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 38, 1998.
[ ] 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 March 31, 1998, Registrant had 3,301,000 shares of common stock
outstanding.
<PAGE>
NAVIDEC, INC.
-------------
INDEX
-----
PART I. FINANCIAL INFORMATION
- -----------------------------
Item 1. Financial Statements
Balance Sheets as of March 31, 1998 and December 31, 1997
Statements of Operations, Three months ended March 31, 1998 and 1997
Statements of Cash Flows,
Three months ended March 31, 1998 and 1997
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
2
<PAGE>
PART I - FINANCIAL INFORMATION
- ------------------------------
Item 1. Financial Statements
NAVIDEC, INC.
-------------
BALANCE SHEETS
--------------
NAVIDEC, INC.
BALANCE SHEETS
March 31, December 31,
1998 1997
----------- ------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 584,000 $ 369,000
Accounts Receivable:
Trade net of $50,000 allowance for doubtful
accounts $ 689,000 $ 726,000
Retainage $ 21,000
Cost and estimated earnings in excess of billing $ 367,000 $ 106,000
Notes Receivable $ 49,000 $ 60,000
Inventory $ 294,000 $ 549,000
Prepaid expenses and other current assets $ 87,000 $ 86,000
----------- -----------
Total current assets $ 2,071,000 $ 1,917,000
PROPERTY AND EQUIPMENT, net $ 743,000 $ 713,000
OTHER ASSETS
Restricted certificate of deposit $ 300,000 $ 300,000
Intangibles, net $ 89,000 $ 169,000
----------- -----------
Total Assets $ 3,203,000 $ 3,099,000
=========== ===========
LIABILITIES AND STOCKHOLDERS EQUITY
CURRENT LIABILITIES
Current portion of capital lease obligations $ 37,000 $ 37,000
Notes payable $ 63,000 $ 63,000
Accounts payable $ 644,000 $ 778,000
Payable to factor $ 232,000 $ 190,000
Other accrued liabilities $ 210,000 $ 171,000
----------- -----------
Total current liabilities $ 1,185,000 $ 1,239,000
CAPITAL LEASE OBLIGATIONS,
net current portion $ 94,000 $ 95,000
NOTES PAYABLE,
net current portion $ 200,000 $ 215,000
STOCKHOLDERS EQUITY
Common stock, no par value;
20,000,000 shares authorized
3,301,000 and 3,201,000 shares
issued and outstanding $ 7,422,000 $ 6,768,000
Accumulated deficit (5,699,000) (5,218,000)
Total stockholders
equity (deficit) $ 1,724,000 $ 1,550,000
----------- -----------
TOTAL LIABILITIES and
STOCKHOLDERS EQUITY $ 3,203,000 $ 3,099,000
=========== ===========
See accompanying notes to these financial statements.
3
<PAGE>
NAVIDEC, INC.
-------------
STATEMENTS OF OPERATIONS
For the Three Months
Ended March 31,
------------------------------
1998 1997
----------- -----------
NET SALES $ 1,702,000 $ 1,363,000
Cost of Sales $ 1,055,000 $ 858,000
GROSS MARGIN $ 647,000 $ 506,000
Operating Expenses $ 1,112,000 $ 769,000
----------- -----------
OPERATING INCOME (LOSS) $ (465,000) $ (263,000)
OTHER INCOME (EXPENSES)
Interest, net $ (16,000) $ (231,000)
Other $ 0 $ (1,000)
----------- -----------
Other, net $ (16,000) $ (232,000)
NET INCOME (LOSS) $ (481,000) $ (534,000)
=========== ===========
NET LOSS PER SHARE $ (.15) $ (.23)
WEIGHTED AVERAGE COMMON SHARES
AND EQUIVALENTS OUTSTANDING 3,236,000 2,290,000
See accompanying notes to these financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
NAVIDEC, INC.
-------------
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED
MARCH 31
1998 1997
----------- -----------
Cash flows from operating activities
<S> <C> <C>
Net Loss $ (481,000) $ (534,000)
Adjustments to reconcile net loss to net cash used by operating activities:
Depreciation and amortization $ 169,000 $ 92,000
Changes in operating assets and liabilities
Decrease (increase) in accounts receivable $ 58,000 $ (953,000)
Decrease (increase) in costs and estimated earnings $ (261,000)
Decrease (increase) in inventory $ 255,000 $ (49,000)
Decrease (increase) in prepaid expenses $ (1,000) $ (193,000)
Increase (decrease) in accounts payable $ (134,000) $ 186,000
Increase (decrease) in accrued expenses $ 39,000 $ (152,000)
Net cash provided by (used in) operating activities $ (356,000) $(1,527,000)
Cash flows from investing activities:
Purchases of fixed assets $ (119,000) $ (67,000)
Cash flows from financing activities:
Proceeds from sale of Accounts receivable $ 402,000 $ --
Payments on Notes Payable/Lease Payable $ (376,000) $(1,850,000)
Proceeds from issuance of notes/Capital Leases $ 0 $ 240,000
Decrease (increase) in notes receivable $ 11,000 $ (30,000)
Issuance of common stock $ 654,000 $ 4,880,000
Net cash provided by (used in) financing activities $ 690,000 $ 3,634,000
Net increase in cash $ 215,000 $ 2,040,000
Supplemental schedule of cash flow information:
Debentures converted to common stock $ 1,437,000
See accompanying notes to these financial statements.
5
</TABLE>
<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.
Private Placement - The Company is raising additional capital in a private
placement. The offering provides for a maximum amount of $2,700,000 with no
minimum consisting of a maximum of 600,000 units (comprised of one share of
common stock and one warrant) at $4.50 per unit. Each warrant allows for the
holder to purchase one share of common stock at an exercise price of $7.20 for a
period extending though February 10, 2002. The warrants are redeemable by the
Company at $.05 per warrant upon 30 days notice if the market price for 20
consecutive trading days within the 30-day period preceding the date the notice
is given equals or exceeds $8.40. The Company is required by the term of the
placement agreement to register the common shares and the common shares
underlying the warrants within 45 day of filing the Company's 10-KSB. Offing
costs associated with the private placement include underwriting commissions and
non-accountable expenses totaling 13% of proceeds, as well as placement agent
warrants to purchase units for 5 years from the date of closing at $4.50 per
unit. In addition, the Company has agreed to issue any broker or registered
agent who places four or more placement units (consisting of 6,000 units or
$27,000 each) on broker warrant for each $20 sold at a price of $4.50. As of
March 31, 1997, the Company had closing on the private placement of $1,363,000
net of offering costs of $246,000. No warrants had been issued to brokers or
registered representatives as of March 31, 1998.
7
<PAGE>
Notes Payable
Notes payable at March 31, 1997, consists of the following:
Note payable to a bank, interest at prime plus 1/2% (8.75% as of March
31, 1998) 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. $260,000
Note payable to officer/director /shareholder,
principal along with interest at 10% per annum
due on December 31, 1998. $ 4,000
8
<PAGE>
Item 2
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
------------------------------------------------
Cautionary Statement Regarding Forward Looking Statements. The matters discussed
in this report, when not historical matters, are forward looking statements that
involve a number of risks and uncertainties that could cause actual results to
differ materially from projected results. Such factors include, among other
things, the rapidly developing and unpredictable nature of the Internet, intense
competition in all of the Company's markets, obsolescence of products and
technological changes, the need for management of growth and the dependence on
relationships of the Company with its customers and suppliers, as well as other
risk factors described from time to time in the Company's filings with the
Securities and Exchange Commission.
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, license fees from
recurring lead revenue from the Wheels solution. The Company merged with
Interactive Planet, Inc. ("IPI"), a designer and developer of Internet World
Wide Web sites, in July 1996. The Company issued an aggregate of 678,877 shares
of Common Stock to the shareholders of IPI and a promissory note in the amount
of $75,000 to one shareholder of IPI in exchange for all of the issued and
outstanding stock of IPI. The Company acquired TouchSource, Inc. ("TS"), a
designer and developer of interactive Kiosks, in July 1997. The Company issued
an aggregate of 207,000 shares of Common Stock to the shareholders of TS and TS
was merged into the Company in exchange for all of the issued and outstanding
stock of TS. The merger and acquisition were consummated in order to expand the
Company's business model of combined expertise in traditional marketing and
distribution and Internet/ Intranet technology.
The Company's strategy is to increase revenue generated by its two core
competencies: (1) Internet/Intranet Solutions i.e. "Wheels", 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 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.
From August through October, 1996, the Company raised net proceeds of
approximately $1,233,000 from the sale of 10% Unsecured Subordinated Convertible
Promissory Notes (the "Bridge Promissory Notes") in a private placement (the
"Bridge Private Placement"). These notes were converted by their terms into an
aggregate of 349,126 Units upon consummation of the Company's public offering
described below. The Units were identical to the Units offered in the public
offering.
On February 14, 1997, the Company consummated a public offering of 1,000,000
Units consisting of one share of Common Stock and one Common Stock purchase
warrant ("Warrant"). Each Warrant entitles the holder to purchase one share of
Common Stock at a price of $7.20 per share until February 10, 2002. The Warrants
are redeemable at the option of the Company, at $.05 per Warrant, at any time on
or after February 10, 1998 or such earlier date as may be determined by Joseph
9
<PAGE>
Charles & Associates, the managing underwriter in the public offering. Of the
1,000,000 shares of Common Stock and 1,000,000 Warrants included in the
offering, 755,000 shares of Common Stock and 1,000,000 Warrants were sold by the
Company, for net proceeds of approximately $3,504,000 (after subtracting the
underwriting discount and other expenses of the offering). The remaining 255,000
shares of Common Stock were sold by the investors in the Bridge Private
Placement.
From November 1997 to March 1998, the Company raised net proceeds of
approximately $1,117,000 from the issuance of 302,890 shares of commons stock
and warrants from a private placement. Each Warrant entitles the holder to
purchase one share of Common Stock at a price of $7.20 per share until February
10, 2002. The Warrants are redeemable at the option of the Company, at $.05 per
Warrant, at any time on or after February 10, 1998 or such earlier date as may
be determined by Joseph Charles & Associates, the managing underwriter in the
public offering
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
1998 1997
---- ----
Net Sales 100% 100%
Cost of Sales 62% 63%
Gross Margin 38% 37%
Operating Expense 65% 56%
Other Income (Expense) (1)% (17)%
Net Income (Loss) (28)% (39)%
Net sales for the first quarter of 1998 were $1,702,000 which represents an
increase of 25% over net sales of $1,363,000 for the first quarter of 1997. The
increase is primarily attributed to sales of Internet/Intranet Solutions, which
were $614,000 an increase of 109% over net sales of $294,000 during the first
quarter of 1997. Sales of the companies Wheels solution, which was introduced in
the 4th quarter of 1997 accounted for $365,000 or 59% of the Internet/Intranet
sales for the first quarter of 1998. In addition, net sales of Computer
Infrastructure were $539,000 an increase of 34% over net sales of $402,000 The
increase in net sales in all three categories was primarily attributable to
increased marketing activities and greater market penetration.
Net sales in Distribution were $549,000 a decrease of 18% from net sales of
$667,000 during the first quarter of 1997. The decrease in sales is attributed
to the discontinuation of distribution products that didn't have strong gross
profit and or recurring sales.
Operating expenses for first quarter of 1998 were $1,112,000 compared with
$769,000 for the first quarter 1997. The increase in operating expenses was
primarily the result of an increase in staff and marketing activities associated
with expanding the wheels product and its market area. Operating expenses are
expected to remain stable as the Company continues to invest in the development
of high end Internet/Intranet Solutions.
Net interest expense for first quarter of 1998 was $16,000 compared with
$232,000 for first quarter of 1997. The decrease was a result of the Bridge
Promissory Notes that were converted in February of 1997. The company expects
interest expense to remain constant for the remainder of 1998.
10
<PAGE>
Liquidity and Capital Resources
Through March 31, 1998, the Company funded its operations primarily through
equity investments, through the Company's IPO and subsequent Private Placement
that was completed in April of 1998 , and revenues generated from operations,
lines of credit and factoring arrangements made available to it by banks. On
March 31, 1997 the Company had cash and cash equivalents of $584,000 and a net
working capital of $886,000 compared to cash and cash equivalents of $369,000
and a net working capital of $678,000 as of December 31, 1997.
Cash used in operating activities for the Company totaled $356,000 and
$1,527,000 for first quarter of 1998 and 1997, respectively. Cash used in
investing activities consisted of expenditures for property and equipment.
Capital expenditures increased to $119,000 in first quarter of 1998 from $67,000
during first quarter of 1997. Th expenditures were to develop the infrastructure
for the Wheels products.
Cash from financing activities in fiscal 1998 consisted of advances from
receivable financing of $402,000 net of repayments of $376,000, proceeds from
the issuance of common stock of $654,000. This compares to 1997 repayments of
Notes of $1,437,000 from the Bridge Private Placement, $226,000 in loans from
shareholders and employees.
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.
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) Exhibits.
The exhibits included in the Company's Annual Report on Form
10-KSB for the fiscal year ended December 31, 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.
11
<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: May 12, 1998
By /S/ RALPH ARMIJO
-----------------------------
Ralph Armijo
President and CEO
By /S/ PAT MAWHINNEY
-----------------------------
Pat Mawhinney
Chief Financial Officer
12
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 584,000
<SECURITIES> 0
<RECEIVABLES> 1,056,000
<ALLOWANCES> 50,000
<INVENTORY> 294,000
<CURRENT-ASSETS> 2,076,000
<PP&E> 743,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 3,203,000
<CURRENT-LIABILITIES> 1,185,000
<BONDS> 0
0
0
<COMMON> 7,422,000
<OTHER-SE> (5,699,000)
<TOTAL-LIABILITY-AND-EQUITY> 3,203,000
<SALES> 1,702,000
<TOTAL-REVENUES> 1,702,000
<CGS> 1,055,000
<TOTAL-COSTS> 1,112,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16,000
<INCOME-PRETAX> (481,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (481,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (481,000)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
