-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UQ7Z0m2rF8HQH2SsMY0sghxqMKP1GgNBg2IM3sMns4bZpQUrzvf4NZ10SYqtmXvw UzaFThWrpgf21wYA/U2NNA== 0000944209-99-001311.txt : 19990813 0000944209-99-001311.hdr.sgml : 19990813 ACCESSION NUMBER: 0000944209-99-001311 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990812 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MEDJET INC CENTRAL INDEX KEY: 0000932265 STANDARD INDUSTRIAL CLASSIFICATION: SURGICAL & MEDICAL INSTRUMENTS & APPARATUS [3841] IRS NUMBER: 223283541 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 001-11765 FILM NUMBER: 99684730 BUSINESS ADDRESS: STREET 1: 1090 KING GEORGE POST RD STREET 2: STE 301 CITY: EDISON STATE: NJ ZIP: 08837 BUSINESS PHONE: 9087383990 MAIL ADDRESS: STREET 1: 1090 KING GEORGES POST ROAD STREET 2: SUITE 301 CITY: EDISON STATE: NJ ZIP: 08837 10QSB 1 FOR QUARTER ENDED JUNE 30, 1999 ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ----------------- FORM 10-QSB (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1999 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______________________ to ____________________ Commission File Number: 1-11765 MEDJET INC. (Exact name of Small Business Issuer as Specified in its Charter) DELAWARE 22-3283541 (State or Other Jurisdiction of Incorporation or Organization) (I.R.S. Employer Identification No.)
1090 King Georges Post Road, Suite 301 Edison, New Jersey 08837 (Address of Principal Executive Offices) (732) 738-3990 (Registrant's Telephone Number, Including Area Code) - -------------------------------------------------------------------------------- (Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] As of July 31, 1999, 3,901,431 shares of Common Stock, par value $.001 per share, were outstanding. Transitional Small Business Disclosure Format: Yes [ ] No [X] ================================================================================ MEDJET INC. (A Development Stage Company) Condensed Interim Balance Sheet June 30, 1999 (Unaudited) ASSETS Current Assets: Cash and cash equivalents $ 42,724 Prepaid expenses 47,348 ----------- Total Current Assets 90,072 ----------- Property and Equipment - less accumulated depreciation of $290,714 144,531 Patents and Trademarks - less accumulated amortization of $23,359 162,621 Deferred tax asset 594,209 Security deposits 4,837 ----------- Total Assets $ 996,270 =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable and accrued liabilities $ 347,984 Deferred revenues 175,000 Income taxes payable 150 ----------- Total Liabilities 523,134 ----------- Stockholders' Equity: Common stock, $.001 par value, 7,000,000 shares authorized, 3,935,220 shares issued and 3,901,431 shares outstanding 3,935 Preferred stock, $.01 par value, 1,000,000 shares authorized, no shares issued - Additional paid-in capital 6,066,036 Accumulated deficit (including deficit accumulated during development stage of $7,099,805 of which $1,556,204 was applied to additional paid-in capital upon conversion from an "S" to a "C" corporation) (5,595,135) Less: Treasury stock, 33,789 shares, at cost (1,700) ----------- Total Stockholders' Equity 473,136 ----------- Total Liabilities and Stockholders' Equity $ 996,270 ===========
See Notes to the Condensed Interim Financial Statements. MEDJET INC. (A Development Stage Company) Condensed Interim Statements of Operations For The Three and Six Months Ended June 30, 1999 and 1998 And The Period From December 16, 1993 (Date of Inception), to June 30, 1999 (Unaudited)
Three Months Ended Six Months Ended Period from June 30, June 30, December 16, -------------------------- -------------------------- 1993 (Inception) to 1999 1998 1999 1998 June 30, 1999 ---------- ---------- ---------- ----------- ------------------- Revenues: License fee income $ 55,000 $ - $ 175,000 $ - $ 675,000 ---------- ---------- ---------- ----------- ----------- Total revenues 55,000 - 175,000 - 675,000 ---------- ---------- ---------- ----------- ----------- Expenses: Research, development, general and administrative 390,916 719,205 731,171 1,448,825 8,639,225 ---------- ---------- ---------- ----------- ----------- Total expenses 390,916 719,205 731,171 1,448,825 8,639,225 ---------- ---------- ---------- ----------- ----------- Loss from Operations (335,916) (719,205) (556,171) (1,448,825) (7,964,225) Other Income (Expense): Net interest income 1,613 14,593 4,205 29,118 271,061 ---------- ---------- ---------- ----------- ----------- Loss Before Income Tax (334,303) (704,612) (551,966) (1,419,707) (7,693,164) Income tax 200 200 200 200 (593,359) ---------- ---------- ---------- ----------- ----------- Net Loss (334,503) (704,812) (552,166) (1,419,907) (7,099,805) Dividends on Preferred Stock - - - - 184,923 ---------- ---------- ---------- ----------- ----------- Net Loss Attributable to Common Shareholders $ (334,503) $ (704,812) $ (552,166) $(1,419,907) $(7,284,728) ========== ========== ========== =========== =========== Net Loss Per Share $ (0.09) $ (0.19) $ (0.14) $ (0.39) $ (2.36) ========== ========== ========== =========== =========== Weighted average common and equivalent shares outstanding 3,891,855 3,686,280 3,886,536 3,681,168 3,088,500 ========== ========== ========== =========== ===========
See Notes to the Condensed Interim Financial Statements. MEDJET INC. (A Development Stage Company) Condensed Interim Statements of Cash Flows For The Six Months Ended June 30, 1999 and 1998 And The Period From December 16, 1993 (Date of Inception), to June 30, 1999 (Unaudited)
For the Six Months Ended Period from June 30, December 16, 1993 ------------------------------------ (Inception) to 1999 1998 June 30, 1999 ---------------- ---------------- ---------------- Cash Flows from Operating Activities $(297,620) $(1,200,758) $(6,855,967) Cash Flows from Investing Activities (3,250) (168,583) (674,243) Cash Flows from Financing Activities - 1,117,748 7,572,934 ---------------- ---------------- ---------------- Net Increase (Decrease) in Cash and Cash Equivalents (300,870) (251,593) 42,724 Cash and Cash Equivalents - Beginning of Period 343,594 1,491,040 - ---------------- ---------------- ---------------- Cash and Cash Equivalents - End of Period $ 42,724 $ 1,239,447 $ 42,724 =============== =============== =============== Supplemental Disclosures of Cash Flow Information: Cash paid for: Income taxes $ 200 $ 200 $ 600 =============== =============== =============== Interest expense $ 168 $ 183 $ 13,689 =============== =============== ===============
See Notes to the Condensed Interim Financial Statements. MEDJET INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS NOTE A - NATURE OF ORGANIZATION AND BASIS OF PRESENTATION: (1) Nature of Organization: ---------------------- Medjet Inc. (the "Company") was incorporated in the State of Delaware on December 16, 1993 and is in the development stage. The Company is engaged in research and development of medical technology, with a current emphasis on ophthalmic surgical technology and equipment. (2) Basis of Presentation: --------------------- The Condensed Interim Financial Statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted as permitted by such rules and regulations. The Condensed Interim Financial Statements included herein reflect, in the opinion of management, all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the results for the interim periods. The results of operations for the three and six month periods ended June 30, 1999 are not necessarily indicative of results to be expected for the entire year ending December 31, 1999. NOTE B - NET LOSS PER SHARE: Net loss per share, in accordance with the provisions of Financial Accounting Standards No. 128, "Earnings Per Share," is computed by dividing net loss by the weighted average number of shares of Common Stock outstanding during the period. Common stock equivalents have not been included in this computation as the effect would be anti- dilutive. NOTE C - LICENSE AGREEMENT: In July 1998, the Company entered into an agreement with Nestle S.A. ("Nestle") granting Nestle and its wholly-owned subsidiary, Alcon Laboratories, Inc. ("Alcon"), an exclusive, worldwide license for the use of the Company's proprietary microjet technology for corneal refractive surgery. Under the terms of the agreement, Alcon will register, manufacture, promote and market refractive microjet devices and consumables developed by the Company. In connection with the execution of the agreement, a payment in the amount of $500,000 was made by Alcon to the Company. The agreement provides for future payments and royalties based on the attainment of certain milestones and upon sales by Alcon of the Company's products. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION This Quarterly Report on Form 10-QSB, including any documents that are incorporated by reference, contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Generally, such statements are indicated by words or phrases such as "anticipate," "expect," "intend," "management believes" and similar words and phrases. Such statements are based on the Company's current expectations and are subject to risks, uncertainties and assumptions. Certain of these risks are described or referred to below and in the introduction to Part I of the Company's Annual Report on Form 10-KSB for the fiscal year ended December 31, 1998 on file with the Securities and Exchange Commission and are incorporated herein by this reference. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, expected, intended or believed. GENERAL The Company is engaged in research and development of medical technology, with a current emphasis on ophthalmic surgical technology and equipment, and has developed a proprietary technology and derivative devices for corneal surgery based on microjets. The Company expects, during the remainder of 1999, to continue its research and development activities, focusing principally on ophthalmic surgical technology and equipment, and to commence early exploratory work on dental applications of its microjet technology. The Company is a development stage company. RESULTS OF OPERATIONS The Company has not yet initiated sales of its products and, consequently, had no sales revenues during the three or six months ended June 30, 1999. Under the terms of the license agreement with Nestle (as described under "License Agreement" in Note C of Notes to the Condensed Interim Financial Statements), a total of $350,000 was paid by Alcon to the Company during the six months ended June 30, 1999. This amount has been reflected as License Fee Income and Deferred Revenues in the accompanying Condensed Interim Financial Statements. Total expenses during the three months ended June 30, 1999 decreased by $328,289 (45.6%) to $390,916 from $719,205 for the comparable period of 1998. This was primarily due to a net decrease in staff (to seven full-time employees and one part-time employee from twenty full-time employees) and a decrease in consulting and professional fees as the Company continued to curtail several operational activities in order to husband and stretch its existing capital. (See "Liquidity and Capital Resources" below). Expenses were also higher during the 1998 period due to increased purchases for materials, testing and analysis and other higher costs associated with the higher level of activity. During the six months ended June 30, 1999, total expenses decreased by $717,654 (49.5%) to $731,171 from $1,448,825 for the comparable period of 1998, generally for the same reasons as during the three-month period. Other income/expense consists of interest income, interest expense and finance charges. Net interest income for the three months ended June 30, 1999 decreased by $12,980 (88.9%) to $1,613 from $14,593 for the comparable period of 1998. This decrease principally results from income earned on the Company's short-term investments which were lower in the 1999 period, reflecting the utilization of these funds to continue the Company's research and development activities. For the six months ended June 30, 1999, net interest income decreased by $24,913 (85.6%) to $4,205 from $29,118 for the comparable period of 1998 for the same reason as during the three-month period. LIQUIDITY AND CAPITAL RESOURCES In April 1998, the Company sold and issued 110,000 shares of its Convertible Preferred Stock for an aggregate price of $1,100,000, the net proceeds of which were added to the Company's working capital. On October 8, 1998, these shares were converted into 182,724 shares of Common Stock and the Company paid the applicable dividend on the Convertible Preferred Stock by issuing a total of 12,154 shares of Common Stock. Throughout the second half of 1998, the Company had been seeking additional capital to finance its 1999 business plan. Pending obtaining additional financing, the Company made the decision to curtail several operational activities and to downsize its employee base in order to husband and stretch its existing capital. In October and November 1998, the Company dismissed nine of its nineteen employees. It also significantly reduced the salary of the management group, in some cases by up to 50%. The specific goal was to reduce the Company's monthly expenditures by 60%, to approximately $100,000. The Company currently is focused on fulfilling its commitments with respect to the agreement with Alcon, although the Company may seek to license the HydroBrush(TM) Keratome to a third party at some future date. The Company will also consider submitting proposals to the government and to industrial organizations to fund some of the costs of the study of other potential medical applications of its technology platform. Finally, as its financial resources permit, the Company will continue explorations and analyses of potential new medical applications of its microjet technology. In January 1998, the State of New Jersey enacted legislation allowing emerging technology and/or biotechnology companies to sell their unused New Jersey Net Operating Loss ("NOL") Carryover and Research and Development Tax Credits ("R&D Credits") to corporate taxpayers in New Jersey. The Company retained a third party broker to identify a buyer for the Company's NOL Carryover and R&D Credits. The anticipated net proceeds of this transaction ($594,209) have been recorded as a non-current deferred tax asset in the accompanying condensed interim financial statements. There can be no assurances, however, that this proposed sale will occur. To the extent that the NOL Carryover and R&D Credits are sold, they will be unavailable to the Company to offset future New Jersey state taxes. During March 1999, Dr. Gordon agreed to make available to the Company a loan of up to $250,000. Under the terms of this arrangement, the Company has issued to Dr. Gordon warrants to purchase a total of 50,000 shares of the Company's Common Stock at a price per share of $.89 and will pay interest on the amounts borrowed at the rate of 8.27% per annum. During July 1999, Dr. Gordon advanced a total of $100,000 to the Company under this arrangement. The Company anticipates that its cash on hand, together with the payments to be received by the Company in connection with the license agreement, plus the loan from Dr. Gordon and the sale of its New Jersey State NOL Carryover and R&D Credits, will be sufficient to meet the Company's 1999 working capital and planned capital expenditure requirements. If, however, the Company incurs unexpected expenses, or if the New Jersey NOL Carryover and R&D Credits are not sold as anticipated, the Company may require additional financing prior to the end of 1999 in order to maintain its current operations. Assuming FDA marketing clearance is obtained, minimum royalty payments under the licensing agreement are anticipated to begin in early 2000. However, if the Company and Alcon fail to obtain FDA clearance of the Company's HydroBlade(TM) Keratome device or Alcon's manufacturing and marketing of the device is otherwise delayed, the Company will need to raise additional capital to maintain its current scope of operations beyond the second quarter of 2000. The Company currently has no commitment or arrangement for any capital, and there can be no assurance whether or on what terms it will be able to obtain any needed capital. If additional financing is not available, the Company would be materially adversely affected and be required to further curtail or cease altogether its current operations. The Company's current strategy is to exclusively license its products. As of the date of filing of this quarterly report on Form 10-QSB, the Company has entered into one such agreement, the Alcon Agreement, covering corneal refractive surgery. Later, it may undertake the marketing and sale of its own products. In such event, the Company would be subject to the risks and uncertainties described under "Additional Factors That May Affect Future Results - No Manufacturing Experience; Dependence on Third Parties," in the Company's Annual Report on Form 10-KSB, which information is incorporated herein by reference. ADDITIONAL FACTORS THAT MAY AFFECT FUTURE RESULTS The Company's current strategy is to selectively license its ophthalmology products when appropriate. To date, the Company has entered into one such agreement to license its proprietary microjet technology for corneal refractive surgery only. If the Company is unable or elects not to enter into additional license agreements with respect to its other products, it may undertake the manufacture and marketing of such products directly. If manufactured internally, the Company's proposed products must be produced in commercial quantities in compliance with regulatory requirements at acceptable costs. Production in clinical or commercial-scale quantities will involve scale-up challenges for the Company. The Company currently has no volume manufacturing capacity or experience in manufacturing medical devices or any other products. If the Company elects to manufacture certain of its potential products, it would be required to establish its own manufacturing capabilities, which would require significant scale-up expenses and additions to facilities and personnel. There can be no assurance that the Company would be able to obtain the necessary regulatory approvals on a timely basis, or at all, and delays in receipt of, or failure to receive such approvals, or loss of previously received approvals, would have a material adverse effect on the Company. There can be no assurance that the Company will be able to enter into agreements with third parties with respect to the manufacture of any products or develop its own manufacturing capability at an acceptable cost. The Company's dependence on third parties for the manufacture of its products may adversely affect the Company's profit margins and its ability to develop and deliver such products on a timely basis. Moreover, there can be no assurance that such third parties will perform adequately, and any failures by third parties may delay the submission of products for regulatory approval, impair the Company's ability to deliver products on a timely basis, or otherwise impair the Company's competitive position and any such failure could have a material adverse effect on the Company. If the Company does not enter into additional license or distribution arrangements with respect to its products other than those related to its proprietary microjet technology for corneal refractive surgery, it may undertake the marketing and sale of its own products. In such event, the Company intends to market and sell its products in the United States and certain foreign countries, if and when regulatory approval is obtained, through a direct sales force or a combination of a direct sales force and distributors. The Company currently has no marketing organization and has never sold a product. Establishing sufficient marketing and sales capabilities will require significant resources. There can be no assurance that the Company will be able to recruit and retain skilled sales management, direct salespersons or distributors, or that the Company's marketing or sales efforts will be successful. To the extent that the Company enters into distribution arrangements for the sale of its products, the Company will be dependent on the efforts of third parties. There can be no assurance that such efforts will be successful. OTHER MATTERS The Company has been assessing its "Year 2000" computer readiness and exposure to Year 2000 issues. In connection with such assessment, the Company initiated a review of all information technology systems utilized by the Company. The Company uses no internally-developed systems, only those available from commercial software vendors. As part of its review, the Company has received confirmation from its principal software vendors that such systems are Year 2000 compliant. Based on its review to date, the Company believes there are no major Year 2000 compliance issues with respect to its information technology systems, and, therefore, the Company has not and does not intend to prepare a contingency plan for these systems. The Company anticipates that the total cost for its Year 2000 compliance efforts will not exceed $5,000. In addition, although the Company has not yet initiated commercial production of any of its products, the list of component parts used in those products was reviewed and it was determined that multiple vendors, parts suppliers or contract manufacturers are available to the Company for all of the critical component parts of these products. Although there are no vendors currently engaged by the Company for products to be manufactured, when engaging vendors, the Company will ascertain that they are compliant. Based on its review to date, the Company believes, in the most likely worst case scenario, that Year 2000 issues would have only a minimal impact on the Company. PART II - OTHER INFORMATION Item 1. LEGAL PROCEEDINGS New Jersey Institute of Technology On April 21, 1998, the Company was served with a complaint by the New Jersey Institute of Technology ("NJIT") commencing a lawsuit in the United States District Court for the District of New Jersey ("U.S. District Court"). Each of the Company, Eugene I. Gordon, Ph.D. (the Company's Chairman and Chief Executive Officer), a former employee of the Company, certain patent law firms and an individual patent attorney were named as defendants. The complaint alleged that the defendants, with deceptive intent, failed to name an NJIT professor and/or NJIT research associate as a co-inventor on the Company's U.S. Patent No. 5,556,406 on the "Lamellar Surgical Device and Procedure" (the "Patent") and breached fiduciary duties and contractual obligations owed to NJIT. The complaint sought monetary damages from the Company and an order directing that the Company's Patent (and corresponding foreign patents and patent applications) be assigned and transferred to NJIT. It further sought an order that NJIT has not infringed any claims of such Patent and a declaratory judgment that all of the Company's claims under such Patent are invalid and unenforceable against NJIT. NJIT submitted a patent application relating to a different refractive corrective procedure based on the use of an isotonic waterjet to the U.S. Patent and Trademark Office. That patent has recently been allowed. The three inventors of the subject of such patent application, one of which was Dr. Gordon, had assigned such patent application to NJIT as part of a dispute settlement in which NJIT agreed to grant an exclusive license to the Company of the patent rights under such patent application. That license was terminated by the Company because the Company found that the device did not operate as claimed and could be harmful to the patient. In its court pleas, NJIT claims, without being specific, that the Company's Patent emanates from the earlier invention. Prior to being served with the complaint by NJIT, the Company and Dr. Gordon filed a complaint, on March 27, 1998, against NJIT in the Superior Court of the State of New Jersey, Middlesex County, seeking a declaratory judgment that NJIT had no ownership or other interest in the patent rights to the Company's Patent and seeking payment for damages. NJIT removed the Company's lawsuit to the U.S. District Court, seeking to have it consolidated with its lawsuit. The Company moved to have its suit remanded to state court and to have the NJIT lawsuit dismissed on the grounds that the federal court lacked jurisdiction over either action, and that NJIT had not been harmed by the Company's Patent and therefore could not challenge its validity. During October 1998, the lawsuit brought in U.S. District Court by NJIT was dismissed on jurisdictional grounds. In addition, the U.S. District Court also held that NJIT improperly removed the Company's state court action and ordered that action remanded to the state court. NJIT appealed the remand action and appealed the dismissal of its lawsuit brought in U.S. District Court. These appeals have been dismissed. On April 26, 1999, NJIT commenced a second action in U.S. District Court. NJIT alleged that the defendants failed to name a NJIT professor and/or a NJIT research associate as co-inventors of the Patent and breached fiduciary duties and contractual obligations owed to NJIT. As in the first federal court action, NJIT sought monetary damages, an order directing that the Company's Patent, foreign patents and patent applications be assigned and transferred to NJIT, a declaratory judgment that all of the claims of the Company's Patent are invalid and unenforceable against NJIT and an order amending the named inventors of the Company's Patent to include the NJIT professor and/or the NJIT research associate. Briefing to the federal court on the motion to dismiss the action against the Company, Dr. Gordon and the former employee of the Company is complete. On or about September 13, 1999, the court is scheduled to hear the motion to dismiss the second federal action. With respect to the Company's lawsuit against NJIT, NJIT has asserted counterclaims and/or third party claims against each of the Company, Dr. Gordon, a former employee of the Company and certain patent law firms. Beginning in November 1998, the Company and Dr. Gordon requested discovery from NJIT in the state court action. NJIT produced very few responsive and/or relevant documents to the Company and refused to answer certain of the Company's interrogatories, which requested support for NJIT's alleged claims of ownership of or an interest in the Company's Patent. In mid- 1999, the Company and Dr. Gordon moved to compel the production of documents from NJIT and to compel NJIT's answers to the interrogatories. On July 19, 1999, the state court ordered NJIT to provide additional responsive and/or relevant documents, if any, that the Company requested and answer certain interrogatories that NJIT previously refused to answer. Pursuant to the court order, NJIT provided answers to the interrogatories and certified that it undertook a reasonable search for and produced all documents that the Company requested. While the state court action is still in the discovery phase and NJIT has advised the Company that it is not prepared to go forward with depositions on dates noticed by the Company, the Company believes that its Patent is valid and enforceable and that the Company has valid defenses to each of NJIT's claims. The Company believes the probability of an unfavorable outcome is extremely low, and therefore no amounts have been accrued with respect to this lawsuit. Other On April 16, 1999, the Company was served with a complaint commencing a lawsuit in the United States District Court for the District of New Jersey by Robert G. Donovan, a former officer and director, seeking payment of $129,500 for undocumented services alleged to have been performed for the Company. A compensation package offered by the Company for documented services had been rejected by Mr. Donovan previously. Although the Company believes the probability of a significant unfavorable outcome is remote, this matter is currently in the preliminary stages and no prediction can be made of the ultimate outcome. Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS None Item 3. DEFAULTS UPON SENIOR SECURITIES None Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None Item 5. OTHER INFORMATION None Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 10 Employment Agreement between the Registrant and Eugene I. Gordon, dated as of April 9,1999 11 Statement regarding computation of per share earnings 27.1 Financial Data Schedule 27.2 Financial Data Schedule (Restated) (b) Reports on Form 8-K None SIGNATURES ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Dated: August 12, 1999 MEDJET INC. /s/ Eugene I. Gordon -------------------------------------------- Eugene I. Gordon, Ph.D. Chairman of the Board and Chief Executive Officer /s/ Thomas M. Handschiegel -------------------------------------------- Thomas M. Handschiegel Vice President - Finance and Human Resources (Principal financial and accounting officer) INDEX TO EXHIBITS EXHIBIT NO. DESCRIPTION 10 Employment Agreement between the Registrant and Eugene I. Gordon, dated as of April 9,1999 11 Statement regarding computation of per share earnings 27.1 Financial Data Schedule 27.2 Financial Data Schedule (Restated) EX-10 2 EMPLOYMENT AGREEMENT DATED APRIL 9, 1999 Exhibit 10 EMPLOYMENT AGREEMENT AGREEMENT made as of the 9th day of April, 1999 between MEDJET INC. (the "Company"), a Delaware corporation having an office at 1090 King Georges Post Road, Suite 301, Edison, New Jersey 08837 and EUGENE I. GORDON ("Executive"), residing at 1535 Coles Avenue, Mountainside, New Jersey 07092. W I T N E S S E T H: - - - - - - - - - - WHEREAS, Executive has served as Chairman, Chief Executive Officer, and Chief Technical Officer of the Company since its inception; WHEREAS, the Company desires to continue to receive the benefit of Executive services and Executive is willing to continue to provide such services to the Company, upon the terms and conditions set forth in this Agreement; NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth, the parties agree as follows: 1. Employment. 1.01 Term. The Company hereby employs Executive, and Executive hereby ---- accepts employment with the Company with the duties hereinafter set forth, for a period commencing on March 16, 1999 and ending March 15, 2002 subject, however, to earlier termination in accordance with the provisions of this Agreement (the "Employment Period"). 2. Duties; Chairman and Chief Executive Officer. 2.01 Duties. During the Employment Period, Executive shall serve as ------ Chairman, Chief Executive Officer and Chief Technical Officer of the Company in accordance with the provisions of the Company by-laws or such other executive position determined by the Board of Directors of the Company in accordance with Section 2.02 and shall perform such duties as may from time to time be reasonably assigned to him by the Company's Board of Directors, consistent with such position, taking into account those duties currently performed by him. Executive agrees that, during the term of this Agreement, he will devote his full time, skills and efforts to the performance of his duties hereunder and to the furtherance of the interests of the business of the Company. 2.02 Titles. When elected annually by the Board of Directors, ------ Executive shall serve as Chairman and Chief Executive Officer of the Company. If Executive is not reelected as a director of the Company or if the Board of Directors chooses to remove Executive from the offices of Chairman, Chief Executive Officer and/or Chief Technical Officer, Executive agrees to serve in such other executive capacity as the Board of Directors shall determine. 3. Compensation and Related Matters. 3.01 Base Salary. As compensation for Executive's services, the ----------- Company shall pay Executive during the Employment Period, a base salary of $170,000 per annum (the "Base Salary"), commencing March 16, 1999, payable semi- monthly or in accordance with the Company's customary practice from time to time. The Base Salary may be increased in the sole discretion of the Company's Board of Directors from time to time, provided, however, that Executive shall not participate in such determination. The Company and the Executive may, from time to time, agree in writing that the Executive shall forego all or a portion of his Base Salary for a specified period and receive in lieu thereof that number of unregistered shares of the Company's Common Stock, $.001 par value per share ("Common Stock") having an aggregate Fair Market Value (as that term is hereinafter defined) equal to the portion of the Base Salary otherwise due to him during the period specified in such written agreement. 3.02 Bonuses. For each twelve (12) month period commencing March 16, ------- 1999 during the Employment Period ("Agreement Year"), Executive shall receive, in addition to his Base Salary, a bonus of $20,000 ("Bonus") upon the occurrence of each one of any three events defined by the Company's Board of Directors from time to time (the "Bonus Events"), up to an aggregate of $60,000 during any Agreement Year. Each Bonus earned by Executive shall be paid in 12 equal payments over one year after the Bonus Event for which it was earned, provided, however, that in the event the foregoing would require the payment of more than $60,000 in Bonuses in any Agreement Year, the additional Bonus(es) may be deferred at the Company's option, until the first day of the next Agreement Year, or, if this Agreement shall have terminated, upon the termination of this Agreement. In the event that the Company's Board of Directors determines that the Company's financial condition makes it infeasible to pay these Bonuses in cash, they will be paid in unregistered shares of the Company's Common Stock as specified in Section 3.01 of this Agreement. 3.03 Stock Options. Executive shall be granted stock options to ------------- purchase 150,000 shares of the Company's Common Stock. Such stock options shall be either incentive stock options or non-qualified stock options for the purposes of the Internal Revenue Code of 1986, as amended, at the option of Executive. The exercise price of such stock options shall be the Fair Market Value of the Company's Common Stock on the date of this Agreement unless such stock options shall be incentive stock options, in which event the exercise price shall be 110% of such Fair Market Value. Such stock options shall be exercisable to the extent of one-third on the first anniversary of the date of the grant and an additional one-third on each of the succeeding two anniversaries of date of grant provided Executive remains an employee of the Company as of such date and shall terminate on the tenth anniversary of such grant unless such stock options shall be incentive stock options, in which event the termination date shall be the fifth anniversary of the date of grant or such earlier date as may be required by law. The stock options shall be evidenced by an agreement substantially in the form of Exhibit A (incentive stock options) or Exhibit B (nonqualified stock options) attached hereto. The Company shall take all steps as shall be necessary to effectuate the foregoing including, without limitation, proposing a new stock option plan for approval by the Company's stockholders and reserving a sufficient number of authorized but unissued shares to permit the purchase of the shares pursuant to the stock options to be granted to Executive. 3.04 Fair Market Value. For the purpose of any computation under this ----------------- Agreement, the Fair Market Value per share of Common Stock at any time shall mean: (a) If the principal market for the Common Stock is a national securities exchange, the Nasdaq National Market or the Nasdaq SmallCap Market, the closing sales price of the Common Stock on such day as reported by such exchange or market, or on a consolidated tape reflecting transactions on such exchange or market; or (b) If the principal market for the Common Stock is not a national securities exchange, the Nasdaq National Market or the Nasdaq SmallCap Market, the closing mean between the highest bid and lowest asked price for the Common Stock on the date in question, as reported by the National Quotation Bureau, Inc. ("NQB") or at least two market makers in the Common Stock if quotations are not available from NQB but are available from market makers; or (c) If the Fair Market Value can not be determined in accordance with subsections (a) or (b), Fair Market Value shall be determined by the Company's Board of Directors, whose decision shall be final and binding, provided, however, that Executive shall not participate in such determination. 3.05 Expenses. The Company shall pay or reimburse Executive for all -------- reasonable business expenses (including automobile, hotel, business entertainment and other travel (other than commuting) expenses) incurred in the performance of Executive's duties, upon submission of appropriate vouchers and other supporting data. 3.06 Benefits. Executive shall be entitled to (i) participate in all -------- general pension, profit-sharing, life, medical, disability and other insurance and executive benefit plans at any time in effect for executives of the Company, and (ii) twenty (20) days paid vacation during each Agreement Year at mutually agreeable times. 4. Termination; Disability; Death. 4.01 Termination. The Company shall have the right to terminate the ----------- employment of Executive hereunder at any time for any reason upon written notice. If termination is "for cause", such cause shall include and be limited exclusively to the occurrence of any of the following acts or events by or relating to Executive: (i) any material breach of any obligations of Executive under this Agreement or the Company's Proprietary Information, Inventions, Non- Competition and Non-Solicitation Agreement executed by the Executive on February 28, 1996 (the "Proprietary Info Agreement") which remains uncured for more than thirty (30) days after written notice thereof by the Company to Executive; (ii) continued, habitual intoxication or performance under the influence of controlled substances during working hours, after the Company shall have provided written notice to Executive and given Executive thirty (30) days within which to commence rehabilitation with respect thereto, and the Employee shall have failed to commence such rehabilitation; (iii) theft or embezzlement from the Company or any other material acts of dishonesty in the course of Executive's duties hereunder which significantly injures the Company; or (iv) conviction by a court of competent jurisdiction of a felony or conviction in respect of any dishonest or fraudulent act relating to the Executive's duties as an executive officer of the Company or which significantly injures the Company or its reputation (other than traffic violations and minor misdemeanors). In the event that during the Employment Period, the Company discharges Executive for any reason other than for cause, death or disability, Executive shall be entitled to receive a severance payment (the "Severance Payment") equal to the lesser of (a) the amount of Base Salary payable to Executive for the balance of the Employment Period (as if such Employment Period had not been terminated), payable semi-monthly or in accordance with the Company's customary payroll practices for the balance of the Employment Period or (b) the amount of the Base Salary and Bonuses earned during the one year period immediately prior to such termination. If Executive is discharged for death or disability, the Company shall pay to Executive or his designated beneficiaries a payment ("Death/Disability Payment") equal to the amount set forth in (b) above; provided further that any payments to Executive under any disability insurance or plan maintained by the Company shall be applied against and shall reduce the amount of the Death/Disability Payment. In the event Executive shall have received a portion of his Base Salary in Common Stock in accordance with Section 3.01, for purposes of the calculation of the Severance Payment or Death/Disability Payment under clause (b) above, Executive's Base Salary shall include the amount he would have received in cash had he not received payment in Common Stock. The Death/Disability Payment or the Severance Payment (only if calculated under clause (b) above) shall be due and payable to Executive in 12 equal monthly payments over the ensuing one year period. If the Company breaches this Agreement, Executive shall have the option to treat it as termination without cause and to receive the Severance Payment after Executive shall have given the Company written notice thereof and the Company has failed to cure such breach within thirty (30) days thereafter. 4.02 Disability. If Executive, by reason of illness, mental or ---------- physical incapacity (as determined by a physician chosen by the Company) or other disability, is unable to perform his regular duties hereunder for any consecutive period of 180 days or more from its commencement or for non- consecutive periods aggregating 180 days in any consecutive twelve-month period, then, in any such event, the Company may terminate this Agreement at any time thereafter upon ten days' written notice to Executive. 4.03 Death. In the event of Executive's death, the Employment Period ----- shall terminate effective as of the date of death. 4.04 No Salary Continuation For Cause. In the event of termination of -------------------------------- this Agreement or the Employment Period "for cause" under Section 4.01, Executive's Base Salary shall cease as of the date of termination and the Company shall pay Executive any Bonuses then earned and unpaid, in accordance with Section 3.02. 4.05 Transfer of Assets. If during the Employment Period, a sale of ------------------ all or substantially all the assets of the Company occurs, Executive's remaining unvested stock options granted under Section 3.03 will immediately vest. 5. Miscellaneous. 5.01 Notices. All notices under this Agreement shall be in writing ------- and shall be deemed to have been duly given if personally delivered or if mailed by first class registered or certified mail, return receipt requested, addressed to the Company or to Executive, as the case may be, at their respective addresses set forth on the first page of this Agreement, or to such other person or address as may be designated by like notice hereunder. Any such notice shall be deemed to have been given on the day delivered, if personally delivered, or on the third day after the date of mailing if mailed in accordance with the above. 5.02 Parties in Interest. This Agreement shall be binding upon and ------------------- inure to the benefit of and be enforceable by the parties hereto and their respective heirs, legal representatives, successors and, in the case of the Company, assigns, but no other person shall acquire or have any rights under or by virtue of this Agreement, and the obligations of Executive under this Agreement may not be assigned or delegated. 5.03 Governing Law; Severability. This Agreement shall be governed by --------------------------- and construed and enforced in accordance with the laws and decisions of the State of New Jersey applicable to contracts made and to be performed therein without giving effect to the principles of conflict of laws. The invalidity or unenforceability of any other provision of this Agreement, or the application thereof to any person or circumstance, in any jurisdiction shall in no way impair, affect or prejudice the balance of this Agreement, which shall remain in full force and effect, or the application thereof to other persons and circumstances. 5.04 Survival. The provisions of Section 5 shall survive the -------- expiration or termination of this Agreement for any reason. 5.05 Entire Agreement; Modification; Waiver; Interpretation. This -------------------------------------- -------------- Agreement, together with the Proprietary Info Agreement, contain the entire agreement and understanding between the parties with respect to the subject matter hereof and thereof and supersede all prior negotiations and oral understandings, if any. Neither this Agreement nor any of its provisions may be modified, amended, waived, discharged or terminated, in whole or in part, except in writing signed by the party to be charged. No waiver of any such provision or any breach of or default under this Agreement shall be deemed or shall constitute a waiver of any other provision, breach or default. All pronouns and words used in this Agreement shall be read in the appropriate number and gender, the masculine, feminine and neuter shall be interpreted interchangeably and the singular shall include the plural and vice versa, as the circumstances may require. IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the date first above written. MEDJET INC. Executive By /s/ Thomas M. Handschiegel By /s/ Eugene I. Gordon --------------------------- --------------------- Name: Thomas M. Handschiegel Eugene I. Gordon Title: Vice President - Finance and Human Resources EX-11 3 STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS Exhibit 11 COMPUTATION OF NET LOSS PER COMMON SHARE
Three Months Ended Six Months Ended June 30, June 30, -------- -------- 1999 1998 1999 1998 ---- ---- ---- ---- NET LOSS PER SHARE Loss from Operations applicable to Common Stock $ (334,503) $ (704,812) $ (552,166) $(1,419,907) ========== ========== ========== =========== Weighted Average Common and Equivalent Shares Outstanding 3,891,855 3,686,280 3,886,536 3,681,168 ---------- ---------- ---------- ----------- Net Loss Per Share $ (0.09) $ (0.19) $ (0.14) $ (0.39) ========== ========== ========== =========== NET LOSS PER SHARE - ASSUMING DILUTION (See "NOTE") Loss from Operations applicable to Common Stock $ (334,503) $ (704,812) $ (552,166) $(1,419,907) ========== ========== ========== =========== Weighted Average Common and Equivalent Shares Outstanding 3,891,855 3,686,280 3,886,536 3,681,168 Add: (A) Assuming Exercise of Stock Options 114,111 37,917 80,224 44,765 (B) Assuming Exercise of Warrants - 49,251 - 50,755 ---------- ---------- ---------- ----------- Weighted Average Common Shares Outstanding - As Adjusted 4,005,966 3,773,448 3,966,760 3,776,688 ========== ========== ========== =========== Net Loss Per Share - Assuming Dilution $ (0.08) $ (0.19) $ (0.14) $ (0.38) ========== ========== ========== ===========
NOTE: The calculation for Net Loss Per Common Share - Assuming Dilution is submitted in accordance with Securities Exchange Act of 1934 Release No. 9083 although not required by Financial Accounting Standards Board No. 128 "Earnings Per Share" ("FASB 128") since the results are anti-dilutive. (A) - For 1999, the dilutive options (i.e., the average market price is greater than the exercise price), assume that options are exercised and proceeds realized as indicated below. Next, using the treasury stock method with the average market price per share during each period and the total shares assumed to be reacquired as of the beginning of each period, the additional shares included as outstanding are indicated below.
Period Ended June 30, 1999 Three Months Six Months ------------ ---------- Options assumed exercised 229,050 207,550 Proceeds assumed realized $221,643 $188,443 Shares assumed reacquired: - During three months ($221,643/$1.92) 115,439 - During six months ($188,443/$1.48) 127,326 Net additional shares assumed outstanding 114,111 80,224
COMPUTATION OF NET LOSS PER COMMON SHARE - CONTINUED For 1998, the dilutive options (i.e., the average market price is greater than the exercise price), assume that options are exercised and proceeds realized as indicated below. Next, using the treasury stock method with the average market price per share during each period and the total shares assumed to be reacquired as of the beginning of each period, the additional shares included as outstanding are indicated below.
Period Ended June 30, 1998 Three Months Six Months ------------ ---------- Options assumed exercised 257,050 257,050 Proceeds assumed realized $1,494,488 $1,494,488 Shares assumed reacquired: - During three months ($1,494,488/$6.82) 219,133 - During six months ($1,494,488/$7.04) 212,285 Net additional shares assumed outstanding 37,917 44,765
(B) - For 1999, the dilutive warrants (i.e., the average market price is greater than the exercise price), assume that warrants are exercised and proceeds realized as indicated below. Next, using the treasury stock method with the average market price per share during each period and the total shares assumed to be reacquired as of the beginning of each period, the additional shares included as outstanding are indicated below.
Period Ended June 30, 1999 Three Months Six Months ------------ ---------- Warrants assumed exercised - - Proceeds assumed realized $ - $ - Shares assumed reacquired: - During three months ($ 0/$1.92) - - During six months ($ 0/$1.48) - Net additional shares assumed outstanding - -
For 1998, the dilutive warrants (i.e., the average market price is greater than the exercise price), assume that warrants are exercised and proceeds realized as indicated below. Next, using the treasury stock method with the average market price per share during each period and the total shares assumed to be reacquired as of the beginning of each period, the additional shares included as outstanding are indicated below.
Period Ended June 30, 1998 Three Months Six Months ------------ ---------- Warrants assumed exercised 97,389 97,389 Proceeds assumed realized $328,300 $328,300 Shares assumed reacquired: - During three months ($328,300/$6.82) 48,138 - During six months ($328,300/$7.04) 46,634 Net additional shares assumed outstanding 49,251 50,755
EX-27.1 4 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE JUNE 30, 1999 (UNAUDITED) FINANCIAL STATEMENTS OF MEDJET INC. AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 6-MOS DEC-31-1999 JAN-01-1999 JUN-30-1999 42,724 0 0 0 0 90,072 435,245 290,714 996,270 523,134 0 0 0 3,935 469,201 996,270 0 175,000 0 0 731,171 0 168 (551,966) 200 (552,166) 0 0 0 (552,166) (.14) (.14)
EX-27.2 5 FINANCIAL DATA SCHEDULE (RESTATED)
5 THIS SCHEDULE CONTAINS RESTATED SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE JUNE 30, 1998 (UNAUDITED) FINANCIAL STATEMENTS OF MEDJET INC. AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 6-MOS DEC-31-1998 JAN-01-1998 JUN-30-1998 1,239,447 0 0 0 0 1,268,280 310,161 222,538 1,694,755 380,829 0 1,100 0 3,720 1,309,106 1,694,755 0 0 0 0 1,449,025 0 183 (1,419,707) 200 (1,419,907) 0 0 0 (1,419,907) (.39) (.38)
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