FORM 10-QSB-Quarterly
Report Under Section 13 or 15 (d) of the Securities Exchange Act of 1934
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[x] Quarterly Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the period ended September 30, 1997.
[ ] 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 0-29098
NAVIDEC, INC.
(Exact name of registrant as specified in its charter)
COLORADO 33-0502730
(State or other (Employer
jurisdiction of Identification No.)
incorporation)
14 INVERNESS DRIVE, SUITE F-116, ENGLEWOOD, CO 80112
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 303-790-7565
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK NO PAR VALUE
Title of Class
APPLICABLE ONLY TO CORPORATE ISSUERS:
As of October 31, 1997, Registrant had 3,010,000 shares of common stock
outstanding
<PAGE>
NAVIDEC, INC.
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets as of September 30, 1997 and December 31, 1996
Statements of Operations, Three months and Nine months ended
September 30, 1997 and 1996
Statements of Cash Flows,
Nine months ended September 30, 1997 and 1996
Notes to Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
PART II. OTHER INFORMATION
Item 1- 4. Not Applicable
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
PART III. SIGNATURES
Item 1. Signatures
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
NAVIDEC, INC.
BALANCE SHEETS
September 30, December 31,
1997 1996
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 513,000 $ 231,000
Accounts Receivable:
Trade net of $50,000
allowance for doubtful
accounts 970,000 100,000
Retainage 25,000 45,000
Work In Process 153,000
Inventory 339,000 196,000
Prepaid expenses and other
current assets 64,000 28,000
-------------- ---------------
Total current assets $2,064,000 $ 600,000
PROPERTY AND EQUIPMENT, net $ 776,000 $ 465,000
OTHER ASSETS
Notes Receivable $ 30,000 $ 0
Intangibles, net 1,560,000 1,193,000
Deposits 33,000
------------- --------------
Total Assets $4,463,000 $ 2,258,000
========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Current portion of capital
lease obligations $ 31,000 $ 31,000
Current portion of
long term debt 60,000 0
Accounts Payable
401K/Cafeteria 38,000 0
Notes payable
related parties 9,000 160,000
Line of Credit 35,000 0
Accounts payable 320,000 760,000
Other accrued liabilities 191,000 360,000
------------- --------------
Total current liabilities $ 684,000 $1,311,000
CAPITAL LEASE OBLIGATIONS,
net current portion $ 109,000 $ 132,000
RELATED PARTY NOTES PAYABLE,
net current portion $ 0 $ 87,000
LONG TERM DEBT $ 230,000 $ 0
UNSECURED SUBORDINATED
CONVERTIBLE NOTES $ 0 $ 1,438,000
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, no par value;
20,000,000 shares authorized
2,701,000 and 1,701,000
shares issued and
outstanding $5,887,000 $ 401,000
Accumulated deficit (2,447,000) (1,111,000)
------------- -------------
Total stockholders'
equity (deficit) $3,440,000 $ (710,000)
TOTAL LIABILITIES and
STOCKHOLDERS' EQUITY $4,463,000 $2,258,000
============ ==========
</TABLE>
See accompanying notes to these financial statements
<PAGE>
NAVIDEC, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Nine Months For the Three Months
Ended September 30 Ended September 30
------------------------------- --------------------------
1997 1996 1997 1996
------------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
NET SALES $4,877,000 $4,222,000 $1,926,000 $1,750,000
Cost of Sales 3,234,000 3,417,000 1,308,000 1,354,000
------------- ------------- ------------- ------------
GROSS MARGIN $1,643,000 $ 805,000 $ 618,000 $ 396,000
Operating
Expenses $2,959,000 $1,391,000 $ 968,000 $ 758,000
-------------- -------------- ------------- ------------
OPERATING
(LOSS) $(1,316,000) $ (585,000) $ (350,000) $ (362,000)
OTHER INCOME (EXPENSES)
Interest,
net $ (21,000) $ (128,000) $ (9,000) $(105,000)
Other 1,000 (1,000) 0 2,000
-------------- -------------- ------------- ------------
Other,
net $ (19,000) $ (129,000) $ (9,000) $(103,000)
-------------- -------------- - ------------ -----------
NET INCOME
(LOSS) $(1,336,000) $ (714,000) $(359,000) $(465,000)
========= ========== ========= =========
NET LOSS
PER SHARE $ (.51) $ (.59) $ (.12) $ (.39)
COMMON SHARES
AND
EQUIVALENTS 2,610,000 1,202,000 2,943,000 1,202,000
</TABLE>
See accompanying notes to these financial statements
<PAGE>
<TABLE>
<CAPTION>
NAVIDEC, INC.
STATEMENTS OF CASH FLOWS
For The Nine Months Ended
September 30
1997 1996
--------------------------
<S> <C> <C>
Cash flows from operating activities
Net Loss $(1,336,000) $ (714,000)
Adjustments to reconcile net loss to
net cash used by operating activities:
Depreciation and amortization 233,000 89,000
Stock based compensation 0 83,000
Provision for bad debt 23,000
Changes in operating assets and
liabilities
Decrease (increase) in
accounts receivable (770,000) (395,000)
Decrease (increase) in
work in process (153,000) 0
Decrease (increase) in inventory (105,000) (78,000)
Decrease (increase) in other assets (66,000) (26,000)
Increase (decrease) in
accounts payable and
accrued liabilities (536,000) 304,000
Increase(decrease) in
other liabilities (227,000) 109,000
--------------- ---------------
Net cash (used in)
operating activities $(2,960,000) $ (605,000)
Cash flows from investing activities
Purchases of fixed assets $ (403,000) $ (377,000)
Cash acquired in merger with IPI 5,000
Cash acquired in merger
with TouchSource 7,000 0
------------- --------------
Net cash used in
investing activities $ (396,000) $ (372,000)
Cash flows from financing activities:
Proceeds from sale of
accounts receivable $ 240,000 $ 773,000
Payments on notes payable (1,949,000) (2,520,000)
Proceeds from issuance of
notes/capital leases 300,000 3,207,000
Decrease (increase) in
notes receivable (30,000) 0
Issuance of common stock 5,115,000 2,000
Payment for deferred financing
and offering cost (38,000) (208,000)
--------------- ---------------
Net cash provided by
financing activities $3,638,000 $ 1,254,000
--------------- ---------------
Net increase in cash $ 282,000 $ 277,000
=============== ===============
Supplemental schedule of cash flow information:
Debentures converted
to common stock $ 1,438,000 $ -
=============== ================
</TABLE>
See accompanying notes to these financial statements
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Unaudited Financial Statements
The unaudited financial statements and related notes to the financial
statements presented herein have been prepared by the Company pursuant to
the rules and regulations of the Securities and Exchange Commission.
Accordingly, certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been omitted pursuant to such rules
and regulations. The accompanying financial statements were prepared in
accordance with the accounting policies used in the preparation of the
Company's audited financial statements included in its Annual Report on
Form 10-KSB for the fiscal year ended December 31, 1996, and should be
read in conjunction with such financial statements and notes thereto.
In the opinion of management, all adjustments (consisting only of normal
recurring adjustments) which are necessary for a fair presentation of
operating results for the interim period presented have been made.
Stockholders' Equity
Public Stock Offering - On February 14, 1997, the Company completed an
initial public stock offering of 1,000,000 Units (comprised of
1,000,000 shares of common stock and warrants for the purchase of
1,000,000 shares of common stock) which provided gross proceeds to the
Company of approximately $4,555,000. Simultaneous with the offering
convertible debenture holders converted $1,438,000 in convertible notes
into common stock and warrants. Included in the 1,000,000 Units are
245,000 shares of common stock offered by the holders of the unsecured
subordinated convertible promissory notes. Each warrant allows the
holder to purchase one share of common stock at an exercise price of
$7.20 for a period of five years after the date of the offering. The
warrants are redeemable by the Company at $.05 per warrant upon 30
days notice if the market price of the common stock for 20 consecutive
trading days within the 30-day period preceding the date the notice is
given equals or exceeds $8.40. The Company also sold to the
underwriter at the close of the public offering underwriters warrants,
at a price of $0.001 per warrant, to purchase 100,000 shares of common
stock exclusive of the over-allotment. The underwriters warrants are
exercisable for 4 years beginning in February 1998 at $7.38 per share.
Stock Split - During 1996, the Company declared a 1 for 2 reverse stock
split and 510.2041 to 1 stock split. The Company also declared a .85
for 1 reverse stock split which became effective upon the initial
public offering in February 1997. All common stock reflected in the
financial statements and accompanying notes reflect the effect of the
split and reverse split.
Notes Payable
Notes payable at September 30, 1997, consists of the following:
Note payable to a bank, interest at prime plus 1/2% (8.75% as of
September 30, 1997) and principal payments of
$5,000 payable monthly with remaining principal
paid upon maturity in June 2002,
collateralized by a CD owned by
the company. $280,000
Note payable to officer/director /shareholder,
principal along with interest at 10% per annum
due on December 31, 1997. $ 4,000
Note payable to shareholder, non-interest
bearing, subordinated to all other indebtedness
of the Company, due in monthly installments of
$4,583 through Oct 1, 1997. $ 5,000
<PAGE>
Merger with TouchSource - Effective July 30, 1997, the Company acquired
TouchSource, Inc. in a purchase transaction where the Company acquired
100% of the stock of TouchSource for 207,000 shares of common stock of
the Company. The acquisition was valued at $1,024,000 and resulted in
goodwill of $877,000 being recorded. The goodwill is being amortized
over five years. TouchSource designs and markets touch screen
computer kiosks.
<PAGE>
Item 2
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
The Company was organized as ACI Systems, Inc. in July 1993 and changed its
name to NAVIDEC, Inc. in July 1996. The Company's principal sources of
revenue are from sales of (i) computers, peripherals and electronic
components ("Distribution"), (ii) computer network infrastructure
("Infrastructure"), and (iii) Internet/Intranet solutions ("Internet/Intranet
Solutions"). Effective July 11, 1996, the Company acquired all of the
outstanding common shares of Interactive Planet, Inc. ("IPI") in exchange for
678,877 shares of the Company's common stock and a promissory note of $75,000
payable to a shareholder of IPI and merged IPI in the Company. In addition,
as of July 30, 1997, the Company acquired all of the outstanding common
shares of TouchSource, Inc. ("TouchSource") in exchange for 207,000 shares
of the Company's common stock and merged TouchSource in the Company.
Management believes that the mergers with IPI and TouchSource have
accelerated implementation of the Company's Internet/Intranet Solutions
operating plan while contributing to continued growth in systems integration
and sales of networking and computer peripherals and supplies.
The Company's strategy is to increase revenue generated by its two core
competencies: (1) Internet/Intranet and Kiosk Solutions, which are focused in
four major market areas, including computer and network infrastructure
equipment, software and services, electronic commerce and order fulfillment,
and (2) Product Distribution. The Company has built and intends to continue
to build an infrastructure that assumes this strategy will succeed. The
failure of the Company to achieve this strategy could have a material adverse
effect on the Company's business, financial condition and results of
operations.
The Company recognizes revenue upon delivery of its Internet/Intranet and
Kiosk Solutions and Product Distribution goods. Internet/Intranet and Kiosk
Solutions generally begin with consulting arrangements that are billed on an
hourly basis and then progress to a bid for a proposed project. Deposits
are then taken upon acceptance of the bid. Most of the Company's customers
elect to update and expand their Web sites frequently, and clients are billed
monthly on a time and materials basis for these services. Additional sources
of ongoing revenue include revenue from advertising sold by the Company on
clients' Web sites, revenue from sales of merchandise and services over
clients' Web sites and revenue from maintenance and hosting of client Web
sites. The Company receives a percentage of gross revenue from advertising
and merchandise sales immediately upon completion of these sales.
In September 1997, the Company together with The Denver Post launched
Colorado Wheels, an on-line, multi-dealership motor vehicle inventory
directory. The Company intends to establish services similar to Colorado
Wheels in other regions, and to link all of the regions together in a service
to be called U.S. Wheels. The Company intends to license the product to
regional media outlets. Revenue sources for Colorado Wheels include an up-
front license fee paid by Denver Post, hosting and maintenance fees paid by
the Denver Post, setup and monthly maintenance fees paid by participating
dealerships, sales of software and hardware solutions to participating
dealerships and a share of revenues from customer lead charges paid by
dealerships. The Company anticipates that other regional Wheels services
will have similar revenue sources.
Results of Operations
The following tables set forth for the periods indicated the percentage of
net sales represented by certain line items included in the Company's
statement of operations.
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
------------------ ----------------
1997 1996 1997 1996
---- ---- ----- ----
<S> <C> <C> <C> <C>
Net Sales 100% 100% 100% 100%
Cost of Sales 68 77 66 81
Gross Margin 32 23 34 19
Operating Expense 50 43 61 33
Other Income (Expense) 0 (6) (1) (3)
Net Income (Loss) (19) (27) (27) (17)
Net sales for the nine months ended September 30, 1997 were $4,877,000, which
represents an increase of 16% over net sales of $4,222,000 for the nine months
ended September 30, 1996. Net sales were $1,926,000 for the three months
ended September 30, 1997, which represents an increase of 10% compared to
$1,750,000 for the three months ended September 30, 1996. The increase was
primarily attributed to the revenues associated with the companies
introduction of its new automotive on-line solutions and increased demand
for the companies kiosk solutions.
Sales of Internet/Intranet Solutions during the nine months ended September
30, 1997 increased by $724,000, or 190%, to $1,106,000, compared to sales of
$382,000 for the nine months ended September 30, 1996. Sales of
Internet/Intranet Solutions were $472,000 for the three months ended September
30, 1997, an increase of $276,000, or 141%, compared to sales of $196,000
during the three months ended September 30, 1996. Infrastructure sales
increased by $1,055,000, or 150%, to $1,759,000, compared to $704,000 for
the nine months ended September 30, 1996. Infrastructure sales were
$900,000 for the three months ended September 30, 1997, an increase of
$675,000, or 300%, compared to $225,000 for the three months ended
September 30, 1997. Management believes the increase in sales in both
divisions was attributable to the increasing demand for the solutions
approach the Company began implementing in the third quarter of 1996.
Sales for Distribution during the nine months ended September 30, 1997
decreased by $1,124,000, or 36%, to $2,012,000, compared to $3,136,000 for
the nine months ended September 30, 1996. Sales for Distribution were
$553,000 for the three months ended September 30, 1997, a decrease of
$590,000, or 52%, compared to $1,143,000 for the three months ended
September 30, 1996. The decrease in Distribution sales is the result of the
Company's discontinuation of Laser and Repro-graphics products, which
accounted for $1,052,000 in sales for the nine months ended September 30,
1996 and $503,000 for the three months ended September 30, 1996.
Gross margin was 34% of net sales for the nine months ended September 30,
1997, fifteen percentage points higher than the gross margin for the same
period of 1996. This represented an absolute increase of $838,000 in gross
margin for the nine months ended September 30, 1997 compared to the nine
months ended September 30, 1996. The increase in gross margin is attributed
to the strong gross margin of Internet/Intranet Solutions and management's
decision to eliminate certain low margin Distribution products. For the
three months ended September 30, 1997, gross margin increased to 32% of net
sales, fifteen percentage points higher than the gross margin for the 1996
period. This represented an absolute increase of $222,000 in gross margin
for the three months ended September 30, 1997 compared to the three months
ended September 30, 1996.
Operating expenses for the nine months ended September 30, 1997 were
$2,959,000 compared with $1,391,000 for the nine months ended September 30,
1996, and were $968,000 compared with $758,000 for the three months ended
September 30, 1997 and 1996, respectively. The increases in operating
expenses were primarily the result of an increase in staff needed to
develop the Company's nationwide and regional automotive solution and its
Intranet initiatives, increased marketing activity and depreciation and
goodwill expense resulting from expansion and the mergers with IPI and
TouchSource, respectively.
Net interest expense for the nine months ended September 30, 1997 was $21,000
compared with $128,000 for the nine months ended September 30, 1996. For the
three months ended September 30, 1997, the Company had net interest expense
of $9,000 compared with a net interest expense of $105,000 during the three
months ended September 30, 1996. The higher interest expense in 1996 was a
result of bridge financing promissory notes, credit facilities with the
Company's banks and expenses related to loans from shareholders.
<PAGE>
Liquidity and Capital Resources
Through February 14, 1997, the Company funded its operations primarily through
revenues generated from operations, a bridge financing private placement,
loans from principal shareholders and employees, and lines of credit and
factoring arrangements made available to it by banks. On February 14, 1997,
the Company completed its Initial Public Offering, which generated net
proceeds of approximately $3,504,000. On September 30, 1997, the Company
had cash and cash equivalents of $513,000 and net working capital of
$1,380,000. This compares with cash and cash equivalents of $231,000 and a
working capital deficit of $711,000 on December 31, 1996.
The Company will need to raise additional cash during the next twelve months
for working capital and to fund marketing for Wheels services in regions
other than Colorado. The company expects to raise $2.5 million for these
purposes through a private placement of its equity securities to be completed
during the forth quarter of 1997, although there can be no assurance that
the Company will be able to raise such funds successfully on terms acceptable
to management.
Cash used in operating activities for the Company totaled $2,960,000 and
$605,000 for the nine months ended September 30, 1997 and 1996, respectively.
Cash used in investing activities totaled $396,000 and $372,000 for the nine
months ended September 30, 1997 and 1996, respectively. Cash used in
investing activities consisted of expenditures for property and equipment net
of cash acquired in the merger with TouchSource. Capital expenditures
increased to $403,000 during the nine months ended September 30, 1997,
compared to $377,000 for the nine months ended September 30, 1996. During
the nine months ended September 30, 1997 and 1996, net cash provided by
financing activities (including advances under the Company's line of credit
and factoring arrangement and proceeds from the bridge financing private
placement) was $3,668,000 and $1,254,000, respectively, including note and
line of credit payments of $1,949,000 and $2,520,000, respectively.
The Company has not recorded a deferred tax asset as it cannot conclude to
date that it is more likely than not that the deferred tax asset will be
realized.
Forward Looking Information
Information contained in this report, other than historical information,
should be considered forward looking and reflects management's current
views of future events and financial performance that involve a number of
risks and uncertainties. The factors that could cause actual results to
differ materially include, but are not limited to, the following: general
economic conditions and developments within the Internet and Intranet
industries; competition; market acceptance of the Company's products and
services; length of sales cycle; variability of sales order flow;
management of growth; and other risk factors identified from time to time
in the Company's filings with the Securities and Exchange Commission. These
filings are available on-line at http://www.sec.gov.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
<PAGE>
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
The exhibits included in the Company's Annual Report
on Form 10-KSB for the fiscal year ended December 31,
1996 and the Company's Quarterly report for the
quarter ended June 30, 1997
27 Financial Data Schedule
(b) Reports on Form 8-K
There are no reports on Form 8-K filed during the
quarter for which this report is filed.
<PAGE>
PART III. SIGNATURES
Item 1. Signatures
In accordance with the requirements of the Securities Exchange Act of 1934,
the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
NAVIDEC, INC.
Date: November 11, 1997
By /S/ RALPH ARMIJO
Ralph Armijo
President and CEO
By /S/ PAT MAWHINNEY
Pat Mawhinney
Chief Financial Officer
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 513,000
<SECURITIES> 0
<RECEIVABLES> 1,045,000
<ALLOWANCES> 50,000
<INVENTORY> 339,000
<CURRENT-ASSETS> 2,064,000
<PP&E> 1,009,000
<DEPRECIATION> 233,000
<TOTAL-ASSETS> 4,463,000
<CURRENT-LIABILITIES> 684,000
<BONDS> 0
0
0
<COMMON> 5,887,000
<OTHER-SE> (2,447,000)
<TOTAL-LIABILITY-AND-EQUITY> 4,463,000
<SALES> 4,877,000
<TOTAL-REVENUES> 4,877,000
<CGS> 3,234,000
<TOTAL-COSTS> 6,193,000
<OTHER-EXPENSES> 1,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 21,000
<INCOME-PRETAX> (1,336,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,336,000)
<EPS-PRIMARY> (.51)
<EPS-DILUTED> (.51)
</TABLE>
