-----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, NBrYv7J4kxJFVNbreIpiQpPG7RaOQZGZrGGOsdvrc9yEgocsGOJNCQnLlxyfnLqS V1KbMekXa/XjuoRs7ckRfw== 0001005477-96-000532.txt : 19961121 0001005477-96-000532.hdr.sgml : 19961121 ACCESSION NUMBER: 0001005477-96-000532 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961119 SROS: NONE 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: 96669345 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: September 30, 1996 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. September 30, 1996 ------------------ Class A Common Stock 2,107,321 Class B Common Stock 1,657,679 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 September 30, 1996 (unaudited) ASSETS ------ Current Assets: Cash and cash equivalents 392,316 Prepaid research and development costs (Note F) 4,014 Prepaid expenses & other current assets 87,699 ---------- Total current assets 484,029 Equipment, at cost (net of $5,097 accumulated depreciation) 8,372 Patent costs (net of $6,375 accumulated depreciation) 187,244 Equipment under construction (Note G) 200,000 Advances to Joint Venture (Note G) 302,096 Other 12,625 ---------- TOTAL 1,194,366 ========== LIABILITIES ----------- Current Liabilities: Accrued expenses 149,494 ---------- Total current liabilities 149,494 ---------- STOCKHOLDERS' EQUITY -------------------- (Notes B, C, D and E) 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; 1,657,679 shares issued and outstanding, including 872,125 forfeitable shares 1,694 Class A common stock, par value $0.001 per share, 18,000,000 shares authorized; 2,107,321 shares issued and outstanding, including 127,875 forfeitable shares 2,071 Capital in excess of par value 7,411,271 Deficit accumulated during the development stage (6,370,164) ---------- Total stockholders' equity 1,044,872 ---------- TOTAL 1,194,366 ========== 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 Nine Months Ended of Operations September 30, September 30, (January 1, -------------------------- ------------------------- 1993) to 1995 1996 1995 1996 Sept. 30, 1996 ---- ---- ---- ---- -------------- Operating Expenses: Research and development expenses (Notes D[1] and G) 103,267 1,223,401 894,903 1,375,346 4,236,289 General and administrative expenses (Note D) 178,720 241,253 612,257 581,532 1,835,271 ------------------------- ------------------------- ---------- Total operating expenses 281,987 1,464,654 1,507,160 1,956,878 6,071,561 ------------------------- ------------------------- ---------- Loss from Operations (281,987) (1,464,654) (1,507,160) (1,956,878) (6,071,561) ------------------------- ------------------------- ---------- Financing Costs (Income): Interest (income) (8,159) (6,915) (57,939) (23,607) (144,965) Interest expense 83,317 Amortization of deferred financing costs 299,000 Amortization of debt discount 61,250 ------------------------- ------------------------- ---------- Total financing costs (income) (8,159) (6,915) (57,939) (23,607) 298,602 ------------------------- ------------------------- ---------- NET LOSS (273,828) (1,457,740) (1,449,221) (1,933,272) (6,370,164) ========================= ========================= =========== Net loss per share of common stock $ (0.12) $ (0.53) $ (0.64) $ (0.73) (3.47) ========================= ========================= =========== Weighted average number of common shares and common share equivalents outstanding 2,265,000 2,765,000 2,265,000 2,633,613 1,837,404 ========================= ========================= ===========
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 Nine Months Ended of Operations September 30, September 30, (January 1, ----------------------------------------------- 1993) to 1995 1996 1995 1996 Sept. 30, 1996 ---- ---- ---- ---- -------------- Cash flows from operating activities: Net loss (273,828) (1,457,740) (1,449,221) (1,933,272) (6,370,164) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 1,200 6,050 3,600 9,975 20,472 Rent recorded as capital contribution 22,000 Amortization of debt issuance costs 360,250 Write-off of equipment under construction (Note G) 1,153,945 1,153,945 1,153,945 Changes in operating assets and liabilities: Accounts & other receivables 116,967 300,000 166,697 0 Organization costs (12,000) Prepaid expenses and other assets (56,579) (103,394) 437,462 (228,078) (358,451) Accounts payable and other current liabilities 11,362 (20,448) (146,327) (27,065) 149,494 ---------------------------------------------------------------- Net cash (used in) operating activities (317,845) (304,620) (854,486) (857,798) (5,034,454) ---------------------------------------------------------------- Cash flows from investing activities: Purchase of fixed assets (15,192) (508,312) (1,367,414) Patent costs (1,301) (291) (1,301) (193,619) Deposits (2,500) (9,625) ---------------------------------------------------------------- Net cash (used in) investing activities (15,192) (1,301) (511,103) (1,301) (1,570,658) ---------------------------------------------------------------- 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 991,547 7,296,428 ---------------------------------------------------------------- Net cash provided by financing activities 991,547 6,997,428 ---------------------------------------------------------------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (333,037) (305,921) (1,365,589) 132,448 392,316 Cash and cash equivalents - beginning of period 850,126 698,237 1,882,678 259,868 ---------------------------------------------------------------- CASH AND CASH EQUIVALENTS - END OF PERIOD 517,089 392,316 517,089 392,316 392,316 ================================================================ Supplemental disclosures of cash flow information Taxes paid 1,364 1,364 Interest paid 83,317 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 nine-month period ended September 30, 1996, are not necessarily indicative of the results that may be expected for the year ending December 31, 1996. 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, 1995. 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 Phase I or that the Company will be in a position to proceed with Phase II. 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 On March 13, 1996, the Company sold 500,000 unregistered shares of Class A common stock and unregistered warrants for an additional 2,000,000 shares for a total of $1,000,000. The warrants are exercisable at $1.00 per share. After this transaction, the Company has 3,765,000 shares outstanding. 5 SKYSAT COMMUNICATIONS NETWORK CORPORATION (a development stage company) NOTES TO FINANCIAL STATEMENTS NOTE D - Related Party Transactions [1] Research and development expense includes the following payments to related parties for the periods indicated: January 1, 1995 - Sept. 30, 1995 ........... $ 150,000 ========= January 1, 1996 - Sept. 30, 1996............ $ 76,458 ========= January 1, 1993 - Sept. 30, 1996............ $ 500,484 ========= General and Administrative expenses for the nine-month periods ended September 30, 1995 and September 30, 1996, and for the period from January 1, 1993 through September 30, 1996 includes $181,289, $165,000 and $620,250, respectively, paid to three officers/stockholders and three director/stockholders. [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. NOTE E - Stock Option Plan The Company has granted nonqualified stock options under the Stock Option Plan to certain Company directors to purchase, at $6.00 per share, an aggregate of 60,000 shares of Class A common stock and incentive stock options to officers and employees of the Company to purchase, at $6.00 and $1.00 per share, 10,000 shares and 82,500 shares, respectively, of Class A common stock. During 1995 and 1996, the Company also granted an aggregate of 16,000 and 1,500, respectively, nonqualified stock options to consultants to the Company. NOTE F - 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 $2,543,000 through Sept. 30, 1996 (including $256,000 and $50,000 in the periods ended Sept. 30, 1995 and 1996, respectively), for development work. The Company is charging research and 6 SKYSAT COMMUNICATIONS NETWORK CORPORATION (a development stage company) NOTES TO FINANCIAL STATEMENTS NOTE F - Jet Propulsion Laboratory Agreement (cont.) development expense as JPL utilizes the funds. JPL commenced its work with respect to the initial contract in April 1994 and substantially completed it in September 1996. NOTE G - 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 has advanced $302,000 to and on behalf of the joint venture being formed. Due to the redirection of the Company's primary efforts toward lighter-than-air technology, the Company wrote down, to estimated realizable value, equipment previously being developed based on glider technology; this write down resulted in a charge to research and development expense of $1,154,000 in the quarter ended September 30, 1996. 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS (A) Management's Discussion and Analysis of Financial Condition and 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 $6,370,164 of which $1,933,272 and $1,449,221 were incurred during the nine-month periods ended September 30, 1996 and 1995, 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 $4,236,289 since inception, of which $1,375,346 and $894,903 were incurred during the nine-month periods ended September 30, l996 and l995, respectively. Research and development expenses for the nine-month period ended September 30, 1996 includes $1,153,945 resulting from the write-down to estimated realizable value of capitalized costs relating to the prototype aircraft discussed above. The Company's research and development agreement (the "JPL Agreement") with the Jet Propulsion Laboratory ("JPL"), an operating division of the California Institute of Technology which operates JPL under contract from NASA, commenced in April 1994. JPL incurred expenses aggregating $134,612 during the nine-month period ended September 30, 1996. In May, 1996, the Company paid an additional $50,000 to JPL for research activities related to payload development and activities in support of the Company's research and development into unmanned aerial vehicles. General and administrative expenses were $1,835,271 since the Company's inception in July 1992, of which $581,532 and $612,257 were expended during the six-month periods ended September 30, 1996 and 1995, 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. 8 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 will work together over the next several months 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. Liquidity and Capital Resources: The Company has had no revenue and has incurred a cumulative loss through September 30, 1996 of $6,370,164. The Company currently does not have the necessary liquidity and capital resources to sustain planned operations for the one year period following September 30, 1996 unless it obtains additional financing. There can be no assurances as to the availability or terms of such additional financing. 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 September 30, 1996, the Company intends to continue to conduct significant additional research, development and testing activities related to the JPL Agreement and additional activities in connection with the development of the Skysat System, including the completion of, and/or 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, completed development of the Skysat System using its microwave power transmission technology and received necessary regulatory approvals. The Company is currently seeking additional financing or a strategic or other arrangement in order to continue its planned activities for the current fiscal year. As previously disclosed, in July 1994 the Company entered into an agreement with B & R Designs, Inc. (the "B & R Designs Agreement"), pursuant to which B & R Designs agreed to construct the Company's first Platform. Due to disagreements and cost overruns, work by B & R Designs under the B & R Designs Agreement was scaled back and ultimately suspended entirely during 1995. The Company is currently in discussions with B & R Designs management regarding quantifying expenses. The Company and B & R Designs management are attempting to resolve the amount payable, if any, under the B & R Designs Agreement. Due to these uncertainties, the Company's financial commitment cannot be quantified at this time. 9 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. SKYSAT COMMUNICATIONS NETWORK CORPORATION Date: November 19, 1996 By: /s/ Martin D. Fife ------------------------------ Martin D. Fife, Chief Executive Officer Date: November 19, 1996 By: /s/ Martin D. Fife ------------------------------ Martin D. Fife, Chief Financial Officer 10 EX-27 2 FDS -- SKYSAT COMMUNICATIONS NETWORK
5 CONDENSED BALANCE SHEET AND CONDENSED STATEMENT OF OPERATIONS FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 1996 3-MOS 3-MOS 9-MOS 9-MOS OTHER DEC-31-1995 DEC-31-1996 DEC-31-1995 DEC-31-1996 DEC-31-1996 SEP-30-1995 SEP-30-1996 SEP-30-1995 SEP-30-1996 SEP-30-1996 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 281,987 1,464,654 1,507,160 1,956,878 6,071,561 0 0 0 0 0 0 0 0 0 83,317 (273,828) (1,457,740) (1,449,221) (1,933,272) (6,370,164) 0 0 0 0 0 (273,828) (1,457,740) (1,449,221) (1,933,272) (6,370,164) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 (273,828) (1,457,740) (1,449,221) (1,933,272) (6,370,164) (.12) (.53) (.64) (.73) (3.47) (.12) (.53) (.64) (.73) (3.47)
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