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As Of Filer Filing For·On·As Docs:Size Issuer Agent 12/15/03 Skyway Comms Holding Corp 10QSB 10/31/03 5:282K Equity Tech Group Inc/FA |
Document/Exhibit Description Pages Size 1: 10QSB Quarterly Report -- Small Business HTML 268K 2: EX-31 Certification per Sarbanes-Oxley Act (Section 302) HTML 10K 3: EX-31 Certification per Sarbanes-Oxley Act (Section 302) HTML 10K 4: EX-32 Certification per Sarbanes-Oxley Act (Section 906) HTML 7K 5: EX-32 Certification per Sarbanes-Oxley Act (Section 906) HTML 7K
| FOrm 10Q for Skyway Communications |
(Mark One)
| [X] | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended: October 31, 2003
Or
| [ ] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ____________ to _____________
Commission File Number: 000-32033
SKYWAY
COMMUNICATIONS HOLDING CORP.
(Exact name of registrant as specified in its charter)
Florida
(State or other jurisdiction of incorporation or organization)
65-0881662
(IRS Employer
Identification Number)
6021 — 142nd
Avenue North Clearwater, FL 33760
(Address of principal executive offices) (Zip Code)
727.535.8211
(Registrant’s telephone no., including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: 70,200,000
| Page | |
| PART I - FINANCIAL INFORMATION | 3 |
| Item 1. Financial Statements | |
| Balance Sheet | 4-5 |
| Statement of Operations | 6 |
| Statement of Cash Flows | 7-8 |
| Notes to Financial Statements | 9-23 |
| Item 2. Management's Discussion and Plan of Operation | 24 |
| Item 3. Controls and Procedures | 26 |
| PART II - OTHER INFORMATION | |
| Item 1. Legal Proceedings | 28 |
| Item 2. Changes in Securities | 28 |
| Item 3. Defaults upon Senior Securities | 28 |
| Item 4. Submission of Matters to a Vote of Security Holders | 29 |
| Item 5. Other Information | 29 |
| Item 6. Exhibits | 29 |
| SIGNATURES | 29 |
2
Item 1. Unaudited Financial Statements
SKYWAY COMMUNICATIONS
HOLDING CORP. AND SUBSIDIARY
[A Development Stage
Company]
| PAGE | |
| - Unaudited Condensed Consolidated Balance Sheet as of | |
| October 31, 2003 and audited Condensed Consolidated | |
| Balance Sheet as of April 30, 2003 | 4 - 5 |
| - Unaudited Condensed Consolidated Statements of | |
| Operations, for the three months ended | |
| October 31, 2003 and 2002 and for the period from | |
| inception on April 24, 2002 through October 31, 2003 | 6 |
| - Unaudited Condensed Consolidated Statements of | |
| Cash Flows, for the six months ended | |
| October 31, 2003 and 2002 and for the period from | |
| inception on April 24, 2002 through October 31, 2003 | 7 - 8 |
| - Notes to Unaudited Condensed Consolidated | |
| Financial Statements | 9 - 23 |
3
SKYWAY COMMUNICATIONS HOLDING CORP. AND SUBSIDIARY
[A Development Stage Company]
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
| October 31, 2003 (unaudited) |
April 30, 2003 | |||||||
|---|---|---|---|---|---|---|---|---|
| CURRENT ASSETS: | ||||||||
| Cash | $ | 42,388 | $ | 741 | ||||
| Advance to related party | 51,382 | -- | ||||||
| Employee advance | 2,500 | 2,000 | ||||||
| Prepaid expense | 59,893 | 8,313 | ||||||
| Total Current Assets | 156,163 | 11,054 | ||||||
| PROPERTY AND EQUIPMENT, net | 720,731 | 324,961 | ||||||
| OTHER ASSETS: | ||||||||
| Indefinite-life intangible assets | 23,800 | 23,800 | ||||||
| Deposit | 92,500 | 92,500 | ||||||
| Total Other Assets | 116,300 | 116,300 | ||||||
| $ | 993,194 | $ | 452,315 | |||||
[Continued]
4
SKYWAY COMMUNICATIONS
HOLDING CORP. AND SUBSIDIARY
[A Development Stage Company]
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
[Continued]
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
| October 31, 2003 (unaudited) |
April 30, 2003 | |||||||
|---|---|---|---|---|---|---|---|---|
| CURRENT LIABILITIES: | ||||||||
| Accounts payable | $ | 130,172 | $ | 91,069 | ||||
| Accrued payroll | 311,327 | 44,693 | ||||||
| Accrued interest | 9,743 | -- | ||||||
| Installment payable | -- | 250,000 | ||||||
| Advances from related party | -- | 1,316,946 | ||||||
| Note payable | 25,000 | -- | ||||||
| Note payable - related party | 3,600 | -- | ||||||
| Deferred Rent | 197,055 | -- | ||||||
| Total Current Liabilities | 676,897 | 1,702,708 | ||||||
| COMMITMENTS AND CONTINGENCIES [See Note 10] | -- | -- | ||||||
| Total Liabilities | 676,897 | 1,702,708 | ||||||
| STOCKHOLDERS' EQUITY (DEFICIT) [Restated]: | ||||||||
| Preferred stock, $.0001 par value, | ||||||||
| 10,000,000 shares authorized: | ||||||||
| Series A convertible preferred stock, | ||||||||
| 1,000,000 and no shares issued | ||||||||
| and outstanding, respectively | 100 | -- | ||||||
| Series B convertible preferred stock, | ||||||||
| 1,000,000 and no shares issued | ||||||||
| and outstanding, respectively | 100 | -- | ||||||
| Series C convertible preferred stock, | ||||||||
| 2,812,000 and no shares issued | ||||||||
| and outstanding, respectively | 281 | -- | ||||||
| Series D convertible preferred stock, | ||||||||
| 85,000 and no shares issued | ||||||||
| and outstanding, respectively | 9 | -- | ||||||
| Common stock, $.0001 par value, | ||||||||
| 2,500,000,000 shares authorized, | ||||||||
| 70,200,000, and 10,000,000 shares | ||||||||
| issued and outstanding, respectively | 7,020 | 1,000 | ||||||
| Capital in excess of par value | 14,717,743 | 30,300 | ||||||
| Deficit accumulated during the | ||||||||
| development stage | (8,349,999 | ) | (1,281,693 | ) | ||||
| Total Stockholders' Equity (Deficit) | 6,375,254 | (1,250,393 | ) | |||||
| Less: Subscription Receivable | (6,058,957 | ) | -- | |||||
| $ | 993,194 | $ | 452,315 | |||||
NOTE: The balance sheet at April 30, 2003 was taken from the audited financial statements at that date and condensed.
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
5
SKYWAY
COMMUNICATIONS HOLDING CORP. AND SUBSIDIARY
[A Development Stage Company]
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
| For the Three Months Ended October 31, |
For the Six Months Ended October 31, |
From Inception on April 24, 2002 through | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2003 |
2002 |
2003 |
2002 |
October 31,2003 | |||||||||||||
| REVENUE | $ | -- | $ | -- | $ | -- | $ | -- | $ | -- | |||||||
| EXPENSES: | |||||||||||||||||
| Selling | 32,047 | -- | 79,649 | -- | 87,671 | ||||||||||||
| General and Administrative | 2,044,293 | 29,887 | 5,349,744 | 46,511 | 6,176,987 | ||||||||||||
| Research and Development | 319,712 | 69,848 | 529,047 | 162,448 | 1,002,402 | ||||||||||||
| Total Expenses | 2,396,052 | 99,735 | 5,958,440 | 208,959 | 7,267,060 | ||||||||||||
| LOSS BEFORE OTHER INCOME (EXPENSE) | 2,396,052 | 99,735 | 5,958,440 | 208,959 | 7,267,060 | ||||||||||||
| OTHER INCOME (EXPENSE): | |||||||||||||||||
| Rental Income - Related Party | -- | -- | -- | -- | 26,927 | ||||||||||||
| Interest Expense | (1,109,329 | ) | -- | (1,109,866 | ) | -- | (1,109,866 | ) | |||||||||
| Total Other Income (Expense) | (1,109,329 | ) | -- | (1,109,866 | ) | -- | (1,082,939 | ) | |||||||||
| LOSS BEFORE INCOME TAXES | (3,505,381 | ) | (99,735 | ) | (7,068,306 | ) | (208,959 | ) | (8,349,999 | ) | |||||||
| CURRENT TAX EXPENSE | -- | -- | -- | -- | -- | ||||||||||||
| DEFFERED TAX EXPENSE | -- | -- | -- | -- | -- | ||||||||||||
| NET LOSS | $ | (3,505,381 | ) | $ | (99,735 | ) | $ | (7,068,306 | ) | $ | (208,959 | ) | $ | (8,349,999 | ) | ||
| NET LOSS PER COMMON SHARE-BASIC AND DILUTED | $ | (.05 | ) | $ | (.01 | ) | $ | (.15 | ) | $ | (.03 | ) | |||||
| SHARES USED IN COMPUTING NET LOSS PER SHARE | 64,837,900 | 7,500,000 | 47,188,376 | 7,500,000 | |||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
6
SKYWAY
COMMUNICATIONS HOLDING CORP. AND SUBSIDIARY
[A Development Stage Company]
UNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
| For the Six Months Ended October 31, |
From Inception on April 24, 2002 Through October 31,2003 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| 2003 |
2002 |
||||||||||
| Cash Flow from Operating Activities: | |||||||||||
| Net Loss | $ | (7,068,306 | ) | $ | (208,959 | ) | $ | (8,349,999 | ) | ||
| Adjustments to reconcile net loss to net cash | |||||||||||
| used by operating activities: | |||||||||||
| Depreciation | 49,737 | -- | 70,613 | ||||||||
| Non-cash services rendered for stock and | 3,551,810 | -- | 3,853,513 | ||||||||
| warrants | |||||||||||
| Non-cash other | 1,107,137 | -- | 1,107,137 | ||||||||
| Changes in assets and liabilities: | |||||||||||
| (Increase)/Decrease in: | |||||||||||
| Employee Advances | (500 | ) | -- | (2,500 | ) | ||||||
| Prepaid Expenses | (51,580 | ) | -- | (59,893 | ) | ||||||
| Deposit | -- | -- | (92,500 | ) | |||||||
| Increase/(Decrease) in: | |||||||||||
| Accounts Payable | (8,652 | ) | -- | 82,417 | |||||||
| Accrued Payroll | 189,666 | -- | 234,359 | ||||||||
| Accrued Interest | 1,771 | -- | 1,771 | ||||||||
| Deferred Rent | 197,055 | -- | 197,055 | ||||||||
| Installment Payable | (250,000 | ) | -- | (250,000 | ) | ||||||
| Net Cash (Used) by Operating Activities | (2,281,862 | ) | (208,959 | ) | (3,208,027 | ) | |||||
| Cash Flows from Investing Activities: | |||||||||||
| Advance to related party | (63,000 | ) | -- | 63,000 | |||||||
| Payments received on advance to related party | 11,618 | -- | 11,618 | ||||||||
| Payments for property and equipment | (445,507 | ) | -- | (791,344 | ) | ||||||
| Net Cash (Used) by Investing Activities | (496,889 | ) | -- | (842,726 | ) | ||||||
| Cash Flow from Financing Activities: | |||||||||||
| Advances from related party | 247,069 | 215,290 | 1,564,015 | ||||||||
| Proceeds from issuance of common stock | 2,573,329 | -- | 2,573,329 | ||||||||
| Payments of stock offering costs | -- | (5,500 | ) | (44,203 | ) | ||||||
| Net Cash Provided by Financing Activities | 2,820,398 | 209,790 | 4,093,141 | ||||||||
| Net Increase in Cash | 41,647 | 831 | 42,388 | ||||||||
| Cash at Beginning of Period | 741 | -- | -- | ||||||||
| Cash at End of Period | $ | 42,388 | $ | 831 | $ | 42,388 | |||||
| Supplemental Disclosures of Cash Flow Information: | |||||||||||
| Cash paid during the period for: | |||||||||||
| Interest | $ | -- | $ | -- | $ | -- | |||||
| Income taxes | $ | -- | $ | -- | $ | -- | |||||
[Continued]
7
SKYWAY
COMMUNICATIONS HOLDING CORP. AND SUBSIDIARY
[A Development Stage Company]
UNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
Supplemental Schedule of Non-cash Investing and Financing Activities:
| For the period from inception on April 24, 2002 through October 31, 2003: |
| In October 2003, we issued 2,812,000 share of Series C Convertible Preferred Stock to 42 employees and consultants. The Holders shall have the right in their sole and absolute discretion to convert the shares of Convertible Preferred Stock — Series C issued by the Corporation into 28,120,000 common shares of the Corporation on a one share for ten share basis upon the occurrence of a significant event. The value of these shares has been estimated at $4,358,600 and has been recorded as a subscription receivable which will be amortized to expense over the estimated time to conversion [see Note 6]. |
| In October 2003, we issued 85,000 share of Series D Convertible Preferred Stock. The Holders shall have the right in their sole and absolute discretion to convert the shares of Convertible Preferred Stock — Series D issued by the Corporation into 8,500,000 common shares of the Corporation on a one share for one hundred share basis upon the occurrence of a significant event. The value of these shares has been estimated at $1,317,500 and has been recoded as a subscription receivable which will be amortized to expense over the estimated time to conversion [see Note 6]. |
| In July 2003, the Company issued 50,000 shares of common stock for future services pursuant to consulting agreements valued at $18,000. |
| In July 2003, the Company issued warrants to purchase 10,000,000 shares of common stock for services rendered pursuant to a consulting agreement valued at $2,800,000. |
| In July 2003, the Company issued 2,250,000 shares of common stock for future services pursuant to consulting agreements valued at $630,000. |
| In June 2003, Parent acquired Subsidiary pursuant to an Amended and Restated Agreement and Plan of Merger which has been accounted for as a recapitalization of Subsidiary in a manner similar to a reverse purchase[See Note 2]. Immediately prior to the recapitalization of Subsidiary, Parent had no assets and $161,295 of liabilities and 49,319,466 shares of common stock outstanding. An additional 2,330,493 shares of common stock were issued as finder’s fees in the transaction. |
| In June 2003, the Company issued 1,000,000 shares of preferred stock for payment of $1,564,015 in debt. |
| In April 2003, the Company abandoned their proposed stock offering and wrote off the deferred stock offering costs of $46,303 directly to general and administrative expense. |
| In March 2003, the Company issued 1,360 shares of common stock for an amended license agreement valued at $23,800. |
| In March 2003, the Company cancelled 3,888,360 shares of common stock. |
| In January 2003, the Company recorded an installment payable of $250,000 for the remaining purchase price under an Asset Purchase Agreement. The Company also expensed $250,000 of the purchase price which was for ground-site lease contact information and a temporary restriction on the transfer of certain patent rights. |
| In April 2002, in connection with their organization, the Company issued 13,887,000 shares of common stock for organization costs of $1,870 and services rendered valued at $5,630. |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
8
SKYWAY
COMMUNICATIONS HOLDING CORP. AND SUBSIDIARY
[A Development Stage Company]
| Organization — SkyWay Communications Holding Corp. (“Parent”) was organized under the laws of the State of Florida on December 16, 1998. In April 2003, Parent changed its name to SkyWay Communications Holding Corp. |
| Sky Way Aircraft Inc. (“Subsidiary”) was organized under the laws of the State of Nevada on April 24, 2002. On June 21, 2003, Parent acquired Subsidiary pursuant to an Amended and Restated Agreement and Plan of Merger. The agreement called for Parent to issue 1,000,000 shares of Series B convertible preferred stock to the former shareholders of Subsidiary for 100% of the outstanding shares of Subsidiary’s common stock and for Parent to issue 1,000,000 shares of Series A convertible preferred stock to the former shareholders of Subsidiary for 100% of the outstanding shares of Subsidiary’s preferred stock wherein Subsidiary became a wholly-owned subsidiary of Parent [See Note 2]. The acquisition of Subsidiary has been accounted for as a recapitalization of Subsidiary in a manner similar to a reverse purchase. Accordingly, the equity transactions have been restated to reflect the recapitalization of Subsidiary and the operations of Parent prior to the date of acquisition have been eliminated. At the date of acquisition, the Parent had no assets and $161,295 in liabilities. The financial statements reflect the operations of Subsidiary from its inception. |
| SkyWay Communications Holding Corp. and Subsidiary (“the Company”) plans to provide security and other services for the airline industry through applications of their licensed high-speed, broadband wireless communications technology. The Company has not yet generated any revenues from their planned principal operations and is considered a development stage company as defined in Statement of Financial Accounting Standards No.7. The Company has, at the present time, not paid any dividends and any dividends that may be paid in the future will depend upon the financial requirements of the Company and other relevant factors. |
| Condensed Financial Statements — The accompanying financial statements have been prepared by the Company without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows at October 31, 2003 and for the periods then ended have been made. |
| Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States of America have been condensed or omitted. It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Company’s April 30, 2003 audited financial statements. The results of operations for the periods ended October 31, 2003 are not necessarily indicative of the operating results for the full year. |
| Consolidation — The consolidated financial statements include the accounts of Parent and Parent’s wholly owned Subsidiary. All significant intercompany transactions have been eliminated in consolidation. |
| Fiscal Year — The Company’s fiscal year-end is April 30th. |
| Cash and Cash Equivalents — The Company considers all highly liquid debt investments purchased with a maturity of three months or less to be cash equivalents. |
9
SKYWAY
COMMUNICATIONS HOLDING CORP. AND SUBSIDIARY
[A Development Stage Company]
| Accounts and Loans Receivable — The Company records accounts and loans receivable at the lower of cost or fair value. The Company determines the lower of cost or fair value of non-mortgage loans on an individual asset basis. The Company recognizes interest income on an account receivable based on the stated interest rate for past-due accounts over the period that the account is past due. The Company recognizes interest income on a loan receivable based on the stated interest rate over the term of the loan. The Company accumulates and defers fees and costs associated with establishing a receivable to be amortized over the estimated life of the related receivable. The Company estimates allowances for doubtful accounts and loan losses based on the aged receivable balances and historical losses. The Company records interest income on delinquent accounts and loans receivable only when payment is received. The Company first applies payments received on delinquent accounts and loans receivable to eliminate the outstanding principal. The Company charges off uncollectible accounts and loans receivable when management estimates no possibility of collecting the related receivable. The Company considers accounts and loans receivable to be past due or delinquent based on contractual terms. |
| Property and Equipment — Property and equipment are stated at cost. Expenditures for major renewals and betterments that extend the useful lives of property and equipment are capitalized upon being placed in service. Expenditures for maintenance and repairs are charged to expense as incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the assets of four to five years. In accordance with Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”, the Company periodically reviews their property and equipment for impairment. |
| Website Costs — The Company has adopted the provisions of Emerging Issues Task Force 00-2, “Accounting for Web Site Development Costs.” Costs incurred in the planning stage of a website are expensed as research and development while costs incurred in the development stage are capitalized and amortized over the life of the asset, estimated to be five years. As of October 31, 2003, the Company has capitalized a total of $1,988 of website costs. The Company did not incur any planning costs and did not record any research and development costs for the six months ended October 31, 2003 and 2002. |
| Intangible Assets — The Company accounts for their intangible assets in accordance with Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets”. SFAS No. 142 establishes three classifications for intangible assets including definite-life intangible assets, indefinite-life intangible assets and goodwill and requires different accounting treatment and disclosures for each classification. In accordance with SFAS No. 142, the Company periodically reviews their intangible assets for impairment. No impairment was recorded during the three months ended October 31, 2003 and 2002. |
| Stock Offering Costs — Costs related to proposed stock offerings are deferred and offset against the proceeds of the offering. In the event a stock offering is unsuccessful, the costs related to the offering are written off to expense. |
10
SKYWAY
COMMUNICATIONS HOLDING CORP. AND SUBSIDIARY
[A Development Stage Company]
| Advertising Costs — Advertising costs, except for costs associated with direct-response advertising, are charged to operations when incurred. The costs of direct-response advertising are capitalized and amortized over the period during which future benefits are expected to be received. Advertising costs for the three months ended October 31, 2003 and 2002 amounted to $79,649 and $0, respectively. |
| Research and Development — Research and development costs are expensed as incurred. The Company expensed $319,712 and $69,849 in research and development costs during the three months ended October 31, 2003 and 2002, respectively. |
| Debt Extinguishment — The Company accounts for extinguishment of debt in accordance with Statement of Financial Accounting Standards No. 145, “Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections”. SFAS No. 145 rescinds the requirement that gains and losses from extinguishment of debt be classified as an extraordinary item. |
| Income Taxes — The Company accounts for income taxes in accordance with Statement of Financial Accounting Standards No. 109 “Accounting for Income Taxes. |
11
SKYWAY
COMMUNICATIONS HOLDING CORP. AND SUBSIDIARY
[A Development Stage Company]
| Loss Per Share — The computation of loss per share is based on the weighted average number of shares outstanding during the period presented in accordance with Statement of Financial Accounting Standards No. 128,“Earnings Per Share”. |
| Accounting Estimates — The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amount of revenues and expenses during the reported period. Actual results could differ from those estimated. |
| Recently Enacted Accounting Standards — Statement of Financial Accounting Standards (“SFAS”) No. 146, “Accounting for Costs Associated with Exit or Disposal Activities”, SFAS No. 147, “Acquisitions of Certain Financial Institutions — an Amendment of FASB Statements No. 72 and 144 and FASB Interpretation No. 9", SFAS No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities”, and SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity”, were recently issued. SFAS No. 146, 147, 149 and 150 have no current applicability to the Company or their effect on the financial statements would not have been significant. |
| Reclassification — The financial statements for periods prior to October 31, 2003 have been reclassified to conform to the headings and classifications used in the October 31, 2003 financial statements. |
| Restatement — The financial statements have been restated for all periods presented to reflect the recapitalization of Subsidiary [See Note 2] and to reflect a 1.8516-for-1 forward stock split that Subsidiary effected on March 11, 2003 [See Note 7]. |
| On May 30, 2003, Parent and Subsidiary entered into an Agreement and Plan of Merger. On June 19, 2003, Parent and Subsidiary entered into an Amended and Restated Agreement and Plan of Merger whereby Parent agreed to acquire100% of Subsidiary in a stock for stock exchange. The agreement called for Parent to issue 1,000,000 shares of Series B convertible preferred stock to the former shareholders of Subsidiary for 100% of the outstanding shares of Subsidiary’s common stock and for Parent to issue 1,000,000 shares of Series A convertible preferred stock to the former shareholders of Subsidiary for 100% of the outstanding shares of Subsidiary’s preferred stock. Voting control of the Company passed to the former shareholders of Subsidiary. The Company has accounted for the acquisition as a recapitalization of Subsidiary in a manner similar to a reverse purchase. Accordingly, the equity transactions have been restated to reflect there capitalization of Subsidiary and the operations of Parent prior to the date of acquisition have been eliminated. At the date of acquisition the Parent had no assets and $161,295 in liabilities. The financial statements reflect the operations of Subsidiary from its inception. Prior to there capitalization of Subsidiary, Parent had 49,319,466 shares of common stock previously outstanding. An additional 2,330,493 shares of common stock were issued as finder’s fees in the transaction. |
12
SKYWAY
COMMUNICATIONS HOLDING CORP. AND SUBSIDIARY
[A Development Stage Company]
Property and equipment consisted of the following at:
| October 31, 2003 |
April 30, 2003 | |||||||
|---|---|---|---|---|---|---|---|---|
| Machinery and equipment | $ | 572,936 | $ | 263,955 | ||||
| Furniture | 11,926 | -- | ||||||
| Vehicles | 204,492 | 79,280 | ||||||
| Website | 1,988 | 1,988 | ||||||
| 791,342 | 345,223 | |||||||
| Less: accumulated depreciation | (70,611 | ) | (20,262 | ) | ||||
| Net property and equipment | $ | 720,731 | $ | 324,961 | ||||
| Depreciation expense for the three months ended October 31, 2003 and 2002 amounted to $28,861 and $0, respectively. |
Indefinite-life intangible assets consist of the following at:
| October 31, 2003 |
April 30, 2003 | |||||||
|---|---|---|---|---|---|---|---|---|
| License agreements with Sky Way Global, Inc. | $ | 23,800 | $ | 23,800 | ||||
| Indefinite-life Intangible Assets | $ | 23,800 | $ | 23,800 | ||||
| On June 23, 2003, the Company signed a License Agreement with Sky Way Global, LLC (“SWG”), an entity under common control, to replace the Company’s Amended and Restated Software License and Services Agreement dated March 11, 2003. This new agreement exclusively and irrevocably assigns virtually all of SWG’s rights to certain patented technology in exchange for a royalty of 3% of the Company’s net revenues. |
| On March 11, 2003, the Company signed an Amended and Restated Software License and Services Agreement with SWG, an entity under common control, to replace the Company’s Licensing Agreement entered into during 2002. Under this new agreement, the Company issued 1,360 shares of common stock valued at $23,800 to obtain the rights for indefinite use of certain high-speed, broadband wireless technology for the aircraft industry and other related uses. This agreement was replaced by a License Agreement signed June 23, 2003. |
| In 2002, the Company entered into a ten-year licensing agreement with SWG,an entity under common control. The Company was to pay a royalty fee of 5%of gross sales for the exclusive right to use Global’s high-speed, broadband wireless technology for the aircraft industry. This agreement was replaced by an Amended and Restated Software License and Services Agreement signed March 11, 2003. |
13
SKYWAY
COMMUNICATIONS HOLDING CORP. AND SUBSIDIARY
[A Development Stage Company]
Notes payable consist of the following at:
| October 31, 2003 |
April 30, 2003 | |||||||
|---|---|---|---|---|---|---|---|---|
| 18% unsecured demand note payable to | ||||||||
| ECI Communications, Inc. | $ | 5,000 | $ | -- | ||||
| 11% unsecured demand note payable to a | ||||||||
| shareholder of the Company | 3,600 | -- | ||||||
| 28,600 | -- | |||||||
| Less current portion | (28,600 | ) | -- | |||||
| $ | -- | $ | -- | |||||
| For the three months ended October 31, 2003 and 2002, interest expense amounted to $1,234 and $0, respectively. |
| The Company has authorized 10,000,000 shares of preferred stock, $.0001 par value, with such rights, preferences and designations and to be issued in such series as determined by the Company’s Board of Directors. In June 2003, the Board of Directors designated 1,180,000 shares as Series A and 1,000,000 shares as Series B. |
| Series A Convertible Preferred Stock — Each share of Series A convertible preferred stock has a stated value of $15, has the voting rights of 100 shares of common stock and is convertible at the shareholder’s option into 100 shares of common stock. Series A convertible preferred shareholders must approve any dividend payments and are entitle to share in common stock dividends as if their preferred stock had been converted into common stock. Upon liquidation of the Company, Series A convertible preferred shareholders are entitled to receive an amount equal to the stated value plus one percent per annum from the date of issuance. The Company may redeem all or part of the Series A convertible preferred stock within one year of the date of issuance by paying an amount equal to the stated value plus five percent. |
| In June 2003, in connection with an Amended and Restated Agreement and Plan of Merger, the Company issued 1,000,000 shares of their previously authorized but unissued Series A convertible preferred stock for all 1,000,000 shares of Subsidiary’s preferred stock which had been issued to SWG for debt relief of $1,564,015 or approximately $1.564 per share. |
14
SKYWAY
COMMUNICATIONS HOLDING CORP. AND SUBSIDIARY
[A Development Stage Company]
| Series B Convertible Preferred Stock — Series B Convertible Preferred Stock — Each share of Series B convertible preferred stock has a stated value of $15, and has no voting, liquidation or dividend rights. Within three years of the date of issuance, each share of Series B convertible preferred stock will be converted, upon the occurrence of certain events, automatically into 200 shares of the Company’s common stock if certain conditions are met. The Company may redeem all or part of the Series B convertible preferred stock within one year of the date of issuance by paying an amount equal to the stated value plus five percent. Any shares of Series B convertible preferred stock which remain outstanding three years following the date of issuance will be automatically cancelled. |
| In June 2003, in connection with an Amended and Restated Agreement and Plan of Merger, the Company issued 1,000,000 shares of their previously authorized but unissued Series B convertible preferred stock for all 10,000,000 shares of Subsidiary’s common stock. |
| Series C Convertible Preferred Stock — Each share of Series C convertible preferred stock has a $.0001 stated value and no voting rights. Through December 31, 2013 each share is convertible, upon the occurrence of certain events, into 10 shares of common stock. Upon liquidation of the Company, Series C convertible preferred shareholders are entitled to receive an amount equal to the stated value per share. |
| In October 2003, we issued 2,812,000 share of Series C Convertible Preferred Stock to 42 employees and consultants. The Holders shall, upon the occurrence of certain events, have the right in their sole and absolute discretion to convert the shares of Convertible Preferred Stock — Series C issued by the Corporation into 28,120,000 common shares of the Corporation on a one share for ten share basis. The value of these shares has been estimated at $4,385,600 and has been recoded as a subscription receivable which will be amortized to expense over the estimated time to conversion. |
| Series D Convertible Preferred Stock — Each share of Series D convertible preferred stock has a $.0001 stated value and no voting rights. Each share is convertible, upon the occurrence of certain events, into 100 shares of common stock. Upon liquidation of the Company, Series D convertible preferred shareholders are entitled to receive an amount equal to the stated value per share. |
| In October 2003, we issued 85,000 share of Series D Convertible Preferred Stock. The Holders shall have the right in their sole and absolute discretion to convert the shares of Convertible Preferred Stock — Series D issued by the Corporation into 8,500,000 common shares of the Corporation on a one share for one hundred share basis. The value of these shares has been estimated at $1,317,500 and has been recoded as a subscription receivable which will be amortized to expenses over the estimated time to conversion. |
| Common Stock – The Company has authorized 2,500,000,000 shares of common stock with a par value of $.0001. |
| In September 2003, the Company issued 225,000 shares of their previously authorized but unissued common stock at $.10 per share for cash of $22,500. |
| In September 2003, the Company issued 10,781,851 shares of their previously authorized but unissued common stock at $.13 per share for cash of $1,401,640. |
| In connection with the above two issuances of shares, the Company has recorded interest expense of $1,107,138 for the difference between the market price of the shares and the amount paid for them. |
| In August 2003, the Company issued 833,333 shares of their previously authorized but unissued common stock at $.15 per share for cash of $125,000. In connection with the issuance of these shares the Company has recorded consulting expenses of $106,667 for the difference between the market price of the shares and the amount paid for them. |
15
SKYWAY
COMMUNICATIONS HOLDING CORP. AND SUBSIDIARY
[A Development Stage Company]
| In July 2003, the Company issued 1,000,000 shares of their previously authorized but unissued common stock at $.10 per share for cash of $100,000 upon the exercise of warrants. |
| In July 2003, the Company issued 3,000,000 shares of their previously authorized but unissued common stock at $.10 per share for cash of $300,000. |
| In July 2003, the Company issued 50,000 shares of their previously authorized but unissued common stock at $.36 per share for future services valued at $18,000. |
| In July 2003, the Company issued 2,250,000 shares of their previously authorized but unissued common stock at $.28 per share for future services valued at $630,000. |
| In March 2003, the Company issued 1,360 shares of their previously authorized but unissued common stock at $17.50 per share for an amended license agreement valued at $23,800. |
| In April 2002, in connection with their organization, the Company issued 13,887,000 shares of their previously authorized but unissued common stock at approximately $.00054 per share for payment of organization costs of $1,870 and non-cash services valued at $5,630 including $2,100 which was classified as stock offering costs and $3,530 which was classified as general and administrative expense. |
| Cancellation — In March 2003, the Company’s Board of Directors approved to cancel 3,888,360 shares of common stock that had been accounted for as issued to consultants in April 2002 [See Note 10]. |
| Stock Split — On March 11, 2003, Subsidiary effected a 1.8516-for-1 forward stock split. The financial statements for all periods presented have been restated to reflect the stock split. |
16
SKYWAY
COMMUNICATIONS HOLDING CORP. AND SUBSIDIARY
[A Development Stage Company]
| Abandoned Proposed Stock Offering — The Company was proposing to make a public offering of 5,000,000 shares of their previously authorized but unissued common stock which was to be registered with the Securities and Exchange Commission on Form SB-2. An offering price of $17.50 per share was arbitrarily determined by the Company and offering costs were estimated to be approximately $73,000. In April 2003, the Company abandoned their proposed stock offering and wrote off the deferred stock offering costs of $46,303 directly to general and administrative expense. |
| Stock Warrants — In July 2003, the Company issued five-year warrants to purchase 10,000,000 shares of common stock for future services valued at$2,800,000 or $.28 per warrant using the Black-Scholes option pricing model, with the following assumptions: risk-free interest rate of 2.48%, expected dividend yield of zero, expected lives of 5 years and expected volatility of 670%. The warrants were issued to purchase shares of common stock at the following exercise prices: 1,000,000 at $.10 per share, 2,000,000 at $.15, 1,000,000 at $.30 per share, 1,000,000 at $.55 per share, 1,000,000 at $1.00 per share, 2,000,000 at 80% of market value with a $.20 per share minimum, 1,000,000 at 85% of market value with a $.20 per share minimum and 1,000,000 at 90% of market value with a $.20 per share minimum. In July 2003, warrants to purchase 1,000,000 shares of common stock at $.10 per share. In August 2003, warrants to purchase 833,333 shares of common stock at $.15, were exercised. At October 31, 2003, warrants to purchase 8,166,667 shares of common stock were still outstanding. |
| Stock Options — In June 2003, Parent granted options to purchase 420,000 shares of common stock at $.19 per share as additional compensation to officers of the Company. The options vest over three years with 140,000 vesting on June 20, 2004, 140,000 vesting on June 20, 2005 and 140,000 vesting on June 20, 2006. The options are exercisable for three years following vesting. Since the exercise price of the options was the same as the market price of the Company’s common stock on the grant date, the Company has recorded no compensation cost for the options in accordance with Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees”. |
17
SKYWAY
COMMUNICATIONS HOLDING CORP. AND SUBSIDIARY
[A Development Stage Company]
A summary of the status of the options granted under the Company’s stock-based employee compensation plan is presented below.
| For the Three Months Ended October 31, |
From Inception on April 24, 2002 Through | |||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2003 |
2002 |
October 31, 2003 | ||||||||||||||||||
| Shares |
Weighted Average Exercise Price |
Shares |
Weighted Average Exercise Price |
Shares |
Weighted Average Exercise Price | |||||||||||||||
| Outstanding at beginning of period | 420,000 | $ | .19 | -- | $ | -- | 420,000 | $ | -- | |||||||||||
| Granted | -- | -- | -- | -- | -- | -- | ||||||||||||||
| Exercised | -- | -- | -- | -- | -- | -- | ||||||||||||||
| Forfeited | -- | -- | -- | -- | -- | -- | ||||||||||||||
| Expired | -- | -- | -- | -- | -- | -- | ||||||||||||||
| Outstanding at end of period | 420,000 | .19 | -- | -- | 420,000 | -- | ||||||||||||||
| Weighted average fair value of options | ||||||||||||||||||||
| granted during the period | 420,000 | $ | .19 | -- | $ | -- | 420,000 | $ | .19 | |||||||||||
The fair value of each option granted is estimated on the date granted using the Black-Scholes option pricing model, with the following assumptions: risk-free interest rate of 2.31%, expected dividend yield of zero, expected lives of 4 to 6 years and expected volatility of 680%.
A summary of the status of the options outstanding under the Company’s stock-based employee compensation plan at October 31, 2003 is presented below:
| Options Outstanding |
Options Exercisable | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Range of Exercise Prices |
Number Outstanding |
Weighted-Average Remaining Contractual Life |
Weighted-Average Exercise Price |
Number Exercisable |
Weighted-Average Exercise Price | ||||||||||||
| $ | .19 | 420,000 | 4.6 years | $ | .19 | -- | $ | -- | |||||||||
18
SKYWAY
COMMUNICATIONS HOLDING CORP. AND SUBSIDIARY
[A Development Stage Company]
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| The accompanying financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America, which contemplate continuation of the Company as a going concern. However, the Company was only recently formed and has not yet been successful in establishing profitable operations. These factors raise substantial doubt about the ability of the Company to continue as a going concern. In this regard, management is proposing to raise any necessary additional funds not provided by operations through loans or through additional sales of their common stock. There is no assurance that the Company will be successful in raising this additional capital or in achieving profitable operations. The financial statements do not include any adjustments that might result from the outcome of these uncertainties. |
| Advance to Sky Way Global — The Company advanced $35,000 in July 2003, $8,000 in August 2003 and $20,000 in October 2003 to Sky Way Global, LLC (“SWG”), an entity under common control. SWG has made payments on behalf of the Company totaling $11,618 through October 31, 2003,resulting in a balance of $51,382 owed by SWG to the Company as of October 31, 2003. The advance bears no interest and is due on demand. |
| License Agreements — The Company has entered into licensing agreements with SWG [See Note 4]. |
| Advances from Sky Way Global and Note Payable — SWG made payments on behalf of the Company and made cash advances to the Company totaling $1,564,015. The advances bore no interest and were due on demand. On June 19, 2003, the Company converted the amounts owed to SWG into a promissory note. The note bore no interest and was due on demand. On June 21, 2003, Subsidiary issued 1,000,000 shares of its preferred stock to SWG as repayment of the note and advances. |
| Note Payable — At October 31, 2003, $3,600 of the Company’s notes payable and $1,088 of accrued interest were owed to a shareholder of the Company [See Note 5]. For the three months ended October 31, 2003 and 2002, interest expense to the shareholder amounted to $99 and $0, respectively. |
| Office Space — The Company shares office space with SWG. In May 2003, due to the reduced operations of SWG, the Company stopped charging rent to SWG. During the three months ended October 31, 2003 and 2002, respectively, the Company billed SWG $0 and $0 in rent. |
| Employment Agreements and Management Compensation — In June 2003, the Company entered into a three-year Employment Agreement with the Company’s President to pay a salary of $150,000 per year increased annually by 10%. The agreement also required the Company to grant options to purchase 210,000 shares of common stock and to pay $750 per month as a non-accountable automobile allowance. The June 2003 Employment Agreement replaced an April 2003 five-year Employment Agreement which required a salary of $150,000 per year increased annually by 10%. During the three months ended October 31, 2003 and 2002, respectively, the Company expensed $37,500and $0 as compensation to the Company’s President. At October 31, 2003, the Company owed $33,878 in accrued salary to the Company’s President. |
19
SKYWAY
COMMUNICATIONS HOLDING CORP. AND SUBSIDIARY
[A Development Stage Company]
| In June 2003, the Company entered into a three-year Employment Agreement with the Company’s Chief Executive Officer to pay a salary of $150,000 per year increased annually by 10%. The agreement also required the Company to grant options to purchase 210,000 shares of common stock and to pay $750 per month as a non-accountable automobile allowance. The June 2003 Employment Agreement replaced an April 2003 five-year Employment Agreement which required a salary of $175,000 per year increased annually by 10%. During the three months ended October 31, 2003 and 2002, respectively, the Company expensed $37,500 and $0 as compensation to the Company’s Chief Executive Officer. At October 31, 2003, the Company owed $88,197 in accrued salary to the Company’s Chief Executive Officer. |
| During the three months ended October 31, 2003 and 2002, respectively, the Company expensed $20,000 and $0 as compensation to a shareholder of the Company. At October 31, 2003, the Company owed $14,260 in accrued salary to the shareholder. |
| Consulting Agreement — In July 2003, the Company entered into a six-month Consulting Agreement, as amended in August 2003, with Michael Farkas, a shareholder of the Company, to provide consulting services valued at $2,030,000 using the Black-Scholes option pricing model in exchange for 1,250,000 shares of common stock and five-year warrants to purchase 6,000,000 shares of common stock [See Note 7]. The warrants were issued to purchase shares of common stock at the following exercise prices: 1,000,000 at $.10 per share, 2,000,000 at $.15, 1,000,000 at $.30 per share, 1,000,000 at $.55 per share and 1,000,000 at $1.00 per share. At October 31, 2003, the Company has recorded $210,000 of the services as a subscription receivable. |
| Investment Banking/Advisory Agreement — In June 2003, the Company entered into an Investment Banking/Advisory Agreement with Atlas Capital Services, LLC (“Atlas”), an entity controlled by a shareholder of the Company. The agreement provided for Atlas to assist the Company in finding an acquisition candidate and the Company was to issue 2,330,493 shares of common stock upon consummation of an acquisition. In June 2003, Parent acquired Subsidiary and issued 2,330,493 shares of common stock to Atlas for services rendered valued at $442,794. The agreement also provides for Atlas to assist the Company in obtaining financing and the Company will pay 10% of the proceeds received from any such financing. |
20
SKYWAY
COMMUNICATIONS HOLDING CORP. AND SUBSIDIARY
[A Development Stage Company]
| Consulting Agreements — In July 2003, the Company entered into a six-month Consulting Agreement with Bruce Baker to provide consulting services valued at $1,400,000 using the Black-Scholes option pricing model in exchange for 1,000,000 shares of common stock and five-year warrants to purchase 4,000,000 shares of common stock [See Note 7]. The warrants were issued to purchase shares of common stock at the following exercise prices: 2,000,000 at 80% of market value with a $.20 per share minimum, 1,000,000 at 85% of market value with a $.20 per share minimum and 1,000,000 at 90% of market value with a $.20 per share minimum. At October 31, 2003, the Company has recorded $210,000 of the services as a subscription receivable. |
| In July 2003, the Company entered into a nine-month Consultant Services Plan with Beadros Asare to provide consulting services valued at $18,000 in exchange for 50,000 shares of common stock. At October 31, 2003, the Company has recorded $10,000 of the services as a subscription receivable. |
| In September 2003, the Company entered into one-year Consulting Agreements with Doug Dahms and William Craig to provide consulting services in exchange for a total of 12,000,000 shares (6,000,000 shares each) of the Company’s common stock. The Company has terminated this agreement and has not issued any shares there under. |
| Engagement Agreement — In June 2003, Parent entered into an Engagement Agreement with Michael Williams to provide legal services through December 31, 2003 valued at $380,000 in exchange for 2,000,000 shares of common stock. At October 31, 2003, the Company has recorded $162,857 of the services as a subscription receivable. |
21
SKYWAY
COMMUNICATIONS HOLDING CORP. AND SUBSIDIARY
[A Development Stage Company]
| Escrow and Lease Agreements — In January 2003, the Company signed an Escrow Agreement with ECI Telecom, Inc. (“ECI”) and Klein & Heuchan (“KH”) to rent office space for the month of February 2003 while a long-term lease was finalized. The agreement called for the Company to deposit $105,000 with KH and for rent of $16,000 to accrue for February. In March 2003, the Company signed an Extension of Escrow Agreement with ECI and KH to provide for the Company to continue to occupy the rented office space through April 30, 2003. In May 2003, the Company signed a Lease Agreement with ECI Telecom, Inc (“ECI”) to replace the escrow agreements. The lease provides for a five-year term beginning February 1, 2003 and the lease is renewable for one additional five-year term. The lease requires payments of $46,367 per month beginning June 2003 and skipping January 2004. The lease payments will increase 3% each February 1 and the Company will pay additional expenses for upkeep of the building. The lease continues the $92,500 security deposit of the escrow agreement. The Company paid $15,000 required under the lease in order for the Company to have the option to purchase the leased office space for $4,750,000 by August 1, 2003 or $4,900,000 by November 1, 2003. The lease is guaranteed by Sky Way Global, LLC, an entity under common control. For the three months ended October 31, 2003 and 2002, total rent expense amounted to $139,101 and $0, respectively. |
| Minimum future rental payments under the lease agreement for the twelve-month periods ended and in aggregate are: |
| October 31, |
Amount | ||||
|---|---|---|---|---|---|
| 2004 | $ | 523,000 | |||
| 2005 | 586,000 | ||||
| 2006 | 604,000 | ||||
| 2007 | 622,000 | ||||
| 2008 | 157,000 | ||||
| $ | 2,492,000 | ||||
| Letter of Intent — In July 2003, the Company signed a Letter of Intent to acquire Star Navigation Systems Group Ltd. The agreement provides for the two companies to work toward an acquisition agreement. No acquisition agreement has been signed and final consummation of an acquisition is not guaranteed. |
| Services Agreement — In February 2003, the Company entered into a three-year Services Agreement with XO Communications, Inc. [“XO”]. The agreement calls for XO to provide internet services to the Company and the term of the agreement does not begin until XO has completed installation of the internet connection. The agreement requires the Company to purchase a minimum of $4,600 of services per month with annual minimum purchases of $55,200 for the first year, $110,400 for the second year and $165,600 for the third year. At July 31, 2003, XO had not yet complete installation of the internet connection and no amount has been accrued in the accompanying financial statements for the payments required under this agreement. |
22
SKYWAY
COMMUNICATIONS HOLDING CORP. AND SUBSIDIARY
[A Development Stage Company]
| Stock Cancellation and Contingency — In March 2003, Subsidiary’s Board of Directors approved to cancel 3,888,360 shares of Subsidiary’s common stock that had been accounted for as issued to consultants in April 2002. Management claims that consideration was not received for the stock. Although the certificates representing these shares were not delivered, the possibility exists that the consultants may demand delivery of the shares pursuant to agreements with the Company. |
| Consulting Agreements — In November 2003, the Company entered into 18 week Consulting Agreements with Aran Strategic Finance, LLC to provide consulting services for $100,000. |
| Stock Issuances — We sold 4,900,000 shares of common stock at prices ranging from $.10 to $.13 for aggregate consideration of $630,000 to 4 accredited and/or sophisticated investors. |
| Building Option to Purchase — The Company has notified the lessor of building of their intent to purchase the building under the lease agreement. The company is actively pursuing financing at this time1[See Note 10]. |
23
Item 2. Management’s Discussion and Plan of Operation
Forward-Looking Statements
| This Quarterly Report contains forward-looking statements about SkyWay Communications Holding Corp.‘s business, financial condition and prospects that reflect management’s assumptions and beliefs based on information currently available. We can give no assurance that the expectations indicated by such forward-looking statements will be realized. If any of our management’s assumptions should prove incorrect, or if any of the risks and uncertainties underlying such expectations should materialize, SkyWay Communications Holding Corp.‘s actual results may differ materially from those indicated by the forward-looking statements. |
| The key factors that are not within our control and that may have a direct bearing on operating results include, but are not limited to, acceptance of our services, our ability to expand our customer base, managements’ ability to raise capital in the future, the retention of key employees and changes in the regulation of our industry. |
| There may be other risks and circumstances that management may be unable to predict. When used in this Quarterly Report, words such as, “believes,” “expects,” “intends,” “plans,” “anticipates,” “estimates” and similar expressions are intended to identify forward-looking statements, as defined in Section 21E of the Securities Exchange Act of 1934, although there may be certain forward-looking statements not accompanied by such expressions. |
| The safe harbors of forward-looking statements provided by Section 21E of the Exchange Act are unavailable to issuers of penny stock. As we issued securities at a price below $5.00 per share, our shares are considered penny stock and such safe harbors set forth under the Reform Act are unavailable to us. |
BUSINESS DEVELOPMENT.
| We were incorporated under the name Mastertel, Inc. in the State of Florida on December 16, 1998 as a wholly owned subsidiary of i-Incubator.com, Inc. (now known as Inclusion, Inc.), a public company that formerly traded on the NASDAQ OTC Electronic Bulletin Board. On December 2, 1999, the Company filed a Certificate of Amendment changing the name of the Company to i-Teleco.com, Inc. On April 14, 2003, the Company filed a Certificate of Amendment changing the name of the Company to SkyWay Communications Holding Corp. |
| On June 21, 2003, SWYC Acquisition Corporation, a Florida corporation and our wholly owned subsidiary, merged, pursuant to an Amended and Restated Agreement and Plan of Merger, dated as of June 19, 2003, with and into Sky Way Aircraft, Inc., a Nevada corporation. The merger closed on June 21, 2003. In connection with the merger, we moved our headquarters to 6021 — 142nd Avenue North, Clearwater, FL 33760. |
24
We are developing a ground to air in-flight aircraft communication network that we anticipate will facilitate homeland security and in-flight entertainment. We are focused on bringing to the market a network supporting aircraft-related services including anti-terrorism support, real time in-flight surveillance and monitoring, WIFI or wireless access to the Internet, telephone service and enhanced entertainment service for commercial and private aircraft throughout the United States. Based on the final upgrading of a previous airborne telephone and communications network, we intend to provide broadband connectivity between the ground and in-flight aircraft throughout the U.S. using technology that provides a broadband high-speed data transmission.
We intend to be the communications solution for commercial and private aircraft owners wanting real time access to on-board security systems, aircraft health and welfare monitoring, avionics operations and for passengers wanting real time high-speed access to the internet. Our network will enable third party applications that can personalize the in-flight entertainment experience, provide real time access to flight management avionics with long-term data storage and also support for ground monitoring of in-flight surveillance systems that is being designed with the goal of enhancing current airline security standards. However, we will only provide the network. Other parties will use their applications on our network to provide these types of services.
Sky Way Aircraft was formed to utilize now-patented wireless data transmission software technology developed by Mr. Brent Kovar, our President. This technology is a software program for data indexing, which is similar to data compression but which mitigates data loss problems associated with compression. This technology permits faster and less expensive transmission of data, video, voice and audio between the ground and an airplane or other homeland security related ground locations than using traditional, non-indexed data transmission mechanisms. This is because indexed data takes up less transmission space, and thus travels faster and costs less to transmit than non-indexed data transmission. The technology is licensed to us under an irrevocable, perpetual exclusive worldwide license agreement.
We are currently in the process of testing our technology in the transmission of data between the ground and airplanes. We have demonstrated that video and internet connection data can be transmitted between the ground and airplanes using our technology. We are in the process of additional testing to refine these communication links. We are also in the process of developing our homeland security applications.
We currently have no customers, although we have signed a contract to provide services to Southeast Airlines. All of our products and services are in the development stage and will require additional testing. In addition, we need to develop our infrastructure and secure agreements with a number of third party service providers in order to commence operations.
25
Results of Operations
We had the following expenses for the following periods:
Three months ended October 31, 2002 vs. three months ended October 31, 2003
General and administrative expenses for the three months ended October 31, 2003 totaled $2,044,293 and included consulting fees, payroll, rent and legal fees. Selling expenses for the three months ended October 31, 2003 totaled $32,047, included advertising. Research and Development expenses for the three months ended October 31, 2003 totaled $319,712 and included rental costs for equipment and testing. Interest expense was $1,109,329.
General and administrative expenses for the three months ended October 31, 2002 totaled $29,887 and included office expenses, travel and legal fees. We had no selling expenses. Research and Development expenses for the three months ended October 31, 2002 totaled $69,848 and included personnel costs for research and development and rental costs for equipment and testing. We had no interest expense.
All increases in expenses were the result of our merger with Sky Way Aircraft, Inc. and the fact that Sky Way Aircraft had minimal operations during the three months ended October 31, 2002.
Future Plans
We plan to accomplish the following in the future. We need additional funds to finance our business development in the next 12 months, as set forth below, but we are not committed to make any of these expenditures. We have no source of these funds identified. We hope to be able to raise additional funds from an offering of our stock in the future. However, this offering may not occur, or if it occurs, may not raise the desired funding. If we fail to secure adequate funds to accomplish the objectives outlined below, we will be able to conduct only limited operations. However, we believe that if we secure the required funding on a timely basis, we can accomplish these objectives within the projected time frames.
| EVENT OR MILESTONE |
TIME FRAME FOR IMPLEMENTATION |
METHOD OF ACHIEVEMENT |
ESTIMATED COST [Low/High] |
|---|---|---|---|
| Lease, activate and upgrade tower network Identify, test and upgrade equipment in aircraft Build out and equip operations center Complete research and testing of aircraft network Hire additional employees to operate network |
October 1, 2003 - June 30, 2004 October 1, 2003 - June 30, 2004 October 1, 2003 - June 30, 2003 October 1, 2003 - March 31, 2004 October 1, 2003 - March 31, 2004 |
Contact owners and complete negotiations; conduct site survey Identify airlines, execute agreement, secure installation service Construct and test all operations Continue research and testing Interview and hire |
$600,000-$850,000 $500,000-$650,000 $300,000-$450,000 $250,000-$400,000 $500,000-$650,000 |
26
We have no sources of financing identified. Even if we identify sources for such financing:
| o | Additional financing may not be available on commercially reasonable terms or available at all |
| o | Additional financing may result in dilution to existing and future equity holders; and |
| o | If we issue debt instruments, we will be subject to increased debt obligations that will impose a greater financial strain upon our operations. |
If we do not secure the required funding, the major expansion planned milestones may not be achieved within the anticipated time period, if at all. We believe that future plans will be achieved if we receive the necessary funding. Furthermore, in the event that the level of funding is less that we have anticipated, this may also result in a delay in our ability to generate revenues or a reduced amount of revenues being generated.
Liquidity and Capital Resources
From our inception on April 24, 2002 to October 31, 2003, we incurred operating losses of ($8,349,999) and at October 31, 2003 we had a net working capital deficit of $520,734. Net cash used in operating activities for the period from August 1, 2003 to October 31, 2003 was $2,281,862.
In addition, as of October 31, 2003, we had a cash position of $42,388. Our cash resources are not sufficient to satisfy our cash requirements over the next 12 months. We will need to secure a minimum of $2,000,000 to satisfy such requirements, but we need an additional minimum of $5,000,000 to finance our planned expansion in the next 12 months, which funds will be used for product development and personnel. In order to become profitable we may still need to secure additional debt or equity funding. We have no source of funding identified. Our failure to secure additional funds would impair and delay our ability to implement our business plan.
We may experience problems; delays, expenses, and difficulties sometimes encountered by an enterprise in Sky Way Aircraft’s stage of development, many of which are beyond our control. These include, but are not limited to, unanticipated problems relating to the development of the system, production and marketing problems, additional costs and expenses that may exceed current estimates, and competition.
The Corporation maintains disclosure controls and procedures designed to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the specified time periods. As of the end of the period covered by this report, the Corporation’s Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of the Corporation’s disclosure controls and procedures. Based on the evaluation, which disclosed no significant deficiencies or material weaknesses, the Corporation’s Chief Executive Officer and Chief Financial Officer concluded that the Corporation’s disclosure controls and procedures are effective as of the end of the period covered by this report. There were no changes in the Corporation’s internal control over financial reporting that occurred during the Corporation’s most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Corporation’s internal control over financial reporting.
27
NONE
We sold duPont Investment Fund, and Accredited Investor, 4,000,000 shares of common stock at $0.25 per share. In addition, the duPont Fund acquired common stock purchase warrants to acquire an additional 2,000,000 shares at $0.35 per share, 2,000,000 shares at $0.50 per share, 2,000,000 shares at $0.70 per share, 2,000,000 shares at $1.25 per share and 2,000,000 shares at $1.50 per share. The Warrants are exercisable at any time prior to October 31, 2005. All of these securities are restricted securities. The purchase of the initial 4,000,000 shares for $1,000,000 was consummated on September 19, 2003.
In October 2003, we issued 2,812,000 share of Series C Convertible Preferred Stock to 42 employees and consultants.
| a. | The Holders shall have the right in their sole and absolute discretion to convert 2,812,000 shares of Convertible Preferred Stock — Series C issued by the Corporation into 28,120,000 common shares of the Corporation on a one share for ten share basis upon the occurrence of the following event: |
| The Corporation signing additional contracts for installation of its system with a second airline or general aviation company or any combination thereof. |
| b. | Time of Conversion. The Shares shall be convertible at any time, in whole or in part, at any time for a period commencing on the date of a Conversion Event and ending on December 31, 2013. No additional consideration is payable upon conversion. |
| c. | Forfeiture. Liquidation Preference. The Shares shall be forfeited to Corporation for no consideration if a Conversion Event is not completed prior to December 31, 2013. The Shares shall have a preference over holders of Common Stock of the Corporation upon liquidation equal to its par value. |
In October 2003, we issued 85,000 shares of Series D Convertible Preferred Stock. The Holders shall have the right in their sole and absolute discretion to convert 85,000 shares of Convertible Preferred Stock — Series D issued by the Corporation (into 8,500,000 common shares of the Corporation upon a one share for one hundred share basis upon the occurrence of the following event: The conversion of shares of Class A Preferred Stock into common stock.
In addition, during the 3 month period ending October 31, 2003, we sold 12,250,000 shares of common stock at prices ranging from $.10 to $.13 for aggregate consideration of $1,474,000 to 36 accredited and/or sophisticated investors.
We relied upon Section 4(2) of the Securities Act of 1933, as amended for the above issuances. We believed that Section 4(2) was available because:
| o | None of these issuances involved underwriters, underwriting discounts or commissions; |
| o | We placed restrictive legends on all certificates issued; |
| o | No sales were made by general solicitation or advertising; |
| o | Sales were made only to accredited investors or investors who were sophisticated enough to evaluate the risks of the investment. |
In connection with the above transactions, although some of the investors may have also been accredited, we provided the following to all investors:
| o | Access to all our books and records. |
| o | Access to all material contracts and documents relating to our operations. |
| o | The opportunity to obtain any additional information, to the extent we possessed such information, necessary to verify the accuracy of the information to which the investors were given access. |
NONE
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Item 4. Submission of Matters to a Vote of Security Holders.
NONE
NONE
| 31.1 31.2 32.1 32.2 |
Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer, Richard Lough Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer, James Kent Section 1350 Certification, Richard Lough Section 1350 Certification, James Kent |
8-K Reports
8-K Current report, items 5
and 7 2003-10-15
8-K Current report, items 5 and 7 2003-10-09
8-K Current
report, items 5 and 7 2003-10-08
8-K Current report, items 5 and 7 2003-10-06
8-K Current report, items 5 and 7 2003-10-02
8-K Current report, items 5 and
7 2003-10-01
8-K Current report, items 5 and 7 2003-09-24
8-K/A[Amend]Current report, item 7 2003-09-05
8-K Current report, items 4 and 7
2003-09-05
8-K Current report, items 5 and 7 2003-09-02
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, thereunto duly authorized.
| Skyway Communications Holding Corp. By /s/ Richard Lough Richard Lough, Chief Financial Officer By /s/ James Kent James Kent, Chief Executive Officer |
Date: December 15, 2003
29
| This ‘10QSB’ Filing | Date | Other Filings | ||
|---|---|---|---|---|
 | ||||
| 12/31/13 | ||||
| 6/20/06 | ||||
| 10/31/05 | ||||
| 6/20/05 | ||||
| 6/30/04 | ||||
| 6/20/04 | ||||
| 3/31/04 | ||||
| 12/31/03 | ||||
| Filed on: | 12/15/03 | |||
| 11/1/03 | ||||
| For Period End: | 10/31/03 | |||
| 10/1/03 | 8-K | |||
| 9/19/03 | ||||
| 8/1/03 | ||||
| 7/31/03 | 10QSB, NT 10-Q | |||
| 6/30/03 | ||||
| 6/23/03 | 4, 8-K, SC 14F1 | |||
| 6/21/03 | 8-K/A | |||
| 6/19/03 | 8-K/A | |||
| 5/30/03 | 8-K | |||
| 4/30/03 | 10KSB, NT 10-K | |||
| 4/14/03 | ||||
| 3/11/03 | ||||
| 2/1/03 | ||||
| 10/31/02 | ||||
| 4/24/02 | ||||
| 12/2/99 | ||||
| 12/16/98 | ||||
| List all Filings | ||||