<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ----------
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ----------
EXCHANGE ACT OF 1934
For the transition period from ____________ to ___________
Commission file number 000-25229
---------
SKYNET HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Delaware 65-1480559
------------------------------- ----------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
343 So. Glasgow Avenue, Inglewood, CA 90301
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (310) 642-7776
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 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 May 17, 1999, the registrant had issued and outstanding
18,935,034 shares of common stock, $.0001 par value per share.
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Page 1 of 13
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SKYNET HOLDINGS, INC.
INDEX TO FORM 10-Q
<TABLE>
<CAPTION>
<S> <C>
PART I. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets as of
June 30, 1998 and March 31, 1999 3
Condensed Consolidated Statements of Operations for the
Three and Nine Months Ended March 31, 1998 and 1999 4
Condensed Consolidated Statements of Cash Flows for the
Nine Months Ended March 31, 1998 and 1999 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 2. Changes in Securities 12
Item 3. Defaults Upon Senior Securities 12
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURES 13
</TABLE>
Page 2 of 13
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PART 1 - FINANCIAL INFORMATION
------------------------------
Item 1 - Financial Statements
SKYNET HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, March 31
1998* 1999
------------------ -----------------
(Unaudited)
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents $ $ 337,314 $ 2,101,695
Receivables 5,657,218 6,763,876
Prepaid expenses and other 66,430 574,727
------------------ -----------------
Total current assets 6,060,962 9,440,298
Property and equipment, net 704,296 1,036,371
Intangible and other assets, net 120,557 2,060,696
------------------ -----------------
$ 6,885,815 $ 12,537,365
================== =================
Liabilities and Stockholders' Equity (Deficiency)
Current liabilities
Accounts payable $ 5,560,712 $ 4,376,310
Bank debt (Note 3) 782,012 955,488
Other accrued liabilities 107,514 1,300,903
Accrued payroll 209,368 542,589
Accrued income taxes 34,993 251,891
Current portion of long-term debt 424,619 146,695
------------------ -----------------
Total current liabilities 7,119,218 7,573,876
------------------ -----------------
Long-term debt, net of current portion 452,822 384,355
------------------ -----------------
Stockholders' Equity (Deficiency)
Convertible preferred stock, $.0001 par value,
5,000,000 shares authorized; 2,450,000,
and 0 shares issued and outstanding
(liquidation preference $7,000,000) 245 -
Common stock, $.0001 par value, 50,000,000
shares authorized; 7,451,000 and 18,903,915
shares issued and outstanding 745 1,890
Additional paid-in capital 402,568 7,178,592
Foreign currency translation adjustment 53,332 6,843
Accumulated deficit (1,143,115) (2,608,191)
------------------ -----------------
Total stockholders' equity (deficiency) (686,225) 4,579,134
------------------ -----------------
$ 6,885,815 $ 12,537,365
================== =================
</TABLE>
* Derived from audited financial statements
Page 3 of 13
<PAGE>
SKYNET HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three months ended Nine months ended
March 31, March 31,
--------------------------------- --------------------------------
1998 1999 1998 1999
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues $ 7,923,804 $ 8,662,087 $ 24,105,906 $ 25,609,176
Cost of sales 4,290,783 5,515,759 14,502,379 15,617,573
------------- ------------- ------------- -------------
Gross profit 3,633,021 3,146,328 9,603,527 9,991,603
------------- ------------- ------------- -------------
Operating expenses
Compensation 1,787,992 2,079,235 5,184,312 6,077,818
Occupancy costs 136,889 146,949 414,283 424,105
Communication expense 152,891 180,506 457,283 556,176
Other operating expenses 1,194,161 1,284,326 3,079,343 3,824,742
------------- ------------- ------------- -------------
Total operating expenses 3,271,933 3,691,016 9,135,221 10,882,841
Income (loss) from operations 361,088 (544,688) 468,306 (891,238)
Other expense (113,126) (160,416) (371,809) (569,038)
------------- ------------- ------------- -------------
Income (loss) before income taxes 247,962 (705,104) 96,497 (1,460,276)
Income taxes 117,110 1,500 133,110 (4,800)
------------- ------------- ------------- -------------
Net income (loss) $ 130,852 $ (703,604) $ (36,613) $ (1,465,076)
============= ============= ============= =============
Basic income (loss) per common share $ 0.02 $ (0.04) $ (0.01) $ (0.09)
============= ============= ============= =============
Basic income (loss) per common share 0.02 $ (0.04) $ (0.01) $ (0.09)
============= ============= ============= =============
Basic weighted average number
of common shares outstanding 7,451,500 16,685,922 7,189,897 16,352,761
============= ============= ============= =============
Diluted weighted average number
of common shares outstanding 7,451,500 16,685,922 7,189,897 16,352,761
============= ============= ============= =============
</TABLE>
Page 4 of 13
<PAGE>
SKYNET HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Increase (decrease) in cash and cash equivalents)
<TABLE>
<CAPTION>
Nine months ended
March 31,
-------------------------------------
1998 1999
----------------- -----------------
<S> <C> <C>
Cash flows from operating activities
Net loss $ (36,613) $ (1,465,076)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 169,636 226,454
Changes in operating assets and liabilities,
net of business acquired:
Receivables 313,318 (42,682)
Prepaid expenses and other assets (390,740) (455,726)
Accounts payable (2,126,089) (1,336,106)
Accrued expenses and other liabilities 1,014,990 1,517,248
-------------- ---------------
Net cash used in operating activities (1,055,498) (1,555,888)
-------------- ---------------
Cash flows from investing activities
Purchase of property and equipment (136,820) (111,385)
Acquisition of business - 272,551
Other - (330,125)
-------------- ---------------
Net cash used in investing activities (136,820) (168,959)
-------------- ---------------
Cash flows from financing activities
Proceeds from sale of common stock 412,158 2,673,094
Proceeds from issuance of notes 288,000 1,195,538
Bank borrowings (repayments) 1,059,034 173,476
Debt repayments (53,915) (506,391)
-------------- ---------------
Net cash provided by financing activities 1,705,277 3,535,717
-------------- ---------------
Effect of foreign currency
translation adjustments (116,567) (46,489)
-------------- ---------------
Net increase (decrease) in
cash and cash equivalents 396,392 1,764,381
Cash and cash equivalents,
beginning of period 322,628 337,314
-------------- ---------------
Cash and cash equivalents, end of period $ 719,020 $ 2,101,695
============== ================
</TABLE>
Page 5 of 13
<PAGE>
SKYNET HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - GENERAL
The consolidated financial statements include the accounts of Skynet
Holdings, Inc. (the "Company"), its majority-owned subsidiaries. All significant
inter-company transactions and balances have been eliminated. The accompanying
unaudited condensed consolidated financial statements were prepared on the
accrual basis of accounting. In the opinion of management, all adjustments
(consisting only of normal, recurring accruals) which are necessary for a fair
presentation of the financial results for the periods presented have been made.
Certain information and footnote disclosures, normally included in
financial statements prepared in accordance with generally accepted accounting
principles, were condensed and omitted. Accordingly, these condensed
consolidated financial statements should be read in conjunction with the audited
financial statements and notes thereto for the year ended March 31, 1998.
Statements included herein, which are not historical facts, are
forward-looking statements. These statements are based upon information
available to the Company on the date hereof. Inherent in these statements are a
variety of risks and other factors, both known and unknown, and which are
described more fully under the caption "RISK FACTORS" included in the Company's
Registration Statement on Form S-1 and which may cause the Company's actual
results to differ materially from those in forward-looking statements.
Accordingly, the realization of forward-looking statements is not certain, and
all such statements should be evaluated based upon the applicable risks and
uncertainties affecting the Company. Consequently, the results of operations for
the three month and nine month periods ended March 31, 1999 are not necessarily
indicative of operations expected for the full year ending June 30, 1999.
NOTE 2 - ACQUISITIONS
Fleet Delivery Service
On March 15, 1999, the Company acquired, for approximately $3.0 million,
the operating assets of Nevada Fleet Management, Inc. dba Fleet Delivery
Service, a regional courier company. The Company issued 1,479,415 shares of
its Common Stock as consideration for the acquisition. The assets acquired
include: receivables, delivery vehicles, equipment, refundable deposits,
licenses, administrative material and equipment, records and documents, and all
personal property used in the operation of the business. The Company also
assumed approximately $300,000 in liabilities relating to the acquisition. The
Company accounted for the acquisition using the purchase method of accounting
with the assets acquired and liabilities assumed recorded at fair values, and
the results of the acquired business included in the Company's consolidated
financial statements from the closing date of the acquisition. The Company
recorded approximately $1.5 million representing the excess of the purchase
price over the fair value of the assets acquired (goodwill).
Page 6 of 13
<PAGE>
FOB
On April 12, 1999, the Company completed the first tier of a scheduled two-
tiered acquisition of Freight on Board International Limited, a corporation
organized under the laws of the United Kingdom ("FOB"). At the initial closing,
the Company purchased 51% of the issued and outstanding shares of FOB for cash
in the amount of approximately $680,000; 31,119 shares of Common Stock; and a
one (1) year cash earn-out payment in the amount of up to $144,000 based on
quarterly revenues of FOB for the one year period following the closing. The
Company is scheduled to purchase the remaining 49% of the capital stock of FOB
during the third or fourth quarter of 1999. This will occur by virtue of
reciprocal put and call features within the acquisition agreement which permits
the seller to "put" his shares to the Company commencing July 2, 1999 and
terminating December 31, 1999; and the Company to "call" such shares from the
seller commencing August 1, 1999 and terminating September 29, 1999. The
purchase price for the remaining 49% consists of (i) cash in the amount of
approximately $570,000; (ii) 83,067 shares of Common Stock; and (iii) a one year
cash earn-out payment in the amount of up to approximately $265,000 based on
quarterly revenues of FOB for the one year period following the closing. The
cash has been placed in an escrow account pending such acquisition. The Company
accounted for the acquisition using the purchase method of accounting with the
assets acquired and liabilities assumed recorded at fair values, and the results
of the acquired business will be included in the consolidated financial
statements from the closing date of the acquisition. The Company recorded
approximately $826,000 representing the excess of the purchase price over the
fair value of the assets acquired (goodwill).
Potential Acquisition
On May 1, 1999 the Company entered into a letter of intent to acquire all
of the issued and outstanding shares of capital stock of Pony Express Delivery
Services, Inc. ("Pony Express"), an Atlanta based express courier which
maintains 100 offices in 22 states. The potential acquisition is subject to the
negotiation and execution of a definitive agreement. Thereafter, closing of the
acquisition would be further conditioned upon a number of factors including (i)
the Company's completion of a satisfactory due diligence review of the business
and financial condition of Pony Express; (ii) restructuring the outstanding
indebtedness of Pony Express; and (iii) the absence of any material contingent
liabilities. The Company has just recently commenced its due diligence of Pony
Express and has not made any judgment as to whether it will be in a position to
complete the acquisition in the short term, if at all. Accordingly, there can
be no assurance that the potential acquisition will be completed.
NOTE 3 - PRIVATE PLACEMENTS
On December 9, 1998, the Company signed a letter of intent with a Placement
Agent for the purpose of offering (the "Offering") up to 2,000,000 shares of
Common Stock, par value $.0001 per share (the "Shares"), at a purchase price of
$2.00 per Share on a "best efforts, 1,000,000 Shares or none" basis. On
February 19 and March 5, 1999, the Company conducted closings with respect to
the Private Placement resulting in the issuance of an aggregate of 1,325,500
shares of Common Stock which generated net proceeds of approximately $2,173,000
(after offering costs of approximately $478,000).
During April of 1999, the Company further completed a private placement
through the issuance of an aggregate of 500,890 Units consisting of an aggregate
of 2,003,560 Series A Convertible Preferred Stock and warrants to purchase an
aggregate of 500,890 shares of Common Stock at an exercise price of $5.00 per
share which generated net proceeds (after offering costs of approximately
$600,000) of approximately $4,000,000. The Series A Shares are convertible into
2,003,560 shares of Common Stock within two (2) years from the date of issuance.
Page 7 of 13
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Introduction
Unless the context otherwise requires, the "Company" refers to Skynet
Holdings, Inc. and its wholly owned subsidiaries. The Company is a full service
provider of international transportation delivery services operating primarily
as an express courier for time sensitive documents and packages. These services
are formulated on a customized basis to meet the special needs of a diverse
international customer base. The Company provides these services through
Company owned offices as well as through a global network of over 1,000 offices
which are independently owned and operated in over 100 countries.
On October 14, 1998, Skynet Nevada merged (the "Merger") with and into EPL
Resources (Delaware) Corp., a Delaware corporation ("EPLR"), in a share exchange
transaction. Upon completion of the Merger, the combined companies changed
their name to "Skynet Holdings, Inc.", a Delaware corporation. Prior to the
Merger, EPLR was an inactive company whose shares were eligible for quotation on
the OTC Electronic Bulletin Board. Since the former stockholders of Skynet
Nevada acquired a controlling interest in EPLR in the Merger, the Merger has
been accounted for as a "reverse acquisition." Accordingly, for financial
statement presentation purposes, Skynet Nevada is viewed as the continuing
entity and the related business combination is viewed as a recapitalization of
Skynet Nevada, rather than an acquisition by EPLR.
Results of Operations
Revenues. Revenues for the nine months ended March 31, 1999 amounted to
$25,609,176 compared to $24,105,906 for the nine months ended March 31, 1998, an
increase of 6.2%. Revenues for the three months ended March 31, 1999 amounted to
$8,662,087 compared to $7,923,804 for the three months ended March 31, 1998, an
increase of 9.3%. The increase in revenues in both periods primarily resulted
from to higher volume including mix of services selected by customers, including
$630,000 resulting from the Fleet acquisition, which occurred on March 15, 1999.
Cost of sales. Cost of sales for the nine months ended March 31, 1999
amounted to $15,617,573 compared to $14,502,379 for the nine months ended March
31, 1998. As a percentage of sales, such costs amounted to 61.0% for the nine
months ended December 31, 1998 compared to 60.2% for the corresponding period of
the prior year. The percentage increase for the nine months ended March 31,
1999, resulted primarily from the acquisition of Fleet, partially offset by the
elimination during fiscal 1998 of marginal business and improved rates received
for existing business from carriers utilized by the Company. Cost of sales for
the three months ended March 31, 1999 amounted to $5,515,759 compared to
$4,290,783 for the three months ended March 31, 1998. As a percentage of sales,
such costs amounted to 63.7% for the three months ended March 31, 1999 compared
to 54.2% for the corresponding period of the prior year The increase for the
three months ended March 31, 1999, resulted primarily from the acquisition of
Fleet and higher rates paid to other carriers.
Operating Expenses. Compensation and compensation related costs increased
from $1,787,992 to $2,079,235, or by 16.3 % and from $5,184,312 to $6,077,818,
or by 17.2% for the three and nine months ended March 31, 1999 compared to the
corresponding periods of the prior year. As a percentage of sales, compensation
costs increased to 24.0% and 23.7% during the three and nine months ended March
31, 1999 as compared to 22.6% and 21.5% for the corresponding periods of the
prior year. $412,786 of the increase for the nine months ended March 31, 1999
and $141,259 for the three months ended March 31, 1999 relates to the addition
of senior level management personnel. The remainder of the increase principally
relates to additional staff level personnel.
Page 8 of 13
<PAGE>
Occupancy costs increased to $146,949 and $424,105 for the three and nine
months ended March 31, 1999 compared to $136,889 and $414,283 during the prior
year. Occupancy costs as a percentage of sales remained constant during both
periods. Communication expense amounted to $180,506 and $556,176 during the
three and nine months ended March 31, 1999 as compared to $152,891 and $457,283
for the corresponding period of the prior year. The increase in communication
expense relates to the move during the prior year into larger facilities and the
creation of a corporate management team.
Other operating expenses for the three and nine months ended March 31,
1999 amounted to $1,284,326 and $3,824,742 compared to $1,194,161 and $3,079,343
for the three and nine months ended March 31, 1998. The increase for the nine
months ended March 31, 1999 resulted from higher legal and professional costs of
approximately $100,000, including $50,000 relating to the Merger that was
completed on October 14, 1998, increased audit fees of $70,000, increased travel
and related costs of approximately $253,000 partially offset by reductions in
other operating expenses. The increase for the three months ended March 31,
1999 was primarily due to increased travel and related costs.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity
A foreign subsidiary of the Company has a financing agreement with a bank
in London. The agreement provides borrowing for the subsidiary based on 75% of
customer receivables generated from accounts in the United Kingdom, which are
less than 90 days old up to a maximum of $1,700,000. The subsidiary pays an
administrative charge of .2% plus interest at the bank's base rate plus 2.25%
(10.0% at June 30, 1998). Borrowings under the agreement amounted to $782,012 at
June 30, 1998 and $955,488 at March 31, 1999.
Total cash and cash equivalents at March 31, 1999 amounted to $2,101,695.
Net cash used in operating activities during the nine months ended March
31, 1998 and 1999 amounted to $1,055,498 and $1,555,888. The increase during
the nine months ended March 31, 1999 primarily results from the increase in net
loss for the period.
Net cash used in investing activities, primarily the acquisition of
property and equipment, amounted to $136,820, and $168,959 during the nine
months ended March 31, 1998 and 1999. Included in investing activities for the
nine months ended March 31, 1999 was $272,551 received in connection with the
Fleet acquisition.
Net cash provided by financing activities during the nine months ended
March 31, 1998 and 1999 amounted to $1,705,277 and $3,535,717. The increase
during the nine months ended March 31, 1999 resulted from net proceeds of
$2,873,094 from the sale of the Company's common stock, increased bank
borrowings of $173,476, and proceeds from short term borrowings of $1,195,538,
partially offset by repayments of long-term debt of $506,391.
At June 30, 1998 and March 31, 1999, management provided 100% valuation
allowances amounting to approximately $722,000 against the net deferred tax
asset represented by its net operating loss carry forwards due to the
indeterminate nature of the Company's ability to realize this deferred asset.
On December 1, 1998, the Company enhanced its liquidity through the repayment of
an aggregate of $1,145,000 of outstanding indebtedness through the issuance of
572,500 shares of Common Stock. The Company further enhanced its liquidity
through two (2) private placements of equity securities resulting in net
proceeds to the Company of approximately $6,210,000. See Capital Resources
below.
Page 9 of 13
<PAGE>
Capital Resources
On March 5, 1999, the Company completed a private placement resulting in
the issuance of an aggregate of 1,325,500 shares of Common Stock which generated
net proceeds (after offering costs of approximately $478,000) of approximately
$2,173,000. During April of 1999, the Company further enhanced its liquidity
through the issuance of an aggregate of 422,556 Units consisting of an aggregate
of 2,003,560 Series A Shares and warrants to purchase an aggregate of 422,556
shares of Common Stock at an exercise price of $5.00 per share which generated
net proceeds (after offering costs of approximately $600,000) of approximately
$4,000,000. The Company intends to use the net proceeds of these offerings for
general working capital and general corporate purposes, primarily to finance the
Company's business plan, which includes an acquisition and consolidation
strategy, and to upgrade the Company's information technology.
The Company anticipates incurring capital expenditures in the amount of
between $150,000 and $200,000 during the quarter ending June 30,1999 in
connection with the upgrade of the Company's existing information technology.
This represents the initial software development and installation costs as well
as the additional hardware needed to effectively implement and operate the
proposed new system. The Company anticipates incurring additional capital
expenditures of $570,000 during the quarter ending September 30, 1999 in
connection with the completion of the second tier of the acquisition of the
remaining 49% of the issued and outstanding shares of capital stock of FOB. In
this regard, the Company has placed these funds into escrow to secure this
obligation.
On May 1, 1999 the Company entered into a preliminary agreement to acquire
all of the issued and outstanding shares of capital stock of Pony Express
Delivery Services, Inc. ("Pony Express"), an Atlanta based express courier which
maintains 100 offices in 22 states. In connection with the preliminary
agreement, the Company advanced $1,000,000 (the "Advance") to Pony Express. The
Advance is secured by a second lien on all assets owned by Pony Express.
The potential acquisition is subject to the negotiation and execution of a
binding definitive agreement. Thereafter, closing of the acquisition would be
further conditioned upon a number of factors including (i) the Company's
completion of a satisfactory due diligence review of the business and financial
condition of Pony Express; (ii) restructuring the outstanding indebtedness of
Pony Express; and (iii) the absence of any material contingent liabilities. The
Company has just recently commenced its due diligence of Pony Express and has
not made any judgment as to whether it will be in a position to complete the
acquisition in the short term, if at all. Accordingly, there can be no
assurance that the potential acquisition will be completed. As of May 19, 1999,
the Company is uncertain as to whether this acquisition is probable of
occurrence.
In the event the acquisition is not completed, the Advance, together with
accrued interest at a rate of 10% per annum, is due and payable on the earlier
of (i) six (6) months after the termination of the preliminary agreement or
definitive agreement, as applicable; or (ii) December 31, 1999. Based on
unaudited financial information provided to the Company, management believes
that during the past several years Pony Express has incurred substantial
operating losses and presently has a capital deficit of in excess of $8 million.
If the acquisition is completed, the Company anticipates that, during the twelve
(12) month period following closing, it will be caused to provide funding to
Pony Express to cover working capital requirements, fund operating losses and
reduce existing bank indebtedness. Based upon current estimates, the Company
believes that it will be caused to advance between $2.5 and $7.5 million. The
Company's present capital resources are not sufficient to meet these needs on a
short-term or longer-term basis. Accordingly, the Company will be required to
secure additional funding either through incurring indebtedness or through the
sale of equity securities.
Page 10 of 13
<PAGE>
Management believes that with the completion of the private placement
transactions described above, the Company's existing capital resources will be
sufficient to fund its operations during the next twelve (12) months. The
Company intends to pursue an aggressive acquisition strategy. This may involve
acquiring target companies for cash, indebtedness, newly issued securities, or a
combination thereof. The Company will likely require additional operating
capital in order to finance any acquisitions that involve material cash
components. In addition, the Company will likely require additional capital to
finance the continued growth of the Company, to the extent its acquisition
strategy is successful. The Company may seek additional funds from public or
private offerings of debt or equity securities or from bank-financing facilities
to the extent available to the Company.
Included in the Company's consolidated balance sheets at June 30, 1998 and
1997 and March 31, 1999 are the net assets (liabilities) of the Company's United
Kingdom subsidiary of approximately $410,000, and $148,000 and the
Company's Australian subsidiary of approximately $212,000 and $230,000 and
for the same periods.
Year 2000 Issues
The Company is currently addressing Year 2000 issues. Year 2000 issues are
the result of computer programs being written using two digits rather than four
to define the applicable year associated with the program or an associated
computation. Any of the Company's computer programs that have time-sensitive
software may recognize a date using "00" as the year 1900 rather than the year
2000. This could result in a system failure or miscalculation causing
disruptions of operations, including among other things, a temporary inability
to process transactions, send invoices or engage in normal business activities.
Management expects to have substantially all of the systems application changes
completed within the next 5 months and believes that its level of preparedness
is appropriate.
Page 11 of 13
<PAGE>
PART II. OTHER INFORMATION
--------------------------
Item 1. Legal Proceedings.
The Company has become subject to various lawsuits, claims and other
legal matters in the ordinary course of conducting its business. As of the date
of this Report, management believes that there are no legal proceedings pending,
the adverse resolution of which is expected to have a material adverse financial
impact on the Company's consolidated financial position.
Item 2. Changes in Securities.
On February 19 and March 5, 1999, the Company issued an aggregate of
1,325,500 shares of Common Stock raising gross proceeds of $2,651,000. Puglisi
Howells & Co., a registered/broker dealer, acted as placement agent to the
Company pursuant to which it received sales commissions and non-accountable
expenses equal to $265,100. The securities were issued to accredited investors
in a private placement transaction exempt from the registration requirements of
the Securities Act pursuant to Section 4(2) thereof and Regulation D promulgated
thereunder.
Item 3. Defaults Upon Senior Securities.
None
Item 4. Submission of Matters to a Vote of Security Holders.
None
Item 5. Other Information.
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits -
27.1 Financial Data Schedule.
(b) Reports on Form 8-K
None
Page 12 of 13
<PAGE>
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.
SKYNET HOLDINGS, INC.
Date: May 20, 1999 /s/ Vjekoslav Nizic
------------------------
Vjekoslav Nizic
Chief Executive Officer
Date: May 20, 1999 /s/ Martin G Paravato
------------------------
Martin G. Paravato
Chief Financial Officer
Page 13 of 13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 1998 AND THE THREE
AND NINE MONTHS ENDED MARCH 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C> <C>
<PERIOD-TYPE> YEAR 9-MOS 3-MOS
<FISCAL-YEAR-END> JUN-30-1998 JUN-30-1999 JUN-30-1999
<PERIOD-START> JUL-01-1997 JUL-01-1998 JAN-01-1999
<PERIOD-END> JUN-30-1998 MAR-31-1999 MAR-31-1999
<CASH> 337,314 2,101,695 2,101,695
<SECURITIES> 0 0 0
<RECEIVABLES> 6,380,466 7,880,060 7,880,060
<ALLOWANCES> 734,257 1,184,554 1,184,554
<INVENTORY> 0 0 0
<CURRENT-ASSETS> 6,885,815 9,440,298 9,440,298
<PP&E> 2,092,831 2,466,716 2,486,716
<DEPRECIATION> 1,388,538 1,450,345 1,450,345
<TOTAL-ASSETS> 6,885,815 12,537,365 12,537,365
<CURRENT-LIABILITIES> 7,119,218 7,573,876 7,573,876
<BONDS> 0 0 0
245 0 0
0 0 0
<COMMON> 745 1,890 1,890
<OTHER-SE> 402,568 7,178,592 7,178,592
<TOTAL-LIABILITY-AND-EQUITY> 6,885,815 12,537,365 12,537,365
<SALES> 31,838,919 25,609,176 8,662,087
<TOTAL-REVENUES> 31,838,919 25,609,176 8,662,087
<CGS> 19,123,468 15,617,573 5,515,759
<TOTAL-COSTS> 12,134,474 10,882,841 3,691,016
<OTHER-EXPENSES> 29,809 589,038 160,416
<LOSS-PROVISION> 400,955 189,199 39,880
<INTEREST-EXPENSE> 199,714 193,804 30,905
<INCOME-PRETAX> 351,454 (1,460,276) (705,104)
<INCOME-TAX> 185,404 4,800 1,500
<INCOME-CONTINUING> 166,050 (1,465,076) (703,604)
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 166,050 (1,465,076) (703,604)
<EPS-BASIC> 0.02 (0.09) (0.04)
<EPS-DILUTED> 0.02 (0.09) (0.04)
</TABLE>
