<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 for the quarterly period ended March 31, 2000.
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 for the transition period from _______ to _________.
Commission File No. 33-55254-39
SKYNET TELEMATICS.COM, INC.
(Exact name of Small Business Issuer as specified in its charter)
NEVADA 87-0485315
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Link House, 259 City Road
London, England EC1V 1JE
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(Address of principal executive offices)
Issuer's telephone number, including area code: 44 207 490 7900
Check whether the issuer: (1) has 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 registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
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The number of shares outstanding of the issuer's common stock, $.001 par value
per share, as of May 17, 2000, was 26,986,076 shares.
Transitional Small Business Disclosure Format (check one): Yes No X
--- ---
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SKYNET TELEMATICS.COM, INC.
FORM 10-QSB FOR QUARTER ENDED
MARCH 31, 2000
INDEX
PART I - FINANCIAL INFORMATION Page
Item 1 Financial Statements
Balance Sheet as of March 31, 2000 3
Statement of Operations for the three month ended
March 31, 2000 and 1999 4
Statement of Cash Flows for the three month ended
March 31, 2000 and 1999 5
Notes to Financial Statements 6
Item 2 Management's Discussion and Analysis 7
PART II - OTHER INFORMATION
Item 1 Legal Proceedings 12
Item 2 Changes in Securities 12
Item 3 Defaults Upon Senior Securities 12
Item 4 Submission of Matters to a Vote of Security Holders 12
Item 5 Other Information 12
Item 6 Exhibits and Reports on Form 8-K 12
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
SKYNET TELEMATICS.COM, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
MARCH 31, 2000
<TABLE>
<CAPTION>
<S> <C>
ASSETS
CURRENT ASSETS
Cash in bank $ 680,978
Accounts receivable 140,730
Inventory 503,451
Prepaid expenses 718,253
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TOTAL CURRENT ASSETS 2,043,412
Furniture and equipment 522,318
Software and intellectual property rights 4,809,903
Deferred expenses 98,888
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TOTAL ASSETS $7,474,521
==========
LIABILITIES & SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Bank overdraft $ 81,319
Accounts payable and accrued expenses 1,166,295
Capitalized lease obligations 110,139
Note payable 32,292
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TOTAL CURRENT LIABILITIES 1,390,045
Loan payables 357,790
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TOTAL LIABILITIES 1,747,835
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STOCKHOLDERS' EQUITY
Preferred stock - $.001 par value; authorized: 20,000,000 shares;
issued and outstanding: none
Common stock - $.001 par value; authorized: 75,000,000 shares;
issued and outstanding: 26,944,676 shares 26,945
Additional paid-in capital 14,198,217
Deficit ( 8,593,211)
Accumulated other comprehensive income 94,735
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TOTAL STOCKHOLDERS' EQUITY 5,726,686
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TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 7,474,521
===========
</TABLE>
See notes to consolidated financial statements
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SKYNET TELEMATICS.COM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
AND COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
For the three months
ended March 31,
2000 1999
------------ -------------
<S> <C> <C>
Sales $ 280,562 $ 13,050
Cost of sales ( 473,365) ( 96,856)
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GROSS LOSS ( 192,803) ( 83,806)
Depreciation and amortization ( 469,774) ( 194,602)
Research and development ( 73,263) ( 8,693)
General and administrative expenses ( 643,521) ( 379,321)
Interest expense - net ( 11,951) ( 22,415)
Settlement of liabilities ( 93,635)
-------------- -------------
NET LOSS ( 1,484,947) ( 688,837)
Foreign currency translation adjustments 8,832 946
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TOTAL COMPREHENSIVE LOSS ($ 1,476,115) ($ 687,891)
============= =============
Basic net loss per common share ($ .06) ($ .03)
============= =============
Weighted average number of common shares 25,611,900 22,073,916
============= =============
</TABLE>
See notes to consolidated financial statements
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SKYNET TELEMATICS.COM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the three months,
Ended March 31,
2000 1999
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss ($ 1,484,947) ($ 688,837)
Adjustments to reconcile net loss to cash
used in operating activities
Depreciation and amortization 469,774 194,602
Settlement of liabilities 93,635
Stock issued for expenses 93,378
Other 3,993
Changes in assets and liabilities:
Accounts receivable 23,628 11,478
Inventory ( 232,239) ( 28,274)
Prepaid expenses ( 508,108) 34,446
Deferred expenses ( 51,126)
Accounts payable and accrued expenses ( 11,454) 6,217
------------ ------------
NET CASH USED IN OPERATING ACTIVITIES ( 1,603,466) ( 470,368)
------------- ------------
INVESTING ACTIVITIES
Purchases of fixed assets ( 28,063) ( 34,946)
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FINANCING ACTIVITIES
Proceeds from sales of common stock 2,351,342 403,526
Increase in bank overdraft 14,711 35,551
Payments of note payable ( 39,970) ( 41,964)
Payment of capitalized lease obligations ( 22,408)
Loans from shareholders 107,262
------------ ------------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 2,303,675 504,375
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EFFECT OF FOREIGN CURRENCY ADJUSTMENTS 8,832 946
------------ ------------
INCREASE IN CASH 680,978 7
CASH - beginning of Year 0 20
------------ ------------
CASH - end of Period $ 680,978 $ 27
============ ============
</TABLE>
See notes to consolidated financial statements
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<PAGE>
SKYNET TELEMATICS.COM, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. NATURE OF OPERATIONS
Skynet Telematics.com, Inc. and Subsidiaries (Company) develop, market, license,
and monitor tracking and anti-theft systems for automobiles and trucks.
In February 2000, the Company changed its name from Skynet Telematics, Inc. to
Skynet Telematics.com, Inc.
2. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by annual financial statements. In the opinion of management,
all adjustments (consisting of normal recurring accruals) considered necessary
for a fair presentation of the financial statements have been included.
These unaudited consolidated financial statements should be read in conjunction
with the audited consolidated financial statements and footnotes thereto,
included in Form 10-KSB of Skynet Telematics.com Inc. and Subsidiaries, as of
and for the year ended December 31, 1999, as filed with the Securities and
Exchange Commission. The results of operations for the three months ended March
31, 2000 are not necessarily indicative of the results to be expected for the
full year.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the consolidated financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
3. NET LOSS PER SHARE
Basic net loss per share was computed based upon the weighted average number of
common shares outstanding during the year. Dilutive net loss per common share
has not been presented because it was anti-dilutive.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OVERVIEW
The business of the Company and its subsidiaries is the development, marketing,
and distribution of integrated modular automotive telematic systems and
providing of monitoring services to users of those products. Through its
subsidiary, Skynet Telmatics, Ltd., the Company distributes its own proprietary
products and products developed and manufactured by third parties, generally
ComROAD AG (ComROAD) in a number of countries around the world. Skynet entered
into a written distribution agreement with ComROAD in March 1999. Skynet
develops its own software and hardware solutions to provide for customer
specific requirements. These development projects are either patented or are
registered as intellectual property and add significant value to the project.
Automotive telematic systems combine the technology for mobile phones (GSM),
global positioning satellite systems (GPS) and the Internet, to enable customers
to identify the exact location and status information about automotive vehicles
and to receive a variety of information through communication with the
monitoring station. These devices can be used by businesses to manage fleets of
vehicles of various kinds and by individuals for their automobiles for security
purposes, emergencies and access to information available from the monitoring
station. These devices are available with in-car vehicle computers operating
with Windows CE that provide the user with an array of usage options as are
found on a personal digital assistant (PDA), including internet connections and
e-mail capabilities.
Through the first quarter of 2000, the Company has entered into a number of
important strategic alliances and joint ventures and is currently negotiating
further joint ventures and strategic alliances with world class companies. The
recently announced strategic alliance with Casio is designed to further increase
Casio and Skynet's sales into the UK and European express delivery and freight
industry.
Casio and Skynet have already developed a cost-effective solution for
proof-of-delivery (POD) applications for express parcel delivery companies using
the DT-800. The DT-800 confirms delivery by the customer's electronic signature
and scanning of a bar code. This vital tracking reference data is sent
immediately from the truck, together with an automatic time and date stamp
through Skynet's "Skamp" telematics product, via a low cost SMS (short message
service) to the accounting department. In the event of any query, the customer
can find out who signed to accept delivery via an Internet website. This
solution can also re-route the driver, select the most cost-effective route and
alert the authorities to any stolen vehicle movements.
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RESULTS OF OPERATIONS
CONSOLIDATED RESULT OF OPERATIONS
<TABLE>
<CAPTION>
Three months ended
March 31,
2000 1999 CHANGE %
---- ---- ------ -
<S> <C> <C> <C> <C>
NET SALES 280,562 13,050 267,512 2050%
COST OF SALES (473,365) (96,856) (376,509) 389%
GROSS LOSS (192,803) (83,806) (108,997) 130%
DEPRECIATION AND AMORTIZATION (469,774) (194,602) (275,172) 141%
RESEARCH AND DEVELOPMENT (73,263) (8,693) (64,570) 743%
GENERAL AND ADMINISTRATIVE (643,521) (379,321) (264,200) 70%
INTEREST EXPENSE-NET (11,951) (22,415) 10,464 (47%)
SETTLEMENT OF LIABILITIES (93,635) 0 N/A N/A
TOTAL EXPENSES (1,292,144) (605,031) (687,113) 114%
NET LOSS (1,484,947) (688,837) (796,110) 116%
</TABLE>
The above table represents an analysis of the increases and decreases of the
components of consolidated results of operations as derived from the Company's
consolidated statement of operations for the three months ended March 31, 2000
and 1999. In general, 2000 is not comparable to 1999 because the Company has
been in an early growth stage of organizing and acquiring subsidiaries and joint
ventures. Only recently has the Company begun a greater effort to market the
Company's products.
Net Sales
Net sales increased over 1999 as the Company has commenced more actively
marketing of the Company's products. However, sales have been restricted in
order to focus the Company's resources on developing the Avis telematics
solution. The Skamp product range was modified to suit Avis's precise
requirements and has undergone extensive testing. Concentrating all corporate
efforts on the "Avis Solution" has resulted in low unit sales in the first
quarter. Volume sales of the product are expected to commence in the second
quarter of 2000.
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The test on the 250 units fitted to Avis vehicles at Heathrow Airport was highly
successful, demonstrating significant revenues to Avis and a high level of
customer appreciation as well as the location of stolen Avis vehicles. This
successful test resulted in a letter of intent from Avis UK Ltd., dated 7th
February 2000, confirming Avis's intention to fit the entire UK fleet of rental
cars (approximately 27,000 units) with the Skamp telematics device.
However, subsequently Avis UK Ltd., stated that as a condition of this order,
Avis would require a full worldwide exclusive for the Skamp Telematics products
in rental cars without a time limit. As we have joint venture agreements in
place, we were unable to commit for a world exclusive, as it would substantially
reduce the potential profitability of Skynet and its joint venture partners. We
have subsequently been approached by Hertz and are currently negotiating a
minimum of 500, up to 3,000, unit trial in the UK. This contract is expected to
be signed by the end of May 2000. We are also in negotiation with a number of
other rental car companies in the UK and Europe. The "Avis" solution provided
Skynet with the focus to package a world class product for the car rental
industry. Skynet and its joint venture partners are convinced that the "Avis"
solution for car rental companies will prove to be a very profitable part of
Skynet and its joint venture partners in the telematics business.
In the second quarter of 2000, Skamp unit sales are expected to substantially
increase partly as a result of the Hertz and other rental car company
transactions.
Joint venture arrangements between Eurotrade AS, Risk Consultants Lebanon SARL,
Gestion Developpment & Financement S.A. and Lancry Protection Securite S.A and
Skamp International Ltd., the Company's subsidiary, cover 38 countries and are
expected to substantially contribute to sales in the second and third quarters
of the year 2000. Negotiations for joint ventures in India, Thailand, Taiwan,
Hong Kong and Mainland China are expected to be concluded and announced during
the second quarter of 2000.
Lancry Protection Securite S.A. and the Company, together with our other joint
venture partners, intend to create a corridor of safety between the French coast
line and Central Russia, enabling vehicles to be monitored and tracked through
the "corridor of safety" in the knowledge that if there is a problem, or an
attack on the vehicle, accident or other emergency, the nearest Skamp monitoring
station will immediately alert the correct emergency, police or private security
services and direct them to the vehicle. Communication with these emergency
services will be in the language of the region/country, so that there is no
confusion or misunderstanding. "Intervention Team" will be positioned at
strategic points along the corridor to provide immediate response. This unique
service is expected to dramatically reduce hi-jack incidents leading to
significant insurance discounts.
Connections
Telematics and GSM Companies are currently valued by the number of "connections"
they have on an annual basis. Large airtime providers such as Vodaphone, Orange,
etc., are particularly interested in acquiring companies with 100,000+
connections. Each rental car connection by Skynet is based on a 3 year contract
and is both a GSM connection and an Internet connection to a dedicated Internet
service provider.
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<PAGE>
Cost of Sales
Although cost of sales has increased in 2000, the gross profit percentage is not
indicative of what it will be at higher sales levels. Purchases and salaries are
the largest components of cost of sales.
Depreciation and Amortization
Depreciation and amortization has increased in 2000 primarily due to the
Company's change in the estimated future lives of the software and intellectual
properties from ten to five years and the acquisition of additional fixed
assets.
Research and Development
Research and development has increased and will increase substantially as
cutting edge technological solutions are designed to meet specific customer
requirements. Telematics systems require software and hardware development to
ensure full customer utilization and demand. In the same way that computers will
not function without software, Telematics requires software, hardware, sensors,
looms and monitoring service center development. The Company has obtained the
additional financing to further such development.
General and Administrative Expenses
General and administrative expenses increased substantially in 2000 due to the
growth of the Company, its increased marketing effort and substantial additional
costs incurred in reaching the "Avis Solution". The Company has a program to
keep general and administrative expenses as low as possible. Salaries,
professional fees and marketing are the most significant components of general
and administrative.
Interest Expense
Interest expense decreased in 2000 as the Company repaid certain financings.
Settlements of Liabilities
Settlements of liabilities in 2000 include continued settlements with certain of
the sellers of SSCC.
Net Loss
Consolidated net loss has increased due to the nature of the Company's plan of
operations rather than declining profitability. The Company anticipates reaching
profitability by the end of 2000.
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FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
During the three months ended March 31, 2000, the Company raised $2,351,342, net
of expenses, as compared to $403,526 from private sales of shares of its common
stock, which have been the Company's primary source of the Company's funding of
operations for the Company and its subsidiaries. The Company does not have any
significant capital commitments; however, it is committed to maintain the
infrastructure it has developed, the expenses of which consist primarily of
wages and salaries of Skynet personnel. For the three months ended March 31,
2000, the Company's operating activities used cash of $1,603,466 as compared to
$470,358 in 1999.
The Company believes it has built an infrastructure sufficient to support a
substantial increase in the size of the operations of the Company and its
subsidiaries over the next few years and intends to focus its efforts on revenue
growth. Skynet intends to substantially increase its marketing and distribution
efforts over the next year, and will focus its marketing efforts primarily on
the distribution of the ComROAD Skamp range of products. Such activities will
require additional funds either in the form of additional capital or financing
to permit Skynet to purchase the products from ComROAD that it in turn sells to
others. There can be no assurance that the Company and its subsidiaries will be
able to obtain the capital or financing they need to implement their growth
strategy.
At the present time, the Company's consolidated revenues cannot support the
expenses of the operations of the Company and its subsidiaries. The Company
intends to raise additional capital to fund such operations until its
consolidated revenues are sufficient to support all of the costs and expenses of
its operations. The Company will remain dependent upon infusions of capital from
investors and/or loans from its shareholders until such time. There can be no
assurance that the Company can continue to raise capital from the sale of its
securities.
Seasonality
The Company does not deem its sales to be seasonal and any effect would be
immaterial.
FORWARD LOOKING INFORMATION
This Form 10-QSB contains forward looking statements regarding the Company's
business strategy and future plans of operation. Forward looking statements
involve known and unknown risks and uncertainties. These and other important
factors, including those mentioned in various filings with the Securities and
Exchange Commission made periodically by the Company and in various press
releases of the Company, may cause the actual results and performance to differ
materially from the future results expressed in or implied by such forward
looking statements. The forward looking statements contained herein are only as
of the date hereof and the Company disclaims any obligation to provide public
updates, revisions or amendments to any forward looking statements made herein
to reflect changes in the Company's expectations or future events.
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PART II
Other Information
Item 1. Legal proceedings: None
Item 2. Changes in Securities: Sales of Securities to offshore investors
SUMMARY OF SALES OF SECURITIES
During the first quarter of 2000, the Company sold 2,472,581 shares of common
stock at prices between $0.70 and $5.00 per share for an aggregate sale price of
$3,253,883.65. These shares were sold pursuant to Regulation S under the
Securities Act of 1933.
There were no underwriters for any of the above offerings.
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Item 3. Defaults Upon Senior Securities: None
Item 4. Submission of Matters to a Vote of Security Holders: None
Item 5. Other Information: None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits: Exhibit 15 - Letter on unaudited financial information
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K: January 19, 2000 - Item 4. Changes in
Registrant's Certifying Accountant - Dismissed Smith & Company;
February 19, 2000 - Item 4. Changes in Registrant's
Certifying Accountant - Retained Most Horowitz &
Company, LLP
SIGNATURES
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.
Skynet Telematics.com, Inc.
Dated: May 19, 2000 By: /s/ Tomas George Wilmot
------------------------------
Tomas George Wilmot, President
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INDEPENDENT ACCOUNTANTS' REPORT
We have reviewed the accompanying consolidated financial statements of
Skynet Telematics.com, Inc. and Subsidiaries as of March 31, 2000 and for the
three-months then ended. These financial statements are the responsibility of
the company's management.
Another accountant reviewed the interim financial information of
Netking Limited and Subsidiary and Skamp International Limited, subsidiaries of
the Company, whose combined total assets as of March 31, 2000 and whose revenues
for the three-months then ended which constituted substantially all of the
consolidated totals.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review and the report of the other accountant, we are not
aware of any material modifications that should be made to the accompanying
consolidated financial statements for them to be in conformity with generally
accepted accounting principles.
May 17, 2000 By: /s/ Most Horowitz & Company, LLP
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Most Horowitz & Company, LLP
