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 March 31, 1997.
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from ___________ to _______________
NAVIDEC, INC.
(Exact name of registrant as specified in its charter)
COLORADO 33-0502730
(State or other (Employer
jurisdiction of Identification
incorporation) (Number)
14 INVERNESS DRIVE, SUITE F-116, ENGLEWOOD, CO 80112
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, incl. area code: 303-790-7565
Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past
twelve 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 CORPORATE ISSUERS:
As of May 5, 1997, Registrant had 2,804,721 shares of common
stock outstanding.
Traditional Small Business Disclosure Format (check one):
Yes X No
NAVIDEC, INC.
INDEX
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
Balance Sheets as of March 31, 1997 and December 31,
1996
Statements of Operations, three months ended
March 31, 1997 and 1996
Statements of Cash Flows,
three months ended March 31, 1997 and 1996
Notes to Financial Statements
PART II. OTHER INFORMATION
ITEM 1- 5. NOT APPLICABLE
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
SIGNATURES
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
NAVIDEC, INC.
BALANCE SHEETS
March 31, December 31,
1997 1996
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $2,271,000 $ 231,000
Accounts Receivable:
Trade net of $50,000
allowance for doubtful
accounts $1,048,000 $ 100,000
Retainage $ 50,000 $ 45,000
Inventory $ 245,000 $ 196,000
Prepaid expenses and
other current assets $ 221,000 $ 28,000
Total current assets $ 3,835,000 $ 600,000
PROPERTY AND EQUIPMENT, net $ 467,000 $ 465,000
OTHER ASSETS
Notes Receivable $ 30,000 $ 0
Intangibles, net $ 761,000 $1,193,000
Total Assets $5,093,000 $2,258,000
======== ========
LIABILITIES AND STOCKHOLDERS EQUITY
CURRENT LIABILITIES
Current portion of capital
lease obligations $ 31,000 $ 31,000
Notes payable related
parties $ 80,000 $ 160,000
Accounts payable $ 958,000 $ 760,000
Other accrued liabilities $ 208,000 $ 360,000
------- -------
Total current liabilities $ 1,265,000 $ 1,311,000
CAPITAL LEASE OBLIGATIONS,
net current portion $ 127,000 $ 132,000
RELATED PARTY NOTES PAYABLE,
net current portion $ 0 $ 87,000
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 $ 5,111,000 $ 401,000
Accumulated deficit (1,410,000) (1,111,000)
------------- -------------
Total stockholders
equity (deficit) $ 3,701,000 $ (710,000)
TOTAL LIABILITIES and
STOCKHOLDERS EQUITY $ 5,093,000 $ 2,258,000
======== ========
See accompanying notes to these financial statements.
NAVIDEC, INC.
STATEMENTS OF OPERATIONS
For the Three Months
Ended March 31,
1997 1996
----------- -------
NET SALES $ 1,363,000 $ 847,000
Cost of Sales $ 858,000 $ 629,000
GROSS MARGIN $ 506,000 $ 218,000
Operating Expenses $ 769,000 $ 241,000
OPERATING INCOME (LOSS) $ (263,000) $ (23,000)
OTHER INCOME (EXPENSES)
Interest, net $ (35,000) $ (12,000)
Other $ (1,000) $ (1,000)
Other, net $ (36,000) $ (13,000)
NET INCOME (LOSS) $ (299,000) $ (36,000)
========= ========
NET LOSS PER SHARE $ (.13) $ (.03)
WEIGHTED AVERAGE COMMON SHARES
AND EQUIVALENTS OUTSTANDING 2,290,000 1,352,000
See accompanying notes to these financial statements.
NAVIDEC, INC.
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED
MARCH 31
1997 1996
Cash flows from operating
activities
Net Loss $ (299,000) (36,000)
Adjustments to reconcile
net loss to net cash used
by operating activities:
Depreciation and
amortization $ 92,000 $ 11,000
Changes in operating
assets and liabilities
Decrease (increase)
in accounts receivable $ (953,000) $ 517,000
Decrease (increase)
in inventory $ ( 49,000) $ (25,000)
Decrease (increase)
in prepaid expenses $ (193,000) $ (38,000)
Increase (decrease)
in accounts payable $ 186,000 $ ( 4,000)
Increase (decrease)
in accrued expenses $ (152,000) $ (19,000)
Net cash provided by
(used in) operating
activities $(1,292,000) $ 406,000
Cash flows from investing
activities:
Purchases of fixed assets $ (67,000) $ (19,000)
Cash flows from financing
activities:
Proceeds from sale of
accounts receivable $ -- $ 491,000
Payments on Notes
Payable $(1,850,000) $(1,172,000)
Proceeds from issuance
of notes/Capital
Leases $ 240,000 $ 369,000
Decrease (increase)
in notes receivable $ (30,000) $ -
Issuance of common stock $ 5,115,000 $ -
Net cash provided by
(used in) financing
activities $ 3,399,000 $ (312,000)
Net increase in cash $ 2,040,000 $ 75,000
Supplemental schedule of
cash flow information:
Debentures converted
to common stock $ 1,437,000 $ -
See accompanying notes to these financial statements.
NOTES TO FINANCIAL STATEMENTS
1. UNAUDITED FINANCIAL STATEMENTS:
The unaudited financial statements and related notes to
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 it 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 $1,437,500 in convertible notes into common stock and
warrants. Included in the 1,000,000 Units are 245,000 units
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 - Related Parties
Notes payable - related parties at March 31, 1997 consists
of the following:
Note payable to officer/director /shareholder,
principal along with interest at 10% per annum
due on December 31, 1997. $42,000
Note payable to shareholder, non-interest bearing,
subordinated to all other indebtedness of the Company,
due in monthly installments of $6,250 through July 1,
1997 $38,000
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULT 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 the resale of computer
equipment, high technology peripherals and electronic components
manufactured by independent vendors ( Product Distribution ) and
services related to 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 Commons Stock and a promissory note of
$75,000 payable to a shareholder of IPI and merged IPI in the
Company. Management believes the merger with IPI has 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 historic operations of IPI prior to the merger
were minimal and comparable financial data is not available.
The Company's strategy is to increase revenue generated by
its two core competencies: (1) Internet/Intranet Solutions, which
are focused in five major market areas, including computer and
network infrastructure equipment, software and services, content
aggregation, 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 Solutions and Product Distribution goods.
Internet/Intranet Solutions generally begin with consulting
arrangements that are billed on an hourly basis and then
progresses 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.
During the quarter ended March 31, 1997, the Company
factored certain receivables on a recourse basis allowing it
to have readily available access to cash from receivables at
acceptable discount rates. See note 7 to the audited financial
statements included in Navidec, Inc. Annual Report on Form 10-KSB
for the fiscal year ended December 31, 1996. Based on the
Company's cash position, management has discontinued factoring in
order to lower its cost of capital.
Results of Operations
The following tables sets forth for the periods indicated
the percentage of net sales represented by certain line items
included in the Company's statement of operations.
Quarter Ended
March 31
1997 1996
Net Sales 100% 100%
Cost of Sales 63 75
Gross Margin 37 25
Operating Expense 57 27
Other Income (Expense) (1) (3)
Net Income (Loss) (21) (5)
Net sales for the first quarter of 1997 were $1,363,000
which represents an increase of 61% over net sales of $847,000 in
the first quarter of 1996. All divisions showed an increase in
sales over the first quarter of 1996. Sales of Internet/Intranet
were $294,000; this compares to IPI's sales of $90,000 for the
first quarter of 1996. System sales increased by $260,000, or
184%, to $402,000 compared to $142,000 for the first quarter of
1996. The increase in sales in both divisions is attributable
to the systems approach the Company implemented in the third
quarter of 1996. The improvement in net sales occurred despite
the discontinuation of Lasers and Repro-graphics, which
management determined no longer fit the Company's business plan.
Gross margin was 37% during first quarter of 1997, 12%
higher than the gross margin for the first quarter of 1996. The
increase in gross margin is attributed to the strong gross margin
of Internet/Intranet Solutions and to the strength of the U.S.
dollar versus the yen, which improved gross margin for
Components.
Operating expenses for the first quarter of 1997 were
$806,000 compared with $335,000 for the first quarter of 1996.
The increase in operating expenses was primarily the result of an
increase in staff, marketing activity and goodwill and
depreciation expense resulting from expansion and the merger with
IPI.
Net Interest expense for the quarter ended March 31, 1997,
was $35,000 compared with $5,000 for the first quarter of 1996.
The increased interest expense for 1996 was a direct result of
the bridge financing promissory notes, increased credit
facilities with the Company's banks and expenses related to loans
from the primary shareholders. Interest expense should decrease
for the remainder of 1997 as a result of the conversion of the
Bridge Promissory Notes on February 14, 1997.
Liquidity and Capital Resources
Through February 14, 1997, the Company funded its operations
primarily through revenues generated from operations, the 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 it Initial Public Offering which generated net
proceeds of approximately $3,504,000. On March 31, 1997, the
Company had cash and cash equivalents of $2,271,000 and net
working capital of $2,570,000. This compares with cash and cash
equivalents of $231,000 and a working capital deficit of
$711,000 on December 31, 1996.
Management believes the Company's cash and revenues from
operations will be sufficient to fund the Company's operations
for at least the next twelve months.
Cash generated (used) in operating activities for the
Company totaled ($1,330,000) and $406,000 for the quarters ended
March 31, 1997 and 1996 respectively. Cash used in investing
activities consisted of expenditures for property and equipment.
Capital expenditures increased to $48,000 during the quarter
ended March 31, 1997 from $19,000 for the quarter ended March
31, 1996 primarily due to expanded operations. During the
quarters ended March 31, 1997 and 1996, cash from financing
activities included borrowings (including advances under the
Company's line of credit and factoring arrangement and proceeds
from the bridge financing private placement) of $240,000 and
$860,000, respectively, net of note and line of credit payments
of $1,888,000 and $1,172,000, 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; length of sales cycle; variability of sales order
flow; and management of growth.
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
ITEM 5. Other Information
None
ITEM 6. Exhibits And Reports on Form 8-K
(a) Incorporation by reference to exhibits included in
the Company's Annual Report on Form 10-KSB for the
fiscal year ended December 31, 1996.
(b) Reports on Form 8-K
There are no reports on Form 8-K filed during the
quarter for which this report is filed.
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be sign on its behalf by the
undersigned, thereunto duly authorized.
NAVIDEC, INC.
Date: May 15, 1997 By: /s/RALPH ARMIJO
Ralph Armijo, President and CEO
By: /s/PAT MAWHINNEY
Pat Mawhinney
Chief Financial Officer
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