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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A-2
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 2, 1999
SKYLYNX COMMUNICATIONS, INC.
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(Exact name of registrant as specified in its charter)
COLORADO 0-24687 84-1360029
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(State or other (Commission file number) (Employer Identi-
incorporation) fication No.)
600 South Cherry Street, Suite 305, Denver, Colorado 80222
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 316-0400
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103 Sarasota Quay, Sarasota, Florida 34236
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(Former name or former address, if changed since last report)
ITEM 7: FINANCIAL STATEMENTS AND EXHIBITS
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(a) Financial Statements
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Pursuant to Item 7(a)(4), the Registrant files herewith the
following financial statements of the acquired business:
InterAccess Corporation Audited Financial Statements
Independent Auditor's Report
Balance sheet as of December 31, 1998
Statements of Operation and Accumulated Deficit for the year
ended December 31, 1998 and inception to December 31, 1997
Statements of Cash Flows for the years ended December 31, 1998
and December 31, 1997
Notes to Financial Statements
(b) Pro Forma Financial Information
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Pursuant to Item 7(b) and Item 7(a)(4), the Registrant files
herewith the following unaudited pro forma consolidated financial
information:
Pro Forma Consolidated Balance Sheet as of December 31, 1998
Pro Forma Consolidated Statements of Operations for the year
ended December 31, 1998
The unaudited Pro Forma Consolidated Sheet as of December 31, 1998 and
unaudited Pro Forma Consolidated Statements of Operations for the year
ended December 31, 1998 (collectively the Pro Forma Consolidated Financial
Statements) give effect to the acquisition by SkyLynx Communications of
certain assets of InterAccess Corporation. These transactions were
accounted for as a purchase in accordance with the provisions of Accounting
Principles Board Opinion Number 16.
The Pro Forma Consolidated Statements of Operations were prepared
assuming that the acquisition described above was consummated as of the
beginning of each period presented. The Pro Forma Consolidated Balance
Sheet includes the pro forma purchase accounting entries for the
acquisition and was prepared assuming that the transaction was consummated
as of January 1, 1998.
The unaudited Pro Forma Consolidated Financial Statements are based
upon historical consolidated and combined financial statements of the
Registrant and InterAccess Corporation.
The pro forma adjustments and the resulting Pro Forma Consolidated
Financial Statements have been prepared based upon available information
and certain assumptions and estimates deemed appropriate by the Registrant.
A final determination of required purchase accounting adjustments and the
allocation of the purchase price to the assets acquired based upon their
respective fair values has not yet been made for the acquisition.
The Pro Forma Consolidated Balance Sheet and the Pro Forma
Consolidated Statements of Operations are not necessarily indicative of the
results of operations that actually would have been achieved had the
acquisition been consummated as of the dates indicated, or that may be
achieved in the future. Furthermore, the Pro Forma Consolidated Financial
Statements do not reflect changes that may occur as the result of post-
combination activities and other matters.
The Pro Forma Consolidated Financial Statements and notes thereto
should be read in conjunction with the accompanying historical financial
statements and notes thereto of InterAccess Corporation and the audited
consolidated financial statements of the Registrant and subsidiaries
included in its Annual Report on Form 10-KSB for the year ended December
31, 1998.
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<PAGE> INTERACCESS CORP.
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Index to Financial Statements
Page
Independent auditors' report 2
Balance sheet, December 31, 1998 3
Statement of operations, year ended December 31, 1998 4
Statement of shareholder's deficit, January 1, 1998
through December 31, 1998 5
Statement of cash flows, year ended December 31, 1998 6
Summary of significant accounting policies 7
Notes to financial statements 9
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To the Board of Directors and Shareholders
Interaccess Corp.
INDEPENDENT AUDITORS' REPORT
We have audited the accompanying balance sheet of Interaccess Corp. as of
December 31, 1998, and the related statements of operations, shareholders'
equity and cash flows for the year then ended. These financial statements
are the responsibility of the Company's management. Our responsibility is
to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Interaccess Corp., as
of December 31, 1998, and the results of its operations and its cash flows
for the year then ended in conformity with generally accepted accounting
principles.
Cordovano and Harvey, P.C.
Denver, Colorado
April 16, 1999
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INTERACCESS CORP.
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Balance Sheet
December 31, 1998
ASSETS
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CURRENT ASSETS
Cash $ 344
Accounts receivable, net of allowance for
uncollectible accounts totaling $50,100 19,321
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TOTAL CURRENT ASSETS 19,665
PROPERTY AND EQUIPMENT, less accumulated depreciation
of $50,800 (Note C) 15,629
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$ 35,294
LIABILITIES AND SHAREHOLDER'S DEFICIT
CURRENT LIABILITIES
Accounts payable $ 10,547
Current maturities on advances payable,
related parties (Note B) 21,340
Accrued interest expense, related party
(Note B) 1,750
Unearned revenue 5,795
Other accrued expenses 2,506
TOTAL CURRENT LIABILITIES 41,938
SHAREHOLDERS' DEFICIT
Common stock, no par value; 7,500 shares authorized;
500 shares issued and outstanding 100
Retained deficit (6,744)
TOTAL SHAREHOLDER'S DEFICIT (6,644)
$35,294
See accompanying summary of significant accounting policies and
notes to the financial statements.
<PAGE> INTERACCESS CORP.
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Statement of Operations
For The Year Ended December 31, 1998
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REVENUES
Sales and $ 273,516
Less: discounts (11,225)
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NET REVENUES 262,291
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OPERATING COSTS AND EXPENSES
Cost of sales and services 139,773
Salaries and payroll taxes 69,847
Consulting fees 15,901
Rent, related party (Note B) 6,425
Professional fees 2,155
Telephone 3,318
Travel 686
Insurance 5,068
Office and supplies 4,068
Depreciation 18,486
Other 3,393
PROVISION FOR UNCOLLECTIBLE ACCOUNTS 50,100
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TOTAL OPERATING COSTS AND EXPENSES 319,220
LOSS FROM OPERATIONS (56,929)
NON-OPERATING (EXPENSE) INCOME
Interest expense (Note B) (1,813)
Interest income 41
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LOSS BEFORE INCOME TAXES (58,701)
INCOME TAXES (Note D) -
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NET LOSS $ (58,701)
Basic weighted average common shares outstanding 500
Basic loss per common share $ (117.40)
See accompanying summary of significant accounting policies and
notes to the financial statements.
<PAGE> INTERACCESS CORP.
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Statement of Shareholder's Deficit
January 1, 1998 through December 31, 1998
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Additional Total
Common Stock Paid-in Retained Shareholders'
Shares Par Value Capital Deficit Equity
Balance,
January 1,
1998 500 $ 100 $ - $ 51,957 $ 52,057
Net loss for
the year
ended
December 31,
1998 - - - - (58,701) (58,701)
BALANCE,
DECEMBER 31,
1998 500 $ 100 $ - $(6,744) $ (6,644)
See accompanying summary of significant accounting policies and notes to
the financial statements.
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INTERACCESS CORP.
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Statement of Cash Flows
For The Year Ended December 31, 1998
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OPERATING ACTIVITIES
Net loss $ (58,701)
Transactions not requiring cash:
Depreciation 18,486
Provision for uncollectible accounts 44,100
Changes in current assets and current liabilities:
Increase in receivables and other current assets (11,408)
Increase in accounts payable and other
current liabilities 22,017
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NET CASH PROVIDED BY OPERATING ACTIVITIES 14,494
INVESTING ACTIVITIES
Purchases of equipment (6,039)
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NET CASH (USED IN) INVESTING ACTIVITIES (6,039)
FINANCING ACTIVITIES
Principal debt payments (13,248)
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NET CASH (USED IN) FINANCING ACTIVITIES (13,248)
NET INCREASE IN CASH (4,793)
Cash, beginning of period 5,137
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CASH, END OF PERIOD $ 344
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
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Cash paid during the period for:
Interest $ -
Income taxes $ -
See accompanying summary of significant accounting policies and
notes to the financial statements.
<PAGE> INTERACCESS CORP.
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Summary of Significant Accounting Policies
December 31, 1998
Use of estimates
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The preparation of the financial statements in conformity with generally
accepted accounting principals requires management to make estimates and
assumptions that affect certain reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements, and the reported amounts of revenues and expenses
during the reporting period. Accordingly, actual results could differ from
those estimates.
Cash equivalents
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For the purpose of the statements of cash flows, the Company considers all
highly liquid debt instruments purchased with an original maturity of three
months or less to be cash equivalents.
Property, equipment and depreciation
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Property and equipment is stated at cost and depreciated using the
straight-line method over the estimated useful lives of the assets.
Maintenance and repair costs are charged to expense as incurred. Gains or
losses on disposition of property and equipment are reflected in income.
Revenues
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Revenues consist of monthly charged fees to members for Internet access,
Internet access consulting and for certain customers, hardware and other
computer equipment. Internet service revenues are recognized in the period
services are provided. Sales of products, such as computers and related
equipment are recognized when the products are delivered. From time to
time, Internet customers may prepay for Internet service. Deferred revenue
of $5,795 consists of payment received for services to be performed in
future periods.
Income Taxes
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Income taxes are provided for the tax effects of transactions reported in
the financial statements and consist of taxes currently due plus deferred
taxes related primarily to differences between the recorded book basis and
tax basis of assets and liabilities for financial and income tax reporting.
The deferred tax assets and liabilities represent the future tax return
consequences of those differences, which will either be taxable or
deductible when the assets and liabilities are recovered or settled.
Deferred taxes are also recognized for operating losses that are available
to offset future taxable income and tax credits that are available to
offset future federal income taxes.
Fair value of financial instruments
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The Company has determined, based on available market information and
appropriate valuation methodologies, that the fair value of its financial
instruments approximates carrying value. The carrying amounts of cash,
receivables, payables and other current liabilities approximate fair value
due to the short-term maturity of the instruments.
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INTERACCESS CORP.
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Summary of Significant Accounting Policies
December 31, 1998
Earnings per common share
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Effective December 31, 1997, SFAS 128 "Earnings per Share" requires a dual
presentation of earnings per share-basic and diluted. Basic earnings per
common share has been computed based on the weighted average number of
common shares outstanding. Diluted earnings per share reflects the
increase in weighted average common shares outstanding that would result
from the assumed exercise of outstanding stock options. However, the
Company has a simple capital structure for the period presented and,
therefore, there is no variance between the basic and diluted earnings per
share.
Recently issued accounting pronouncements
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The Company has adopted the following new accounting pronouncements for the
year ended December 31, 1998. There was no effect on the financial
statements presented from the adoption of the new pronouncements. SFAS No.
130, "Reporting Comprehensive Income," requires the reporting and display
of total comprehensive income and its components in a full set of general-
purpose financial statements. SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information," is based on the "management"
approach for reporting segments. The management approach designates the
internal organization that is used by management for making operating
decisions and assessing performance as the source of the Company"s
reportable segments. SFAS No. 131 also requires disclosure about the
Company's products, the geographic areas in which it earns revenue and
holds long-lived assets, and its major customers. SFAS No. 132, "Employers'
Disclosures about Pensions and Other Post-retirement Benefits," which
requires additional disclosures about pension and other post-retirement
benefit plans, but does not change the measurement or recognition of those
plans.
INTERACCESS CORP.
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Notes to Financial Statements
December 31, 1998
Note A: Nature of Organization
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Interaccess Corp. (the "Company") was incorporated in Florida on March
29, 1995. The Company is an Internet service provider that was formed
to help members derive meaningful benefits from the extensive resources
of the Internet.
Note B: Related party transactions
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During the year ended December 31, 1998, the Company paid an affiliate
$550 per month for office space on a month-to-month basis. Rent
expense for the year ended December 31, 1998 totaled $6,425. The affiliate
also charged the Company $2,973 for services provided during the year
ended December 31, 1998. The $2,973 is included in indebtedness to
related parties in the accompanying financial statements.
At January 1, 1998, the Company owed an officer $31,615 for working
capital advances. The advances bear interest at seven percent and are
due on demand. The Company repaid $13,248 during the year ended
December 31, 1998. The remaining balance of $18,367 at December 31,
1998 is included in indebtedness to related parties in the accompanying
balance sheet. Accrued interest on the advances totaled $1,750 at
December 31, 1998 and is included as accrued interest expense, related
party in the accompanying financial statements.
Note C: Property and equipment
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Property and equipment consisted of the following at December 31, 1998:
Furniture 401
Computer hardware 62,640
Computer software 3,388
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66,429
Less accumulated depreciation (50,800)
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$15,629
INTERACCESS CORP.
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Notes to Financial Statements
December 31, 1998
Note D: Income taxes
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A reconciliation of the U.S. statutory federal income tax rate to the
effective rate follows for the year ended December 31, 1998:
U.S. statutory federal rate 16.48%
State income tax rate, net of federal
benefit 0.00%
Net operating loss for which no tax
benefit is currently available -16.48%
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0.00%
Deferred taxes consisted of the following at December 31, 1998:
Deferred tax asset, net operating loss
carryforward $ 9,675
Valuation allowance ( 9,675)
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Net deferred taxes $ -
The valuation allowance offsets the deferred tax assets for which there
is no assurance of recovery. The change in the valuation allowance for
the year ended December 31, 1998 totaled $9,675. The net operating loss
carryforward expires through the year 2018.
The valuation allowance will be evaluated at the end of each year,
considering positive and negative evidence about whether the deferred tax
asset will be realized. At that time, the allowance will either be
increased or reduced; reduction could result in the complete elimination
of the allowance if positive evidence indicates that the value of the
deferred tax assets is no longer impaired and the allowance is no longer
required.
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INTERACCESS CORP.
Notes to Financial Statements
December 31, 1998
Note E: Year 2000 compliance
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The Year 2000 issue (Y2K) is the result of computer programs written
using two digits rather than four to define the applicable year. Any of
the Company's computer and telecommunications programs that have date
sensitive software may recognize a date using "00" as the year 1900
instead of 2000. This could result in system failure or miscalculations
causing disruptions in operations, including the ability to process
transactions, send invoices, or engage in similar normal business
activities.
The Company cannot determine the extent to which the Company is
vulnerable to third parties' failure to remediate their own Y2K problems.
As a result, there can be no guarantee that the systems of other
companies on which the Company's business relies will be timely
converted, or that failure to convert by another company, or a conversion
that is incompatible with the Company's systems, would have a material
adverse affect on the Company. In view of the foregoing, there can be no
assurance that the Y2K issue will not have a material adverse effect on
the Company's business.
Note F: Subsequent event
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Asset Purchase Agreement
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Effective February 2, 1999, the Company consummated an Asset Purchase
Agreement pursuant to which substantially all of its assets were sold to
SkyLynx Communications, Inc. ("SkyLynx"), an Internet service provider
operating in Florida, California and Oregon and serving approximately
1,400 customers. The purchase price of this acquisition was $390,770,
consisting of $195,385 in cash and 25,607 shares of SkyLynx common stock.
Unaudited Pro Forma Condensed, Combined Financial Information
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The following unaudited pro forma condensed, combined balance sheet and
pro forma condensed, combined statement of operations gives effect to the
acquisition of the Company by SkyLynx as of and for the year ended
December 31, 1998. The unaudited condensed, combined statement of
operations is presented as if the acquisition had occurred on January 1,
1998.
The unaudited pro forma condensed, combined financial information should
be read in conjunction with the separate audited financial statements and
notes thereto of each of the companies included in the pro forma as of
and for the year ended December 31, 1998.
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INTERACCESS CORP.
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Notes to Financial Statements
December 31, 1998
Note F: Subsequent event, continued
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Unaudited Pro Forma Condensed, Combined Financial Information, continued
------------------------------------------------------------------------
These unaudited pro forma condensed, combined statements are not
necessarily indicative of results of operations had the acquisition
occurred at January 1, 1998, nor of the results to be expected in the
future.
The following footnotes should be read in understanding pro forma
adjustments to the unaudited pro forma condensed, consolidated
statements.
(a) Adjustment to reflect the $390,770 asset purchase by SkyLynx;
$170,385 allocated to the customer list, $25,000 allocated to
property and equipment, and $195,385 allocated to the covenant
not to compete. SkyLynx paid $195,385 in cash for the customer
list and property and equipment. SkyLynx issued 25,607 common
shares valued at market of approximately $7.63 per share as of
the date of closing, in exchange for a covenant not to compete
from the principals of Interaccess.
(b) Adjustment to recognize depreciation on the property and
amortization expense on the customer list and covenant not to
compete agreement. The property was depreciated over three years
($8,333), the customer list was amortized over 3 years ($56,795),
and the covenant not to compete was amortized over 18 months
($130,257).
(c) Adjustment to revise the weighted average common shares
outstanding and basic loss per share for the 25,607 common shares
issued in the asset purchase agreement.
(d) Reflects balances at December 31, 1998 of the Company that were
not acquired by SkyLynx. Equity ($100), retained earnings
($51,957) and current liabilities ($36,143).
The unaudited pro forma condensed, combined financial statements do not
show a pro forma benefit for income taxes. The benefit from net
operating losses has been offset by the establishing of a valuation
allowance equal to the deferred tax asset derived from net operating
losses. The valuation allowance offsets the net deferred tax asset for
which there is no assurance of recovery.
INTERACCESS CORP.
Notes to Financial Statements
December 31, 1998
Note F: Subsequent event
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Unaudited Pro Forma Condensed, Combined Financial Information, continued
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PRO FORMA CONDENSED, COMBINED BALANCE SHEET
DECEMBER 31, 1998
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SkyLynx (d)
Interaccess Communications, Pro Forma Pro Forma Pro
Forma
Corp. Inc. Adjustments Adjustments
Combined
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Cash $ 344 $ 512,925 $ (344) $ (195,385)
(a)$ 317,540
Current assets 19,665 533,060 (344) (195,385) (a)
356,996
Total assets 35,294 2,407,603 (344) -
2,442,553
Current
liabilities 41,938 1,134,474 (36,143) -
1,140,269
Total
liabilities 41,938 1,134,474 (36,143) -
1,140,269
Retained equity
(deficit) (6,744) (5,553,586) (51,957) -
(5,612,287)
Total share-
holders'
equity. (6,644) 1,273,129 (50,244) 195,385
(a)1,411,626
PRO FORMA CONDENSED, COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
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SkyLynx (d)
Interaccess Communications, Pro Forma Pro Forma Pro
Forma
Corp. Inc. Adjustments Adjustments
Combined
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-
Revenues $ 262,291 $ 7,898 $ - $
270,189
Operating
costs and
expenses 319,220 5,300,834 195,385 (b)
5,8
15,
439
Loss from
operations (56,929) (5,292,936) (195,385)
(b)(5,545,250)
Interest and
other expenses (1,772) 18,104 1,813 18,145
41
Net loss (58,701) (5,274,832) (193,572)
(b)(5,527,105)
Weighted average
common shares
outstanding 500 8,946,874 25,107 (c)
8,972,481
Basic loss per
share $(117.40) $ (0.60) $ 117.38 (c)
.62<PAGE>
SIGNATURE
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 hereunto duly authorized.
SKYLYNX COMMUNICATIONS, INC. COMMUNICATIONS ,
Dated: April 19, 1999 By: /s/ Jeffery A. Mathias
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Jeffery A. Mathias, President
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