<PAGE>
Prospectus Supplement No. 1
Dated August 23, 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.
Settlement of Gordon Litigation.
We and Gary Brown, our former President and Chief Executive Officer, have
entered into a settlement agreement with James F. Gordon with respect to Mr.
Gordon's claims against us and Mr. Brown made in James Gordon v. Gary Brown
and SkyLynx Communications, Inc. (Circuit Court for the Twelfth Judiciary
Circuit in and for Sarasota County, Florida, Case No. 98-6394-CC). The
settlement agreement provides that, in consideration for shares of the common
stock of Teleservices International Group, Inc. Mr. Gordon previously
delivered to us, we will issue Mr. Gordon an aggregate of 115,000 shares of
our common stock, and Mr. Brown will transfer to Mr. Gordon an aggregate of
20,000 shares of our common stock Mr. Brown currently holds. The agreement
additionally provides that the shares we issue to Mr. Gordon under the
agreement will be deemed to have been paid for by Mr. Gordon as of September
7, 1998, the date he delivered the Teleservices shares to us. Under the
agreement, the parties agreed to mutually release each other from all previous
claims and causes of action, and to dismiss the claims and counterclaims
previously filed against each other.
The date of this Prospectus Supplement No. 1 is August 23, 1999.
SECOND QUARTER 1999 RESULTS
A copy of our Quarterly Report on Form 10-QSB for the fiscal quarter
ended June 30, 1999, is attached hereto.
<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 June 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
of 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 July 19, 1999, the Company had 11,194,281 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 June 30, 1999 2
Condensed Consolidated Statements of Operations for the
three month and six month periods ended June 30, 1999
and June 30, 1998 3
Condensed Consolidated Statements of Cash Flows for the
six month periods ended June 30, 1999 and June 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>
SKYLYNX COMMUNICATIONS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheet
June 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
ASSETS
<S> <C>
CURRENT ASSETS:
Cash $ 8,853,806
Accounts receivable, net allowance for doubtful accounts
of $121,902 396,508
Prepaid expenses and other current assets 50,689
Deposits on unissued shares of common stock and preferred
stock 91,907
------------
Total current assets 9,392,910
PROPERTY AND EQUIPMENT, net 2,318,884
GOODWILL AND INTANGIBLE ASSETS, net of accumulated
amortization of $358,545 4,438,939
------------
Total assets $16,150,733
============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $ 1,248,084
Deferred revenue 292,528
Current maturities of capital lease obligations 97,375
Current maturities of note payable 25,000
------------
Total current liabilities 1,662,987
NOTE PAYABLE, net of current maturities 20,432
CAPITAL LEASE OBLIGATIONS, net of current maturities 45,311
COMMITMENTS AND CONTINGENCIES (Note 5)
STOCKHOLDERS' EQUITY:
Common stock 11,102
Preferred stock 14,396,916
Additional paid-in capital 30,530,470
Accumulated deficit (30,516,485)
------------
Total stockholders' equity 14,422,003
------------
Total liabilities and stockholders' equity $16,150,733
============
</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 Six-month Periods Ended
June 30, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
Three-month Period Six-month Period
Ended June 30, Ended June 30,
-------------------------------------------------
1999 1998 1999 1998
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
REVENUES $ 632,866 $ - $ 700,754 $ -
----------- ----------- ------------ ------------
COSTS AND EXPENSES:
Cost of revenues 400,798 - 431,046 -
Selling, general and
administrative 9,898,068 506,183 13,228,426 841,520
----------- ----------- ------------ ------------
Total costs and
expenses 10,298,866 506,183 13,659,472 841,520
----------- ----------- ------------ ------------
OTHER INCOME (EXPENSE):
Interest 67,478 5,777 70,373 8,209
Other (4,275) (9,872) (4,275) -
----------- ----------- ------------ ------------
Total other income
(expense) 63,203 (4,095) 66,098 8,209
----------- ----------- ------------ ------------
Net loss (9,602,797) (510,278) (12,892,620) (833,310)
----------- ----------- ------------ ------------
PREFERRED STOCK
DIVIDENDS 363,353 2,073 602,995 2,073
ACCRETION OF BENEFICIAL
CONVERSION FEATURE OF
PREFERRED STOCK 11,284,096 - 11,422,538 -
----------- ----------- ------------ ------------
NET LOSS APPLICABLE TO
COMMON STOCK-
HOLDERS $(21,250,246) $ (512,351) $(24,918,153) $ (835,383)
=========== =========== ============ ============
PER SHARE NET LOSS
APPLICABLE TO COMMON
STOCKHOLDERS
BASIC AND DILUTED $ (1.90) $ (0.06) $ (2.28) $ (0.10)
SHARES USED IN COMPUTING
PER SHARE NET LOSS
APPLICABLE TO COMMON
STOCKHOLDERS
BASIC AND DILUTED 11,201,882 8,902,988 10,915,340 8,786,277
</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 Six-month Periods Ended
June 30, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
Six-month Period Ended June 30,
------------------------------
1999 1998
------------- ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(12,892,620) $ (833,310)
Adjustments to reconcile net loss to
net cash provided
by (used in) operating activities:
Common stock issued for services 1,971,209 -
Common stock options issued for
services 7,153,336 -
Depreciation and amortization 611,966 41,897
Changes in operating assets and
liabilities 258,121 (308,999)
Net cash used in operating
activities (2,897,988) (1,177,847)
------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of fixed assets (342,226) (603,682)
Acquisition of subsidiaries, net of
cash acquired (4,072,174) -
------------- ------------
Net cash used in investing activities (4,414,400) (603,682)
------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the issuance of common
stock, net of offering costs 200,000 -
Proceeds from the issuance of preferred
stock and warrants, net of offering
costs 14,924,143 2,686,615
Proceeds from conversion of preferred
stock and warrants 506,232 -
Proceeds from exercise of common stock
options 103,960 -
Reimbursement of advances on unissued
shares (50,000) -
Principal debt payments (4,568) (100,000)
Payments of capital lease obligations (26,498) -
------------- ------------
Net cash (used in) provided by
financing activities (15,653,269) 2,586,615
------------- ------------
NET INCREASE IN CASH 8,340,881 805,085
CASH, beginning of period 512,925 628,110
------------- ------------
CASH, end of period $ 8,853,806 $ 1,433,196
============ =============
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Cash paid for interest $ 2,003 $ -
SUPPLEMENTAL DISCLOSURE OF NONCASH
INVESTING AND FINANCING ACTIVITIES:
Common stock issued for acquired assets $ 499,547 $ -
</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
June 30, 1999
(Unaudited)
1. BASIS OF PRESENTATION:
Prior to the three-month period ended 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."
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 June 30, 1999, and the results of
operations for the three- and six-month periods ended June 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 six-month
periods ended June 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 $2,123,775 in cash. Goodwill and 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. The purchase allocation is preliminary and adjustments may be
necessary as more information becomes available and existing contingencies are
resolved over a period not to exceed one year from the date of acquisition.
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 $1,175,000 in cash. Goodwill and 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. The purchase allocation is preliminary and adjustments may be
necessary as more information becomes available and existing contingencies are
resolved over a period not to exceed one year from the date of acquisition.
On May 7, 1999, the Company acquired substantially all of the assets of
SeaTac.Net, Inc., an Internet service provider. The aggregate purchase price
for this acquisition was $400,000, consisting of $200,000 in cash and 19,865
shares of the Company's common stock. Goodwill and 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.
The purchase allocation is preliminary and adjustments may be necessary as
more information becomes available and existing contingencies are resolved
over a period not to exceed one year from the date of acquisition.
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 $923,000 of remaining debt
owed to the FCC by Paradise Cable. In accordance with the Plan of
Reorganization, 120,000 shares of the Company's common stock have been placed
in escrow until the contingency has been resolved.
6. COMMON STOCK:
On January 1, 1999, the Board of Directors (the Board) issued 450,000
shares of common stock as signing bonuses for three employees and 125,000
shares of common stock in exchange for services. The shares were issued
without registration under the federal securities laws in reliance upon an
exemption from registration requirements contained in the Securities Act of
1933, as amended.
On January 7, 1999, the Board issued 121,355 shares of common stock in
exchange for services. The shares were issued without registration under the
federal securities laws in reliance upon an exemption from registration
requirements contained in the Securities Act of 1933, as amended.
On January 21, 1999, the Board issued 3,919 shares of common stock in
exchange for services. The shares were issued without registration under the
federal securities laws in reliance upon an exemption from registration
requirements contained in the Securities Act of 1933, as amended.
On January 31, 1999, the Company issued and sold 263,158 units to one
investor at a price of $1.90 per unit, for aggregate consideration of
$500,000. Each unit sold in this offering consisted of one share of the
Company's common stock, one warrant exercisable for three years to purchase
one additional share of common stock at a price of $6.00 per share, and one
warrant exercisable for three years to purchase an additional share of common
stock at an exercise price of $8.00 per share.
7. 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 all Class B warrants. As of June
30, 1999, 263,150 shares of common stock were issued for total consideration
of $526,300.
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. 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 $1,000.00 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 on 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 June 30, 1999, the Company had accrued but unpaid dividends on
preferred stock of $513,606.
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.
8. LOSS PER SHARE:
As of June 30, 1999, there were 4,322,252 stock options, 1,540,410 of
convertible preferred stock and 2,654,342 common stock purchase warrants
outstanding, and as of June 30, 1998, there were 698,500 shares of convertible
preferred stock, respectively, which were not included in the calculation of
net loss per share-diluted because they were antidilutive.
9. PRO FORMA RESULTS OF OPERATIONS:
The following pro forma information for the six-month period ended June
30, 1999 and 1998, include the results of the Company and Interaccess
Corporation, Simply Internet, Inc., Net Asset, LLC and CalWeb Internet
Services, Inc., 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>
Six-month Period Ended
------------------------------
1999 1998
-------------- --------------
<S> <C> <C>
Revenue $ 2,176,876 $ 1,863,839
============== ==============
Net loss $(10,842,219) $ (2,169,167)
============== ==============
Net loss applicable to common
stockholders $(11,275,171) $ (2,572,119)
============== ==============
Per share net loss per share
applicable common stockholders
basic and diluted $ 1.03 $ .29
============== ==============
Shares used in computing per
share net loss applicable to
common stockholders basic
and diluted 10,942,756 8,952,171
============== ==============
</TABLE>
10. SUBSEQUENT EVENTS:
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. 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.
On July 27, 1999, the Company acquired all of the capital stock of CalWeb
Internet Services, Inc., an Internet service provider. 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.
On July 27, 1999, the Company acquired substantially all of the assets of
Inficad Computing and Design, LLC, an Internet service provider. The
aggregate 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.
Subsequent to June 30, 1999, the Company settled the outstanding
litigation with James Gordon.
<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. In April 1999, the Company
completed an offering of an additional 513,669 shares of Series C convertible
preferred stock at a private offering price of $4.00 per share. The aggregate
purchase price for the foregoing securities was $2,054,676.
In May 1999, the Company completed a private offering of 10,000 shares of
Series D convertible preferred stock at a private offering price of $1,000 per
share. Each share of Series D convertible preferred stock is convertible into
shares of common stock at a rate of $3.00 per share of common stock. Series D
investors also received 405,880 warrants exercisable for one year to purchase
405,880 shares of common stock at an exercise price of $8.17 per share. The
aggregate gross proceeds for the foregoing securities were $10,000,000.
In May 1999, the Company completed a private offering of 3,000 shares of
Series E convertible preferred stock at a private offering price of $1,000 per
share. Each share of Series E convertible preferred stock is convertible into
shares of common stock at a rate of $3.00 per share of common stock. Series E
investors also received 91,764 warrants exercisable for one year to purchase
91,764 shares of common stock at an exercise price of $8.17 per share. The
aggregate gross proceeds for the foregoing securities were $3,000,000.
Stockholders' equity at June 30, 1999, was $14,422,003. The Company will
require substantial additional capital for the acquisition of additional ISPs
as well as for the continued deployment of its current ISP networks. The
precise timing of the Company's future capital requirements cannot be
accurately predicted at this time. The Company will require additional
financing through the sale of equity or debt securities in the future. The
Company currently has no commitments for any additional financing and there
can be no assurance that such commitments can be obtained, and, if so, on
terms acceptable to the Company. Any additional equity financing may be
dilutive to the Company's existing stockholders, 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 obtain
additional capital as needed, the Company may be required to reduce the scope
of its operations, which would have a material adverse impact upon the
Company's business financial condition and results of operations.
Results of Operations
Prior to the three-month period ended June 30, 1999, the Company
presented its consolidated financial statements in accordance with accounting
and reporting standards for development stage enterprises.
For the three and six-month periods ended June 30, 1999, the Company had
revenues of $632,866 and $700,754, respectively. Revenues for these periods
consisted primarily of subscriber revenues received for Internet access
services provided. The Company had no revenues from continuing operations for
the three and six-month periods ended June 30, 1999.
For the three and six-month periods ended June 30, 1999, the cost of
revenues was $400,798 and $431,046, respectively. Cost of revenues consisted
primarily of data transport and backhaul charges paid to various providers in
order to provide Internet access to subscribers. The Company had no cost of
revenues for the three and six-month periods ended June 30, 1999.
Selling, general and administrative expenses for the three and six-month
periods ended June 30, 1999, increased to $9,898,068 and $13,228,426,
respectively, from $506,183 and $841,520, respectively, for the three and six-
month periods ended June 30, 1998. The increase was due to the Company's
continued efforts to acquire ISPs in selected markets, increased employee
wages and other operating costs associated with the acquired ISPs and non-cash
compensation expense related 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 six-month periods ended June 30, 1999 of $9,602,797 and
$12,892,620, respectively.
Subsequent Events
Effective July 16, 1999, the Company consummated an Asset Purchase
Agreement pursuant to which it acquired substantially all of the assets of
Network Training and Consulting d/b/a ISAT Network, an ISP operating in the
Las Vegas, Nevada area serving approximately 3,100 customers. The purchase
price for this acquisition was approximately $900,000 in cash and stock.
Effective July 27, 1999, the Company consummated a Stock Purchase
Agreement pursuant to which it acquired all of the capital stock of CalWeb
Internet Services, Inc., an ISP operating in the Sacramento, California area
serving approximately 7,800 customers. The purchase price for this
acquisition was approximately $4.3 million in cash and stock.
Effective July 27, 1999, the Company consummated an Asset Purchase
Agreement pursuant to which it acquired substantially all of the assets of
Inficad Computing and Design, LLC an ISP operating in the Phoenix, Arizona
area serving approximately 9,100 customers. The purchase price for this
acquisition was approximately $2.6 million in cash and stock.
Subsequent to June 30, 1999, the Company settled the outstanding
litigation with James Gordon.
<PAGE>
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Subsequent to June 30, 1999, the Company settled the outstanding
litigation with James Gordon.
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: August 23, 1999 By: /s/ Jeffery A. Mathias
--------------- ---------------------------------
Jeffery A. Mathias, President
Dated: August 23, 1999 By: /s/ James Maurer
--------------- ---------------------------------
James Maurer, Chief Financial
Officer
