File pursuant to Rule 424(b)(3)
File No. 333-80023
Supplement dated September 16, 1999
to Prospectus dated August 25, 1999
NetLojix Communications, Inc.
(Formerly known as AvTel Communications, Inc.)
The following information supplements and amends the Prospectus,
dated August 25, 1999, of AvTel Communications, Inc. relating to the
issuance of 2,103,939 shares of AvTel's common stock. This Supplement
should be read in conjunction with the Prospectus dated August 25, 1999.
Sale of Matrix Telecom, Inc.
On August 31, 1999, AvTel and its wholly-owned subsidary, Matrix
Telecom, Inc., entered into a stock purchase agreement with Energy TRACS
Acquisition Corp. Energy TRACS Acquisition Corp. is a wholly-owned
subsidiary of Platinum Equity Holdings, LLC. Pursuant to the stock purchase
agreement, AvTel agreed to sell all of the issued and outstanding capital
stock of Matrix to Energy TRACS Acquisition Corp. or its assignee. On
September 1, 1999, Energy TRACS Acquisition Corp. assigned its rights under
the stock purchase agreement to Matrix Acquisition Holdings Corp.
The closing of the transaction is subject to certain
contingencies, including regulatory consents and the approval of AvTel
shareholders. Shareholders representing over 50% of votes required to
approve the transaction have indicated that they will vote in favor of the
agreement.
The unaudited pro forma financial statements giving effect to the
sale of Matrix are contained on the following pages.
Name Change
On September 15, 1999, AvTel Communications, Inc. changed its
name to NetLojix Communications, Inc. NetLojix's common stock continues to
be traded on the Nasdaq SmallCap Market, but is now traded under the symbol
"NETX."
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NETLOJIX COMMUNICATIONS, INC. AND SUBSIDIARIES
(FORMERLY KNOWN AS AVTEL COMMUNICATIONS, INC.)
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Introduction
The following unaudited pro forma financial statements give effect to
the sale of all of the issued and outstanding stock of Matrix Telecom,
Inc., a wholly owned subsidiary of NetLojix Communications, Inc.
("NetLojix"), to Matrix Acquisition Holding Corp. ("MAHC"). Prior to
September 15, 1999, NetLojix was known as AvTel Communications, Inc. MAHC
is a wholly-owned subsidiary of Platinum Equity Holdings, LLC. The stock
transfer agreement was signed on August 31, 1999. The closing of the
transaction is subject to certain contingencies, including regulatory
consents and the approval of NetLojix shareholders. Shareholders
representing over 50% of votes required to approve the transaction have
consented to the transaction. Consideration for the transaction included
assumption of debt, assignment of certain Matrix assets to NetLojix, future
exchange carrier services and cash based on future performance of Matrix
internet product offerings.
The unaudited proforma financial statements should be read in
conjunction with the historical financial statements of NetLojix and
accompanying notes. This pro forma information is presented for
illustration purposes only and is not necessarily indicative of the results
which actually would have been achieved if the Matrix sale had been
effected on the pro forma dates, nor is it necessarily indicative of future
results.
The Unaudited Pro Forma Balance Sheet at June 30, 1999 assumes that
the Matrix sale was effected on that date. The Unaudited Pro Forma
Statements of Operations for the year ended December 31, 1998 and for the
six months ended June 30, 1999 assume the sale occurred January 1, 1998.
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<TABLE>
<CAPTION>
NETLOJIX COMMUNICATIONS, INC. AND SUBSIDIARIES
(FORMERLY KNOWN AS AVTEL COMMUNICATIONS, INC.)
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
June 30, 1999
Pro Forma Pro Forma
Historical Adjustments Balance Sheet
Assets ---------- ----------- -------------
------
<S> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 684,989 - 684,989
Accounts receivable, net 4,004,945 (2,591,148) (a) 1,413,797
Federal and state income tax
receivable 1,325,000 - 1,325,000
Other current assets 1,088,655 (378,708) (a) 709,947
---------- ----------- ---------
Total current assets 7,103,589 (2,969,856) 4,133,733
Property and equipment, net 1,963,581 (1,022,902) (a) 940,679
Goodwill, net 4,204,868 4,204,868
Other assets, net 1,158,710 (5,115) (a) 1,153,595
--------- ----------- ----------
Total assets $14,430,748 (3,997,873) 10,432,875
=========== =========== ==========
Liabilities and Stockholders' Equity
------------------------------------
CURRENT LIABILITIES
Accounts payable and other
accrued expenses $ 3,498,110 (2,010,067) (a) 1,488,043
Accrued network services costs 4,500,953 (4,500,953) (a) -
Sales and excise tax payable 1,344,977 (724,555) (a) 620,422
Due to affiliates 98,332 (98,332) (a) -
Other current liabilities 1,432,464 (267,125) (a) 1,165,339
----------- ----------- ---------
Total current liabilities 10,874,836 (7,601,032) 3,273,804
Long-term borrowings 2,226,619 (2,226,619) (a) -
Common Stock subject to put
option 112,577 112,577
Long-term obligations under
capital leases 160,840 (1,300) (a) 159,540
---------- ----------- ---------
Total liabilities 13,374,872 (9,828,951) 3,545,921
----------- ----------- ---------
STOCKHOLDERS' EQUITY
Preferred stock, authorized 750,000 shares,
$0.01 par value - - -
Series A convertible convertible preferred
stock, authorized 250,000 shares, $0.01
par value, cumulative as to 8$ dividends,
147,700 shares issued and outstanding.
(Liquidation preference of $704,032
including dividends in arrears.) 1,477 - 1,477
Series B convertible preferred stock,
authorized 1,500 shares, $0.01 par value,
annual dividends of $30 per share, 1,500
shares issued and outstanding.
(Liquidation preference of $1,500,000.) 15 - 15
Common stock, authorized 20,000,000 shares,
$0.01 par value, issued 10,579,870 and
10,409,473 shares at June 30, 1999 and
December 31, 1998, respectively. 105,048 - 105,048
Additional paid in capital 21,384,408 - 21,384,408
Accumulated deficit (20,434,961) 5,831,078 (a) (14,603,883)
Treasury stock, $0.01 par value,
11,075 shares at June 30, 2000 (111) - (111)
------------ --------- -----------
Total stockholders' equity 1,055,876 5,831,078 6,886,954
Total liabilities and
stockholders' equity $ 14,430,748 (3,997,873) 10,432,875
============ =========== ===========
Notes to Unaudited Pro Forma Balance Sheet
(a) Record the sale of Matrix for assumption of liabilities and fair value of
future services. A gain of $5,831,078 is reflected in the Pro Forma
balance sheet.
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<CAPTION>
NETLOJIX COMMUNICATIONS, INC. AND SUBSIDIARIES
(FORMERLY KNOWN AS AVTEL COMMUNICATIONS, INC.)
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Year Ended Six Months Ended
December 31, 1998 June 30, 1999
----------------- -------------
Historical Adjustments Proforma Historical Adjustments Proforma
<S> <C> <C> <C> <C> <C> <C>
REVENUES $ 44,013,498 (34,125,769) a 9,887,729 18,650,775 (10,781,366) a 7,869,409
COST OF REVENUES 31,849,354 (25,796,234) a 6,053,120 12,644,779 (8,027,271) a 4,617,508
--------------------------- --------- --------------------------- ---------
GROSS MARGIN 12,164,144 (8,329,535) 3,834,609 6,005,996 (2,754,095) 3,251,901
Operating expenses
Selling, general and
administrative 18,480,576 (13,978,781) a 10,239,790 (6,056,620) a
1,539,011 b 6,040,806 858,950 b 5,042,120
Depreciation and
amortization 1,107,321 (487,794) a 753,345 (254,931) a
370 b 619,897 37,598 b 536,012
-------------------------- --------- ------------ ----------- ---------
Total operating
expenses 19,587,897 (12,927,194) 6,660,703 10,993,135 (5,415,003) 5,578,132
-------------------------- --------- ---------- ----------- ---------
OPERATING LOSS (7,423,753) 4,597,659 (2,826,094) (4,987,139) 2,660,908 (2,326,231)
Interest expense (86,251) 18,889 a (67,362) (212,692) 73,677 a (139,015)
Gain on sale of subsidiary - 5,831,078 d 5,831,078 - -
Other Income (expense),
net 181,107 (88,770) a 92,337 13,099 (4,795) a 8,304
------------------------- ---------- ----------- ---------- ----------
Loss before income (7,328,897) 10,358,856 3,029,959 (5,186,732) 2,729,790 (2,456,942)
taxes
Income tax benefit 1,526,579 (1,526,579) a - - - -
-------------------------- ----------- ----------- ---------- ------------
NET LOSS $ (5,802,318) 8,832,277 3,029,959 (5,186,732) 2,729,790 (2,456,942)
========================== =========== =========== ========== ============
a To record reduction in revenues, cost of sales and operating expenses related to sale of Matrix.
b To reverse allocated operating expenses that were previously allocated to Matrix, but will remain after the sale.
c To reduce interest expense associated with Matrix borrowings.
d To record gain associated with the sale of Matrix.
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