
--------
For the fiscal years ending December 31, 2010 and 2009, we did not incur any tax
fees for professional services rendered by our principal accountant for tax
compliance, tax advice, or tax planning.
All Other Fees
--------------
No other fees, as defined by the Securities and Exchange Commission, were paid
for the fiscal years ended December 31, 2010 and 2009 for products or services
provided by our principal accountant that were not included in our usual audit
fees.
The Company currently does not have an audit committee.
For the fiscal years ending December 31, 2010 and 2009, no hours were expended
on our principal accountant's engagement to audit our financial statements that
were attributed to work performed by persons other than the principal
accountant's full-time, permanent employees.
58
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
Number Description
2.1 Plan and Agreement of Merger of Voyager Entertainment
International, Inc. (North Dakota) into Voyager Entertainment
International, Inc. (Nevada) (incorporated by reference to
Exhibit 3.3 to the Company's Quarterly Report on Form 10-QSB for
the period ended September 30, 2003 filed on November 14, 2003).
2.2 Nevada Articles of Merger (incorporated by reference to Exhibit
3.4 to the Company's Quarterly Report on Form 10-QSB for the
period ended September 30, 2003 filed on November 14, 2003).
2.3 North Dakota Certificate of Merger (incorporated by reference to
Exhibit 3.5 to the Company's Quarterly Report on Form 10-QSB for
the period ended September 30, 2003 filed on November 14, 2003).
2.4 Completion of Acquisition of Western Architectural Services, LLC
by the Company (incorporated by reference to exhibit 2.1 to the
Company's Current Report on Form 8-K filed on September 12,
2006).
2.5 Completion of Disposition of Western Architectural Services, LLC
by the Company (incorporated by reference to exhibit 2.1 to the
Company's Current Report on Form 8-K filed on March 30, 2007).
3.1 Nevada Articles of Incorporation (incorporated by reference to
Exhibit .1 to the Company's Quarterly Report on Form 10-QSB for
the period ended September 30, 2003 filed on November 14, 2003).
3.2 Amended and Restated Bylaws (incorporated by reference to Exhibit
3.2 to the Company's Quarterly Report on Form 10-QSB for the
period ended September 30, 2003 filed on November 14, 2003).
4.1 Certificate of Designation of Series A Convertible Preferred
Stock (incorporated by reference to Exhibit 4.1 to the Company's
Quarterly Report on Form 10-QSB for the period ended September
30, 2003 filed on November 14, 2003).
4.2 Certificate of Designation of Series B Convertible Preferred
Stock (incorporated by reference to Exhibit 10.3 to the Company's
Quarterly Report on Form 10-QSB for the period ended September
30, 2003 filed on November 14, 2003).
4.3 2002 Stock Plan for Voyager Entertainment International, Inc.
(incorporated by reference to Exhibit 99 to the Company's Current
Report on Form 8-K filed on April 15, 2002).
10.1 Loan and Security Agreement (by and between the Company and Dan
Fugal, dated November 15, 2002) (incorporated by reference to
Exhibit 10.1 to the Company's Current Report on Form 8-K filed on
November 22, 2002).
10.2 Amendment No. 1 to Loan and Security Agreement (by and between
the Company and Dan Fugal, dated February 15, 2003) (incorporated
by reference to Exhibit 10(k) to the Company's Form 10-KSB filed
on April 16, 2003).
10.3 Amendment No. 2 to Loan and Security Agreement (by and between
the Company and Dan Fugal, dated April 23, 2003) (incorporated by
reference to Exhibit 10.3 to the Company's Quarterly Report on
Form 10-QSB for the period ended March 31, 2003 filed on May 20,
2003).
59
10.4 Contractor Agreement by and between the Company and Western
Architectural Services, LLC, dated May 30, 2002 (incorporated by
reference as exhibit 10.1 to for the Quarter ending September 30,
2004 and filed with the 10-QSB on November 23, 2004).
10.5 Definitive Joint Venture Agreement between Allied Investment
House, Inc. and Voyager to build a Voyager Project in the United
Arab Emirates dated March 15, 2005 (incorporated by reference as
filed and attached as exhibit 99.1 to the 8-K filed on March 17,
2005).
10.6 Settlement and General Release Agreement (incorporated by
reference as exhibit 10.6 as filed with the 10-QSB for the
Quarter Ending September 30, 2004 and filed on November 23,
2004).
10.7 Secured Promissory Note between the Company and Diversified
Lending Group, Inc. dated September 5, 2006 (incorporated by
reference as exhibit 10.1 filed with the 8-K filed on September
12, 2006).
10.8 Extension of repayment of Secured Promissory Note between the
Company and Diversified Lending Group, Inc. dated September 5,
2006 (incorporated by reference as exhibit 10.3 filed with the
8-K filed on November 6, 2007).
14 Code of Ethics applicable to the principal executive and
financial officers (incorporated by reference to Exhibit14 to the
Company's Annual Report on Form 10-K for the period ended
December 31, 2008 filed on March 31, 2009).
31 Rule 13a-14 (a) / 15d-14 (a) Certifications
32 Section 1350 Certifications
(b) Reports on Form 8-K
* On November 5, 2007, the Company filed with the SEC a
Current Report pursuant to Item 2.03 and 9.01of Form 8-K,
"Creation of a Direct Financial Obligation or an Obligation
Under an Off-Balance Sheet Arrangement of a Registrant."
60
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the 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.
By: /s/ Richard Hannigan
--------------------
Richard Hannigan,
President/Director
Dated: March 29, 2011
Pursuant to the requirements of the Securities Exchange Act on 1934, 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
March 29, 2011
By: /s/ Myong Hannigan
------------------
Myong Hannigan
Secretary/Treasurer/Director
March 29, 2011
By: /s/Tracy Jones
--------------
Tracy Jones
COO/Director
March 29, 2011
61