UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED: MARCH 31, 2005
COMMISSION FILE NUMBER: 0-27551
MARINE JET TECHNOLOGY CORP.
(Exact name of small business issuer as specified in its charter)
NEVADA 88-0450923
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
936A BEACHLAND BOULEVARD, SUITE 13, VERO BEACH, FL 32963
(Address of principal executive offices)
(772) 231-7544
(Issuer's telephone number)
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 April 15, 2005, 28,122,570 shares of the registrant's common stock
were outstanding.
Transitional Small Business Disclosure Format (Check One):
Yes ___ No _X_
TABLE OF CONTENTS
Page
PART I Financial Information
Item 1. Financial Statements
Accountants' Review Report 1
Balance Sheets 2
Statements of Operations and Accumulated Deficit 3
Statement of Changes in Stockholders' Equity 4-5
Statements of Cash Flows 6
Notes to Financial Statements 7-10
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 11-22
Item 3. Controls and Procedures 23
PART II Other Information
Item 1. Legal Proceedings 24
Item 2. Changes in Securities and Use of Proceeds 24
Item 3. Defaults upon Senior Securities 24
Item 4. Submission of Matters to a Vote of Security Holders 24
Item 5. Other information 24
Item 6. Exhibits and Reports on Form 8-K 24-25
PART I
ITEM 1. FINANCIAL STATEMENTS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors of
Marine Jet Technology, Corp:
We have reviewed the accompanying balance sheet of Marine Jet Technology, Corp.
(a Development Stage Company) as of March 31, 2005 and the related statements of
operations and accumulated deficit for the three months ended March 31, 2005 and
2004 and from February 9, 2000 (date of inception) to March 31, 2005, and the
statements of cash flows for the three months ended March 31, 2005 and 2004 and
from February 9, 2000 (date of inception) to March 31, 2005. These interim
financial statements are the responsibility of the Company's management.
We conducted our review in accordance with the standards of the Public Company
Accounting Oversight Board (United States). A review of interim financial
information consists principally of applying analytical procedures and making
inquiries of persons responsible for financial and accounting matters. It is
substantially less in scope than an audit conducted in accordance with the
standards of the Public Company Accounting Oversight Board, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying interim financial statements for them to be in
conformity with U.S. generally accepted accounting principles.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As disclosed in Note 4, certain conditions
indicate that the Company may be unable to continue as a going concern. The
accompanying financial statements do not include any adjustments to the
financial statements that might be necessary should the Company be unable to
continue as a going concern.
/s/ De Joya & Company
De Joya & Company
Henderson, Nevada
1
MARINE JET TECHNOLOGY CORP.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
AS OF MARCH 31, 2005 AND DECEMBER 31, 2004
(Unaudited) (Audit)
March 31, December 31,
2005 2004
--------- ---------
ASSETS
CURRENT ASSETS
Cash $ 86,018 $ 869
--------- ---------
Total current assets 86,018 869
ASSETS HELD FOR SALE -- 48,186
--------- ---------
TOTAL ASSETS $ 86,018 $ 49,055
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Liabilities associated with assets held for sale $ -- $ 44,754
Accounts payable 15,379 --
Deposit liability 50,000 --
Short-term loan payable 2,500 --
--------- ---------
Total current liabilities 67,879 44,754
STOCKHOLDERS' EQUITY
Preferred stock, $0.001 par value, 5,000,000 shares
authorized; no shares issued or outstanding as of
March 31, 2005 and December 31, 2004, respectively -- --
Common stock, $0.001 par value, 45,000,000 shares
authorized; 28,122,570 and 21,822,570 issued and
outstanding as of March 31, 2005 and December 31,
2004, respectively 28,123 21,823
Additional paid-in capital 344,055 287,355
Accumulated deficit during development stage (354,039) (304,877)
--------- ---------
Total stockholders' equity 18,139 4,301
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 86,018 $ 49,055
========= =========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS
2
MARINE JET TECHNOLOGY CORP.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
FOR THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004
AND FROM INCEPTION TO MARCH 31, 2005
(UNAUDITED)
Three months ended Inception to
March 31, 2005 March 31, 2004 March 31, 2005
------------ ------------ ------------
REVENUES $ -- $ -- $ --
EXPENSES
General and administrative expenses 132,253 11,091 440,136
------------ ------------ ------------
TOTAL EXPENSES 132,253 11,091 440,136
------------ ------------ ------------
OTHER INCOME (EXPENSE)
Gain from disposal of Marine Jet
technology related assets and liabilities 83,091 -- 83,091
Interest expense -- (225) (2,844)
Gain on forgiveness of debt -- -- 5,850
------------ ------------ ------------
TOTAL OTHER INCOME (EXPENSE) 83,091 (225) 86,097
------------ ------------ ------------
NET LOSS (49,162) (11,316) (354,039)
Accumulated deficit, beginning of period (304,877) (145,483) --
------------ ------------ ------------
Accumulated deficit, end of period $ (354,039) $ (156,799) $ (354,039)
============ ============ ============
Weighted average number of shares
Outstanding 25,182,570 20,782,570 19,971,895
============ ============ ============
Net loss per basic shares $ -- $ -- $ (0.02)
============ ============ ============
Net loss per diluted shares $ -- $ -- $ (0.02)
============ ============ ============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS
3
MARINE JET TECHNOLOGY CORP.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FROM INCEPTION TO MARCH 31, 2005
(UNAUDITED)
Accumulated
Additional Deficit During Total
Common Paid-in Development Stockholders'
Shares Stock Capital Stage Equity
---------- ---------- ---------- ---------- ----------
Issued for cash, February 11, 2000 105,000 $ 105 $ -- $ -- $ 105
Issued for cash, February 12, 2000 3,125,000 3,125 -- -- 3,125
Issued for cash, May 18, 2000 100,000 100 -- -- 100
Issued for proprietary rights agreement,
May 19, 2000 1,000,000 1,000 -- --
1,000
Issued for patents, May 19, 2000 15,875,000 15,875 33,906 -- 49,781
Expense paid for by an officer and
director, December 31, 2000 -- -- 4,790 -- 4,790
Net loss, December 31, 2000 -- -- -- (18,718) (18,718)
---------- ---------- ---------- ---------- ----------
Balance, December 31, 2000 20,205,000 20,205 38,696 (18,718) 40,183
504 Offering, July 31, 2001 527,570 528 104,986 -- 105,514
Expenses paid for by an officer and
director, September 30, 2001 -- -- 11,575 -- 11,575
Expenses paid for by an officer and
director, December 31, 2001 -- -- 3,179 -- 3,179
Net loss, December 31, 2001 -- -- -- (49,650) (49,650)
---------- ---------- ---------- ---------- ----------
Balance, December 31, 2001 20,732,570 20,733 158,436 (68,368) 110,801
Expenses paid for by an officer and
director, December 31, 2002 -- -- 9,844 -- 9,844
Net loss, December 31, 2002 -- -- -- (35,549) (35,549)
---------- ---------- ---------- ---------- ----------
Balance, December 31, 2002 20,732,570 20,733 168,280 (103,917) 85,096
Expense reimbursement to an officer
and director, March 31, 2003 -- -- (635) -- (635)
Issued for cash, December 16, 2003 50,000 50 9,950 -- 10,000
Net loss, December 31, 2003 -- -- -- (41,566) (41,566)
---------- ---------- ---------- ---------- ----------
Balance, December 31, 2003 20,782,570 20,783 177,595 (145,483) 52,895
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS
4
MARINE JET TECHNOLOGY CORP.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FROM INCEPTION TO MARCH 31, 2005
(UNAUDITED)
(CONTINUED)
Accumulated
Additional Deficit During Total
Common Paid-in Development Stockholders'
Shares Stock Capital Stage Equity
---------- ---------- ---------- ---------- ----------
Issued for services, July 9, 2004 1,000,000 $ 1,000 $ 99,000 $ -- $ 100,000
Issued for services, July 27, 2004 40,000 40 10,760 -- 10,800
Net loss, December 31, 2004 -- -- -- (159,394) (159,394)
---------- ---------- ---------- ---------- ----------
Balance, December 31, 2004 21,822,570 21,823 287,355 (304,877) 4,301
Issued for cash, February 17, 2005 5,000,000 5,000 45,000 -- 50,000
Issued for services, February 17, 2005 1,300,000 1,300 11,700 -- 13,000
Net loss, March 31, 2005 -- -- -- (49,162) (49,162)
---------- ---------- ---------- ---------- ----------
Balance, March 31, 2005 28,122,570 $ 28,123 $ 344,055 $ (354,039) $ 18,139
========== ========== ========== ========== ==========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS
5
MARINE JET TECHNOLOGY CORP.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004
AND FROM INCEPTION TO MARCH 31, 2005
(UNAUDITED)
Three months ended Inception to
March 31, 2005 March 31, 2004 March 31, 2005
------------ ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (49,162) $ (11,316) $ (354,039)
Adjustments to reconcile net loss to net
cash provided (used) by operating
activities:
Gain on disposal of assets (83,091) -- (83,091)
Stock issued for services 13,000 -- 123,800
Deposit liability 50,000 -- 50,000
Depreciation and amortization 633 2,523 39,375
Increase in accounts payable 15,379 -- 15,379
Increase in accrued expenses 85,642 -- 85,642
Increase in interest payable 248 225 3,002
------------ ------------ ------------
NET CASH FLOWS PROVIDED (USED) BY
OPERATING ACTIVITIES 32,649 (8,568) (119,932)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of capital assets -- -- (30,689)
Purchase of licensing agreement, patents -- -- (5,458)
------------ ------------ ------------
NET CASH FLOWS USED BY INVESTING
ACTIVITIES -- -- (36,147)
CASH FLOWS FROM FINANCING ACTIVITIES
Note payable - shareholder -- -- 12,000
Notes payable -- -- 30,000
Short-term loan payable 2,500 -- 2,500
Proceeds from issuance of capital stock 50,000 -- 168,843
Capital contributions through expenses
paid by officer -- -- 28,754
------------ ------------ ------------
NET CASH PROVIDED BY FINANCING
ACTIVITIES 52,500 -- 242,097
NET INCREASE (DECREASE) IN CASH 85,149 (8,568) 86,018
CASH, BEGINNING OF PERIOD 869 9,766 --
------------ ------------ ------------
CASH, END OF PERIOD $ 86,018 $ 1,198 $ 86,018
============ ============ ============
Supplemental disclosures:
Interest paid $ -- $ -- $ --
============ ============ ============
Taxes paid $ -- $ -- $ --
============ ============ ============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS
6
MARINE JET TECHNOLOGY CORP.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2005 AND 2004
1. BASIS OF PRESENTATION
The financial statements as of March 31, 2005 included herein have been prepared
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 United States
generally accepted accounting principles have been condensed or omitted pursuant
to such rules and regulations. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. It is suggested that these financial statements
be read in conjunction with the December 31, 2004 audited financial statements
and notes thereto.
2. RECENT DEVELOPMENTS
On January 11, 2005, Mr. Jeff P. Jordan entered into a Securities Purchase
Agreement with Keating Reverse Merger Fund, L.L.C., ("KRM Fund") under which KRM
Fund agreed to purchase, and Mr. Jordan agreed to sell, an aggregate of
15,306,500 shares of common stock of Marine Jet Technology Corp. (the "Company")
owned by Mr. Jordan for a purchase price of $440,000, or $0.029 per share. Mr.
Jordan resigned as our President and Treasurer and a director of the Company
effective February 9, 2005.
On January 20, 2005, the Company entered into an Assumption Agreement with Mr.
Jordan and Intellijet Marine, Inc., a Nevada corporation ("Intellijet") that was
then the Company's wholly-owned subsidiary. Under the Assumption Agreement, the
Company transferred all of its assets, except for 21,822,570 shares of common
stock of Intellijet and approximately $2,500 in cash, to Intellijet. Intellijet
agreed to assume all of the Company's liabilities and obligations and to
indemnify it for any loss the Company incurs with respect to the assumed
liabilities. Mr. Jordan and Intellijet also agreed to release the Company from
any and all obligations and claims whatsoever.
On February 4, 2005, the Company completed the distribution of all 21,822,570
shares of common stock of Intellijet owned by it pro rata to the Company's
stockholders of record as of January 24, 2005. Pursuant to the distribution,
each of the Company's stockholders received one share of common stock of
Intellijet for each one share of common stock of the Company owned by the
stockholder. Intellijet will continue to operate its business of developing
marine jet propulsion technology; supplying mechanical components under the
Quick JetTM brand name; and licensing boat manufacturers to produce boats
incorporating Intellijet's systems.
As more fully described in Footnote 3, the distribution of Intellijet shares to
the Company's stockholders has been accounted for as a disposal of assets. Since
the Company has not commenced operations and has been considered a development
stage company since inception, the spin-off of Intellijet Marine, Inc. has been
considered as a disposal of assets rather than discontinued operations.
7
MARINE JET TECHNOLOGY CORP.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2005 AND 2004
3. DISPOSAL OF ASSETS
As described in Footnote 2, the Company disposed of its existing assets in
February 2005 through a distribution of Intellijet shares by the Company to its
stockholders. This transaction has been accounted for as a disposal of assets
rather than discontinued operations since the Company is a development stage
company and is not considered to have begun operations. The excess of
liabilities of Intellijet (including those liabilities assumed by Intellijet
under the Assumption Agreement) over the adjusted basis of the assets owned by
Intellijet (including those assets transferred to Intellijet under the
Assumption Agreement) was recorded as a gain on disposal of assets and
liabilities.
The following is a summary of the assets and liabilities of Marine Jet, which
are included in the gain on disposal of assets and liabilities at the
distribution date:
Assets transferred:
Office Equipment $ 689
Machinery 30,000
Less accumulated depreciation (20,964)
Patents 55,238
Property rights 1,000
Less accumulated amortization (18,410)
-------
Net assets transferred 47,553
Liabilities assumed:
Accrued expenses 85,641
Notes payable shareholders 13,749
Notes payable 31,254
--------
Total liabilities assumed 130,644
--------
Net gain on disposal of operations $ 83,091
========
Following completion of the transactions under the Assumption Agreement and the
distribution of Intellijet shares to the Company's stockholders, the Company has
no material assets, liabilities or ongoing operations. Nevertheless, the
Company's management believes that it may be able to recover some value for its
shareholders by the adoption and implementation of a plan to seek, investigate
and, if the results of the investigation warrant, effectuate a business
combination with a suitable privately-held company that has both business
history and operating assets.
8
MARINE JET TECHNOLOGY CORP.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2005 AND 2004
4. GOING CONCERN
The Company has sustained recurring operating losses, currently has no source of
operating revenue, and has only limited working capital with which to pursue its
business plan, which contemplates the completion of a business combination with
an operating company. The amount of capital required to sustain operations until
the successful completion of a business combination is subject to future events
and uncertainties. It may be necessary for the Company to secure additional
working capital through loans or sales of common stock, and there can be no
assurance that such funding will be available in the future. These conditions
raise substantial doubt about the Company's ability to continue as a going
concern.
5. EXCHANGE AGREEMENT
On April 14, 2005, the Company entered into the Exchange Agreement with Antik
Denim, LLC ("Antik"), the Antik members, and KRM Fund. Under the Exchange
Agreement, the Company will, at closing of the exchange transaction ("Closing"),
acquire all of the outstanding membership interests of Antik (the "Interests")
from the Antik members, and the Antik members will contribute all of their
Interests to the Company. In exchange, the Company will issue to the Antik
members 843,027 shares of its Series A Convertible Preferred Stock, par value
$0.001 per share ("Preferred Shares"), which will be convertible into
708,984,875 shares of its common stock ("Conversion Shares"). Following
completion of the exchange transaction, Antik will become a wholly-owned
subsidiary of the Company. There can be no assurance that the exchange
transaction will be completed.
Under the terms of the Exchange Agreement, all of the outstanding Interests will
be exchanged for 843,027 Preferred Shares. Each Preferred Share will be
convertible into 841 shares of our common stock (the "Conversion Rate"). The
Preferred Shares will immediately and automatically be converted into shares of
our common stock (the "Mandatory Conversion") upon the approval by a majority of
the Company's stockholders (voting together on an as-converted-to-common-stock
basis), following the exchange transaction, of an increase in the number of
authorized shares of the Company's common stock from 45,000,000 to 75,000,000,
and a 1 for 29 reverse stock split of the Company's outstanding common stock
("Reverse Split").
The holders of Preferred Shares will be entitled to vote together with the
holders of the common stock, as a single class, upon all matters submitted to
holders of common stock for a vote. Each Preferred Share will carry a number of
votes equal to the number of shares of common stock issuable in the Mandatory
Conversion based on the then applicable Conversion Rate. As such, immediately
following the exchange transaction, the Antik members will own 95.8% of the
total combined voting power of all classes of our stock entitled to vote.
Upon Mandatory Conversion of the Preferred Shares, and subject to an adjustment
of the Conversion Rate as a result of the Reverse Split, the Antik members will,
in the aggregate, receive approximately 24,447,783 shares of our common stock,
representing 95.80% of the outstanding shares of the Company's common stock
immediately following the Mandatory Conversion. The existing stockholders of the
Company will, following the Mandatory Conversion and Reverse Split, own
approximately 969,745 shares of common stock, representing 3.8% of the
outstanding shares of common stock. Subject to completion of the Closing, the
Company will also issue a finder approximately 102,079 shares of its common
stock on a post-Reverse Split basis, representing 0.4% of the outstanding shares
of common stock.
At or prior to the Closing, the Company will also enter into a certain financial
advisory agreement with Keating Securities, LLC ("Keating Securities"), a
registered broker-dealer, under which Keating Securities will be compensated by
the Company for its advisory services rendered to the Company in connection with
the exchange transaction. The transaction advisory fee will be $350,000 and will
be subject to and paid at the Closing.
9
MARINE JET TECHNOLOGY CORP.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2005 AND 2004
5. EXCHANGE AGREEMENT (continued)
In connection with the Exchange Agreement, the Company has received an advance
deposit of $50,000 which is shown as a deposit liability in the accompanying
financial statements.
Antik designs, develops, markets and distributes high fashion jeans and
accessories with a western flair under the brand name "Antik Denim". Antik's
products include jeans, jackets, belts, purses and t-shirts. Antik currently
sells its products in the United States, Canada, Japan and the European Union
directly to department stores and boutiques and through distribution
arrangements in certain foreign jurisdictions. Antik was established in
September 2004, is headquartered in Commerce, California, and maintains two
showrooms in New York and Los Angeles.
6. ISSUANCE OF COMMON SHARES
On February 17, 2005, the Company issued 5,000,000 shares of its common stock
KRM Fund at a purchase price of $0.01 per share, for an aggregate purchase price
of $50,000. The funds will provide working capital to the Company for operating
expenses.
On February 17, 2005, the Company also issued 1,000,000 shares of its common
stock to Mr. Kevin R. Keating, the sole officer and director of the Company, for
services rendered to the Company with a fair value of $10,000, or $0.01 per
share.
On February 17, 2005, the Company also issued 300,000 shares of its common stock
to Garisch Financial, Inc. ("GFI") for consulting services rendered to the
Company with a fair value of $3,000, or $0.01 per share.
7. SHORT TERM NOTE PAYABLE
On February 1, 2005, the Company received a short term advance from an unrelated
third party to cover transaction expenses related to the purchase agreement
described in Note 2. The amount is non-interest bearing and was repaid in April
2005.
10
PART I
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS STATEMENTS
Forward-Looking Statements
Statements made in this Form 10-QSB (the "Quarterly Report") that are
not historical or current facts are "forward-looking statements" made pursuant
to the safe harbor provisions of Section 27A of the Securities Act of 1933, as
amended (the "Act"), and Section 21E of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). The Company intends that such forward-looking
statements be subject to the safe harbors for such statements. The Company
wishes to caution readers not to place undue reliance on any such
forward-looking statements, which speak only as of the date made. Any
forward-looking statements represent management's best judgment as to what may
occur in the future. These forward-looking statements include the plans and
objectives of management for future growth of the Company, including plans and
objectives related to the consummation of acquisitions and future private and
public issuances of the Company's equity and debt securities. The
forward-looking statements included herein are based on current expectations
that involve numerous risks and uncertainties. Assumptions relating to the
foregoing involve judgments with respect to, among other things, future
economic, competitive and market conditions and future business decisions, all
of which are difficult or impossible to predict accurately and many of which are
beyond the control of the Company. Although the Company believes that the
assumptions underlying the forward-looking statements are reasonable, any of the
assumptions could be inaccurate and, therefore, there can be no assurance that
the forward-looking statements included in this Form 10-QSB will prove to be
accurate. In light of the significant uncertainties inherent in the
forward-looking statements included herein, the inclusion of such information
should not be regarded as a representation by the Company or any other person
that the objectives and plans of the Company will be achieved. The Company
disclaims any obligation subsequently to revise any forward-looking statements
to reflect events or circumstances after the date of such statement or to
reflect the occurrence of anticipated or unanticipated events.
The words "we," "us," "our," the "Company," and "Marine" refer to
Marine Jet Technology Corp. The words or phrases "may," "will," "expect,"
"believe," "anticipate," "estimate," "approximate," or "continue," "would be,"
"will allow," "intends to," "will likely result," "are expected to," "will
continue," "is anticipated," "estimate," "project," or similar expressions, or
the negative thereof, are intended to identify "forward-looking statements."
Actual results could differ materially from those projected in the forward
looking statements as a result of a number of risks and uncertainties, including
but not limited to: (a) limited amount of resources devoted to achieving our
business plan; (b) our failure to implement our business plan within the time
period we originally planned to accomplish; (c) because we are seeking to merge
with an operating business which has not yet been identified, you will be unable
to determine whether we will ever become profitable; and (d) other risks that
are discussed in this Form 10-QSB or included in our previous filings with the
Securities and Exchange Commission ("SEC").
Summary and Recent Developments
Marine Jet Technology Corp. ("we," "us," "our," "Marine," or the
"Company") was incorporated in the state of Nevada on February 9, 2000. Since
our inception, we have been focused on developing and marketing boat propulsion
technology developed by Jeff P. Jordan. On January 11, 2005, Mr. Jordan entered
into a Securities Purchase Agreement ("Purchase Agreement") with Keating Reverse
Merger Fund, L.L.C. ("KRM Fund"), under which KRM Fund agreed to purchase, and
Mr. Jordan agreed to sell, an aggregate of 15,306,500 shares of our common stock
owned by him for a purchase price of $440,000, or $0.029 per share.
On January 20, 2005, we entered into the Assumption Agreement with Mr.
Jordan and Intellijet Marine, Inc. ("Intellijet"), a Nevada corporation that we
established as a wholly-owned subsidiary. Under the Assumption Agreement, we
transferred all of our assets, except for 21,822,570 shares of common stock of
Intellijet and approximately $2,500 in cash, to Intellijet. Intellijet agreed to
assume all of our liabilities and obligations and to indemnify us for any loss
we incur with respect to the assumed liabilities. Mr. Jordan and Intellijet also
agreed to release us from any and all obligations and claims whatsoever.
11
On February 4, 2005, we completed the distribution of all 21,822,570
shares of common stock of Intellijet owned by us pro rata to our stockholders of
record as of January 24, 2005. Pursuant to the distribution, each of our
stockholders received one share of common stock of Intellijet for each one share
of our common stock owned by our stockholders on the record date. Intellijet is
now an independent company and will continue to operate our former business of
developing marine jet propulsion technology; supplying mechanical components
under the Quick JetTM brand name; and licensing boat manufacturers to produce
boats incorporating Intellijet's systems.
Mr. Jordan completed the sale of his Marine Jet shares to KRM Fund on
February 9, 2005. Since the transfer of our marine propulsion assets and
business to Intellijet, we have no material assets, liabilities or ongoing
operations. Nevertheless, we believe that we may be able to recover some value
for our shareholders by the adoption and implementation of a plan to seek,
investigate and, if the results of the investigation warrant, effectuate a
business combination with a suitable privately-held company that has both
business history and operating assets. Our potential success will be primarily
dependent on the efforts and abilities of our new management team, who will have
virtually unlimited discretion in searching for, negotiating and entering into a
business combination transaction.
Pursuant to the terms of the Purchase Agreement and effective as of
February 9, 2005, Mr. Jordan resigned as our President, Treasurer and one of our
directors, Martha A. Jordan, the spouse of Mr. Jordan, resigned as our Secretary
and one of our directors, and Wilbur Sebree, resigned as one of our directors.
Kevin R. Keating was appointed our President, Treasurer, Secretary and sole
director. Concurrently, our principal executive office was moved to 936A
Beachland Boulevard, Suite 13, Vero Beach, Florida 32963.
On February 17, 2005, we entered into a contract with Vero Management,
LLC ("Vero") for managerial and administrative services. Vero has not been
engaged to provide, and Vero does not render, legal, accounting, auditing,
investment banking or capital formation services. Kevin R. Keating is the
manager of Vero. The term of the contract is for one year. In consideration of
the services provided, Vero will be paid $1,000 for each month in which services
are rendered.
On February 17, 2005, we issued 1,000,000 shares of our common stock to
Kevin R. Keating, our sole officer and director, for services rendered to us
with a fair value of $10,000. On that same date, we issued 300,000 shares of our
common stock to a financial consultant, for services rendered to us with a fair
value of $3,000.
On February 17, 2005, we also issued 5,000,000 shares of our common
stock to KRM Fund for an aggregate purchase price of $50,000. These funds were
used for working capital purposes.
Kevin R. Keating, is the father of the principal member of Keating
Investments, LLC. Keating Investments, LLC is the managing member of KRM Fund,
which is the current majority stockholder of the Company. Keating Investments,
LLC is also the managing member and 90% owner of Keating Securities, LLC, a
registered broker-dealer. Kevin R. Keating is not affiliated with and has no
equity interest in Keating Investments, LLC, KRM Fund or Keating Securities, LLC
and disclaims any beneficial interest in the shares of our common stock owned by
KRM Fund. Similarly, Keating Investments, LLC, KRM Fund and Keating Securities,
LLC disclaim any beneficial interest in the shares of our common stock currently
owned by Kevin R. Keating.
Since our inception, we have not generated any significant revenues. We
may require additional financing to execute our plan to acquire an operating
company. The accompanying financial statements include a "going concern"
explanatory paragraph from our accountants.
12
Exchange Agreement
On April 14, 2005, we entered into the Exchange Agreement with Antik,
the Antik Members, and KRM Fund. Under the Exchange Agreement, we will, at
closing of the exchange transaction ("Closing"), acquire all of the outstanding
membership interests of Antik (the "Interests") from the Antik Members, and the
Antik Members will contribute all of their Interests to us. In exchange, we will
issue to the Antik Members 843,027 shares of our Series A Convertible Preferred
Stock, par value $0.001 per share ("Preferred Shares"), which will be
convertible into 708,984,875 shares of our common stock ("Conversion Shares").
The issuance of the Preferred Shares and, upon conversion, the shares of our
common stock underlying the Preferred Shares, to the Antik Members is intended
to be exempt from registration under the Securities Act of 1933, as amended (the
"Securities Act"), pursuant to Section 4(2) thereof.
Following completion of the exchange transaction, Antik will become our
wholly-owned subsidiary.
We are presently authorized under our Certificate of Incorporation to
issue 45,000,000 shares of common stock, par value $0.001 per share, and
5,000,000 shares of preferred stock, par value $0.001 per share. Of the
5,000,000 shares of preferred stock authorized, 850,000 shares will be
designated as Series A Convertible Preferred Stock pursuant to a certificate of
designations ("Certificate of Designations"), which will be approved by our
board of directors, and filed with and accepted by, the Secretary of State of
the State of Nevada prior to the Closing. Currently, we have 28,122,570 shares
of common stock issued and outstanding and no shares of preferred stock issued
and outstanding.
Under the terms of the Exchange Agreement, all of the outstanding
Interests will be exchanged for 843,027 Preferred Shares. Each Preferred Share
will be convertible into 841 shares of our common stock (the "Conversion Rate").
The Preferred Shares will immediately and automatically be converted into shares
of our common stock (the "Mandatory Conversion") upon the approval by a majority
of our stockholders (voting together on an as-converted-to-common-stock basis),
following the exchange transaction, of an increase in the number of authorized
shares of our common stock from 45,000,000 to 75,000,000, and a 1 for 29 reverse
stock split of our outstanding common stock ("Reverse Split").
The holders of Preferred Shares will be entitled to vote together with
the holders of the common stock, as a single class, upon all matters submitted
to holders of common stock for a vote. Each Preferred Share will carry a number
of votes equal to the number of shares of common stock issuable in the Mandatory
Conversion based on the then applicable Conversion Rate. As such, immediately
following the exchange transaction, the Antik Members will own 95.8% of the
total combined voting power of all classes of our stock entitled to vote.
Upon Mandatory Conversion of the Preferred Shares, and subject to an
adjustment of the Conversion Rate as a result of the Reverse Split, the Antik
Members will, in the aggregate, receive approximately 24,447,783 shares of our
common stock, representing 95.80% of the outstanding shares of our common stock
immediately following the Mandatory Conversion. The existing stockholders of the
Company will, following the Mandatory Conversion and Reverse Split, own
approximately 969,745 shares of our common stock, representing 3.8% of the
outstanding shares of common stock. Following the Closing, we will also issue a
finder approximately 102,079 shares of our common stock on a post-Reverse Split
basis, representing 0.4% of the outstanding shares of common stock.
Accordingly, if the exchange transaction closed, and the Mandatory
Conversion and the Reverse Split occurred, as of the date of this Report, our
currently issued and outstanding common stock (currently 28,122,570 shares)
would be converted into 969,745 shares of common stock and would represent 3.8%
of our total common stock issued and outstanding.
13
In connection with the Reverse Split, our board of directors may, in
its discretion, provide special treatment to certain of our stockholders to
preserve round lot holders (i.e., holders owning at least 100 shares) after the
Reverse Split. In the event our board determines to provide such special
treatment, our stockholders holding 2,900 or fewer shares of common stock but at
least 100 shares of common stock will receive 100 shares of common stock after
the Reverse Split, and persons holding less than 100 shares of common stock
would not be affected. The terms and conditions of special treatment afforded to
our stockholders to preserve round lot stockholders, if any, including the
record dates for determining which stockholders may be eligible for such special
treatment, will be established at the discretion of our board of directors.
Effective as of the Closing, and subject to applicable regulatory
requirements, including the preparation, filing and distribution of a Schedule
14f-1 Stockholder Notice to our record stockholders at least ten (10) days prior
to Closing, the existing officers of the Company will resign, and the
newly-appointed directors of the Company will consist of Paul Guez (Antik's
Manager and Chief Executive Officer), David Weiner, a director designated by
Paul Guez, and the KRM Designate. The initial KRM Designate will be the current
director of the Company, Kevin R. Keating, who will remain as a director of the
Company following the Closing. KRM Fund and each Antik Member have agreed to
vote their shares of our common stock to elect the KRM Designate to our board
for a period of one year following the Closing and to vote for such other
persons that may be designated by Paul Guez to fill any vacant position on the
board of directors (other than KRM Designate). The size of the board will
initially be three members and may be increased by the board of directors to
five members during the one year period following Closing.
At or prior to the Closing, we will also enter into a certain
financial advisory agreement with Keating Securities, LLC ("Keating
Securities"), a registered broker-dealer, under which Keating Securities will be
compensated by us for its advisory services rendered to us in connection with
the exchange transaction. The transaction advisory fee will be $350,000, with
the payment thereof being subject to the Closing.
Our completion of the transactions contemplated under the Exchange
Agreement is subject to the satisfaction of certain contingencies including,
without limitation, Antik's delivery of audited and pro forma financial
information acceptable to us, compliance with regulatory requirements, and the
filing with and acceptance by the Secretary of State of the State of Nevada of
the Certificate of Designations. Consummation of the exchange transaction is
also conditioned upon, among other things: (i) execution by KRM Fund and each
Member of voting agreements; (ii) preparation, filing and distribution to our
stockholders of the Schedule 14f-1 Stockholder Notice; and (iii) continued
quotation of our common stock on the Over-the-Counter Bulletin Board.
Our directors have approved the Exchange Agreement and the transactions
contemplated thereunder. The manager and members of Antik have approved the
Exchange Agreement and the transactions contemplated thereunder. The parties
expect the Closing of the transactions under the Exchange Agreement to occur on
or about May 1, 2005. However, there can be no assurance that the exchange
transaction will be completed.
The Exchange Agreement may be terminated as follows: (i) by mutual
consent, (ii) by either party if the exchange transaction is not consummated by
May 31, 2005, (iii) by either party if the exchange transaction is prohibited by
issuance of an order, decree or ruling, and (iv) by either party if the other is
in material breach of any representation, warranty, covenant or agreement. In
the event of termination other than by mutual consent, both parties are
responsible for their expenses, except that Marine may retain up to $10,000 of
the $50,000 deposit paid by Antik for reimbursement of our actual expenses and
as liquidated damages.
On March 28, 2005, in our Current Report on Form 8-K dated March 24,
2005, we reported the execution of a letter of intent to acquire Antik. On April
15, 2005, in our Current Report on Form 8-K dated April 14, 2005, we reported
the execution of the Exchange Agreement and included a copy of the Exchange
Agreement therein as Exhibit 2.5. These Current Reports are hereby incorporated
by reference.
On April 19, 2005, we filed with the SEC and mailed to our stockholders
of record as of April 15, 2005 the Schedule 14f-1 Stockholder Notice announcing
the proposed change of control of the Company pursuant to the terms of the
Exchange Agreement. The Company expects to complete the transactions
contemplated under the Exchange Agreement and effect the change in a majority of
the Company's directors promptly following the ten (10) day period after the
mailing of the Schedule 14f-1 Stockholder Notice to stockholders.
14
Results of Operations
For the three months ended March 31, 2005, the Company had no
activities that produced revenues from operations.
For the three months ending March 31, 2005, the Company had net loss of
$(49,162), as compared with net loss of $(11,316) for the corresponding period
of 2004. In the three month period ended March 31, 2005, the Company disposed of
certain assets and liabilities in connection with distribution of all of the
shares of Intellijet to our stockholders of record as of January 24, 2005.
Since the Company has not commenced operations and has been considered
a development stage company since inception, the spin-off of Intellijet has been
considered as a disposal of assets rather than discontinued operations. The
excess of liabilities of Intellijet (including those liabilities assumed by
Intellijet under the Assumption Agreement) over the adjusted basis of the assets
owned by Intellijet (including those assets transferred to Intellijet under the
Assumption Agreement) was recorded as a gain on disposal of assets and
liabilities.
Liquidity and Capital Resources
The Company's total assets as March 31, 2005 are $86,018, which is
comprised of cash. The Company's current liabilities are $67,879, which consists
of accounts payable of $15,379, a short term loan for $2,500, and a deposit
liability related to the potential sale of the Company of $50,000. The Company
has no long-term debt. Total stockholders' equity as of March 31, 2005 is
$18,139.
On February 17, 2005, we also issued 5,000,000 shares of our common
stock to KRM Fund for an aggregate purchase price of $50,000. These funds were
used for working capital purposes.
The following is a summary of the Company's cash flows from operating,
investing, and financing activities:
3 Months Ended March 3 Months Ended March
31, 2005 31, 2004
-------------------- --------------------
Cash Flows from Operating Activities $ 32,649 $ (8,568)
Cash Flows from Investing Activities -- --
Cash Flows from Financing Activities 52,500 --
Net Change in Cash $ 85,149 $ (8,568)
Management considers it possible that additional funds may need to be raised,
either through loans or via private placements of common stock, to sustain the
Company's liquidity in the near term.
Going Concern
The Company has sustained recurring operating losses, currently has no source of
operating revenue, and has only limited working capital with which to pursue its
business plan, which contemplates the completion of a business combination with
an operating company. The amount of capital required to sustain operations until
the successful completion of a business combination is subject to future events
and uncertainties. It may be necessary for the Company to secure additional
working capital through loans or sales of common stock, and there can be no
assurance that such funding will be available in the future. These conditions
raise substantial doubt about the Company's ability to continue as a going
concern.
15
Critical Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities as of
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
Deferred Taxes
We recognize deferred tax assets and liabilities based on the
differences between the financial statement carrying amounts and the tax bases
of assets and liabilities. Management regularly reviews the Company's deferred
tax assets for recoverability and establishes a valuation allowance based on
historical taxable income, projected future taxable income, and the expected
timing of the reversals of existing temporary differences. Management has
recorded a valuation allowance to reduce deferred tax assets including those
associated with net operating losses. The assessment realization of deferred tax
provisions is dependent upon future taxable income, and based on historical
evidence, it is more likely than not that such provision will not be utilized.
Further, in the case of an acquisition of a new business by the Company, the
ability of the post-acquisition business to utilize the Company's net operating
losses may be significantly impaired or eliminated. As of December 31, 2004, the
Company has established a valuation allowance equal to the net deferred tax
asset, since management is unable to determine that the Company will generate
sufficient future taxable income to allow it to realize the deferred tax asset.
Risk Factors
Since the transfer of our marine propulsion system assets and business
to Intellijet, we have no material assets, liabilities or ongoing operations.
Nevertheless, we believe that we may be able to recover some value for our
shareholders by the adoption and implementation of a plan to seek, investigate
and, if the results of the investigation warrant, effectuate a business
combination with a suitable privately-held company that has both business
history and operating assets. Our potential success will be primarily dependent
on the efforts and abilities of our new management team, who will have virtually
unlimited discretion in searching for, negotiating and entering into a business
combination transaction.
Accordingly, an investment in our common stock involves investment
risks and the possibility of the loss of an investor's entire investment. A
prospective investor should evaluate all information about us and the risk
factors discussed below in relation to his financial circumstances before
investing in us.
1. No Current Operating Business. We currently have no relevant
operating business, revenues from operations or assets. Our business plan is to
seek a merger or business combination with an operating business. We face all of
the risks inherent in the investigation, acquisition, or involvement in a new
business opportunity. An investor's purchase of any of our securities must be
regarded as placing funds at a high risk in a new or "start-up" venture with all
of the unforeseen costs, expenses, problems, and difficulties to which such
ventures are subject.
16
2. No Assurance of Success or Profitability. There is no assurance that
we will acquire a suitable and favorable business opportunity in a reverse
merger transaction. In addition, even if we become involved in a business
opportunity, there is no assurance that the business we acquire will generate
revenues or profits, or that the value of our common stock will increase as a
result of the acquired business opportunity.
3. Possible Business - Not Identified and Highly Risky. Except as
otherwise discussed with respect to the Exchange Agreement, we have not
identified and have no commitments to enter into or acquire a specific business
opportunity and therefore we can disclose the risks and hazards of a business or
opportunity that we acquire only in a general manner, and cannot disclose the
risks and hazards of any specific business or other opportunity that we may
enter into. An investor can expect a potential business opportunity to be quite
risky. Our acquisition of or participation in a business opportunity could
result in a total loss to our investors and stockholders if the target business
is unsuccessful. Further, any investment in us may continue to be highly
illiquid.
4. Type of Business Acquired. Except as otherwise discussed with
respect to the Exchange Agreement, the type of business that may be acquired is
not identified. Therefore, our investors and stockholders have to rely on our
management to determine which target business to pursue. There are no
controlling parameters of the business to be acquired. Thus, ultimately an
investment will depend on the target business and therefore investors in us will
be subject to all the risks that would be associated with that selected
business. Our management may have the right to approve and authorize a reverse
merger transaction with a target company without obtaining the vote of the
majority of our stockholders.
5. Impracticability of Exhaustive Investigation. We have limited funds
and lack full-time management which will likely make it impracticable to conduct
a complete and exhaustive investigation and analysis of a business opportunity
before we commit our limited capital and other resources to acquire a target
business. Management decisions, therefore, likely will be made without detailed
feasibility studies, independent analysis, market surveys, and the like which,
if we had more funds available to us, would be desirable. We will be
particularly dependent in making decisions upon information provided by the
promoter, owner, sponsor, or others associated with the business opportunity
seeking to be acquired by us.
6. Lack of Diversification. Because of our limited financial resources,
it is unlikely that we will be able to diversify our acquisitions or operations.
The inability to diversify our activities into more than one area will subject
our investors and stockholders to economic fluctuations within a particular
business or industry and therefore increase the risks associated with the
investment. We only intend to acquire a single business opportunity and thus
your investment will lack diversification.
7. Possible Reliance upon Unaudited Financial Statements. We will
require audited financial statements from target companies that we propose to
acquire. No assurance can be given, however, that audited financials will be
available at the closing of the reverse merger transaction. In cases where
audited financials are unavailable, we will have to rely upon unaudited
information received from target companies' management that has not been
verified by outside auditors. We, at the time of acquisition, will be subject to
the reporting provisions of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and thus will be required to furnish certain information about
significant acquisitions, including audited financial statements for any
business that the shell company acquires. Consequently, acquisition prospects
that do not have or are unable to obtain the required audited statements may not
be appropriate for acquisition so long as the reporting requirements of the
Exchange Act are applicable. But, in cases where we have completed a reverse
merger transaction in reliance on unaudited financial statements and audited
statements cannot subsequently be obtained, the continued ability of the
post-transaction company to remain a reporting company and publicly trading will
be in jeopardy and may significantly reduce the value of your investment.
17
8. Investment Company Regulation. We do not intend to become classified
as an "investment company" under the Investment Company Act of 1940 (the
"Investment Act"). We believe that we will not become subject to regulation
under the Investment Act because (i) we will not be engaged in the business of
investing or trading in securities, and (ii) any acquisition undertaken will
result in the target company obtaining a majority interest in us. Should there
be a requirement to register as an investment company, it would cause
significant registration and compliance costs. Any violation of the Investment
Act will subject us to materially adverse consequences. Should the SEC find that
we are subject to the Investment Act, and order registration under the
Investment Act, we would resist such finding and take steps to avoid such
registration. Irrespective of whether the SEC or we were to prevail in such
dispute about whether or not we are an investment company, however, the damages
and delays would be costly.
9. Other Regulation. Any acquisition made by us may be of a business
that is subject to regulation or licensing by federal, state, or local
authorities. Foreign companies may also be considered, and be subject to similar
business regulations as are applicable in the United States and also may be
subject to limitations on ownership by foreign persons and entities. Compliance
with such regulations and licensing can be expected to be a time-consuming,
expensive process and may limit our other investment opportunities. We intend to
pursue potential business opportunities in foreign countries, including China,
and as such, such opportunities will be subject to foreign country laws and
regulations affecting foreign investment, business operations, currency
exchange, repatriation of profits, and taxation, which will increase the risk of
your investment.
10. Dependence upon Management. We will be heavily dependent upon the
skills, talents, and abilities of our management to implement our business plan.
Our management may devote limited time to our affairs, which may be inadequate
for our business, and may delay the acquisition of any business opportunity
considered. Furthermore, management has little experience in seeking,
investigating, and acquiring businesses and will depend upon its limited
business knowledge in making decisions regarding our acquisition of a business
opportunity. Because investors will not be able to evaluate the merits of
possible business acquisitions by us, they should critically assess the
information concerning the management.
11. Dependence upon Outside Advisors. To supplement the business
experience of management, we may be required to employ accountants, technical
experts, appraisers, attorneys, or other consultants or advisors. Some of these
outside advisors may be our affiliates or their affiliated entities. The
selection of any such advisors will be made by our management without any input
from stockholders.
12. Conflicts of Interest. Our management has other business interests
to which they will devote primary attention. As a result, conflicts of interest
may arise that can be resolved only through the exercise by them of their
judgment as may be consistent with their fiduciary duties. Our management will
try to resolve conflicts to the best advantage of all concerned, but there may
be times when an acquisition opportunity is given to another entity to the
disadvantage of our stockholders and for which there will be no recourse. It is
also expected that we will engage Keating Securities, LLC, an affiliate of
Keating Investments, LLC, the managing member of our controlling stockholder, to
act as a financial advisor in connection with the reverse merger transaction for
which it may earn a cash and/or equity fee.
13. Need for Additional Financing. In all likelihood we will need
additional funds to take advantage of any available acquisition business
opportunity. Even if we were to obtain sufficient funds to acquire an interest
in a business opportunity, we may not have sufficient capital to fully exploit
the opportunity. Our ultimate success will depend upon our ability to raise
additional capital at the time of the acquisition and thereafter. When
additional capital may be needed, there can be no assurance that funds will be
available from any source or, if available, that they can be obtained on
acceptable terms.
14. Borrowing Transactions. There is a possibility that any acquisition
of a business opportunity by us will require borrowing against the assets of the
business opportunity to be acquired, or against the projected future revenues or
profits of the business opportunity. This leverage could increase our exposure
to larger losses. There is no assurance that any business opportunity acquired
through borrowing and leverage will generate sufficient revenues to cover the
related debt and expenses.
18
15. No Foreseeable Dividends. We do not intend to pay any dividends. We
do not foresee making any cash distributions in the manner of a dividend or
otherwise.
16. Loss of Control by Present Management and Stockholders. It is
likely that any acquisition of an operating company will result in a change in
control of the then current directors, officers and the stockholders. Therefore,
our management prior to the acquisition will be changed to those of the target
company and its stockholders, who will then control the combined company. At
that time, our stockholders will be at investment risk for the decisions about
the business by persons that they may not know or have any ability to influence
through a board seat or by the voting mechanism of stockholders.
17. Dilutive Effects of Issuing Additional Common Stock. In any reverse
merger transaction, for tax reasons and management reasons, the owners of the
target company will be issued a large number of shares of common stock which
will dilute the ownership interest of our current stockholders. In addition, at
the time of the reverse merger, it will be likely that there will be additional
authorized but unissued shares that may be later issued by the then new
management for any purpose without the consent or vote of the stockholders. The
acquisition issuance and additional issuances that may occur will dilute the
interests of our stockholders after the reverse merger transaction.
18. Thinly-traded Public Market. Our securities may be very thinly
traded, and the price if traded may not reflect the value of the company.
Moreover, there may be a reverse split of the shares which may not reflect the
value of the company either. There can be no assurance that there will be an
active market for our shares either now or after we complete the reverse merger.
The market liquidity will be dependant on the perception of the operating
business and any steps that its management might take to bring the company to
the awareness of investors. There can be no assurance given that there will be
any awareness generated. Consequently, investors may not be able to liquidate
their investment or liquidate it at a price that reflects the value of the
business. If a more active market should develop, the price may be highly
volatile. Because there may be a low price for our securities, many brokerage
firms may not be willing to effect transactions in the securities. Even if an
investor finds a broker willing to effect a transaction in the securities, the
combination of brokerage commissions, transfer fees, taxes, if any, and any
other selling costs may exceed the selling price. Further, many lending
institutions will not permit the use of such securities as collateral for any
loans.
19. Possible Rule 144 Sales. The majority of our shares currently
outstanding are "restricted securities" within the meaning of Rule 144 under the
Securities Act of 1933, as amended (the "Act"). As restricted shares, these
shares may be resold only pursuant to an effective registration statement or
under the requirements of Rule 144 or other applicable exemption from
registration under the Act and as required under applicable state securities
laws. Rule 144 provides in essence that a person who has held restricted
securities for a period of one year may, under certain conditions, sell every
three months, in brokerage transactions, a number of shares that does not exceed
the greater of 1.0% of a company's outstanding common stock or the average
weekly trading volume during the four calendar weeks prior to the sale. There is
no limit on the amount of restricted securities that may be sold by a
non-affiliate after the restricted securities have been held by the owner for a
period of two years. Current stockholders who own 10% or more of our shares will
likely be deemed an affiliate until 90 days after a reverse merger is completed
with a target company. After such 90-day period, and assuming said shares have
been held for more than two years, these stockholders may be able to sell their
shares without volume restrictions. A sale under Rule 144 or under any other
exemption from the Act, if available, or pursuant to subsequent registrations of
our shares, may have a depressive effect upon the price of our shares in any
market that may develop.
19
Plan of Operations
General Business Plan
Our plan of operation is to seek a target company with which to merge
or to complete a business combination. In any transaction, we will be the
surviving entity, and our stockholders will retain a percentage ownership
interest in the post-transaction company. The amount of the retained equity
ownership by our stockholders will be negotiated by our management and the
target company. We may also be required to pay cash and/or equity fees to third
parties that advise us in connection with the merger or business combination,
commonly refereed to as a reverse merger. These third party advisors may include
certain affiliates of ours and their affiliated entities.
Typically in connection with the reverse merger transaction involving
us and the target company, there will be a capital funding event for the target
business on a combined basis either at the time of the reverse merger or shortly
thereafter. This may be a private placement by either us or the target company,
if the funding event is contingent on the closing of the reverse merger. If the
funding event is after the reverse merger, it will likely be a public offering
or private placement of our securities. It will often be the case that the
liquidity opportunity for our existing stockholders will be tied to the ability
of the old and new investors of the target enterprise to have liquidity in the
market for their financial investment. Therefore, our stockholders may have to
continue to hold their investment or may face competition in being able to sell
their shares in the post-transaction business in the public market, which may
depress the price for such a volume of securities.
We will not restrict our search to any specific business, industry or
geographic location, and we may participate in a business venture of virtually
any kind or nature. This discussion of our plan for acquiring an operating
business is purposefully general, and it is not meant to be restrictive of the
virtually unlimited discretion to search for and enter into potential business
opportunities. We anticipate that we will be able to participate in only one
potential business venture because of our nominal assets and limited financial
resources.
We may seek a business opportunity with entities which have recently
commenced operations, or that desire to utilize the public marketplace in order
to raise additional capital in order to expand into new products or markets, to
develop a new product or service, or for other corporate purposes. We may
acquire assets and establish wholly owned subsidiaries in various businesses or
acquire existing businesses as subsidiaries.
We expect that the selection of a business opportunity will be complex
and risky. Due to general economic conditions, rapid technological advances
being made in some industries and shortages of available capital, we believe
that there are numerous potential targets with either sound business ideas or
operations seeking the benefits of a shell company that has complied with the
federal reporting requirements for public companies and is publicly trading.
Such benefits may include facilitating or improving the terms on which
additional equity financing may be sought, providing liquidity for incentive
stock options or similar benefits to key employees, providing liquidity (subject
to restrictions of applicable statutes) for all stockholders and other factors.
Potentially, available business opportunities may occur in many different
industries and at various stages of development, all of which will make the task
of comparative investigation and analysis of such business opportunities
extremely difficult and complex. We have, and will continue to have, limited
capital with which to provide the owners of business opportunities with any
significant cash or other assets. We will, however, be able to offer owners of
target candidates the opportunity to acquire a controlling ownership interest in
an issuer who has complied with the reporting requirements under federal
securities laws without incurring the cost and time required to conduct an
initial public offering.
20
The analysis of new business opportunities will be undertaken by, or
under the supervision of, our management who will likely engage outside advisors
to assist us in this analysis. Some of these outside advisors may be affiliates
of ours or their affiliated entities. We intend to concentrate on identifying
preliminary prospective business opportunities which may be brought to our
attention through present associations of our officers and directors, or by our
advisors. In analyzing prospective business opportunities, we will consider such
matters as (i) available technical, financial and managerial resources; (ii)
working capital and other financial requirements; (iii) history of operations,
if any and prospects for the future; (iv) nature of present and expected
competition; (v) quality, experience and depth of management services; (vi)
potential for further research, development or exploration; (vii) specific risk
factors not now foreseeable but that may be anticipated to impact the proposed
activities of the company; (viii) potential for growth or expansion; (ix)
potential for profit; (x) public recognition and acceptance of products,
services or trades; (xi) name identification; and (xii) other factors that we
consider relevant. As part of our investigation of the business opportunity, we
or our advisors expect to meet personally with or interview management and key
personnel.
We may also have to compensate certain advisors, finders and investment
banking firms for services rendered in connection with the identification of
target operating companies and the negotiation and completion of the
transaction. Due to our limited resources, it is expected that all or a portion
of this compensation will be in the form of our common stock or from cash
provided by the target company or the funding event. Additional issuance of our
common stock will have a further dilutive effect on the percentage of shares
held by our stockholders. Keating Securities, LLC, an affiliate of Keating
Investments, LLC, the managing member of our controlling stockholder, will also
act as a financial advisor in connection with the reverse merger transaction and
will be paid a cash and/or equity fee upon the successful closing of the reverse
merger.
We will not acquire or merge with any company for which audited
financial statements cannot be obtained within a reasonable period of time after
closing of the proposed transaction.
Acquisition Opportunities
In implementing a structure for a particular business acquisition, we
may become a party to a merger, consolidation, reorganization, joint venture, or
licensing agreement with another company or entity. We may also acquire stock or
assets of an existing business. Our management may have the right to approve and
authorize a reverse merger transaction with a target company without obtaining
the vote of the majority of our stockholders. Further, upon consummation of a
reverse merger transaction, it is probable that our present management and
stockholders will no longer be in control of us. In addition, our management, as
part of the terms of the reverse merger transaction, may resign and may be
replaced by new directors without a vote of our stockholders. Any and all sales
of shares of our common stock may only be made in compliance with the securities
laws of the United States and any applicable state.
It is anticipated that certain securities issued by us in connection
with the reverse merger would be issued in reliance upon exemptions from
registration under application of federal and state securities laws. In some
circumstances, as a negotiated element of the reverse merger transaction, we
will be asked to agree to register all or a part of such securities immediately
after the transaction is consummated or at specified times thereafter. In such a
case, we will attempt to negotiate the registration of some or all of our
current outstanding shares which are restricted, but there is no guarantee that
this will be accomplished or, if accomplished, that the registration rights will
be identical. If such registration occurs, it will be undertaken by the
surviving entity after it has successfully consummated a reverse merger and is
no longer considered an inactive company. The issuance of substantial additional
securities by us in connection with the reverse merger and their potential sale
into any trading market which may develop in our securities may have a
depressive effect on the value of our securities in the future. There is no
assurance that such a trading market will develop.
21
While the actual terms of a reverse merger transaction cannot be
predicted, it is expected that the parties to any business transaction will find
it desirable to avoid the creation of a taxable event and thereby structure the
business transaction in a so-called "tax-free" reorganization under Sections
368(a)(1) or 351 of the Internal Revenue Code (the "Code"). In order to obtain
tax-free treatment under the Code, it may be necessary for the owners of the
acquired business to own 80 percent or more of the voting stock of the surviving
entity. In such event, the equity interest retained by our current stockholders
would be less than 20 percent of the issued and outstanding shares of the
surviving entity. This would result in significant dilution in the equity
interests of our stockholders.
In addition to the tax considerations discussed above, it is likely
that in any reverse merger, and depending upon, among other things, the target
company's assets and liabilities, the equity interests of our stockholders after
the transaction will be a small percentage of the post-transaction company. The
percentage ownership may be subject to significant reduction in the event we
acquire a target company with significant assets and expectations of growth.
We will participate in a business opportunity only after the
negotiation and execution of appropriate written agreements. Although the terms
of the acquisition agreements cannot be predicted, generally such agreements
will (i) require specific representations and warranties by all of the parties;
(ii) specify certain events of default and remedies therefore; (iii) detail the
terms of closing and the conditions which must be satisfied by each of the
parties prior to and after closing; (iv) outline the manner of bearing costs,
including costs associated with our attorneys and accountants; (v) set forth
indemnification provisions; and (vi) include miscellaneous other terms.
As stated above, we will not acquire or merge with any entity which
cannot provide independent audited financial statements within a reasonable
period of time after closing of the proposed transaction. Included in these
requirements is the affirmative duty to file independent audited financial
statements as part of a Current Report on Form 8-K, required to be filed with
the SEC upon consummation of a merger or acquisition, as well as audited
financial statements included in an Annual Report on Form 10-K (or Form 10-KSB,
as applicable). If such audited financial statements are not available at
closing, or within time parameters necessary to insure compliance with the
reporting requirements under federal securities laws, or if the audited
financial statements provided do not conform to the representations made by the
business to be acquired, we will attempt to negotiate a provision in the
definitive closing documents to void the transaction. However, there is no
guarantee that we will be successful in including such a provision and, in such
case, the continued ability of the post-transaction company to remain a
reporting company and publicly trading may be in jeopardy.
Competition
We are an insignificant participant among the firms which engage in the
reverse merger of shell companies into an operating business. There are many
established venture capital and financial concerns that have significantly
greater financial and personnel resources and technical expertise than we have.
In view of our limited financial resources and limited management availability,
we will continue to be at a significant competitive disadvantage compared to our
competitors. As a result, we may not be able to find suitable target companies
with which to complete a reverse merger transaction.
22
ITEM 3. CONTROLS AND PROCEDURES
As of the end of the period covered by this Report, the Company
conducted an evaluation, under the supervision and with the participation of the
Chief Executive Officer and Chief Financial Officer, of the Company's disclosure
controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)) under the
1934 Act. Based on this evaluation, the Chief Executive Officer and Chief
Financial Officer concluded that the Company's disclosure controls and
procedures are effective to ensure that information required to be disclosed by
the Company in reports that it files or submits under the 1934 Act is recorded,
processed, summarized and reported within the time periods specified in
Securities and Exchange Commission rules and forms. There was no change in the
Company's internal control over financial reporting during the Company's most
recently completed fiscal quarter that has materially affected, or is reasonably
likely to materially affect, the Company's internal control over financial
reporting.
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PART II
ITEM 1. LEGAL PROCEEDINGS
We are not aware of any pending or threatened legal proceedings in
which we are involved.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On February 4, 2005, we completed the distribution of all 21,822,570
shares of common stock of Intellijet owned by us pro rata to our stockholders of
record as of January 24, 2005. Pursuant to the distribution, each of our
stockholders received one share of common stock of Intellijet for each one share
of our common stock owned by our stockholders on the record date. Intellijet is
now an independent company and will continue to operate our former business of
developing marine jet propulsion technology; supplying mechanical components
under the Quick JetTM brand name; and licensing boat manufacturers to produce
boats incorporating Intellijet's systems.
On February 17, 2005, we issued 1,000,000 shares of our common stock to
Kevin R. Keating, our sole officer and director, for services rendered to us
with a fair value of $10,000. On that same date, we issued 300,000 shares of our
common stock to a financial consultant, for services rendered to us with a fair
value of $3,000.
On February 17, 2005, we also issued 5,000,000 shares of our common
stock to KRM Fund for an aggregate purchase price of $50,000. These funds were
used for working capital purposes.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
We are not aware of any defaults upon senior securities during the
first quarter of the fiscal year ended March 31, 2005.
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of our stockholders during
the first quarter of the fiscal year ended March 31, 2005.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
31 Certification pursuant to Rule 13a-14(a) or 15d-14(a) under
the Securities Exchange Act of 1934, as amended.
32 Certification of Chief Executive Officer and President of the
Company, pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.
24
(b) Reports on Form 8-K
The following current reports were filed during the quarter ended
March 31, 2005:
On February 10, 2005, the Company filed a Current Report on Form
8-K dated February 9, 2005 announcing the execution of the
Assumption Agreement and the closing of the transactions resulting
in a change of control of the Company.
On February 16, 2005, the Company filed a Current Report on Form
8-K February 10, 2005 announcing the change of the Company's
certifying accountants.
On February 22, 2005, the Company filed a Current Report on Form
8-K dated February 17, 2005 announcing the issuance of and sale of
certain unregistered securities.
On March 28, 2005, the Company filed a Current Report on Form 8-K
dated March 24, 2005 announcing the execution of a Letter of
Intent to acquire Antik.
On April 15, 2005, the Company filed a Current Report on Form 8-K
dated April 14, 2005 announcing the execution of an Exchange
Agreement by and among the Company, Antik, the Members of Antik
and KRM Fund.
25
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
MARINE JET TECHNOLOGY CORP.
Date: April 28, 2005 By: /s/ Kevin R. Keating
----------------------
Kevin R. Keating
President and Chief Executive Officer
26
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
------- ----------------------
31 Certification pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
32 Certification of Chief Executive Officer and Chief Financial
Officer of the Company, pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
27