-----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, GWa2QTcOYVsR+BwH0DQLyu0I0auosifpEfW/SCqkMh27ZQ9Fg4WI3Fov7nbnaajP WolLFh0n0scx00kCJicCNQ== 0001047469-97-005434.txt : 19971120 0001047469-97-005434.hdr.sgml : 19971120 ACCESSION NUMBER: 0001047469-97-005434 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971119 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: SEC FILE NUMBER: 000-24034 FILM NUMBER: 97724065 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 10Q-SB 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, 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. September 30, 1997 Class A Common Stock 3,268,550 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 September 30, 1997 (unaudited) A S S E T S Current Assets: Cash and cash equivalents................................. 161 Prepaid expenses.......................................... 44,757 Other current assets...................................... 3,013 --------- Total current assets.................................. 47,931 Equipment, at cost (net of $2,112 accumulated depreciation). 2,698 Patent costs (net of $15,975 accumulated depreciation)...... 82,644 Other....................................................... 10,225 --------- TOTAL................................................. 143,498 --------- --------- L I A B I L I T I E S Current Liabilities: Accrued expenses.......................................... 320,431 Accrued salaries.......................................... 142,723 Notes payable--stockholders (Note D)...................... 152,309 Less: deferred financing costs.......................... (97,137) --------- Total current liabilities............................. 518,326 --------- STOCKHOLDERS' EQUITY (DEFICIENCY) (Notes B, C, D, E, F and H) 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, 3,268,550 shares issued and outstanding, including 127,875 forfeitable shares ....................................... 3,269 Capital in excess of par value.............................. 7,943,879 Deficit accumulated during the development stage............ (8,496,419) --------- Sub-total............................................. (547,748) Add: stock to be issued in settlement of contract (Note H).. 25,313 stock to be issued to officer/stockholder for loans (Note D)................................... 157,188 Less: 667,750 Class B shares held in the Treasury, at cost (Note E[3]).................................. (9,580) --------- Total stockholders' equity (deficiency)............. (374,828) --------- TOTAL................................................. 143,498 --------- --------- 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 FOR THE NINE MONTHS OF OPERATIONS ENDED ENDED (JANUARY 1, SEPTEMBER 30, SEPTEMBER 30, 1993) TO ----------------------- ------------------------ SEPT. 30, 1996 1997 1996 1997 1997 ----------- ---------- ----------- ----------- ------------- Operating Expenses: Research and development expenses (Note E[1])..................................... 1,423,401 54,004 1,575,347 404,043 5,343,951 General and administrative expenses (Note E)........................................ 241,253 144,075 581,532 599,947 2,784,075 ----------- ---------- ----------- ----------- ------------- Total operating expenses.................... 1,664,654 198,079 2,156,879 1,003,990 8,128,026 ----------- ---------- ----------- ----------- ------------- Loss from Operations........................ (1,664,654) (198,079) (2,156,879) (1,003,990) (8,128,026) ----------- ---------- ----------- ----------- ------------- Financing Costs (Income): Interest (income)........................... (6,915) (23,607) (145,405) Interest expense............................ 2,368 2,368 85,685 Amortization of deferred financing costs.... 67,863 67,863 366,863 Amortization of debt discount............... 61,250 ----------- ---------- ----------- ----------- ------------- Total financing costs (income).............. (6,915) 70,231 (23,607) 70,231 368,393 ----------- ---------- ----------- ----------- ------------- NET LOSS.................................... (1,657,740) (268,310) (2,133,272) (1,074,221) (8,496,419) ----------- ---------- ----------- ----------- ------------- ----------- ---------- ----------- ----------- ------------- Net loss per share of common stock.......... $ (0.60) $ (0.09) $ (0.81) $ (0.41) $ (4.25) ----------- ---------- ----------- ----------- ------------- ----------- ---------- ----------- ----------- ------------- Weighted average number of common shares and common share equivalents outstanding...... 2,765,000 3,114,297 2,633,613 2,603,660 1,997,302 ----------- ---------- ----------- ----------- ------------- ----------- ---------- ----------- ----------- -------------
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 OF OPERATIONS NINE MONTHS ENDED (JANUARY 1, SEPTEMBER 30, 1993) TO ------------------------ SEPT. 30, 1996 1997 1997 ----------- ----------- ------------- Cash flows from operating activities: Net loss............................................................. (2,133,272) (1,074,221) (8,496,419) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization...................................... 9,975 7,695 31,767 Write off of fixed assets.......................................... 1,353,945 1,353,945 Write off of patents............................................... 95,000 Expenses paid by issuance of shares or options..................... 36,205 36,205 Stock to be issued in settlement of contract....................... 25,313 Stock to be issued to officer/stockholder.......................... 157,188 157,188 Rent recorded as capital contribution.............................. 22,000 Amortization of debt issuance costs................................ 67,863 428,113 Changes in operating assets and liabilities: Accounts receivable.............................................. 166,697 Organization costs............................................... (12,000) Prepaid expenses and other assets................................ (228,078) 45,460 (19,067) Accounts payable and other liabilities........................... (27,065) 121,278 298,157 ----------- ----------- ------------- Net cash (used in) operating activities............................ (857,798) (638,534) (6,079,800) ----------- ----------- ------------- Cash flows from investing activities: Purchase of fixed assets............................................. (1,367,414) Patent costs......................................................... (1,301) (193,620) Deposits............................................................. (9,625) ----------- ----------- ------------- Net cash (used in) investing activities............................ (1,301) (1,570,659) ----------- ----------- ------------- Cash flows from financing activities: Proceeds from notes payable.......................................... 152,309 2,303,309 Repayment of notes payable........................................... (2,450,000) Net proceeds from sale of common stock............................... 991,547 465,000 7,802,311 Purchase of treasury stock........................................... (5,000) ----------- ----------- ------------- Net cash provided by financing activities.......................... 991,547 617,309 7,650,620 ----------- ----------- ------------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS................... 132,448 (21,225) 161 Cash and cash equivalents--beginning of period......................... 259,868 21,386 ----------- ----------- ------------- CASH AND CASH EQUIVALENTS--END OF PERIOD............................... 392,316 161 161 ----------- ----------- ------------- ----------- ----------- ------------- Supplemental disclosures of cash flow information Taxes paid........................................................... 1,364 11,965 49,308 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 pursuant to instructions to Form 10-QSB and Item 310(b) of Regulation S-B of the SEC. Accordingly, they do not include all of the information and footnote disclosures 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, 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 Phase I or that the Company will be in a position to proceed with Phase II. As of October 31, 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 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 From February through April, 1997, the Company sold, in a private placement, unregistered shares of Class A common stock. Through this private placement, 930,000 Class A common shares were issued at $.50 per share for a total of $465,000; 5 SKYSAT COMMUNICATIONS NETWORK CORPORATION (a development stage company) NOTES TO FINANCIAL STATEMENTS NOTE C - Sale of Common Stock (cont.) two officers of the Company participated in this private placement. For each share of stock issued, each purchaser received 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 Employees of the Company agreed to defer salaries due from February 15 through October 31, 1997. In addition, one stockholder and one officer/stockholder have made working capital loans to the Company bearing interest at 10%. In consideration for such salary deferrals and loans, the Company has issued or committed to be issued the following shares, options and warrants:
Number of Value of Number of Options/Warrants for Class A Class A Class A Common Shares Exercisable @ Common Common --------------------------------- Shares Shares $0.50 $1.00 $1.50 ------- ------- ------- ------- -------- For salary deferrals: Through 5/15/97 (1) 51,667 $21,844 51,667 51,667 Through 7/31/97 (1) 137,265 137,265 137,265 Through 10/31/97 (2) 126,537 126,537 126,537 ------ ------- ------- ------- ------- Totals 51,667 $21,844 263,802 315,469 315,469 ------ ------- ------- ------- ------- ------ ------- ------- ------- ------- For stockholder loans: Through 7/31/97 (1) 15,000 $7,812 15,000 15,000 Through 7/31/97 (1) 169,000 169,000 Through 10/31/97(2) 323,618 $157,188 154,618 154,618 ------ -------- ------- ------- ------- Totals 338,618 $165,000 338,618 338,618 ------ ------- ------- ------- ------- ------ ------- ------- ------- -------
(1) Issued prior to balance sheet date (2) Issuable as of October 31, 1997 6 SKYSAT COMMUNICATIONS NETWORK CORPORATION (a development stage company) NOTES TO FINANCIAL STATEMENTS NOTE E - Related Party Transactions [1] Research and development expense includes the following payments or accruals to related parties for the periods indicated: January 1, 1996 - September 30, 1996 ...........$ 76,458 --------- --------- January 1, 1997 - September 30, 1997............$ 72,975 --------- --------- January 1, 1993 - September 30, 1997............$ 595,959 --------- --------- General and Administrative expenses for the nine-month periods ended September 30, 1996 and September 30, 1997, and for the period from January 1, 1993 through September 30, 1997 includes $165,000, $168,245 and $831,495, respectively, paid or due 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. [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. 7 SKYSAT COMMUNICATIONS NETWORK CORPORATION (a development stage company) NOTES TO FINANCIAL STATEMENTS NOTE F - Stock Option Plan (cont.) During the nine-month period ended September 30, 1997, the Company granted 23,170 nonqualified stock options exercisable at $1.00 per share to a consultant to the Company. These options were valued at $6,549 and recorded as consulting fees. In addition to options granted during the nine-month period ended September 30, 1997 for salary deferrals (Note D), the Company also granted 215,000 options to directors, officers and employees. Had compensation cost for all of the options granted to directors, officers and employees through September 30, 1997, been determined based upon fair value at the grant date consistent with the methodology prescribed under SFAS #123, The Company's net loss for the period would have increased by $162,800. 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 incurred research and development expenses of $252,306 and $251,628 in the nine- month periods ended September 30, 1996 and 1997, respectively . NOTE H - 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 $8,496,419 of which $2,133,272 and $1,074,221 were incurred during the nine-month periods ended September 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 $5,343,951 since inception, of which $1,575,347 and $404,043 were incurred during the nine-month periods ended September 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 Technology which operates JPL under contract from NASA, commenced in April 1994. JPL 9 incurred expenses aggregating $53,218 during the nine-month period ended September 30, 1997. General and administrative expenses were $2,784,075 since the Company's inception in July 1992, of which $581,532 and $599,947 were expended during the nine-month periods ended September 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, was extended through October 29, 1997. Management of the Company is currently negotiating a further extension of this Agreement. Liquidity and Capital Resources: The Company has had no revenue and has incurred a cumulative loss through September 30, 1997 of $8,496,419. The Company currently does not have the necessary liquidity and capital resources to sustain planned operations for the one year period following September 30, 1997 unless it obtains additional financing. The Company raised $465,000 from a private placement in early 1997 and is attempting to raise additional financing from a second private placement. As of October 31, 1997, the Company has no working 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 September 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 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 10 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: November 18, 1997 By: /s/ Martin D. Fife ------------------------------- Martin D. Fife, Chief Executive Officer Date: November 18, 1997 By: /s/ Martin D. Fife ------------------------------- Martin D. Fife, Chief Financial Officer 12 EX-27 2 EXHIBIT 27 FDS
5 This schedule contains summary financial information extracted from condensed balance sheet and condensed statement of operations for the nine-month period ended September 30, 1997 and is qualified in its entirety by reference to such financial statements. 9-MOS DEC-31-1997 JAN-01-1997 SEP-30-1997 161 0 0 0 0 47,931 2,698 2,112 143,498 518,326 0 0 0 4,792 (379,620) 143,498 0 0 0 0 1,003,990 0 70,231 (1,074,221) 0 0 0 0 0 (1,074,221) (.41) (.41)
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