-----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, LJjAeF0wzSPWD62Whrm+b2vp/44YVS1uZMbLTTrY30mOsgkhU9kiFoYiI1InVAls JZ+evd1+ULN74iulzXfutg== 0000912057-97-028456.txt : 19970820 0000912057-97-028456.hdr.sgml : 19970820 ACCESSION NUMBER: 0000912057-97-028456 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970819 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: SKYSAT COMMUNICATIONS NETWORK CORP CENTRAL INDEX KEY: 0000919374 STANDARD INDUSTRIAL CLASSIFICATION: RADIO & TV BROADCASTING & COMMUNICATIONS EQUIPMENT [3663] IRS NUMBER: 13372217 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-24034 FILM NUMBER: 97666136 BUSINESS ADDRESS: STREET 1: 405 LEXINGTON AVE CITY: NEW YORK STATE: NY ZIP: 10174 BUSINESS PHONE: 2129720070 MAIL ADDRESS: STREET 2: 405 LEXINGTON AVE CITY: NEW YORK STATE: NY ZIP: 10174 10QSB 1 FORM 10-QSB SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 __________________________________________________________________________ FORM 10-QSB Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 ____________________________________________________ For Quarter Ended: June 30, 1997 Commission File No. 0-24034 SKYSAT COMMUNICATIONS NETWORK CORPORATION _________________________________________________________________ (Exact name of small business issuer as specified in its charter) Delaware 13-3722117 _________________________________________________________________ (State of Incorporation) (I.R.S. Employer Identification No.) 405 Lexington Avenue, 33rd floor New York, New York 10174 ________________________________________________________ (Address of Principal Executive Office) (Zip Code) Issuer's telephone number, including area code (212) 972-0070 Indicate by check mark whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date. June 30, 1997 ------------- Class A Common Stock 3,253,550 Class B Common Stock 855,367 Transitional Small Business Disclosure Format (check one): Yes No X --- --- PART I--FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS SKYSAT COMMUNICATIONS NETWORK CORPORATION (A DEVELOPMENT STAGE COMPANY) CONDENSED BALANCE SHEET AT JUNE 30, 1997 (UNAUDITED) ASSETS Current Assets: Cash and cash equivalents...................................................... 178 Prepaid expenses & other current assets........................................ 14,307 --------- Total current assets......................................................... 14,485 Equipment, at cost (net of $1,947 accumulated depreciation)...................... 2,863 Patent costs (net of $13,575 accumulated depreciation)........................... 85,044 Other............................................................................ 10,825 --------- TOTAL........................................................................ 113,217 --------- --------- LIABILITIES Current Liabilities: Accrued expenses............................................................... 221,404 Accrued salaries............................................................... 66,441 Loans payable--stockholders.................................................... 43,000 --------- Total current liabilities.................................................... 330,845 --------- Contract settlement due after one year (Note I).................................. 15,000 --------- STOCKHOLDERS' EQUITY (DEFICIENCY) (Notes B, C, D, E, F and I) Preferred stock, par value $0.01 per share, 5,000,000 shares authorized, none issued Class B common stock, par value $0.001 per share, 2,000,000 shares authorized; 1,523,117 shares issued, including 872,125 forfeitable shares and 667,750 treasury shares................................................................ 1,523 Class A common stock, par value $0.001 per share, 18,000,000 shares authorized, 3,253,550 shares issued and outstanding, including 127,875 forfeitable shares......................................................................... 3,254 Capital in excess of par value................................................... 7,933,523 Deficit accumulated during the development stage................................. (8,228,108) --------- Sub-total.................................................................... (289,809) Add: stock to be issued in settlement of contract (Note I)....................... 25,313 stock to be issued to employees for deferral of salaries (Note D)............ 41,449 Less: 667,750 Class B shares held in the Treasury, at cost (Note E[3])........... (9,580) --------- Total stockholders' equity (deficiency)..................................... (232,627) --------- TOTAL........................................................................ 113,217 --------- ---------
See notes to condensed financial statements. 2 SKYSAT COMMUNICATIONS NETWORK CORPORATION (A DEVELOPMENT STAGE COMPANY) CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE PERIOD FROM COMMENCEMENT FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED OF OPERATIONS JUNE 30, JUNE 30, (JANUARY 1, -------------------------- -------------------------- 1993) TO 1996 1997 1996 1997 JUNE 30, 1997 ------------ ------------ ------------ ------------ -------------- Operating Expenses: Research and development expenses (Note E[1])........ 61,833 141,587 151,945 350,039 5,289,946 General and administrative expenses (Note E)........... 170,837 253,097 340,279 455,872 2,640,000 ------------ ------------ ------------ ------------ -------------- Total operating expenses...... 232,670 394,684 492,224 805,911 7,929,946 ------------ ------------ ------------ ------------ -------------- Loss from Operations............ (232,670) (394,684) (492,224) (805,911) (7,929,946) ------------ ------------ ------------ ------------ -------------- Financing Costs (Income): Interest (income)............. (10,095) (16,692) (145,405) Interest expense.............. 83,317 Amortization of deferred financing costs............. 299,000 Amortization of debt discount.................... 61,250 ------------ ------------ ------------ ------------ -------------- Total financing costs (income).................... (10,095) 0 (16,692) 0 298,162 ------------ ------------ ------------ ------------ -------------- NET LOSS........................ (222,575) (394,684) (475,532) (805,911) (8,228,108) ------------ ------------ ------------ ------------ -------------- ------------ ------------ ------------ ------------ -------------- Net loss per share of common stock......................... $ (0.08) $ (0.15) $ (0.19) $ (0.34) $ (4.25) ------------ ------------ ------------ ------------ -------------- ------------ ------------ ------------ ------------ -------------- Weighted average number of common shares and common share equivalents outstanding....... 2,765,000 2,558,752 2,567,198 2,344,193 1,934,786 ------------ ------------ ------------ ------------ -------------- ------------ ------------ ------------ ------------ --------------
See notes to condensed financial statements. 3 SKYSAT COMMUNICATIONS NETWORK CORPORATION (A DEVELOPMENT STAGE COMPANY) CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE PERIOD FROM COMMENCEMENT THREE MONTHS ENDED SIX MONTHS ENDED OF OPERATIONS JUNE 30, JUNE 30, (JANUARY 1, ---------------------- ---------------------- 1993) TO 1996 1997 1996 1997 JUNE 30, 1997 ---------- ---------- ---------- ---------- -------------- Cash flows from operating activities: Net loss.............................................. (222,576) (394,683) (475,532) (805,911) (8,228,108) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization....................... 1,920 2,565 3,925 5,130 29,202 Write off of fixed assets........................... 1,353,945 Write off of patents................................ 95,000 Stock to be issued in settlement of contract........ 25,313 Rent recorded as capital contribution............... 22,000 Amortization of debt issuance costs................. 360,250 Changes in operating assets and liabilities: Accounts receivable............................... 49,730 49,730 Organization costs................................ (12,000) Prepaid expenses and other assets................. (166,340) 16,615 (126,210) 78,323 13,796 Accounts payable and other liabilities............ (12,991) 158,247 (6,617) 168,968 345,846 ---------- ---------- ---------- ---------- -------------- Net cash (used in) operating activities............. (350,257) (217,258) (554,704) (553,492) (5,994,758) ---------- ---------- ---------- ---------- -------------- Cash flows from investing activities: Purchase of fixed assets.............................. (1,367,414) Patent costs.......................................... 1,526 1,526 (193,620) Deposits.............................................. (9,625) ---------- ---------- ---------- ---------- -------------- Net cash (used in) investing activities............. 1,526 1,526 (1,570,659) ---------- ---------- ---------- ---------- -------------- Cash flows from financing activities: Proceeds from notes payable........................... 2,151,000 Repayment of notes payable............................ (2,450,000) Net proceeds from sale of common stock................ 117,283 991,547 532,284 7,869,595 Purchase of treasury stock............................ (5,000) ---------- ---------- ---------- ---------- -------------- Net cash provided by financing activities........... 117,283 991,547 532,284 7,565,595 ---------- ---------- ---------- ---------- -------------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS.... (348,731) (99,975) 438,369 (21,208) 178 Cash and cash equivalents--beginning of period.......... 1,046,968 100,153 259,868 21,386 ---------- ---------- ---------- ---------- -------------- CASH AND CASH EQUIVALENTS--END OF PERIOD................ 698,237 178 698,237 178 178 ---------- ---------- ---------- ---------- -------------- ---------- ---------- ---------- ---------- -------------- Supplemental disclosures of cash flow information Taxes paid............................................ 1,493 9,965 47,308 Interest paid......................................... 83,317 Fixed assets exchanged for treasury stock............. 4,580 Supplemental disclosures of non-cash financing activities: Warrants issued....................................... 61,250
See notes to condensed financial statements. 4 SKYSAT COMMUNICATIONS NETWORK CORPORATION (a development stage company) NOTES TO FINANCIAL STATEMENTS NOTE A - Basis of Presentation The accompanying unaudited condensed financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with instructions to Form 10-QSB and Item 310(b) of Regulation S-B. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six-month period ended June 30, 1997, are not necessarily indicative of the results that may be expected for the year ending December 31, 1997. For further information, refer to the financial statements and footnotes thereto included in the Registrant Company annual report on Form 10-KSB for the year ended December 31, 1996. NOTE B - The Company Skysat Communications Network Corporation (the "Company") is a development stage company incorporated in Delaware in July 1992. The Company is engaged in the research and development of a high altitude unmanned aircraft system (the "Skysat System" or the "System") for commercial application in the telecommunications industry. The Company has incurred significant losses to date and anticipates substantial additional losses before completion of Phase I of the Skysat System. There is no assurance that necessary financing will be available for completion of Phrase I or that the Company will be in a position to proceed with Phase II. As of August 15, 1997, the Company has no operating capital. These factors raise substantial doubt about the ability of the Company to continue as a going concern. The Company is currently seeking additional financing or other arrangements to complete its planned activities. The accompanying financial statements do not include any adjustments relating to the recoverability of assets and classification of liabilities that might be necessary if the Company is unable to continue as a going concern. NOTE C - Sale of Common Stock In February 1997 the Company commenced selling, in a private placement, unregistered shares of Class A common stock. Through June 30, 1997, 930,000 Class A common shares had been issued at $.50 per share for a total of $465,000; two officers of the Company participated in this private placement. For each share of stock 5 SKYSAT COMMUNICATIONS NETWORK CORPORATION (a development stage company) NOTES TO FINANCIAL STATEMENTS NOTE C - Sale of Common Stock (cont.) issued, each purchaser will receive two warrants to purchase Class A common shares, exercisable at $1.00 and $1.50, respectively. After this transaction, the Company had 4,057,250 shares outstanding. NOTE D - Common Stock to be Issued for Deferral of Salaries/Stockholder Loans In May 1997 the Company issued 51,667 shares of Class A common shares to employees in exchange for the deferral of salaries due through May 15, 1997. In addition, each employee will receive two options to purchase Class A common shares, exercisable at $1.00 and $1.50, respectively. The issuance of these shares increased the total shares outstanding to 4,108,917. Through August 15, 1997, an additional 164,447 shares and 328,894 options are due to employees for the continued deferral of salaries due. In addition, as of August 15, 1997, 160,400 shares and 320,800 warrants (exercisable under the terms noted above) are due to two stockholders of the Company (including one officer) for working capital loans totalling $80,200. NOTE E - Related Party Transactions [1] Research and development expense includes the following payments or accruals to related parties for the periods indicated: January 1, 1996 - June 30, 1996 ......... $ 63,833 --------- --------- January 1, 1997 - June 30, 1997.......... $ 62,725 --------- --------- January 1, 1993 - June 30, 1997.......... $ 585,709 --------- --------- General and Administrative expenses for the six-month periods ended June 30, 1996 and June 30, 1997, and for the period from January 1, 1993 through June 30, 1997 includes $110,000, $153,541 and $816,791, respectively, paid or due to three officers/stockholders and three director/stockholders. 6 SKYSAT COMMUNICATIONS NETWORK CORPORATION (a development stage company) NOTES TO FINANCIAL STATEMENTS NOTE E - Related Party Transactions (cont.) [2] The Company had occupied its headquarters on a rent-free basis in the offices of a stockholder from January 1, 1993 through October 31, 1994. The Company has reflected $22,000, the fair value for such space, as a capital contribution for the period from January 1, 1993 through September 30, 1996. [3] In November 1996 the former president of the Company surrendered 667,750 shares of Class B common stock in return for certain fixed assets with a net book value of $4,580 plus payment of attorney fees of $5,000. This stock has been recorded at a cost of $9,580 and is being held as treasury shares. NOTE F - Stock Option Plan Through December 31, 1996, the Company had granted incentive stock options under the Stock Option Plan to certain Company directors, officers and employees to purchase, at $6.00 per share, an aggregate of 70,000 shares and to purchase, at $1.00 per share, an aggregate of 42,500 shares of Class A common stock. During 1995 and 1996, the Company also granted an aggregate of 13,500 and 54,730 nonqualified options, respectively, to consultants to the Company at exercise prices ranging from $1.00 to $6.00 per share. During the six-month period ended June 30, 1997, the Company granted 23,170 nonqualified stock options exercisable at $1.00 per share and 15,000 nonqualified stock options exercisable at $1.25 per share to two consultants to the Company. NOTE G - Jet Propulsion Laboratory Agreement The Company has entered into an agreement (the "JPL Agreement") under which the Jet Propulsion Laboratory ("JPL") has developed a preliminary design of the Skysat System and determined its technical feasibility. Under the JPL Agreement, the Company paid JPL $2,493,000 through March 31, 1997, for development work. The Company charged research and development expense as JPL utilized the funds. JPL commenced its work with respect to the initial contract in April 1994 and substantially completed it in 1996. In addition, during 1996 JPL was tasked by the Company to do research work on telecommunications payload development with regard to conventionally-powered and 7 SKYSAT COMMUNICATIONS NETWORK CORPORATION (a development stage company) NOTES TO FINANCIAL STATEMENTS NOTE G - Jet Propulsion Laboratory Agreement (cont.) microwave-powered platforms; the Company paid JPL $50,000 in 1996 for this research which was substantially completed in early 1997. NOTE H - Av-Intel Inc. Agreement In April 1996 the Company entered into an agreement with Av-Intel Inc. ("Av-Intel"), a research and development company based in Ottawa, Canada, which has developed lighter-than-air technology (stratospheric satellite vehicles) ("SSV's") that could be applied to airborne platforms. The agreement provides that Skysat and Av-Intel will work together to test the viability and cost-effectiveness of the SSV. In conjunction with this agreement, the Company incurred research and development expenses of $216,113 in the six- month period ended June 30, 1997. NOTE I - Settlement of Construction Agreement with B & R Designs, Inc. In March 1997 the Company and B & R Designs, Inc. settled the amount payable under a construction contract at $20,000 plus 30,000 shares of the Company's Class A common stock upon receipt by the Company of a comprehensive report detailing the research and development done at B & R Designs. The Company has not yet received such a report. 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS (A) Management's Discussion and Analysis of Financial Condition and Results of Operations: Safe Harbor Statements: Any statements contained herein by the Company with regard to its expectations as to financial results and other aspects of its business may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Although the Company makes such statements based on assumptions which it believes to be reasonable, the Company's business is subject to significant risks and there can be no assurance that actual results will not differ materially from the Company's expectations. Accordingly, the Company hereby identifies the following important factors, among others, which could cause its results to differ from any results which might be projected, forecasted or estimated by the Company in any such forward-looking statements: (i) the timely development and acceptance of the Company's product, (ii) the achievement of development milestones by the Company, (iii) the timely receipt of regulatory clearances required to market the Company's proposed product, and (iv) the Company's ability to enter into arrangements with corporate partners. Results of Operations: The Company is a development stage company. Since its inception in July 1992, the Company's efforts have been principally devoted to research and development of the Skysat System and raising capital; the Company has sustained losses of $8,228,108 of which $475,532 and $805,911 were incurred during the six-month periods ended June 30, 1996 and 1997, respectively. These losses have resulted from expenditures specifically in connection with an increased level of effort under the JPL Agreement (discussed below) which commenced during 1994, the construction and development of a conventional engine-powered prototype aircraft (the "Platform"), commencement of the development of the flight management system related to the Skysat System and general and administrative activities, including legal and professional activities relating thereto and salaries to officers and employees which are continuing to date. Research and development expenses have aggregated $5,289,946 since inception, of which $151,945 and $350,039 were incurred during the six-month periods ended June 30, l996 and l997, respectively. The Company's research and development agreement (the "JPL Agreement") with the Jet Propulsion Laboratory ("JPL"), an operating division of the California Institute of 9 Technology which operates JPL under contract from NASA, commenced in April 1994. JPL incurred expenses aggregating $53,218 during the six-month period ended June 30, 1997. General and administrative expenses were $2,640,000 since the Company's inception in July 1992, of which $340,279 and $455,872 were expended during the six-month periods ended June 30, 1996 and 1997, respectively. The Company's research and development and general and administrative expenses will be substantial in the forseeable future, including substantial expenses for the payment of salaries, consulting fees and expenses, the development and construction of the Platform and other related vehicles and the development of the flight management system and other related activities. In April 1996, the Company entered into an agreement with Av-Intel, Inc. ("Av-Intel"), a research and development company which has developed lighter-than-air technology that could be applied to airborne platforms with a capability to fly at 70,000 feet altitude for periods of several months (the "Av-Intel Agreement"). These "stratospheric satellite vehicles" ("SSV's") have certain characteristics that would make them effective as communications platforms. Skysat and Av-Intel have worked together since the inception of the agreement to verify the viability and cost-effectivemess of the SSV. Under the Av-Intel Agreement, the Company and Av-Intel will develop a comprehensive design leading to a telecommunications prototype. The Av-Intel Agreement, which expired in June 1997, has been extended through October 4, 1997. Liquidity and Capital Resources: The Company has had no revenue and has incurred a cumulative loss through June 30, 1997 of $8,228,108. The Company currently does not have the necessary liquidity and capital resources to sustain planned operations for the one year period following June 30, 1997 unless it obtains additional financing. The Company raised $465,000 from a private placement in early 1997 and is presently negotiating a private placement to raise additional funds. At August 15, 1997, the Company has no operating capital. In the event that the Company fails to raise the funds it requires, it may be necessary for the Company to cease operations or severely limit growth. (B) Plan of Operation: During the one-year period following June 30, 1997, the Company intends to continue to conduct significant additional research, development and testing activities in connection with the development of the Skysat System, including the completion of, and/or 10 the acquisition and testing of, a platform, and the exploration of the technical and economic feasibility and viability of additional and alternative aerial vehicles, which, together with other general and administrative expenses, are expected to result in substantially higher operating losses. The Company does not expect to generate any revenues until such time as the Skysat System becomes commercially available, which cannot occur until it has, among other things, obtained substantial additional funds and completed development of the Skysat System. 11 SKYSAT COMMUNICATIONS NETWORK CORPORATION 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. Date: August 19, 1997 By: /s/ Martin D. Fife -------------------------- Martin D. Fife, Chief Executive Officer Date: August 19, 1997 By: /s/ Martin D. Fife -------------------------- Martin D. Fife, Chief Financial Officer 12 EX-27 2 EXHIBIT 27-FDS
5 CONDENSED BALANCE SHEET AND CONDENSED STATEMENT OF OPERATIONS FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 1997. 6-MOS DEC-31-1997 JUN-30-1997 178 0 0 0 0 14,485 2,863 1,947 113,217 330,845 0 0 0 4,777 (237,404) 113,217 0 0 0 0 805,911 0 0 (805,911) 0 (805,911) 0 0 0 (805,911) (.34) (.34)
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