UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2009.
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
FOR THE TRANSITION PERIOD FROM ________ TO ________.
COMMISSION FILE NUMBER 000-33151
VOYAGER ENTERTAINMENT INTERNATIONAL, INC.
(Exact Name of Registrant as Specified in its Charter)
Nevada 54-2110681
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4483 West Reno Avenue, Las Vegas, Nevada 89119
---------------------------------------- ----------
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (702) 221-8070
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the registrant has submitted electronically and
posted on its corporate website, if any, every Interactive Data File required to
be submitted and posted pursuant to Rule 405 of Regulation S-T during the
preceding 12 months (or for such shorter period that the registrant was required
to submit and post such files). Yes [ ] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b -2 of the Exchange Act.
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] Smaller reporting company [X]
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).
Yes [ ] No [X]
As of August 7, 2009, there were 139,152,287 outstanding shares of the issuer's
Common Stock, $0.001 par value.
TABLE OF CONTENTS
Page
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 12
Item 3. Quantitative and Qualitative Disclosures About Market Risk 16
Item 4. Controls and Procedures 16
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 18
Item 1A. Risk Factors 18
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 18
Item 3. Defaults Upon Senior Securities 18
Item 4. Submission of Matters to a Vote of Security Holders 18
Item 5. Other Information 18
Item 6. Exhibits 19
SIGNATURES 20
2
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
VOYAGER ENTERTAINMENT INTERNATIONAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 30, 2009
3
VOYAGER ENTERTAINMENT INTERNATIONAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, December 31,
2009 2008
------------ ------------
(Unaudited) (Audited)
ASSETS
CURRENT ASSETS
Cash $ 6,399 $ 15,234
Prepaids 1,040 1,862
Deferred financing costs 50,000 50,000
Advances - related party 500,000 500,000
------------ ------------
Total current assets 557,439 567,096
FIXED ASSETS, net of accumulated depreciation of
$45,377 and $43,391, respectively 3,992 5,937
------------ ------------
Total assets $ 561,431 $ 573,033
============ ============
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 1,437,765 $ 1,286,380
Accrued expenses - related party 1,636,000 1,470,000
Note payable 1,855,000 1,855,000
Due to related parties 482,000 340,000
Loans and settlement payable 878,239 878,239
------------ ------------
Total current liabilities 6,289,004 5,829,619
------------ ------------
Total liabilities 6,289,004 5,829,619
COMMITMENTS & CONTINGENCIES -- --
STOCKHOLDERS' DEFICIT
Preferred stock: $0.001 par value; authorized 50,000,000 shares
Series A - 1,500,000 designated, none outstanding -- --
Series B - 10,000,000 designated, 1,000,000 outstanding 1,000 1,000
Common stock: $0.001 par value; authorized 200,000,000 shares;
issued and outstanding:139,152,287 and 132,027,287 respectively 139,152 132,027
Additional paid-in capital 13,074,739 12,937,489
Deferred construction costs paid with common stock (56,250) (84,375)
Loan collateral paid with common stock (750,000) (750,000)
Common stock payable 95,000 135,000
Accumulated deficit during the development stage (18,231,214) (17,627,727)
------------ ------------
Total stockholders' deficit (5,727,573) (5,256,586)
------------ ------------
Total liabilities and
stockholders' deficit $ 561,431 $ 573,033
============ ============
See accompanying notes to these condensed consolidated financial statements.
4
VOYAGER ENTERTAINMENT INTERNATIONAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended Six Months Ended From inception
June 30, June 30, June 30, June 30, March 1, 1997 to
2009 2008 2009 2008 June 30, 2009
------------- ------------- ------------- ------------- ----------------
Revenues $ -- $ -- $ -- $ -- $ --
Operating Expenses:
Professional and consulting fees 120,377 335,239 263,754 478,655 12,997,317
Project costs 82,093 12,820 132,567 15,597 328,507
Depreciation 841 1,905 1,945 4,115 45,336
Settlement expense -- -- -- -- 1,025,000
Other expense 31,764 37,309 75,176 67,910 1,235,297
------------- ------------- ------------- ------------- -------------
235,075 387,273 473,442 566,277 15,631,457
Operating loss (235,075) (387,273) (473,442) (566,277) (15,631,457)
Other income (expense):
Interest income -- -- -- 43,750 132,528
Interest expense (64,432) (242,628) (130,045) (308,319) (2,732,285)
------------- ------------- ------------- ------------- -------------
(64,432) (242,628) (130,045) (264,569) (2,599,757)
Net Loss (299,506) (629,901) (603,487) (830,846) (18,231,214)
Preferred stock dividends -- -- -- -- (130,000)
------------- ------------- ------------- ------------- -------------
Net loss allocable to common stockholders $ (299,506) $ (629,901) $ (603,487) $ (830,846) $ (18,361,214)
============= ============= =============
Net loss per common share - basic and
diluted $ (0.00) $ (0.01) $ (0.00) $ (0.01)
============= ============= ============= =============
Weighted average number of common
shares outstanding 137,413,276 121,398,687 135,005,878 122,981,105
============= ============= ============= =============
See accompanying notes to these condensed consolidated financial statements.
5
VOYAGER ENTERTAINMENT INTERNATIONAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
From inception
June 30, June 30, March 1, 1997 to
2009 2008 June 30, 2009
------------ ------------ ----------------
Cash Flows from Operating Activities:
Net Loss $ (603,487) $ (830,846) $(18,231,214)
Adjustments to reconcile net loss to
net cash used by operating activities:
Depreciation 1,945 4,115 45,336
Issuance of common stock for services 132,000 208,000 6,400,315
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 -- 150,000 709,088
Accretion of debt issuance costs -- -- 450,000
Changes in assets and liabilities:
Prepaid expenses 823 919 (1,039)
Accounts payable and accrued expenses 151,384 133,855 1,432,024
Accrued expenses - related party 166,000 87,481 1,636,000
Accrued settlement obligation -- -- 650,000
Net cash used in operating
------------ ------------ ------------
activities (151,335) (246,476) (5,784,490)
Cash flows from Investing Activities:
Payments to acquire fixed assets -- (2,481) (49,850)
Proceeds from Note Receivable -- -- (500,000)
------------ ------------ ------------
Net cash used in investing activities -- (2,481) (549,850)
Cash flows from Financing Activities:
Proceeds from notes payable, short term debt -- -- 2,103,239
Proceeds from notes payable, due to related parties 142,000 75,000 492,500
Payment on notes payable, short term debt -- -- (20,000)
Payment on notes payable, due to related parties -- -- (10,500)
Proceeds from the sale of preferred stock -- -- 150,000
Proceeds from the sale of common stock 500 135,000 3,665,500
Proceeds from common stock payable -- -- 60,000
Payments for loan fees -- -- (50,000)
Payments for deferred financing costs -- -- (50,000)
Net cash provided by financing
------------ ------------ ------------
activities 142,500 210,000 6,340,739
Net (decrease) increase in cash (8,835) (38,957) 6,399
Cash, beginning of year 15,234 42,076 --
------------ ------------ ------------
Cash, end of year $ 6,399 $ 3,119 $ 6,399
============ ============ ============
Cash paid for:
Interest $ -- $ -- $ 93,080
Income Taxes $ -- $ -- $ --
See accompanying notes to these condensed consolidated financial statements.
6
VOYAGER ENTERTAINMENT INTERNATIONAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(CONTINUED)
(UNAUDITED)
From inception
June 30, June 30, March 1, 1997 to
2009 2008 June 30, 2009
------------ ------------ ----------------
Supplemental schedule of non-cash Investing
and Financing Activities:
Common stock issued for financing costs $ -- $ -- $ 988,300
Common stock issued for loan collateral $ -- $ -- $ 750,000
Deferred construction costs, adjusted
to fair value $ 28,125 $ 70,313 $ 56,250
Conversion of preferred shares $ -- $ -- $ 12,600
Common stock issued as acquisition deposit $ -- $ -- $ 750,000
Common stock cancelled due to business combination
cancellation $ -- $ 375,000 $ 375,000
Common stock payable $ (40,000) $ 75,000 $ 95,000
See accompanying notes to these condensed consolidated financial statements.
7
VOYAGER ENTERTAINMENT INTERNATIONAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1. Basis of Presentation and Organization and Significant Accounting
Policies
Basis of Presentation and Organization
--------------------------------------
The accompanying Condensed Consolidated Financial Statements of Voyager
Entertainment International, Inc. (the "Company") should be read in conjunction
with the Company's Annual Report on Form 10-K for the year ended December 31,
2008. Significant accounting policies disclosed therein have not changed except
as noted below.
Voyager Entertainment International, Inc., a North Dakota corporation, formerly
known as Dakota Imaging, Inc. and incorporated on January 31, 1991, is in the
entertainment development business with plans to develop the world's tallest
Observation Wheel on the Las Vegas strip area. During April 2002, the Company
changed its name from Dakota Imaging, Inc. to Voyager Entertainment
International, Inc. and adopted a new fiscal year. On June 11, 2003, the Company
became a Nevada Corporation.
As used in these Notes to the consolidated financial statements, the terms the
"Company", "we", "us", "our" and similar terms refer to Voyager Entertainment
International, Inc. and, unless the context indicates otherwise, its
consolidated subsidiaries. As of June 30, 2009, the Company's wholly-owned
subsidiary includes Voyager Entertainment Holdings, Inc. ("Holdings"), a Nevada
corporation. Outland Development, LLC has been a dormant company and was
discontinued as of June 30, 2009.
These condensed consolidated financial statements include the accounts of the
Company and its subsidiaries. All significant intercompany transactions and
accounts have been eliminated in consolidation.
Basis of Financial Statement Presentation
-----------------------------------------
The accompanying unaudited condensed consolidated financial statements have been
prepared by the Company pursuant to the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted in accordance with such
rules and regulations. The information furnished in the interim condensed
consolidated financial statements includes normal recurring adjustments and
reflects all adjustments, which, in the opinion of management, are necessary for
a fair presentation of such financial statements. Although management believes
the disclosures and information presented are adequate to make the information
not misleading, these interim condensed consolidated financial statements should
be read in conjunction with the Company's most recent audited financial
statements and notes thereto included in its December 31, 2008 Annual Report on
Form 10-K. Operating results for the period ended June 30, 2009 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 2009.
Going Concern
-------------
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, which contemplate continuation of the
Company as a going concern. However, the Company has not begun generating
revenue, is considered a development stage company, has experienced recurring
net operating losses, had a net loss of $603,487 and $830,846 for the six months
ended June 30, 2009 and 2008, and a working capital deficiency of $5,731,565 at
June 30, 2009. These factors raise substantial doubt about the Company's ability
to continue as a going concern. These financial statements do not include any
adjustments relating to the recoverability and classification of recorded asset
amounts, or amounts and classification of liabilities that might result from
this uncertainty.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Fair Value Accounting
---------------------
In September 2006, the Financial Accounting Standards Board ("FASB") issued FASB
Statement No. 157, "Fair Value Measurements" ("FAS 157"). FAS 157 defines fair
value, establishes a framework for measuring fair value in generally accepted
accounting principles, and expands disclosures about fair value measurements.
The provisions of FAS 157 were adopted January 1, 2008. In February 2008, the
FASB staff issued Staff Position No. 157-2 "Effective Date of FASB Statement No.
157" ("FSP FAS 157-2"). FSP FAS 157-2 delayed the effective date of FAS 157 for
nonfinancial assets and nonfinancial liabilities, except for items that are
recognized or disclosed at fair value in the financial statements on a recurring
basis (at least annually). The provisions of FSP FAS 157-2 were adopted for the
Company's fiscal year beginning January 1, 2009 and had no significant impact on
our financial statements.
8
FAS 157 establishes a fair value hierarchy that prioritizes the inputs to
valuation techniques used to measure fair value. The hierarchy gives the highest
priority to unadjusted quoted prices in active markets for identical assets or
liabilities (Level 1 measurements) and the lowest priority to unobservable
inputs (Level 3 measurements). The three levels of the fair value hierarchy
under FAS 157 are described below:
Level 1 Unadjusted quoted prices in active markets that are
accessible at the measurement date for identical,
unrestricted assets or liabilities;
Level 2 Quoted prices in markets that are not active, or inputs that
are observable, either directly or indirectly, for
substantially the full term of the asset or liability;
Level 3 Prices or valuation techniques that require inputs that are
both significant to the fair value measurement and
unobservable (supported by little or no market activity).
New Accounting Pronouncements
-----------------------------
In April 2009, the FASB issued FASB Staff Position 107-1 and Accounting
Principles Board 28-1, "Interim Disclosures about Fair Value of Financial
Instruments," ("FSP 107-1"). FSP 107-1 amends SFAS No. 107, "Disclosures About
Fair Value of Financial Instruments," to require disclosures about fair value of
financial instruments for interim reporting periods of publicly traded companies
as well as in annual financial statements. FSP 107-1 also amends APB Opinion No.
28, "Interim Financial Reporting," to require those disclosures in summarized
financial information at interim reporting periods. FSP 107-1 is effective for
interim reporting periods ending after June 15, 2009. The Company adopted FSP
107-1 in the second quarter of 2009. FSP 107-1 did not have a material impact on
the financial statements.
In April 2009, the FASB issued FASB Staff Positions 115-2 and 124-2,
"Recognition and Presentation of Other-Than-Temporary Impairments" ("FSP 115-2
and 124-2"). FSP 115-2 and 124-2 amends the other-than-temporary impairment
guidance for debt securities to make the guidance more operational and to
improve the presentation and disclosure of other-than-temporary impairments on
debt and equity securities in the financial statements. FSP 115-2 and 124-2 does
not amend existing recognition and measurement guidance related to
other-than-temporary impairments of equity securities. The Company adopted FSP
115-2 and 124-2 in the second quarter of 2009. FSP 115-2 and 124-2 did not have
a material impact on the financial statements.
In April 2009, the FASB issued FASB Staff Position 157-4, "Determining Fair
Value When the Volume and Level of Activity for the Asset or Liability Have
Significantly Decreased and Identifying Transactions That Are Not Orderly,"
("FSP 157-4"). FSP 157-4 provides additional guidance for estimating fair value
in accordance with SFAS No. 157, "Fair Value Measurements," when the volume and
level of activity for the asset or liability have significantly decreased. FSP
157-4 also includes guidance on identifying circumstances that indicate a
transaction is not orderly. FSP 157-4 is effective for interim and annual
reporting periods ending after June 15, 2009. The Company adopted FSP 157-4 in
the second quarter of 2009. FSP 107-1 did not have a material impact on the
financial statements.
In June 2009, the FASB issued Statement of Financial Accounting Standards No.
165, "Subsequent Events," ("SFAS No. 165"). SFAS 165 establishes general
standards of accounting for and disclosure of events that occur after the
balance sheet date but before financial statements are issued or are available
to be issued. SFAS 165 applies to both interim financial statements and annual
financial statements. SFAS 165 is effective for interim or annual financial
periods ending after June 15, 2009. SFAS 165 does not have a material impact on
our financial statements.
In June 2009, the FASB issued Statement of Financial Accounting Standards No.
166, "Accounting for Transfers of Financial Assets, an amendment to SFAS No.
140," ("SFAS 166"). SFAS 166 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. SFAS 166 is effective for fiscal years beginning
after November 15, 2009. The Company will adopt SFAS 166 in fiscal 2010. The
Company does not expect that the adoption of SFAS 166 will have a material
impact on the consolidated financial statements.
9
In June 2009, the FASB issued Statement of Financial Accounting Standards No.
167, "Amendments to FASB Interpretation No. 46(R)," ("SFAS 167"). 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. SFAS 167 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 will adopt SFAS
167 in fiscal 2010. The Company does not expect that the adoption of SFAS 166
will have a material impact on the consolidated financial statements.
In June 2009, the FASB issued Statement of Financial Accounting Standards No.
168, "The FASB Accounting Standards Codification and the Hierarchy of Generally
Accepted Accounting Principles," ("SFAS 168"). SFAS 168 replaces FASB Statement
No. 162, "The Hierarchy of Generally Accepted Accounting Principles", and
establishes the FASB Accounting Standards Codification ("Codification") as the
source of authoritative accounting principles recognized by the FASB to be
applied by nongovernmental entities in the preparation of financial statements
in conformity with generally accepted accounting principles ("GAAP"). SFAS 168
is effective for interim and annual periods ending after September 15, 2009. The
Company will begin to use the new Codification when referring to GAAP in its
annual report on Form 10-K for the fiscal year ending December 31, 2010. This
will not have an impact on the consolidated results of the Company.
Note 2. Stockholders' Deficit
The authorized common stock of the Company consists of 200,000,000 shares of
common stock with par value of $0.001 and 50,000,000 shares of preferred stock.
For our preferred stock, we have designated two series: 1,500,000 shares of
Series A Preferred Stock and 10,000,000 shares of Series B Preferred Stock both
with a par value of $0.001.
In February 2009, the Company issued 25,000 shares of common stock for $500 cash
or $0.02 per share.
In February 2009, the Company issued 225,000 shares of common stock for
professional services rendered for total compensation of $4,500 or $0.02 per
share.
In March 2009, the Company issued 2,000,000 shares of common stock payable or
$0.02 per share for which, $40,000 cash was received in 2008.
In March 2009, the Company issued 1,500,000 shares of common stock for
professional services rendered for total compensation of $45,000 or $0.03 per
share.
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.
No preferred share transactions occurred during the six months ending June 30,
2009.
Note 3. Related Party Transactions
Synthetic Systems
-----------------
During the quarters ended June 30, 2009 and 2008, the Company incurred
consulting fees of approximately $37,000 and $35,000 respectively per month to
Synthetic Systems, LLC for a total of $222,000 and $210,000. The Company leased
furniture and equipment from Synthetic Systems for a total of $1,150 per month
for the quarters ending June 30, 2009 and 2008. The Company also paid on behalf
of Synthetic Systems, LLC office rent expenses of $16,876 and $17,649, as of
June 30, 2009 and 2008, respectively. Synthetic Systems is jointly owned by our
Chief Executive Officer and Secretary.
Western Architectural
---------------------
As previously disclosed in our 2008 Form 10-K, on May 30, 2002, the Company
executed a Contractor Agreement with Western Architectural Services, LLC
("Western") where Western would provide to the Company certain architectural
services for the Las Vegas Observation Wheel Project in exchange for which the
Company issued 2,812,500 shares of restricted common stock to Western. Although
he was not an affiliate of the Company upon execution of the Contractor
Agreement, Western's Chief Executive Officer is currently an executive officer,
director and significant stockholder of the Company. We have accounted for these
shares as Deferred Construction Costs in these financial statements.
Western plans to sell the 2,812,500 shares of common stock at the time before
and during the contract to purchase supplies and to pay subcontractor fees for
the construction of a wheel. At the time the contract was issued the shares of
the Company were trading at $6.50 per share, our current stock price is trading
significantly below that amount. If at the time Western performs the services
10
contracted and the share price is below $6.50 per share, the Company will be
required to issue additional shares to Western in order for the contract to be
fulfilled. Western's Chief Executive Officer is currently an affiliate of the
Company which will also limit the amount of shares that can be sold based on the
trading volume and shares outstanding in accordance with Rule 144 of the
Securities Act of 1933. As of June 30, 2009, we have marked these shares to
market using the period end closing price of our stock. The change in valuation
was debited to additional-paid in capital due to the deferred construction cost
nature of these shares.
As of June 30, 2009, we have received advances in the amounts of $272,000 from
Western Architectural Services, LLC. The advances are unsecured, carry no
interest and are due upon demand. As of June 30, 2009, no payments have been
made to Western.
Directors and Officers
----------------------
On occasion, our Officers and Directors will loan funds to the Company so that
operations can continue.
As of June 30, 2009, we have received advances in the amounts of $210,000 from
our Chief Operating Officer. The advances are unsecured, carry no interest and
are due upon demand.
Interest on related party loans is not imputed due to the lack of terms related
to the debt.
Note 4. Fair Value
In accordance with FAS 157, the table below sets forth the Company's financial
assets and liabilities measured at fair value by level within the fair value
hierarchy. As required by FAS 157, assets and liabilities are classified in
their entirety based on the lowest level of input that is significant to the
fair value measurement.
Fair Value at June 30, 2009
---------------------------------------------
Total Level 1 Level 2 Level 3
------- ------- ------ -------
Assets:
Deferred construction costs $56,250 $56,250 $ -- $ --
------- ------- ------ -------
$56,250 $56,250 $ -- $ --
======= ======= ====== =======
Liabilities:
None $ -- $ -- $ -- $ --
11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION.
The following discussion and analysis ("MD&A") of our financial condition and
results of operations should be read in conjunction with our consolidated
financial statements and related notes included elsewhere in this report.
References in this section to "Voyager Entertainment International, Inc.," the
"Company," "we," "us," and "our" refer to Voyager Entertainment International,
Inc. and our direct and indirect subsidiaries on a consolidated basis unless the
context indicates otherwise.
This interim report contains forward looking statements relating to our
Company's future economic performance, plans and objectives of management for
future operations, projections of revenue mix and other financial items that are
based on the beliefs of, as well as assumptions made by and information
currently known to, our management. The words "expects, intends, believes,
anticipates, may, could, should" and similar expressions and variations thereof
are intended to identify forward-looking statements. The cautionary statements
set forth in this section are intended to emphasize that actual results may
differ materially from those contained in any forward looking statement.
EXECUTIVE SUMMARY AND OVERVIEW
During the next 12 months, we are continuing our efforts on the development of
the Observation Wheel in Las Vegas, Nevada; however, actual production will not
commence until we have sufficient capital for construction and marketing. As of
the year ending December 31, 2008, the Company did not have enough cash on hand
to continue operations through the next year. However, from time-to-time the
officers of the Company loan funds to provide for operations. There can be no
guarantees that the Company's officers and directors will continue to loan funds
to the Company on an ongoing basis. However, if we do not receive a substantial
amount of funding it will be unlikely we can continue operations.
We have been successful in the past in selling our common stock in private
transactions to provide for minimal operations. We plan to seek additional
funding through debt transactions and the sale of our common stock either
privately or publicly. There can be no guarantees we will continue to be
successful in completing those transactions. The primary expenses for the
Company consist of consulting fees that are primarily paid by the issuance of
our common stock.
We are not the traditional Company that has the standard research and
development expenses. As a result, most of our research and development expenses
consist of presentation materials and architectural designs. Upon funding of the
project the initial expense will be engineering and architectural.
Our primary costs consist mainly of professional and consulting, legal and
accounting fees along with those fees paid to related parties, rent expenses and
printing expenses. As the project is being developed we are incurring additional
architectural and travel related fees. If this project is successful there will
be a significant increase in expenses for all aspects of the construction
process to include an additional office set up, additional employees and
continual travel.
We plan to focus primarily on the development of the Observation Wheel in Las
Vegas over the next 12 months although we may entertain discussions with any
interested party in other locations. Other than presentation materials, if a
suitable site is acquired and selected, the primary focus will be on completing
engineering and starting the construction of an Observation Wheel.
For an additional detailed discussion regarding the Company's business and
business trends affecting the Company and certain risks inherent in the
Company's business, see "Item 7: Management's Discussion and Analysis of
Financial Condition and Results of Operation" in the Company's Annual Report on
Form 10-K for the year ended December 31, 2008.
DEVELOPMENT OF OUR BUSINESS
Voyager Entertainment International, Inc., formerly named Dakota Imaging, Inc.,
was incorporated in North Dakota on January 31, 1991. Effective February 8,
2002, the Company completed a reverse triangular merger between Dakota
Subsidiary Corp. ("DSC"), a wholly-owned subsidiary of the Company, and Voyager
Ventures, Inc., a Nevada Corporation ("Ventures"), whereby the Company issued
3,660,000 shares of its Series A preferred stock in exchange for 100% of
Ventures' outstanding common stock. Pursuant to the terms of the merger, DSC
merged with and into Ventures and ceased to exist, and Ventures became a
wholly-owned subsidiary of the Company.
On April 2, 2002, we amended our Certificate of Incorporation to change our name
from Dakota Imaging, Inc. to Voyager Entertainment International, Inc.
12
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. and Outland Development, LLC have been dormant companies
since 2002 and were discontinued as of December 31, 2007 and June 30, 2009,
respectively.
CRITICAL ACCOUNTING POLICIES
The methods, estimates and judgments we use in applying our accounting policies
have a significant impact on the results we report in our financial statements,
which we discuss under the heading "Results of Operations" following this
section of our MD&A. Some of our accounting policies require us to make
difficult and subjective judgments, often as a result of the need to make
estimates of matters that are inherently uncertain. Our most critical accounting
estimates include the assessment of value of our deferred construction costs.
We believe the following critical accounting policy reflects our most
significant estimates and assumptions used in the preparation of our
consolidated financial statements:
STOCK BASED COMPENSATION
On January 1, 2006, we adopted the fair value recognition provisions of SFAS No.
123(R), "Accounting for Stock-Based Compensation", to account for compensation
costs under our stock option plans. We previously utilized the intrinsic value
method under Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees" (as amended).
We use the fair value method for equity instruments granted to non-employees and
will use the Black-Scholes model for measuring the fair value of options, if
issued. The stock based fair value compensation is determined as of the date of
the grant or the date at which the performance of the services is completed
(measurement date) and is recognized over the vesting periods.
We do not have any of the following:
* Off-balance sheet arrangements.
* Certain trading activities that include non-exchange traded contracts
accounted for at fair value.
* Relationships and transactions with persons or entities that derive benefits
from any non-independent relationships other than related party transactions
discussed herein.
LIQUIDITY
We plan to focus primarily on the development of the Observation Wheel in Las
Vegas the next twelve months although we may entertain discussions with any
interested party in other locations.
June 30, 2009 December 31, 2008 $ Change % Change
Cash $ 6,399 $ 15,234 $ (8,835) (58)%
Accounts payable and accrued expenses $1,437,765 $1,286,380 $ 151,385 12%
Due to related parties $2,118,000 $1,810,000 $ 308,000 17%
Total current liabilities $6,289,004 $5,829,619 $ 459,385 8%
Cash proceeds from the sale of common stock $ 500 $ 195,000 $ (194,500) (100)%
We have financed our operations during the year primarily through the use of
cash on hand, issuance of stock for services, and aging of our payables.
Cash on hand decreased $8,835, or 58%, as of June 30, 2009 compared to December
31, 2008. The decrease is a result of the payment of payables throughout 2009.
As of June 30, 2009, we had total current liabilities of $6,289,004 compared to
$5,829,619 as of December 31, 2008. The 8% increase in total current liabilities
is primarily a result of expenses and advances incurred that are due to related
parties, which remain unpaid. These items increased as our lack of cash has
resulted in longer aging of payables and need for additional cash infusion.
13
Accounts Payable and Accrued Expenses
-------------------------------------
Our accounts payable increased by approximately $21,500, or 38%, as of June 30,
2009 compared to December 31, 2008 primarily due to incurrence of travel
expenses. As a result of current economic conditions, travel expenses were
incurred to explore alternative observation wheel locations outside of Las Vegas
for possible business opportunities.
For the remainder of the year ending 2009, we anticipate to incur normal
reoccurring expenses of approximately $300,000 as a result of related party
consulting, furniture and equipment lease, utilities, accounting, health
insurance and rent expense.
Accrued Expenses increased approximately $130,000, or 11%, as of June 30, 2009
compared to December 31, 2008 which consisted primarily of accrued interest.
Until the payment of our loans and their corresponding interest can be made,
upon our initial project financing, it is likely that our interest expense will
continue to accumulate steadily throughout 2009.
Due to Related Parties
----------------------
June 30, 2009 December 31, 2008 $ Change % Change
Accrued Expenses - Related Party $1,636,000 $1,470,000 $ 166,000 11%
Loans Due To - Related Party 482,000 340,000 142,000 42%
------------------------------------------------------
Total Related Party $2,118,000 $1,810,000 $ 308,000 17%
The total amount Due to Related Parties increased $308,000, or 17%, as of June
30, 2009 compared to December 31, 2008 as a result of unpaid consulting services
and cash advancements. These items increased as our lack of cash has resulted in
longer aging of payables to our related parties and the need for additional cash
infusion from our related parties.
Additionally, loans due to related parties increased $142,000, or 42%, as of
June 30, 2009 compared to $340,000 during the fiscal year ended December 31,
2008. The receipt of funds allowed us to pay our vendors so that we could
continue our operating efforts. Future borrowings may be deemed necessary to
sustain our operations until alternative funding can be received.
As of June 30, 2009, we owe $482,000 in related party loans and $1,636,000 for
professional fees and unpaid bonuses for the fiscal years ending December 31,
2007 and 2006. No bonuses were issued for the fiscal year ending December 31,
2008.
These related party trends are likely to continue throughout 2009 and until
fiscal stability can be reached, either by project funding or through the
generation of operating revenues.
CAPITAL RESOURCES
Cash decreased by $8,835, or 58%, as of June 30, 2009 due to the payment of some
of our payables throughout 2009. Additionally, cash received for the purchase of
common stock decreased by $194,500, or 100%, for the six months ended June 30,
2009 compared to the year ended December 31, 2008. It is more likely than not
that the issuance of shares for cash will continue to decrease in the next
twelve months as a result of the apprehensions shareholders have towards the
volatility of the stock market. For the six months ended June 30, 2009, we
issued common stock for $500 cash. This stock transaction was unusual in
comparison to precedent issuances in that significantly fewer shares were
purchased. We anticipate that future purchases of common stock will generate
higher concentrations of capital consistent with prior period transactions. 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 $6,399 cash on hand as of June 30, 2009 compared to $15,234 as of
December 31, 2008. We will continue to need additional cash during the following
twelve months and these needs will coincide with the cash demands resulting from
our general operations and implementing our business plan. It is possible that
an agreement finalizing the security of a project site and the corresponding
construction of an observation wheel may begin in the next twelve months.
Assuming no such occurrences, our remaining anticipated minimum cash payments
for 2009 will be approximately $300,000.
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.
14
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
future to fund growth and expansion through additional equity or debt financing
or credit facilities. No assurance can be made that such financing would be
available, and if available it may take either the form of debt or equity. In
either case, the financing could have a negative impact on our financial
condition and our stockholders.
We anticipate incurring operating losses over the next twelve months. Our lack
of operating history makes predictions of future operating results difficult to
ascertain. Our prospects must be considered in light of the risks, expenses and
difficulties frequently encountered by companies in their early stage of
development, particularly companies in new and rapidly evolving markets such as
development related companies. Such risks include, but are not limited to, an
evolving and unpredictable business model and the management of growth. To
address these risks we must, among other things, implement and successfully
execute our business and marketing strategy, continue to develop and upgrade
technology and products, respond to competitive developments, and attract,
retain and motivate qualified personnel. There can be no assurance that we will
be successful in addressing such risks, and the failure to do so can have a
material adverse effect on our business prospects, financial condition and
results of operations.
RESULTS OF OPERATIONS
As of June 30, 2009, 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 June 30, 2009, we have not settled on any additional Observation
Wheel projects and are continuing to focus on the L.V. Project for the remainder
of 2009.
Three Month Comparison
----------------------
Results of operations for the three months ended June 30, 2009 compared to the
three months ended June 30, 2008 consist of the following:
Three Months Ended June 30, 2009 June 30, 2008 $ Change % Change
Revenue $ -- $ -- $ -- 0%
General and administrative expenses 235,075 387,273 (152,198) (39)%
--------------------------------------------------------
Operating loss $(235,074) $(387,273) $ 152,198 (39)%
The decrease in general and administrative expenses of 39% is due primarily to a
decrease in professional fees. During the quarter ended June 30, 2009, fewer
professionals and consultants were needed to secure project sites allowing us to
focus our efforts on the progress of our project.
Six Month Comparison
--------------------
Results of operations for the six months ended June 30, 2009 compared to the six
months ended June 30, 2008 consist of the following:
Six Months Ended June 30, 2009 June 30, 2008 $ Change % Change
Revenue $ -- $ -- $ -- 0%
General and administrative expenses 473,442 566,277 (92,835) (16)%
--------------------------------------------------------
Operating loss $(473,442) $(566,277) $ 92,835 (16)%
15
The decrease in general and administrative expenses of 16% is due primarily to a
$139,902 decrease in professional fees as of June 30, 2009 compared to June 30,
2008. As we progress towards the execution of our project, consultants that were
needed in the early planning stages of 2008 were not re-engaged in 2009.
However, as a result of our progression and the opportunity to assess possible
project sites in additional locations outside of the Las Vegas strip area,
project costs increased by $41,97 and travel expenses increased by $19,728 for
the six months ended June 30, 2009 compared to June 30, 2008.
Additionally, for the six months ended June 30, 2009, we have worked to decrease
the consumption of office supplies and usage utilities which has resulted in a
$8,575 cash savings compared to the six months ended June 30, 2008.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable to smaller reporting companies.
ITEM 4T. CONTROLS AND PROCEDURES.
(a) Disclosure Controls and Procedures
Based on the management's evaluation (with the participation of our President
and Principal Financial Officer), our President and Principal Financial Officer
has concluded that as of June 30, 2009, our disclosure controls and procedures
(as defined in Rules 13a - 15(e) and 15d-15(e) under the Securities Exchange of
1934 (the "Exchange Act") are effective to provide reasonable assurance that the
information required to be disclosed in this quarterly report on Form 10-Q is
recorded, processed, summarized and reported within the time period specified in
Securities and Exchange Commission rules and forms, and that such information is
accumulated and communicated to the Company's management, including the Chief
Executive Officer and Principal Financial Officer, as appropriate, to allow for
timely decisions regarding required disclosure.
(b) Internal control over financial reporting
Management's quarterly report on internal control over financial reporting
--------------------------------------------------------------------------
Management is responsible for establishing and maintaining adequate internal
control over financial reporting as defined in Rules 13a- 15(f) and 15d-15(f)
under the Exchange Act. Our internal control over financial reporting is
intended to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in
accordance with U.S. GAAP. Our internal control over financial reporting should
include those policies and procedures that:
o pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of our
assets;
o provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance
with applicable GAAP, and that receipts and expenditures are being
made only in accordance with authorizations of management and the
Board of Directors; and
o provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use or disposition of our assets that
could have a material effect on the financial statements.
Under the supervision and with the participation of our management, our Chief
Executive Officer and Principal Financial Officer, we have evaluated the
effectiveness of our internal control over financial reporting and preparation
of our quarterly financial statements as of June 30, 2009 and believe they are
effective. While we believe the present control design and procedures are
effective, future events affecting our business may cause the Company to modify
its controls and procedures.
Attestation report of the registered public accounting firm
-----------------------------------------------------------
This quarterly report does not include an attestation report of the Company's
registered public accounting firm regarding internal control over financial
reporting. Management's report was not subject to attestation by the Company's
registered public accounting firm pursuant to temporary rules of the Securities
and Exchange Commission that permit the Company to provide only management's
report in this quarterly report.
Changes in internal control over financial reporting
----------------------------------------------------
Based on the evaluation as of June 30, 2009, our Chief Executive Officer and
Principal Financial Officer has concluded that there were no significant changes
in our internal controls over financial reporting or in any other areas that
could significantly affect our internal controls subsequent to the date of his
most recent evaluation and there were no corrective actions during the quarter
with regard to significant deficiencies or material weaknesses.
16
PART II
OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
None.
ITEM 1A. RISK FACTORS
There have been no material changes from the Risk Factors described in our
Annual Report on Form 10-K for the fiscal year ended December 31, 2008.
ITEM 2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
In February 2009, the Company issued 25,000 shares of common stock for $500 cash
or $0.02 per share.
In February 2009, the Company issued 225,000 shares of common stock for
professional services rendered for total compensation of $4,500 or $0.02 per
share.
In March 2009, the Company issued 2,000,000 shares of common stock payable or
$0.02 per share. $40,000 cash was received for these shares in 2008.
In March 2009, the Company issued 1,500,000 shares of common stock for
professional services rendered for total compensation of $45,000 or $0.03 per
share.
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.
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
There have been no material changes from the Defaults Upon Senior Securities
described in our Annual Report on Form 10-K for the fiscal year ended December
31, 2008.
ITEM 4 - SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
None.
ITEM 5 - OTHER INFORMATION
(1) Committees and financial reviews.
The board of directors has not established an audit committee. In addition, we
do not have any other compensation or executive or similar committees. We will
not, in all likelihood, establish an audit committee until such time as we
increase our revenues, of which there can be no assurance. We recognize that an
audit committee, when established, will play a critical role in our financial
reporting system by overseeing and monitoring management's and the independent
auditor's participation in the financial reporting process.
Until such time as an audit committee has been established, the board of
directors will undertake those tasks normally associated with an audit committee
to include, but not by way of limitation, the (i) review and discussion of the
audited financial statements with management, and (ii) discussions with the
independent auditors with respect to the matters required to be discussed by the
Statement On Auditing Standards No. 61, "Communications with Audit Committees",
as may be modified or supplemented.
17
ITEM 6 - EXHIBITS
(a) The following exhibits are filed with this report.
31.1 Rule 13a-14(a)/15d-14(a) Certifications.
32.1 Section 1350 Certifications.
18
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
VOYAGER ENTERTAINMENT INTERNATIONAL, INC.
-----------------------------------------
(Registrant)
Dated August 7, 2009
By: /s/ Richard Hannigan
-------------------------
Richard Hannigan,
President/Director
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ Richard Hannigan, Sr.
-------------------------
Richard Hannigan, Sr.
President/CEO/Director
August 7, 2009
By: /s/ Myong Hannigan
-------------------------
Myong Hannigan
Secretary/Treasurer/Director
August 7, 2009
By: /s/ Tracy Jones
-------------------------
Tracy Jones
COO/Director
August 7, 2009
19