-----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, StEuyoEyX2u0/MDHc83DTFS2ST0sY9Ms3ls+PUT7pw8XwfN7EG6Q7yVo+DbAui0k RwCPzXp9XNrQJo1PGnys7w== 0000944209-98-001925.txt : 19981118 0000944209-98-001925.hdr.sgml : 19981118 ACCESSION NUMBER: 0000944209-98-001925 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981113 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: 98749549 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 FORM 10QSB ================================================================================ 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 September 30, 1998 OR [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______________________ to ____________________ Commission File Number: 1-11765 MEDJET INC. (Exact name of Small Business Issuer as Specified in its Charter) DELAWARE 22-3283541 (State or Other Jurisdiction (I.R.S. Employer Identification No.) of Incorporation or Organization) 1090 KING GEORGES POST ROAD, SUITE 301 EDISON, NEW JERSEY 08837 (Address of Principal Executive Offices) (732) 738-3990 (Registrant's Telephone Number, Including Area Code) ----------------------------------------------------------- (Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [_] As of October 31, 1998, 3,881,158 shares of Common Stock, par value $.001 per share, were outstanding. Transitional Small Business Disclosure Format: Yes [_] No [X] ================================================================================ MEDJET INC. INDEX -----
PAGE NO. PART I. FINANCIAL INFORMATION Item 1. Financial Statements: Condensed Interim Balance Sheet as of September 30, 1998 (Unaudited)............... 3 Condensed Interim Statements of Operations for the three and nine months ended September 30, 1998 and 1997 and the period from December 16, 1993 (date of inception) to September 30, 1998 (Unaudited)....................................... 4 Condensed Interim Statements of Cash Flows for the nine months ended September 30, 1998 and 1997 and the period from December 16, 1993 (date of inception) to September 30, 1998 (Unaudited)..................................................... 5 Notes to Condensed Interim Financial Statements (Unaudited)........................ 6 Item 2. Management's Discussion and Analysis or Plan of Operation.......................... 9 PART II. OTHER INFORMATION Item 1. Legal Proceedings.................................................................. 14 Item 2 Changes in Securities and Use of Proceeds.......................................... 15 Item 3. Defaults Upon Senior Securities.................................................... 15 Item 4. Submission of Matters to a Vote of Security Holders................................ 15 Item 5. Other Information.................................................................. 15 Item 6. Exhibits and Reports on Form 8-K................................................... 16 SIGNATURES.......................................................................................... 17
2 MEDJET INC. (A Development Stage Company) Condensed Interim Balance Sheet September 30, 1998 (Unaudited)
ASSETS LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT ASSETS: CURRENT LIABILITIES: - --------------- -------------------- Cash and cash equivalents $ 961,276 Accounts payable and accrued liabilities $ 343,695 Prepaid expenses 27,641 Preferred dividends payable 49,123 ---------- Income taxes payable 150 988,917 ---------- ---------- Total Liabilities 392,968 ---------- PROPERTY, PLANT & EQUIPMENT - - ----------------------------- Less accumulated depreciation of $244,277 260,714 STOCKHOLDERS' EQUITY: ---------- ORGANIZATION COSTS - Preferred stock, $.01 par value, 1,000,000 shares - -------------------- authorized, 110,000 shares designated as Series Less accumulated amortization of $33,222 4,165 A 10% Cumulative Convertible issued and ---------- outstanding 1,100 PATENTS and TRADEMARKS - - ------------------------ Common stock, $.001 par value, 7,000,000 Less accumulated amortization of $14,500 114,041 shares authorized, 3,720,069 shares issued ---------- and 3,686,280 shares outstanding 3,720 SECURITY DEPOSITS 7,050 - ----------------- ---------- Additional paid-in capital 5,880,221 Total Assets $1,374,887 Additional paid-in capital - Beneficial conversion ========== feature on cumulative convertible preferred stock 133,389 Accumulated deficit (including deficit accumulated during development stage of $6,541,892 of which $1,556,204 was applied to additional paid-in capital upon conversion from an "S" to a "C" corporation) (5,034,811) Less: Treasury stock, 33,789 shares, at cost (1,700) ---------- Total Stockholders' Equity 980,819 ---------- Total Liabilities and Stockholders' Equity $1,374,887 ==========
See Notes to the Condensed Interim Financial Statements. 3 MEDJET INC. (A Development Stage Company) Condensed Interim Statements of Operations For The Three and Nine Months Ended September 30, 1998 and 1997 And The Period From December 16, 1993 (Date of Inception), to September 30, 1998 (Unaudited)
Three Months Ended Nine Months Ended September 30, September 30, ------------------------------------ ------------------------------------- 1998 1997 1998 1997 ---------------- ---------------- ---------------- ---------------- Revenues: License fee income $ 500,000 $ - $ 500,000 $ - ---------------- ---------------- ---------------- ---------------- Total revenues 500,000 - 500,000 - ---------------- ---------------- ---------------- ---------------- Expenses: Research, development, general and administrative 821,210 625,672 2,270,235 1,906,062 ---------------- ---------------- ---------------- ---------------- Total expenses 821,210 625,672 2,270,235 1,906,062 ---------------- ---------------- ---------------- ---------------- Loss from Operations (321,210) (625,672) (1,770,235) (1,906,062) Other Income (Expense): Interest income, net 16,326 32,150 45,444 118,106 ---------------- ---------------- ---------------- ---------------- Loss before provision for (benefit from) income tax (304,884) (593,522) (1,724,791) (1,787,956) Provision for (benefit from) income tax - 946,787 - - ---------------- ---------------- ---------------- ---------------- Net Loss (304,884) (1,540,309) (1,724,791) (1,787,956) Dividends on preferred stock 182,512 - 182,512 - ---------------- ---------------- ---------------- ---------------- Net Loss Attributable to Common Shareholders $ (487,396) $(1,540,309) $(1,907,303) $(1,787,956) =============== ================ ================ ================ Net Loss Per Share $ (0.13) $ (0.42) $ (0.50) $ (0.49) =============== ================ ================ ================ Weighted average common and equivalent shares outstanding 3,869,004 3,669,785 3,792,659 3,655,783 =============== =============== ================ ================ Period from December 16, 1993 (Inception) to September 30, 1998 ------------------- Revenues: License fee income $ 500,000 ------------------- Total revenues 500,000 ------------------- Expenses: Research, development, general and administrative 7,298,119 ------------------- Total expenses 7,298,119 ------------------- Loss from Operations (6,798,119) Other Income (Expense): Interest income, net 257,077 ------------------- Loss before provision for (benefit from) income tax (6,541,042) Provision for (benefit from) income tax 850 ------------------- Net Loss (6,541,892) Dividends on preferred stock 182,512 ------------------- Net Loss Attributable to Common Shareholders $(6,724,404) =================== Net Loss Per Share $ (2.26) =================== Weighted average common and equivalent shares outstanding 2,976,815 ===================
See Notes to the Condensed Interim Financial Statements. 4 MEDJET INC. (A Development Stage Company) Condensed Interim Statements of Cash Flows For The Nine Months Ended September 30, 1998 and 1997 And The Period From December 16, 1993 (Date of Inception), to September 30, 1998 (Unaudited)
For the Nine Months Ended September 30, ------------------------------------- 1998 1997 --------------- --------------- Cash Flows from Operating Activities $ (1,493,574) $ (1,842,842) Cash Flows from Investing Activities (153,938) (107,575) Cash Flows from Financing Activities 1,117,748 (138,898) --------------- --------------- Net Increase (Decrease) in Cash and Cash Equivalents (529,764) (2,089,315) Cash and Cash Equivalents - Beginning of Period 1,491,040 4,241,985 --------------- --------------- Cash and Cash Equivalents - End of Period $ 961,276 $ 2,152,670 =============== =============== Supplemental Disclosures of Non-Cash Financing Activities: Cash Paid During the Period for Interest Expense $ 487 $ 12,967 =============== =============== Period from December 16, 1993 (Inception) to September 30, 1998 ------------------- Cash Flows from Operating Activities $ (5,933,671) Cash Flows from Investing Activities (677,969) Cash Flows from Financing Activities 7,572,916 ------------------- Net Increase (Decrease) in Cash and Cash Equivalents 961,276 Cash and Cash Equivalents - Beginning of Period - ------------------- Cash and Cash Equivalents - End of Period $ 961,276 =================== Supplemental Disclosures of Non-Cash Financing Activities: Cash Paid During the Period for Interest Expense $ 38,423 ===================
See Notes to the Condensed Interim Financial Statements. 5 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 and, with a current emphasis on ophthalmic surgical technology and equipment, has developed a technology and derivative devices for corneal surgery. The Company's technology is based on small-diameter, fluid or ice microjets moving at high speeds. In each application, the microjet beam substitutes for conventional, oscillating metal or diamond blades. For example, in combination with other elements of the Company's devices, the microjet beam is capable of removing the epithelium (the front surface layer of the eye) in a procedure known as epithelial keratoplasty and of shaving thin, shaped layers from the cornea in a procedure known as lamellar keratoplasty. The Company believes that the microjet produces less tissue trauma and is potentially more accurate than blades or lasers for tissue separation or removal. The Company also believes that such microjets will bring new surgical capability and performance to the clinic or operating room and may become the standard of care for the treatment of several diseases and conditions. (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 primarily only of normal recurring adjustments) necessary to present fairly the results for the interim periods. The results of operations for the three and nine month 6 periods ended September 30, 1998 are not necessarily indicative of results to be expected for the entire year ending December 31, 1998. NOTE B - EQUITY TRANSACTIONS: (1) Initial Public Offering: ----------------------- During the third quarter of 1996, the Company consummated an initial public offering (the "Offering") in which it issued and sold to the public a total of 1,232,143 Units (the "Units"), each Unit consisting of one share of common stock, $.001 par value, of the Company (the "Common Stock") and one Class A Redeemable Common Stock Purchase Warrant (the "Warrants") to purchase one share of Common Stock at a price of $10.00 per share for a 24-month period commencing on November 6, 1996. The Units became separable on that date and the Common Stock and the Warrants began trading separately on November 8, 1996. In July 1998, in connection with its private placement described in paragraph (2) of this Note B, the Company agreed to extend the exercise period of the Warrants for an additional 12 months. As a result, the Warrants will expire on November 6, 1999, unless exercised prior to that time. The Company realized approximately $5,600,000 of net proceeds from the Offering, which were used, in part, to repay outstanding indebtedness of approximately $550,000. The balance of the net proceeds was used to fund the Company's research and development activities and business operations. (2) Private Placement: ----------------- In January 1998, the Company commenced a private placement of its 10% Cumulative Convertible Preferred Stock, $.01 par value (the "Preferred Stock"), at a price of $10 per share. At the closing for this private placement, which was held in April 1998, the Company sold and issued 110,000 shares of Preferred Stock for an aggregate price of $1,100,000. The net proceeds of the private placement have been and will be used to augment the Company's working capital. The Preferred Stock bears a cumulative annual dividend of 10% (subject to increase to 12% in certain events) and is convertible into approximately 1.66 shares of Common Stock for each share of Preferred Stock, subject to adjustment for any stock splits, stock dividends, recapitalizations, reclassifications and similar events. 7 The private placement, which was terminated on July 31, 1998, was carried out pursuant to available exemptions from registration under Section 4(2) of the Securities Act of 1933 and rules promulgated under that section. On October 9, 1998, the 110,000 shares of Preferred Stock outstanding were converted into 182,724 shares of Common Stock. At the same time, a total of 12,154 shares of Common Stock was issued in payment of the cumulative dividends on the Preferred Stock. The dividend was computed at 10% per annum and totalled approximately $51,534. NOTE C - NET LOSS PER SHARE: Net loss per share is computed by dividing the net loss by the weighted average number of shares of Common Stock outstanding during the period, plus Common Stock equivalents from the assumed conversion of Preferred Stock. NOTE D - 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. 8 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 under "Certain Considerations" and in the introduction to Part I of the Company's annual report on Form 10-KSB for the fiscal year ended December 31, 1997 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 the research and development of medical technology and, with a current emphasis on ophthalmic surgical technology and equipment, has developed a proprietary technology and derivative devices for corneal surgery. During the remainder of 1998, the Company expects to continue its research and development activities, with a principal focus on ophthalmic surgical technology and equipment, and to commence early exploratory work on orthopedic and other applications of its 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 months or nine months ended September 30, 1998. In connection with the execution of the license agreement with Nestle (as described under "License Agreement" in Note D of Notes to the Condensed Interim Financial Statements), a payment in the amount of $500,000 was made by Alcon to the Company during the three months ended September 30, 1998. This amount has been reflected as License Fee Income in the accompanying Condensed Interim Financial Statements. Total costs and expenses during the three months ended September 30, 1998 increased by $195,538 (31.3%) to $821,210 from $625,672 for the comparable period of 1997. This was primarily due to a net increase in staff (to seventeen full-time and two part-time employees from seventeen full-time employees) and an increase in professional fees as the Company continued its research and development and clinical trials activities, offset in part by a reduction in the use of outside consultants (their duties being assumed by the 9 staff). Expenses were also higher during the 1998 period due to increased purchases for materials, testing and analysis and higher insurance costs associated with the higher level of activity. During the nine months ended September 30, 1998, total costs and expenses increased by $364,173 (19.1%) to $2,270,235 from $1,906,062 for the comparable period of 1997, generally for the same reasons as during the three-month period. Other income/expense consists of interest income and interest expense and finance charges. Net interest income for the three months ended September 30, 1998 decreased by $15,824 (49.2%) to $16,326 from $32,150 for the comparable period of 1997. This decrease principally results from income earned on the Company's short-term investments which were lower in the 1998 period, reflecting the utilization of these funds to continue the Company's research and development activities. For the nine months ended September 30, 1998, net interest income decreased by $72,662 (61.5%) to $45,444 from $118,106 for the comparable period of 1997 for the same reason as during the three-month period. LIQUIDITY AND CAPITAL RESOURCES As of September 30, 1998, the Company's working capital was $595,949. Until the consummation of the Offering, the Company's liquidity requirements were met through private sales of Common Stock and short-term borrowings from affiliates of the Company, including Eugene I. Gordon, Ph.D., the founder of the Company and its Chairman of the Board and Chief Executive Officer. All such loans were repaid utilizing proceeds of the Offering. The Company has no long-term indebtedness. In January 1998, the Company commenced a private placement of its Preferred Stock at a price of $10 per share. Pursuant to the private placement, the Company sold and issued 110,000 shares of Preferred Stock for an aggregate price of $1,100,000, the net proceeds of which were released to the Company following a closing in April 1998 and added to the Company's working capital. The private placement was terminated on July 31, 1998. On July 23, 1998, the Company entered into an agreement with Nestle S.A. ("Nestle") pursuant to which the Company granted 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 also provides for future payments based on the attainment of certain milestones and upon sales by Alcon of the Company's products. 10 The Company has not yet obtained marketing approval for the devices covered by the license agreement, and the timing and amount of any future payments to the Company under the agreement will depend upon the Company's success in obtaining such approvals and certain other events, all of which cannot be predicted with any certainty. Throughout the second half of 1998, the Company has been seeking additional capital to finance its 1999 business plan. The Company expects that this activity will be successful but, because of the depressed equity and capital markets since June, it is apparent this will take considerably more time to complete. Pending obtaining additional financing, the Company made the decision to curtail several operational activities as well as to downsize its employee base in order to husband and stretch its existing capital to the next financing. On October 30, 1998, the Company dismissed 7 of its 19 employees. It also significantly reduced the salary of the management group, some reductions being as large as 50%. The specific goal was to reduce the Company's monthly expenditures by 60%, to approximately $100,000. The Company will focus on fulfilling its commitment with respect to its agreement with Alcon. The Company also intends to complete a filing with the FDA for Section 510(k) approval for the use of its HydroBrush(TM) Keratome for treatment of pterygium, and complete associated clinical studies. Assuming the application is approved, no attempt will be made to manufacture or market the device until the necessary funding is available. The Company has not excluded the possibility of licensing the HydroBrush(TM) Keratome to a third party at some future date. The Company will also begin to submit proposals to the government and to industrial organizations to fund some of the costs of the study of other medical applications of its technology platform. Finally, the Company will continue explorations and analyses of potential new medical applications of its novel microjet technology. The Company anticipates that the remaining net proceeds from the private placement of its Preferred Stock, together with the payment received by the Company in connection with the execution of the license agreement, will be sufficient to meet the Company's 1998 working capital and planned capital expenditure requirements. The Company will need to raise additional capital in late 1998 or early 1999 to maintain its current scope of operations. The Company currently has no commitment or arrangement for any such capital, however, 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 its current operations. CERTAIN CONSIDERATIONS The Company's current strategy is to selectively license its ophthalmology products where 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 11 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. At present, the Company has not decided whether to license or manufacture and market its HydroBrush(TM) Keratome product for epithelial removal and treatment of pterygium. 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. 12 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. 13 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS 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 were named as defendants. The complaint alleges 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 seeks 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 seeks 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's patent application relating to a refractive corrective procedure based on the use of an isotonic waterjet had previously been denied by the Patent and Trademark Office as inoperable. NJIT also learned that a similar invention had been made and disclosed publicly prior to the NJIT invention. NJIT did not contest the ruling and did not pursue a U.S. patent. The three inventors of the subject of such denied 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. NJIT then claimed, without being specific, that the Company's Patent emanated from the earlier invention. Prior to being served with the complaint by NJIT, the Company and Dr. Gordon had 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 certain monetary damages. NJIT has moved to have the Company's lawsuit removed to the U.S. District Court and included in its lawsuit. The Company has moved to have the NJIT lawsuit dismissed on the basis that NJIT has not been harmed by the Company's Patent and therefore it cannot 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 has appealed the remand action and has informed the Company that it intends to appeal the dismissal of its lawsuit brought in U.S. District Court. These matters are in the preliminary stages and no prediction can be made as to their final outcome. 14 ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS (a) Not applicable. (b) Not applicable. (c) Not applicable. (d) The Company's Offering was consummated in August 1996. Since that time, through September 30, 1998, the Company has applied all of the net proceeds realized in the Offering (in the aggregate approximate amount of $5,600,000) in the following manner: $362,000 for the purchase and installation of machinery and equipment; $715,000 for the repayment of indebtedness; $1,229,000 for working capital; $56,000 for patent and trademark filings; and $3,238,000 for research and development and human clinical trials (which includes compensation expense attributable to employees performing solely research and development functions in the amount of $1,089,000). Other than the repayment of indebtedness in the aggregate amount of $415,000, none of such payments were made to directors, officers, general partners of the Company or their associates, to persons owning 10% or more of any class of equity securities of the Company, or to affiliates of the Company. Item 3. Defaults Upon Senior Securities ------------------------------- None Item 4. Submission of Matters to a Vote of Security Holders --------------------------------------------------- None Item 5. Other Information ----------------- None 15 Item 6. Exhibits and Reports on Form 8-K -------------------------------- (a) Exhibits 10 Exclusive License Agreement, effective as of July 22, 1998, between the Company and Nestle S.A. 11 Statement regarding computation of per share earnings 27 Financial Data Schedule 16 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: November 13, 1998 MEDJET INC. ------------------------------ (Registrant) /s/ Eugene I. Gordon ------------------------------ Eugene I. Gordon, Ph.D. Chairman of the Board and Chief Executive Officer /s/ Terence A. Walts ------------------------------ Terence A. Walts President and Chief Operating Officer /s/ Thomas M. Handschiegel ------------------------------ Thomas M. Handschiegel Chief Financial Officer and Chief Accounting Officer 17 MEDJET INC. INDEX TO EXHIBITS EXHIBIT NO. DESCRIPTION 10 Exclusive License Agreement, effective as of July 22, 1998, between the Company and Nestle S.A. 11 Statement regarding computation of per share earnings 27 Financial Data Schedule 18 EX-10 2 EXCLUSIVE LICENSE AGREEMENT EXHIBIT 10 ---------- NOTE: THIS DOCUMENT OMITS CERTAIN INFORMATION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT. THE OMITTED INFORMATION HAS BEEN FILLED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. THE LOCATION OF THE OMITTED INFORMATION IS INDICATED HEREIN BY AN ASTERISK. EXCLUSIVE LICENSE AGREEMENT --------------------------- This Agreement is made on the last date executed by a party ("Effective Date"), by and between Medjet, Inc., a Delaware corporation with a principal place of business at 1090 King Georges Post Road, Edison, New Jersey 08837 ("MEDJET") and Nestle S.A., a Swiss business entity, having a place of business at Case Postale 353, Avenue Nestle, CH-1800, Vevey, Switzerland ("NESTLE"). WITNESSETH: WHEREAS, MEDJET is the owner or otherwise controls and has the right to grant licenses and assignments of their interest in certain Waterjet Technology defined hereinafter, WHEREAS, MEDJET is the owner of U.S. Patent No. 5,556,406 claiming a device using the Waterjet Technology; WHEREAS, NESTLE wishes to obtain an exclusive license in the field of corneal refractive surgery to said patent and any future patents relating to the Waterjet Technology; NOW, THEREFORE, in consideration of the following mutual promises and obligations, the parties agree as follows: ARTICLE I --------- DEFINITIONS AND INTERPRETATION ------------------------------ Section 1.01 Defined Terms. --------------------------- Unless the context otherwise requires, the following terms shall have the following meanings for all purposes of this Agreement, such definitions to be equally applicable to both the singular and plural forms and masculine, feminine and neuter gender of any of the terms defined: "Waterjet Technology" means the use of high pressure water to cut, dissect, remove, ablate or otherwise manipulate corneal tissue, including the technology and devices described in U.S. Patent No. 5,556,406, and any continuations, divisions, 1 continuation-in-part, substitutes, reissues, re-examinations and foreign counterparts thereof. "Know-How" means the trade secrets, manufacturing processes, specifications, formulae, techniques, practices and technical data relating to the manufacturing and packaging of Licensed Products; scientific, analytical and clinical data; and all other technical and scientific information relating to the Licensed Products, in each case which are or will be owned by MEDJET and which may be useful in enabling NESTLE to obtain applicable regulatory approval(s) and to manufacture, use, and sell Licensed Products. "Licensed Patent Rights" means U.S. Patent No. 5,556,406, and any other patent or patent application assigned to, owned by, applied for or licensed to MEDJET which includes one or more Valid Claims that encompass either the Waterjet Technology or the use of the Waterjet Technology in performing corneal refractive surgery, and any continuations, divisions, continuation-in-part, substitutes, reissues, re-examinations and foreign counterparts of such patent application(s) or any patent(s) thereon. "Licensed Products" means all devices, handpieces and disposables that fall within one or more Valid Claims contained in the Licensed Patent Rights. NESTLE may, at its sole discretion, create a pak or pak(s) related to specific surgical procedures using the Waterjet Technology ("Waterjet Paks"). NESTLE may sell Waterjet Paks or other Licensed Products in combination or conjunction with other NESTLE paks or NESTLE products ("NESTLE Products"), and no royalty shall be paid on such NESTLE Products. In the event that NESTLE sells Waterjet Paks or other Licensed Products in combination or conjunction with NESTLE Products, royalties on such included, but not separately invoiced, Waterjet Paks or other Licensed Products shall be paid based on NESTLE's average selling price for stand alone Waterjet Paks or other Licensed Products. In the event that no stand alone Licensed Products are sold, then the royalty will be paid on the incremental value of the Licensed Products sold in combination or conjunction with other NESTLE paks or NESTLE products, such incremental value to be mutually agreed between the parties and shall be based on similar NESTLE products. In no event shall the portion of the sale attributed to the Licensed Product be less that the value of the Licensed Product when sold alone. "Licensed Territory" means the entire world. "Net Selling Price" means the gross selling price of the Licensed Products reduced by (to the extent included in the gross selling price): (i) sales commissions paid on international sales through third party brokers and/or distributors; (ii) transportation charges or allowances, including air freight; (iii) sales, use or value added taxes; (iv) normal and customary trade or volume discounts; (v) any returns or allowances granted in lieu of returns; and (vi) rebates paid to buying cooperatives. 2 All deductions from gross selling price shall be consistent with NESTLE's prior business practices for similar products. When calculating Net Selling Price, goods placed in inventory or on consignment shall not be deemed sold until invoiced to the customer. NESTLE's intracompany transfers or sales to subsidiary or affiliated companies shall not be regarded as sales for the purpose of this Agreement. Sales shall be deemed to have been made when title transfers to a third party purchaser. "Net Sales" shall mean the aggregate Net Selling Price for all Licensed Products. "Valid Claim(s)" means any claim of an issued patent contained in the Licensed Patent Rights that has not been held invalid or unenforceable by the unappealable or unappealed decision of a court of competent jurisdiction. ARTICLE II ---------- GRANT OF LICENSE ---------------- Section 2.00 Grant of Exclusive Patent License. ----------------------------------------------- MEDJET hereby grants to NESTLE and NESTLE hereby accepts from MEDJET upon the terms and conditions herein specified the exclusive right and license in the field of corneal refractive surgery under the Licensed Patent Rights and Know- How to make, use, offer for sale and sell Licensed Products in the Licensed Territory. This license shall include the right to grant sublicenses to NESTLE's subsidiaries and affiliates. Section 2.01 Further Obligations of the Parties. ----------------------------------------------- NESTLE shall use its Best Efforts to register, manufacture, promote and market the Licensed Products in all territories that NESTLE reasonably deems commercially viable. For purposes of this Agreement, "Best Efforts" shall mean the diligence, type, extent and intensity of efforts that NESTLE applies to successfully manufacture and market/sell worldwide, products that NESTLE has identified as being important to NESTLE's business. During the term of this Agreement, NESTLE may conduct or cause to be conducted activities directed toward the development and/or marketing of competing refractive surgical products provided NESTLE does not preferentially promote such competing product(s). MEDJET shall diligently develop the Licensed Products to meet the specifications provided by MEDJET to NESTLE and incorporated herein as attached Exhibit A. MEDJET shall provide NESTLE with reasonable levels of technical assistance, training and support as may be required to ensure the successful introduction, manufacture and sale of Licensed Products. MEDJET shall also provide 3 support for NESTLE's efforts at manufacturable design, cost reduction or marketing for Licensed Products for mutually agreed upon compensation. MEDJET will keep NESTLE informed as to MEDJET's activities in the ophthalmic and otic fields and hereby grants NESTLE a right to first refusal to the distribution rights to other ophthalmic or otic products developed by MEDJET. NESTLE shall respond promptly to such offers made by MEDJET. ARTICLE III ROYALTIES, RECORDS AND REPORTS Section 3.00 Licensing Fee. --------------------------- In exchange for the exclusive license granted hereunder, NESTLE shall pay MEDJET a non-refundable licensing fee of * Dollars ($ * ), ------------- ------------- one half (1/2) of which is payable immediately upon signing this Agreement with the remaining one half (1/2) payable upon: 1) * ; and 2) ------------- jointly designed experimental verification in cadaver eyes or animal eyes that the Licensed Product can achieve single pass targeted LASIK equivalent stromal removal without unacceptable thermal damage meeting the refractive range in the specifications listed on Exhibit A. In addition, NESTLE shall pay MEDJET an additional non-refundable licensing fee of * Dollars ($ * ) upon the successful ----------------- ---------------- completion (to NESTLE's reasonable satisfaction) no later than December 31, 2002, of clinical studies jointly designed by MEDJET and NESTLE demonstrating that the HydroBlade keratome for refractive surgery meets all of the specifications on attached Exhibit A. Such pre-FDA clinical study to include blind human eyes and a limited number of healthy human eyes and will be conducted by MEDJET. All determinations of whether experimental verification has been achieved or whether the completion of any clinical studies has been successful or whether the Licensed Product meets the specification on attached Exhibit A shall be determined solely by NESTLE, acting reasonably, using measurement methodology mutually agreed to by NESTLE and MEDJET. ____________________ * Information omitted pursuant to a request for confidential treatment. 4 Section 3.01 Royalties. ----------------------- a) Royalty. In addition to the licensing fee set forth in Section 3.00, ------- NESTLE will pay MEDJET a running royalty of: i) * percent ( * %) of the Net Sales of Licensed Products if the ---- --- cumulative annual Net Sales of Licensed Products are less than or equal to Twenty-Five Million Dollars ($25,000,000.00); or ii) * percent ( * %) of the Net Sales of Licensed Products if ---- --- the cumulative annual Net Sales of Licensed Products are greater than Twenty-Five Million Dollars ($25,000,000.00) but less than or equal to Seventy-Five Million Dollars ($75,000,000.00); or iii) * percent ( * %) of the Net Sales of Licensed Products if ---- --- the cumulative annual Net Sales of Licensed Products are greater than Ninety-Six Million Four Hundred Thousand Dollars($96,400,000.00); or iv) a lump sum of * Dollars ($ * ) ------------ ------------- if the cumulative annual Net Sales of Licensed Products are greater than Seventy-Five Million Dollars ($75,000,000.00) but less than or equal to Ninety-Six Million Four Hundred Thousand Dollars ($96,400,000.00). In the event that Licensed Products are sold in a country where Licensed Patent Rights do not exist and a competitive waterjet product is being sold in that country, then the running royalty rate shall be computed as set forth above and then the royalty due to sales in non-patent countries shall be reduced by one-half (1/2) on Net Sales in such country. (e.g., If cumulative Net Sales in patent and non-patent countries is $25,500,000, with $10,000,000 coming from non-patent countries, the total royalty dues shall be * % of $15,500,000 ------ and * % of $10,000,000. In no event shall the reduction in royalties for ------ sales in non-patent countries result in the total royalty payment being greater than the total royalty payment that would have been due if no reduction had been made for sales in non-patent countries. If MEDJET fails to deliver to NESTLE a corneal refractive surgery product that meets all of the specifications on attached Exhibit A by December 31, 2002, then the running royalty rates stated above shall be reduced retroactively by an amount to be agreed upon by the parties. _____________________ * Information omitted pursuant to a request for confidential treatment. 5 b) Minimum Royalties. To maintain exclusivity, the running royalty ----------------- specified in Section 3.01(a) shall be subject to a minimum annual royalty of * Dollars ($ * ) beginning in 2000, paid quarterly. This - ------------ ------------ minimum annual royalty shall be payable regardless of whether NESTLE has commercially marketed any Licensed Product but shall be deducted from, and fully credited against, any running royalty earned under Section 3.01(a), provided that MEDJET has demonstrated progress (in NESTLE's sole opinion) in achieving the specification in attached Exhibit A. In the event that, by December 31, 2002, MEDJET has failed to deliver to NESTLE a product that meets all of the specifications on attached Exhibit A, then the minimum annual royalties specified above shall be reduced to * Dollars ($ * ). ----------- ------------ Beginning in the year 2001, in the event that NESTLE fails to pay the minimum royalty due in any given year: 1) the exclusive license granted in Section 2.00 shall become non-exclusive; and 2) MEDJET shall be free to grant other non-exclusive licenses to the Licensed Patent Rights and Know-How to third parties; and 3) NESTLE shall no longer be required to make minimum royalty payments under this Section 3.01(b); and NESTLE and MEDJET shall, at the request of MEDJET, negotiate in good faith, the termination of this Agreement, such termination to include adequate mutually agreed upon compensation to NESTLE. c) Unblocking License. In the event that NESTLE reasonably determines, ------------------ in its sole discretion, that a license is required from any third party in order for NESTLE to make, use or sell Licensed Products, the royalties payable to MEDJET under this Section 3.01 shall be reduced accordingly. The provisions of this Section 3.01(c) shall not apply to any changes to the Licensed Products made by NESTLE unless such change(s) were require to make the Licensed Product meet the specification on attached Exhibit A. d) Payment Schedule. Royalties due under Section 3.01 above shall be ---------------- paid by NESTLE to MEDJET in United States dollars within sixty (60) days after the end of each calendar quarter. Partial calendar quarters, if any, shall be treated as calendar quarters. If NESTLE fails to make any payment within the prescribed period, such unpaid amount shall bear interest at an annual rate of five (5) percentage points above the prime lending rate quoted by Citibank, N.A., New York, New York on the date such payment is due, such interest being payable from the date that the payment was due until the date the payment is actually made. _____________________ * Information omitted pursuant to a request for confidential treatment. 6 Section 3.02 Records. -------------------- NESTLE shall keep full, true and accurate books of account containing all particulars which may be necessary for the purpose of showing the amount payable to MEDJET by way of royalty as aforesaid. The books of account shall be kept at NESTLE's principal place of business and the books of the supporting data therefor shall be open at all reasonable times for two (2) years following the end of a calendar year to which they pertain to the inspection of an independent certified public accountant retained by MEDJET for the purpose of verifying NESTLE's royalty statement or NESTLE's compliance in any respect with this Agreement. Any such accountant shall sign an appropriate agreement prepared by NESTLE to hold in confidence any and all information acquired in the course of performing such inspection for MEDJET. Section 3.03 Reports. -------------------- NESTLE, within sixty (60) days after the close of each of its fiscal quarters, shall deliver to MEDJET a true and accurate report giving such particulars of the business conducted by NESTLE during the preceding three months as are pertinent to an accounting for royalty under this Agreement. Simultaneously with the delivery of each report, NESTLE shall pay to MEDJET the royalty accrued for the period covered by such report. If no royalties are due on the sale of Licensed Products, it shall be so reported. Section 3.04 Tax Withholding. ---------------------------- NESTLE shall have no liability, and nothing shall be construed to create any liability, for any income, franchise or similar taxes (including, but not limited to, withholding taxes) which are the legal obligation of MEDJET, which may be required to be paid or collected by NESTLE, and MEDJET agrees to pay same and indemnifies NESTLE from any claim for payment of such taxes. All payments to MEDJET required under this Agreement shall be made to the name or account of MEDJET at the United States address designated by MEDJET. Any and/or all of such payments shall be subject to such withholding tax laws, rules and regulations as may be applicable and, if such laws, rules or regulations require a withholding to be made, such payments(s) will be reduced by such amount(s) and the payment of the reduced amount(s) shall constitute full compliance with this Agreement. NESTLE shall provide to MEDJET appropriate proof of payment of any and all such taxes withheld. To the extent that any and/or all of such payments shall be subject to any currency control or other restrictions, NESTLE's compliance with such currency control or other restrictions shall not constitute a breach of this Agreement. 7 Section 3.05 Health Registrations. ---------------------------------- NESTLE shall be responsible for obtaining and maintaining all governmental approvals to sell Licensed Products in the markets that NESTLE decides to enter and shall assume all related costs. MEDJET will cooperate with NESTLE in seeking regulatory approval of Licensed Products. ARTICLE IV ---------- TERM AND TERMINATION -------------------- Section 4.00 Term. ----------------- This Agreement shall have a term beginning on the Effective Date and terminating on the date that the last patent contained in the Licensed Patent Rights expires. In addition, NESTLE may terminate this Agreement upon three (3) months written notice to MEDJET, provided all royalties due under Section 3.01 have been paid. Section 4.01 Bankruptcy. ------------------------ If NESTLE shall become bankrupt or insolvent and/or the business of NESTLE shall be placed in the hands of a receiver, assignee or trustee whether by the voluntary act of NESTLE or otherwise, this Agreement shall terminate immediately. Section 4.02 Other Default. --------------------------- Upon the breach of or default under this Agreement by NESTLE or MEDJET, the non-breaching party may terminate this Agreement by providing sixty (60) days written notice via certified mail to the breaching party. The notice shall become effective at the end of the sixty-day period after actual receipt of the notice by the breaching party unless during the period, the breach or default is cured. Section 4.03 Effect of Termination. ----------------------------------- Upon termination of this Agreement for any reason, NESTLE may continue to sell in the ordinary course of business for a period of one hundred and eighty (180) days reasonable quantities of Licensed Products that are fully manufactured and in NESTLE's normal inventory at the date of termination, provided any royalties due under Section 3.01 are paid to MEDJET for such Licensed Products. Upon termination of this Agreement by NESTLE for cause, any unamortized advance royalty paid by NESTLE to MEDJET under Section 3.01(b) shall be refunded immediately by MEDJET. 8 Upon termination of this Agreement by MEDJET for cause, NESTLE shall assign to MEDJET any health registrations or government approvals for Licensed Products owned by NESTLE. ARTICLE V --------- NOTICES AND ADDRESSES --------------------- Section 5.00 Notices. -------------------- Any written communication, notice, report or payment shall be addressed and mailed to the addressed party at the appropriate one of the following addresses: NESTLE: Nestle S.A. Case Postale 353 Avenue Nestle, CH-1800 Vevey, Switzerland MEDJET: Medjet, Inc. President, COO 1090 King Georges Post Road Edison, New Jersey 08837 Either party may change its mailing address for the purpose of this Agreement by giving the other party notice of such change fifteen (15) days prior to the date upon which the change is to become effective. All written communications, notices, reports or payments shall be sent by first-class mail, postage prepaid and certified. ARTICLE VI ---------- PATENT PROSECUTION ------------------ Section 6.00 Patent Prosecution Expenses. ---------------------------------------- The expenses of preparing, prosecuting and maintaining the Licensed Patent Rights shall be solely the responsibility of MEDJET. MEDJET shall add to or maintain the Licensed Patent Rights when there is a demonstrated economic incentive to MEDJET to do so, including foreign countries and new technologies. Section 6.01 Ownership of Improvements in Know-How and the Waterjet -------------------------------------------------------------------- Technology. - ---------- The definition of Know-How and the Waterjet Technology shall be amended automatically to include any future improvements in the Waterjet Technology or Know-How developed, owned or controlled in any way by MEDJET. Any future 9 improvements in the Waterjet Technology or Know-How developed solely by NESTLE shall be NESTLE's sole property, and MEDJET shall have no ownership interest in any such future improvements in the Waterjet Technology or Know-How developed by NESTLE; however, NESTLE hereby grants MEDJET a non-exclusive, royalty-free license outside of the fields of ophthalmology and otorhinolaryngology to use such NESTLE-owned future improvements in the Waterjet Technology or Know-How developed by NESTLE. ARTICLE VII ----------- INFRINGEMENT ------------ Section 7.00 Notices. --------------------- If either party hereto becomes aware that any person is, or may be, infringing the Licensed Patent Rights, that party shall immediately inform the other of the infringement, in writing. Section 7.01 Prosecution of Actions. ------------------------------------ MEDJET shall have the right but not the obligation to initiate and prosecute at its own expense and for its sole benefit any action for infringement of any of the Licensed Patent Rights. MEDJET shall also have the right but not the obligation of conducting the defense against any action for declaratory relief asserting the invalidity or non-infringement of the Licensed Patent Rights brought by a third party against NESTLE and/or MEDJET. Should MEDJET fail to institute such proceedings within ninety (90) days from receipt by MEDJET of written notice from NESTLE of the existence of infringement or within thirty (30) days from receipt of service of process from a third party, NESTLE may, at its own expense, prosecute any such action in the name of MEDJET and if NESTLE elects to pursue such action, NESTLE shall retain seventy-five percent (75%) and MEDJET shall retain twenty-five percent (25%) of any moneys collected through such action after deducting all costs and expenses, including attorney fees, incurred by NESTLE in pursuing such action. Except as provided above, MEDJET shall not be responsible for any legal expenses of NESTLE in connection with the prosecution of any action contemplated hereby; however, MEDJET may, at its own expense, participate in and be represented by its own counsel in any action brought by NESTLE. Section 7.02 Cooperation. ------------------------- MEDJET and NESTLE agree to join in any legal action covered by Section 7.01 hereof where such joinder is necessary to permit the action to proceed. Any settlement of any legal action covered by Section 7.01 hereof shall be mutually agreed upon by the parties hereto, and neither party shall withhold unreasonably such agreement. 10 ARTICLE VIII ------------ CONFIDENTIALITY --------------- During the term of this Agreement, either party may disclose to the other party confidential information in the nature of trade secrets. Accordingly, all information received by either party, directly or indirectly incident to this Agreement, shall be held in strictest confidence, and the receiving party shall not either directly or indirectly disclose or use, except in performance of its obligations under this Agreement, any such information of any kind or character as may be disclosed or otherwise imparted to the receiving party or as may be developed during the course of this Agreement, and that all such information shall be held in the strictest confidence. The foregoing obligations of confidentiality and non-use shall remain in effect for a period of three (3) years from the date of disclosure, and shall survive the expiration or termination of this Agreement. The obligations of confidence and non-use assumed by MEDJET and by NESTLE hereunder shall not apply to: (a) information which at the time of disclosure is in the public domain; or (b) information which thereafter lawfully becomes a part of the public domain other than through disclosure by or through the receiving party; or (c) information which is already in the possession of the party receiving same as shown by its written record; or (d) information which is lawfully disclosed to either party by a third party not under an obligation of confidentiality to the disclosing party with respect to said Confidential Information; or (e) information which is subsequently developed by an employee or agent of the receiving party without actual knowledge of the disclosure; or (f) information which the receiving party is required by law to disclose, provided that the receiving party gives the disclosing party reasonable notice of its intent to disclose such information. 11 ARTICLE IX ---------- MISCELLANEOUS ------------- Section 9.00 Indemnification. ----------------------------- NESTLE shall defend, indemnify and hold MEDJET, its officers, directors, employees, agents, representatives, successors and designees harmless against all claims alleging that any Licensed Product sold by NESTLE does not have the approval of the applicable regulatory agency or any defect in materials, workmanship or manufacture of Licensed Products sold under this Agreement or any breach by NESTLE of its obligations under this Agreement and shall bear all costs of defending such actions. MEDJET agrees to make its employees and agents available as expert witnesses at a mutually agreed upon rate to provide deposition and/or trial testimony concerning the design and development of such products and to otherwise assist NESTLE in preparing the defense of such product liability actions, but responsibility for managing such litigation shall rest solely with NESTLE. Section 9.01 Assignability --------------------------- This Agreement, or any of the rights or obligations created herein, may not be assigned, in whole or in part, by either party, without the express, written permission of the other party, such permission not to be withheld unreasonably and permission shall be presumed to be granted thirty (30) days following notice; however, this Agreement shall be assignable by either party without the consent of the other party only to an affiliate or to the successors of the assigning party's entire business or of substantially all of the assigning party's assets relating to the manufacture and sale of Licensed Products. In the event that NESTLE assigns any of its rights under this Agreement to an affiliate of NESTLE, NESTLE shall remain secondarily liable for the obligations assigned to the affiliate. Section 9.02 Severability. -------------------------- If any provision of this Agreement shall for any reason or to any extent be invalid or unenforceable, the remainder of this Agreement shall not be affected thereby, but rather shall be enforced to the greatest extent permitted by law. Section 9.03 Counterparts. -------------------------- This Agreement may be executed in multiple counterparts, each of which shall be deemed an original, but all of which shall be deemed one and the same instrument. 12 Section 9.04 Headings. ---------------------- The headings used in this Agreement are used for administrative purposes only and do not constitute substantive matter to be considered in construing the terms of this Agreement. Section 9.05 Entire Agreement. ------------------------------ This Agreement embodies the entire agreement between the parties relating to the subject matter hereof. All prior arrangements or understandings are hereby superseded and canceled. No change, modification, or waiver of this Agreement or any term thereof shall be valid or binding unless it is in writing and signed by the party intended to be bound. Section 9.06 Binding Effect. ---------------------------- Except as otherwise provided herein, the terms, obligations, covenants, provisions, conditions and agreements herein shall bind and inure to the benefit of the successors, legal representatives, transferees and assigns of NESTLE and MEDJET. Section 9.07 Use of Name. ------------------------- NESTLE shall me the name of MEDJET in connection with the promotion and sale of Licensed Products in a manner to be determined by NESTLE. The parties shall issue a mutually agreed upon press release following the execution of this Agreement Section 9.08 Choice of Law. --------------------------- The construction and performance of this Agreement shall be governed by the laws of the State of New York. Section 9.09 Obligation to Pay. ------------------------------- Termination of this Agreement shall not affect the obligation of NESTLE to pay MEDJET any royalty or other payments which may be due and unpaid at the date of termination, nor shall the same prejudice any other right of MEDJET under this Agreement. Within sixty (60) days after termination, NESTLE shall render to MEDJET a written statement of the kind required in Section 3.03 hereof respecting the due and unpaid royalties and shall accompany such a statement with payment to cover the same. 13 Section 9.10 Attorney Fees. -------------------------- If any party to this Agreement institutes legal proceedings against any other party with respect to this Agreement or other transaction contemplated hereby, the losing or defaulting party shall pay to the prevailing party reasonable attorney fees, costs and expenses incurred in connection with the prosecution or defense of such action. Section 9.11 Warranty. --------------------- MEDJET warrants that it is the sole and exclusive owner of the Know-How and Licensed Patent Rights and has the right to grant the exclusive license contained in this Agreement. MEDJET shall defend, indemnify and hold NESTLE harmless against all claims by any third party alleging ownership of or any rights to the Know-How and Licensed Patent Rights and shall bear all costs of defending such actions, provided MEDJET is given prompt notice of such claim(s) and MEDJET is given the opportunity to take over, control, settle and defend any such claim(s). IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the last day indicated below. NESTLE S.A. BY: /s/ Claude Rossier ------------------- DATE: 22 July, 1998 ------------- NAME: Claude Rossier ------------------- TITLE: Vice-President ------------------- MEDJET, INC. BY: /s/ Eugene I. Gordon DATE: July 15, 1998 --------------------- ------------- NAME: Eugene I. Gordon --------------------- TITLE: Chairman and Chief Executive Officer ------------------------------------- 14 EXHIBIT A Product Specifications for MEDJET Powercut Microkeratome. * ___________________ * Information omitted pursuant to a request for confidential treatment. 15 EX-11 3 COMPUTATION OF PER SHARE EARNINGS
MEDJET INC. EXHIBIT 11 COMPUTATION OF NET LOSS PER SHARE Three Months Ended Nine Months Ended 9/30/98 9/30/97 9/30/98 9/30/97 -------------- -------------- -------------- ------------- NET LOSS PER SHARE Loss from Operations applicable to Common Stock $ (487,396) $ (1,540,309) $ (1,907,303) $ (1,787,956) ============== ============== ============== ============= Weighted Average Common and Equivalent Shares Outstanding 3,869,004 3,669,785 3,792,659 3,655,783 -------------- -------------- -------------- ------------- Net Loss Per Share $ (0.13) $ (0.42) $ (0.50) $ (0.49) ============== ============== ============== ============= NET LOSS PER SHARE - ASSUMING DILUTION Loss from Operations $ (487,396) $ (1,540,309) $ (1,907,303) $ (1,787,956) ============== ============== ============== ============= Weighted Average Common and Equivalent Shares Outstanding 3,869,004 3,669,785 3,792,659 3,655,783 Add: Assuming Exercise of Stock Options 22,380 52,066 39,150 52,066 Assuming Exercise of Warrants 51,674 57,205 55,808 57,205 -------------- -------------- -------------- ------------- Weighted Average Common Shares Outstanding - As Adjusted 3,943,058 3,779,056 3,887,617 3,765,054 ============== ============== ============== ============= Net Loss Per Share - Assuming Dilution $ (0.12) $ (0.41) $ (0.49) $ (0.47) ============== ============== ============== =============
COMPUTATION OF NET INCOME (LOSS) PER COMMON SHARE, CONTINUED NOTE: The calculation for Net Loss Per Common Share - Assuming Dilution is submitted in accordance with Securities Exchange Act of 1934 Release No. 9083 although not required by Financial Accounting Standards Board No. 128 "Earnings Per Share" ("FASB 128") since the results are anti-dilutive. (A) - For 1998, the dilutive options (i.e., the average market price is greater than the exercise price), assume that options 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 September 30, 1998 Three Months Nine Months --------------- ------------- Options assumed exercised 254,050 398,693 Proceeds assumed realized $1,475,738 $2,448,489 Shares assumed reacquired: - During three months ($1,475,738/$6.37) 231,670 - During nine months ($2,448,489/$6.81) 359,543 Net additional shares assumed outstanding 22,380 39,150
For 1997, 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 September 30, 1997 Three Months Nine Months --------------- ------------- Options assumed exercised 219,863 219,863 Proceeds assumed realized $1,370,902 $1,370,902 Shares assumed reacquired: - During three months ($1,370,902/$8.17) 167,797 - During nine months ($1,370,902/$8.17) 167,797 Net additional shares assumed outstanding 52,066 52,066
(B) - 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 September 30, 1998 Three Months Nine Months -------------- ------------ Warrants assumed exercised 115,661 115,661 Proceeds assumed realized $407,600 $407,600 Shares assumed reacquired: - During three months ($407,600/$6.37) 63,987 - During nine months ($407,600/$6.81) 59,853 Net additional shares assumed outstanding 51,674 55,808
For 1997, 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 September 30, 1997 Three Months Nine Months -------------- ------------- Warrants assumed exercised 97,389 97,389 Proceeds assumed realized $328,300 $328,300 Shares assumed reacquired: - During three months ($328,300/$8.17) 40,184 - During nine months ($328,300/$8.17) 40,184 Net additional shares assumed outstanding 57,205 57,205
EX-27 4 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the September 30, 1998 (unaudited) and September 30, 1997 (restated) financial statements of Medjet Inc. and is qualified in its entirety by reference to such financial statements. 9-MOS 9-MOS DEC-31-1998 DEC-31-1997 JAN-01-1998 JAN-01-1997 SEP-30-1998 SEP-30-1997 961,276 2,152,670 0 0 0 0 0 0 0 0 988,917 2,246,554 504,991 347,882 244,277 159,246 1,374,887 2,538,394 392,968 109,835 0 0 1,100 0 0 0 3,720 3,709 977,099 2,424,850 1,374,887 2,538,394 0 0 500,000 0 0 0 0 0 1,770,235 1,906,062 0 0 487 5,738 (1,724,791) (1,787,956) 0 0 (1,724,791) (1,787,956) 0 0 0 0 0 0 (1,907,303) (1,787,956) (.50) (.49) (.49) (.47)
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