<PAGE>
Filed Pursuant to Rule 424(b)(3)
Registration No. 333-83705
Prospectus Supplement No. 3
Dated November 19, 1999 (to Prospectus dated August 13, 1999)
SkyLynx Communications, Inc.
This Prospectus Supplement is part of the Prospectus dated August 13,
1999 relating to an offering of up to 9,996,954 shares of our common stock by
persons who were issued common stock in connection with our capital raising
activities or have been or will be issued common stock upon conversion of
shares of our series B, series D and series E convertible preferred stock or
upon exercise of warrants to purchase our common stock.
Third Quarter 1999 Results
A copy of our Quarterly Report for the fiscal quarter ended September 30,
1999 is attached hereto.
The date of this Prospectus Supplement No. 3 is November 19, 1999
<PAGE>
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal quarter ended September 30, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ____________ to ____________
Commission file number 0-24687
SKYLYNX COMMUNICATIONS, INC.
-----------------------------------
(Exact Name of Registrant as Specified in its Charter)
Colorado 84-1360029
- ---------------------------- ---------------------
(State or other jurisdiction I.R.S. Employer
zof incorporation or organization) Identification number
600 South Cherry Street, Suite 305, Denver, Colorado 80246
--------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 316-0400
103 Sarasota Quay, Sarasota, Florida 34236
------------------------------------------------
(Former Name or Address if Changed Since Last Report)
Check whether the Issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the Issuer was required to file such reports), and (2) has been
subject to filing requirements for the past 90 days. Yes [X] No [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the Registrant has filed all documents and reports required to
be filed by Sections 12, 13, or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by a court. Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
As of November 12, 1999, the Company had 12,468,021 shares of its $0.001 par
value common stock outstanding.
Transitional Small Business Disclosure Format (Check one). Yes [ ] No [X]
<PAGE>
<PAGE>
INDEX
PART I. FINANCIAL INFORMATION
Page
Item 1. Financial Statements
Condensed Consolidated Balance Sheet as of September 30, 1999 2
Condensed Consolidated Statements of Operations for the nine
month periods ended September 30, 1999 and September 30, 1998 3
Condensed Consolidated Statements of Cash Flows for the nine
month periods ended September 30, 1999 and September 30, 1998 4
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's discussion and analysis of financial
condition and results of operations
Liquidity and Capital Resources 7
Results of Operations 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 14
Item 2. Changes in Securities 14
Item 3. Defaults Upon Senior Securities 14
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 14
<PAGE>
<PAGE>
ITEM 1. FINANCIAL STATEMENTS
Forward-Looking Statements
Certain statements made in this Form 10-QSB are "forward looking
statements" (within the meaning of the Private Securities Litigation Reform
Act of 1995) regarding the plans and objectives of management for future
operations. Such statements involve known and unknown risks, uncertainties
and other factors that may cause actual results, performance or achievements
of the Company to be materially different from any future results, performance
or achievements expressed or implied by such forward-looking statements. The
forward-looking statements made in this Report are based on current
expectations that involve numerous risks and uncertainties. The Company's
plans and objectives are based, in part, on assumptions involving the growth
and expansion of business. Assumptions relating to the foregoing involve
judgments with respect to, among other things, future economic, competitive
and market conditions and future business decisions, all of which are
difficult or impossible to predict accurately and many of which are beyond the
control of the Company. Although the Company believes that its assumptions
underlying the forward-looking statements are reasonable, any of the
assumptions could prove inaccurate and, therefore, there can be no assurance
that the forward-looking statements made in this Report will prove to be
accurate. In light of the significant uncertainties inherent in the forward-
looking statements made in this Report, particularly in view of the Company's
early state of operations, the inclusion of such information should not be
regarded as a representation by the Company or any other person that the
objectives and plans of the Company will be achieved.
<PAGE>
<PAGE>
SKYLYNX COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET - SEPTEMBER 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash $ 2,238,988
Accounts receivable, net of allowance for
doubtful accounts of $131,732 355,119
Prepaid expenses and other current assets 1,034,963
------------
Total current assets 3,629,070
PROPERTY AND EQUIPMENT, net 3,885,517
GOODWILL AND INTANGIBLE ASSETS, net of accumulated
amortization of $1,164,977 10,134,561
------------
Total assets $17,649,148
============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $ 1,207,921
Deferred revenue 949,556
Current maturities of capital lease obligations 473,830
Current maturities of note payable 25,000
------------
Total current liabilities 2,656,307
NOTE PAYABLE, net of current maturities 20,432
CAPITAL LEASE OBLIGATIONS, net of current maturities 519,894
------------
COMMITMENTS AND CONTINGENCIES (Note 5)
STOCKHOLDERS' EQUITY:
Common stock 12,593
Preferred stock 13,418,078
Additional paid-in capital 38,814,997
Accumulated deficit (37,793,153)
------------
Total stockholders' equity 14,452,515
------------
Total liabilities and stockholders' equity $17,649,148
============
</TABLE>
The accompanying notes are an integral part of this
condensed consolidated balance sheet
<PAGE>
<PAGE>
SKYLYNX COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED
SEPTEMBER 30, 1999 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
Three-month Period Nine-month Period
Ended September 30, Ended September 30,
------------------------- -----------------------
1999 1998 1999 1998
----------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
REVENUES $1,548,322 $ 1,124 $2,249,076 $ 1,124
----------- ------------ ----------- -----------
COSTS AND EXPENSES:
Cost of revenues 381,168 - 812,214 -
Selling, general and
administrative 4,850,953 1,285,650 18,079,379 2,210,503
----------- ------------ ----------- -----------
Total costs and
expenses 5,232,121 1,285,650 18,891,593 2,210,503
----------- ------------ ----------- -----------
OTHER INCOME (EXPENSE):
Interest, net 33,931 6,812 104,304 18,964
Other 4,275 - - (3,942)
----------- ------------ ----------- -----------
Total other income 38,206 6,812 104,304 15,022
----------- ------------ ----------- -----------
Net loss (3,645,593) (1,277,714)(16,538,213) (2,194,357)
----------- ------------ ----------- -----------
PREFERRED STOCK DIVIDENDS (353,476) - (1,106,043) (8,207)
ACCRETION OF BENEFICIAL
CONVERSION FEATURE OF
PREFERRED STOCK (599,791) - (11,971,977) -
----------- ------------ ----------- -----------
NET LOSS APPLICABLE TO
COMMON STOCKHOLDERS $(4,598,860) $(1,277,714)$(29,616,233)$(2,202,564)
=========== ============ =========== ===========
LOSS PER SHARE APPLICABLE
TO COMMON STOCKHOLDERS-
BASIC AND DILUTED $ (0.40) $ (0.14) $ (2.63) $ (0.24)
SHARES USED IN COMPUTING
LOSS PER SHARE APPLICABLE
TO COMMON STOCKHOLDERS-
BASIC AND DILUTED 11,628,774 9,200,265 11,278,104 8,925,790
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated statements
<PAGE>
<PAGE>
SKYLYNX COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE-MONTH PERIODS ENDED
SEPTEMBER 30, 1999 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
Nine-month Period
Ended September 30,
-----------------------------
1999 1998
-------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(16,538,213) $ (2,194,357)
Adjustments to reconcile net loss to net
cash provided by (used in) operating
activities-
Equity issued for services 9,354,545 716,897
Depreciation and amortization 1,571,092 37,470
Changes in operating assets and
liabilities 408,757 (533,755)
-------------- --------------
Net cash used in operating activities (5,203,819) (1,973,745)
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of fixed assets (8,154,382) (1,042,248)
Acquisition of subsidiaries, net of cash
acquired (1,237,026) -
-------------- --------------
Net cash used in investing activities (9,391,408)
(1,042,248)
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the issuance of common
stock, net of offering costs 572,000 2,095,618
Proceeds from the issuance of preferred
stock and warrants, net of offering costs 15,156,688 1,284,781
Proceeds from conversion of preferred stock
and warrants 622,170 -
Reimbursement of advances on unissued shares
Principal debt payments (29,568) (100,000)
-------------- --------------
Net cash (used in) provided by
financing activities 16,321,290 3,280,399
-------------- --------------
NET INCREASE IN CASH 1,726,063 264,406
CASH, beginning of period 512,925 628,110
-------------- --------------
CASH, end of period 2,238,988 892,516
============= ==============
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Cash paid for interest - 3,706
SUPPLEMENTAL DISCLOSURE OF NONCASH
INVESTING AND FINANCING ACTIVITIES:
Common stock issued for acquired assets 3,520,027 47,100
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated statements
<PAGE>
<PAGE>
SKYLYNX COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(UNAUDITED)
1. BASIS OF PRESENTATION AND REINCORPORATION:
Prior to June 30, 1999, the condensed consolidated financial statements
were presented in accordance with Statement of Financial Accounting Standards
No. 7, "Accounting and Reporting by Development Stage Enterprises."
On August 23, 1999, the Company reincorporated from Colorado to Delaware.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The accompanying unaudited condensed consolidated financial statements
have been prepared pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and note disclosures, normally
included in annual financial statements prepared in accordance with generally
accepted accounting principles, have been omitted pursuant to those rules and
regulations. In the opinion of SkyLynx Communications, Inc. and subsidiaries'
(collectively, the Company) management, these unaudited condensed consolidated
financial statements contain all adjustments that are necessary to present
fairly the financial position as of September 30, 1999, and the results of
operations for the three- and nine-month periods ended September 30, 1999 and
1998. All such adjustments are of a normal, recurring nature.
Certain prior-year amounts have been reclassified to conform to the
current-year presentation.
It is suggested that these condensed consolidated financial statements be
read in conjunction with the financial statements and the notes thereto
included in the Company's latest shareholders' annual report (Form 10-KSB).
3. LIQUIDITY:
The Company incurred operating losses for the three- and nine-month
periods ended September 30, 1999 and 1998. Management plans to obtain future
funding from outside investors and financial institutions. Management
believes that this funding will allow the Company to increase its expansion
efforts, which in turn should generate increased revenues and enable the
Company to continue to meet its obligations. The Company has been advised by
its independent certified public accountants that if this contingency has not
been resolved prior to the completion of their audit of the Company's
financial statements for the year ending December 31, 1999, their auditors'
report on those financial statements may be modified for that contingency.
4. PURCHASE OF ASSETS:
On February 2, 1999, the Company purchased certain assets of Interaccess
Corporation (Interaccess). The assets purchased included property and
equipment, a covenant not-to-compete and a customer list. This acquisition
was accounted for as a purchase and has been reflected in the Company's
condensed consolidated financial statements from the date of acquisition. The
consideration paid in this transaction was $195,385 in cash and 25,607 shares
of common stock with a fair value of $195,385. Intangible assets resulting
from the asset purchase are stated net of accumulated amortization and
amortization is provided using the straight-line method over two years.
On March 23, 1999, the Company purchased certain assets of Continet.
The assets purchased included accounts receivable, inventory, property and
equipment, goodwill and a covenant not- to-compete. Liabilities assumed were
accounts payable and deferred income. This acquisition was accounted for as a
purchase and has been reflected in the Company's condensed consolidated
financial statements from the date of acquisition. The consideration paid in
this transaction was $343,379 in cash, a promissory note in the amount of
$50,000, and 19,110 shares of common stock with a fair value of $104,162.
Intangible assets resulting from the asset purchase are stated net of
accumulated amortization and amortization is provided using the straight-line
method over three years.
On April 28, 1999, the Company acquired substantially all of the assets
of Simply Internet, Inc., an Internet service provider. The acquisition was
accounted for as a purchase and has been reflected in the Company's condensed
consolidated financial statements from the date of acquisition. The purchase
price for this acquisition was approximately $2,123,775 in cash. Intangible
assets resulting from the asset purchase are stated net of accumulated
amortization and amortization is provided using the straight-line method over
three years.
On April 29, 1999, the Company acquired substantially all of the assets
of Net Asset, LLC, an Internet service provider. The acquisition was
accounted for as a purchase and has been reflected in the Company's condensed
consolidated financial statements from the date of acquisition. The purchase
price for this acquisition was approximately $1,175,000 in cash. Intangible
assets resulting from the asset purchase are stated net of accumulated
amortization and amortization is provided using the straight-line method over
three years.
On May 7, 1999, the Company acquired substantially all of the assets of
SeaTac.Net, Inc., an Internet service provider. The acquisition was accounted
for as a purchase and has been reflected in the Company's condensed
consolidated financial statements from the date of acquisition. The aggregate
purchase price for this acquisition was approximately $400,000, consisting of
$200,000 in cash and 19,865 shares of the Company's common stock. Intangible
assets resulting from the asset purchase are stated net of accumulated
amortization and amortization is provided using the straight-line method over
three years.
On July 16, 1999, the Company completed the acquisition of substantially
all of the assets of Network Training and Consulting d/b/a ISAT Network, an
Internet service provider. This acquisition was accounted for as a purchase
and has been reflected in the Company's condensed consolidated financial
statements from the date of acquisition. The aggregate purchase price for
this acquisition was approximately $900,000, consisting of $450,000 in cash
and 56,250 shares of the Company's common stock. Intangible assets resulting
from the asset purchase are stated net of accumulated amortization, and
amortization is provided using the straight-line method over three years.
On July 27, 1999, the Company acquired all of the capital stock of CalWeb
Internet Services, Inc. (CalWeb), an Internet service provider. This
acquisition was accounted for as a purchase and has been reflected in the
Company's condensed consolidated financial statements from the date of
acquisition. The aggregate purchase price for this acquisition was
approximately $4.3 million, consisting of approximately $2.6 million in cash
and 255,639 shares of the Company's common stock. Intangible assets resulting
from the asset purchase are stated net of accumulated amortization, and
amortization is provided using the straight-line method over three years.
On July 29, 1999, the Company acquired substantially all of the assets of
InfiCad Computing and Design, LLC (InfiCad), an Internet service provider.
This acquisition was accounted for as a purchase and has been reflected in the
Company's condensed consolidated financial statements from the date of
acquisition. The purchase price for this acquisition was approximately $2.6
million, consisting of approximately $1.1 million in cash and approximately
216,620 shares of the Company's common stock. Intangible assets resulting
from the asset purchase are stated net of accumulated amortization and
amortization is provided using the straight-line method over three years.
5. CONTINGENCIES:
On June 3, 1999, the United States Bankruptcy Court for the Middle
District of Florida confirmed a Plan of Reorganization involving Paradise
Cable Corporation (Paradise Cable). The Plan of Reorganization provided that
upon successful assignment of the Basic Trading Area authorization and the
incumbent Federal Communications Commission (FCC) channel licenses, the
Company will purchase substantially all of the assets of Paradise Cable.
The consideration in this transaction will be 220,000 shares of the Company's
common stock and the assumption of approximately $891,000 of remaining debt
owed to the FCC by Paradise Cable. To date, 120,000 shares of the Company's
common stock have been issued to the disbursing agent appointed by the
creditors' committee.
On October 8, 1999 E. Paul Hansen, a creditor in the Chapter 11
proceeding of Cable Corporation of America filed a complaint in the United
States Bankruptcy Court, Middle District of Florida seeking to revoke the
Confirmation Order of the Court which was entered into on May 12, 1999. The
complaint alleges that SkyLynx Communications and two former officers, Gary
Brown and Kenneth Marshall, failed to disclose certain material facts during
the reorganization process. The complaint alleges that the failure to
disclose was an intentional omission that constituted fraud on the Court.
SkyLynx Communications, Inc. filed a Motion for Summary Judgment with the
Bankruptcy Court on October 15, 1999 asserting that there is no genuine issue
of material fact and that SkyLynx Communications is entitled to judgment as a
matter of law. The Company's position is that the subject matter of Hansen's
complaint is either immaterial, could not be disclosed because of timing or
was fully disclosed in public disclosure documents files with the Securities
and Exchange Commission and, therefore, did no need to be affirmatively
disclosed to the Court during the bankruptcy Confirmation proceeding.
The Motion was argued on November 9, 1999 and supplement affidavits were
filed on November 15, 1999. The Court's ruling is currently pending.
On July 29, 1999, the Company settled the outstanding litigation with
James Gordon. The settlement provided that James Gordon be transferred a
total of 135,000 shares valued at $936,563 of the Company's common stock, of
which 115,000 shares are to be provided by the Company and the remaining
20,000 shares have been provided by Gary Brown, the Company's former President
and Chairman.
6. PREFERRED STOCK:
Unit Offerings
Series A
In January 1999, the Company, through a private placement offering, sold
79,591 units to qualified investors for $4.00 per unit. Each unit consisted
of one share of Series A convertible preferred stock, one Class A warrant and
one Class B warrant.
The Company's Series A convertible preferred stock has a par value of
$0.01 per share and a dividend rate of 10 percent. Each share of preferred
stock is convertible into one share of the Company's $.001 par value common
stock at the option of the stockholder. The option may be exercised after one
year from the date of issue, upon effective registration of the underlying
common shares, or automatically upon the earlier of (1) the third anniversary
of the date of issue, or (2) once the Company's common stock publicly trades
above $6.00 per share for 10 consecutive trading days. The preferred stock
has a liquidation preference of $4.00 per share.
Each Class A warrant entitles the holder to purchase one share of common
stock at $7.50 per share beginning one year from the date of issuance or
beginning on the effective date of registration of the underlying common
shares, whichever comes first. Each Class B warrant entitles the holder to
purchase one share of common stock at $10.00 per share, beginning one year
from the date of issuance or beginning on the effective date of registration
of the underlying common shares, whichever comes first. Both the Class A and
Class B warrants expire three years from the date of issuance. The Company
may, under certain circumstances, redeem all of the outstanding Class A and
Class B warrants upon 30 days written notice at $.01 per warrant.
During the six-month period ended June 30, 1999, the Company offered to
all investors who purchased units in the 1998 Private Offering, the
opportunity to exercise all Class A warrants to purchase shares of the
Company's common stock at a reduced exercise price of $2.00 per share upon the
surrender to the Company for cancellation of all Class B warrants.
Series B
In January 1999, the Company completed the sale to one accredited
investor of 600 shares of Series B convertible preferred stock, 15,000 shares
of common stock and warrants exercisable to purchase, in the aggregate,
120,000 shares of common stock at an exercise price of $3.00 per share. The
aggregate purchase price for the securities was $600,000.
The Company's Series B convertible preferred stock has a par value of
$0.01 per share and a dividend rate of 8 percent. Each share of preferred
stock is convertible into shares of common stock at a rate of $3.00 per share
of common stock. Each Class A warrant entitles the holder to purchase one
share of common stock at $3.00 per share beginning on the date of issuance and
the warrants expire three years from the date of issuance. The preferred
stock has a liquidation preference of $1,000 per share.
Series C
During the six-month period ended June 30, 1999, the Company, through a
private placement offering, sold 721,419 units to qualified investors for
$4.00 per unit with total proceeds of $2,886,476. Each unit consisted of one
share of Series C convertible preferred stock.
The Company's Series C convertible preferred stock has a par value of
$0.01 per share and a dividend rate of 10 percent, which is cumulative and
payable in preferred stock. Series C investors are also entitled to
participate, on a pro rata basis, in any dividends paid on the outstanding
shares of common stock, after payment of dividends on the preferred stock.
Each share of preferred stock is convertible into one share of the Company's
common stock. The preferred stock may be converted, at the option of the
Series C investor, after one year from the date of issue or upon effective
registration of the underlying common shares, or it will automatically convert
on the third anniversary of the date of issue. The preferred stock has a
liquidation preference of $4.00 per share.
Series D
In May 1999, the Company, through a private placement offering, sold
10,000 units to qualified investors for $1,000 per unit for proceeds of
$10,000,000. Each unit consisted of one share of Series D convertible
preferred stock. Series D investors also received warrants to purchase an
aggregate of 305,880 shares of common stock at $8.17 per share.
The Company's Series D convertible preferred stock has a par value of
$0.01 per share and a dividend rate of 5 percent, which is cumulative and
payable in cash or preferred stock at the option of the Series D investor.
Each share of preferred stock is convertible into 333 shares of the Company's
common stock, subject to adjustments. The preferred stock may be converted at
the option of the Series D investor or it will automatically convert upon the
third anniversary of the date of issue. If, after April 16, 2000, the
Company's common stock is trading at less than $3.00 per share, the Company
may redeem the preferred stock at $1,200 per share plus any unpaid dividends.
The preferred stock has a liquidation preference of $1,000 per share.
Series E
In May 1999, the Company, through a private placement offering, sold
3,000 units to qualified investors for $1,000 per unit for proceeds of
$3,000,000. Each unit consisted of one share of Series E convertible
preferred stock. Series E investors also received warrants to purchase an
aggregate of 91,764 shares of common stock at $8.17 per share.
The Company's Series E convertible preferred stock has a par value of
$0.01 per share and a dividend rate of 5 percent per share, which is
cumulative and payable in cash or preferred stock at the option of the Series
E investor. Each share of preferred stock is convertible into 333 shares of
the Company's common stock, subject to adjustments. The preferred stock may
be converted at the option of the Series E investor or it will automatically
convert upon the third anniversary of the date of issue. If, after May 6,
2000, the Company's common stock is trading at less than $3.00 per share, the
Company may redeem the preferred stock at $1,200 per share plus any unpaid
dividends. The preferred stock has a liquidation preference of $1,000
per share.
As of September 30, 1999, the Company had accrued but unpaid dividends on
preferred stock of $470,023.
Beneficial Conversion Feature
Series A
The Company recorded a beneficial conversion feature of $337,488 related
to its Series A convertible preferred stock, which is being accreted over one
year.
Series B
The Company recorded a beneficial conversion feature of $201,120 related
to its Series B convertible preferred stock, which was fully accreted as of
June 30, 1999.
Series C
The Company recorded a beneficial conversion feature of $2,076,616
related to its Series C convertible preferred stock, which is being accreted
over one year.
Series D
The Company recorded a beneficial conversion feature of $8,208,294
related to its Series D convertible preferred stock, which was fully accreted
as of June 30, 1999. The total excess of fair value over the conversion price
at the date of grant was $24,849,998.
Series E
The Company recorded a beneficial conversion feature of $2,264,335
related to its Series E convertible preferred stock, which was fully accreted
as of June 30, 1999. The total excess of fair value over the conversion price
at the date of grant was $9,449,991.
7. LOSS PER SHARE:
As of September 30, 1999, there were 4,709,752 stock options, 1,110,860
shares of convertible preferred stock and 2,654,342 common stock purchase
warrants outstanding, and, as of September 30, 1998, there were 699,625 shares
of convertible preferred stock, which were not included in the calculation of
net loss per share-diluted because they were antidilutive.
8. PRO FORMA RESULTS OF OPERATIONS:
The following pro forma information for the nine-month periods ended
September 30, 1999 and 1998, include the results of the Company and
Interaccess Corporation, Simply Internet, Inc., Net Asset, LLC, CalWeb
Internet Services, Inc. and InfiCad Computing and Design, LLC as if the
acquisitions had occurred as of January 1, 1998. The pro forma condensed
consolidated statements of operations may not be comparable to, and may not be
indicative of, the Company's post-acquisition results of operations.
<TABLE>
<CAPTION>
Nine-month Period Ended
September 30,
--------------------------
1999 1998
------------- -----------
<S> <C> <C>
Revenue $ 5,243,635 $4,175,102
============= ===========
Net loss $(18,954,765) $(5,800,517)
============= ===========
Net loss applicable to common stockholders $(31,095,590) $(6,142,099)
============= ===========
Per share net loss applicable to common
stockholders-basic and diluted (2.82) (0.63)
============= ===========
Shares used in computing per share net
loss applicable to common stockholders-basic
and diluted 11,043,737 9,677,827
============= ===========
</TABLE>
<PAGE>
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Liquidity and Capital Resources
The Company funds its working capital requirements principally from the
proceeds of private equity financings and from internally generated funds from
its Internet Service Provider ("ISP") operations. During the nine month
period ended September 30, 1999, the Company raised $500,000 through a private
sale of common stock and approximately $16,800,000 through various private
sales of convertible preferred stock. The Company has used the proceeds of
these financings to fund the cash portion of its acquisitions to date, as well
as to fund it operating deficits to date.
Stockholders' equity at September 30, 1999, was $14,452,515. The Company
will require substantial additional capital for the acquisition of additional
ISP's as well as for the continued deployment of its current ISP networks.
Due to the difficulty in predicting the timing of future acquisitions, the
precise timing of the Company's future capital requirements cannot be
accurately predicted at this time. There can be no assurance that commitments
for additional financing can be obtained, or that such commitments can be
obtained on terms acceptable to the Company. Any additional equity financing
may be dilutive to the Company's existing shareholders, and debt financing, if
available, may involve pledging some or all of the Company's assets and may
contain restrictive covenants with respect to raising future capital and other
financial and operational matters. If the Company is unable to raise
additional capital as needed, it may be required to reduce the scope of its
operations and/or its acquisition plans, which would have a material adverse
impact upon the Company's business and financial condition and results of
operations.
Results of Operations
For the three and nine-month periods ended September 30, 1999, the
Company had revenues of $1,548,322 and $2,249,076, respectively. Revenues for
these periods consisted primarily of customer revenues received for Internet
access services and for related Internet services provided. The Company had
only minimal revenues from continuing operations for the three and nine-month
periods ended September 30, 1998.
For the three and nine-month periods ended September 30, 1999, the cost
of revenues was $381,168 and $812,214, respectively. Cost of revenues
consisted primarily of data transport and backhaul charges paid to various
providers in order to provide Internet services to customers. The Company had
no cost of revenues for the three and nine-month periods ended June 30, 1998.
Selling, general and administrative expenses for the three and nine-month
periods ended September 30, 1999, increased to $4,850,953 and $18,079,379,
respectively, from $1,285,650 and $2,210,503, respectively, for the three and
nine-month periods ended September 30, 1998. The increase was due primarily
to the Company's continued efforts to acquire ISPs in its targeted markets,
increased employee wages and other operating costs associated with the
acquired ISPs, increased operating costs associated with customer growth in
its existing operations, and non-cash compensation expense relating to the
vesting of options granted to certain directors and officers of the Company.
These activities resulted in a net loss for the three and nine-month periods
ended September 30, 1999, of $3,645,593 and $16,538,213, respectively.
<PAGE>
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
On June 3, 1999, the United States Bankruptcy Court for the Middle
District of Florida confirmed a Plan of Reorganization involving Paradise
Cable Corporation (Paradise Cable). The Plan of Reorganization provided that
upon successful assignment of the Basic Trading Area authorization and the
incumbent Federal Communications Commission (FCC) channel licenses, the
Company will purchase substantially all of the assets of Paradise Cable.
The consideration in this transaction will be 220,000 shares of the Company's
common stock and the assumption of approximately $891,000 of remaining debt
owed to the FCC by Paradise Cable. To date, 120,000 shares of the Company's
common stock have been issued to the disbursing agent appointed by the
creditors' committee.
On October 8, 1999 E. Paul Hansen, a creditor in the Chapter 11
proceeding of Cable Corporation of America filed a complaint in the United
States Bankruptcy Court, Middle District of Florida seeking to revoke the
Confirmation Order of the Court which was entered into on May 12, 1999. The
complaint alleges that SkyLynx Communications and two former officers, Gary
Brown and Kenneth Marshall, failed to disclose certain material facts during
the reorganization process. The complaint alleges that the failure to
disclose was an intentional omission that constituted fraud on the Court.
SkyLynx Communications, Inc. filed a Motion for Summary Judgment with the
Bankruptcy Court on October 15, 1999 asserting that there is no genuine issue
of material fact and that SkyLynx Communications is entitled to judgment as a
matter of law. The Company's position is that the subject matter of Hansen's
complaint is either immaterial, could not be disclosed because of timing or
was fully disclosed in public disclosure documents files with the Securities
and Exchange Commission and, therefore, did no need to be affirmatively
disclosed to the Court during the bankruptcy Confirmation proceeding.
The Motion was argued on November 9, 1999 and supplement affidavits were
filed on November 15, 1999. The Court's ruling is currently pending.
On July 29, 1999, the Company settled the outstanding litigation with
James Gordon. The settlement provided that James Gordon be transferred a
total of 135,000 shares valued at $936,563 of the Company's common stock, of
which 115,000 shares are to be provided by the Company and the remaining
20,000 shares have been provided by Gary Brown, the Company's former President
and Chairman.
Item 2. Changes in Securities
None.
Item 3. Default 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
Exhibits:
None.
Reports on Form 8-K:
None.
<PAGE>
<PAGE>
SIGNATURE
In accordance with the requirements of the Securities and Exchange Act,
the Registrant caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SKYLYNX COMMUNICATIONS, INC.
Dated: November 19, 1999 By: /s/ Jeffery A. Mathias
------------------------------
Jeffery A. Mathias, President
Dated: November 19, 1999 By: /s/ James Maurer
------------------------------
James Maurer, Chief Financial
Officers
