FORM 10-Q/ASB-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-Q/ASB
[x] Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the period ended March 31, 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
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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
--------------
March 31, December 31,
1998 (Unaudited) 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 $ 88,000 $ 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 $ 210,000 $ 190,000
Other accrued liabilities $ 232,000 $ 171,000
----------- -----------
Total current liabilities $ 1,186,000 $ 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
3,370,000 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) $ 1,723,000 $ 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, (UNAUDITED)
--------------------------------
1998 1997
---- ----
NET SALES $ 1,702,000 $ 1,363,000
Cost of sales 1,055,000 857,000
----------- -----------
GROSS MARGIN 647,000 506,000
Operating expense 1,112,000 769,000
----------- -----------
OPERATING INCOME (LOSS) (465,000) (263,000)
OTHER INCOME (EXPENSE):
Interest, net (16,000) (270,000)
Other -0- (1,000)
----------- -----------
Other, Net (16,000) (271,000)
----------- -----------
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
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<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 in operating activities:
Depreciation and amortization 169,000 92,000
Accounts receivable 58,000 (953,000)
Costs and estimated earnings in
excess of billings (261,000) --
Inventories 255,000 (49,000)
Other assets (3,000) (193,000)
Increase (decrease) in:
Accounts payable and accrued liabilities (134,000) 186,000
Other liabilities 61,000 (152,000)
----------- -----------
Net cash used in operating activities (336,000) (1,603,000)
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease (increase) in Notes Receivable 11,000 (30,000)
Capital expenditures for property and equipment (119,000) (67,000)
----------- -----------
Net cash used in investing activities (108,000) (97,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from factoring of accounts receivable 402,000 --
Payment to factor (382,000)
Proceeds from issuance of common stock 654,000 5,350,000
Proceeds from issuance of notes payable -- 240,000
Proceeds from notes payable -related parties 40,000
Payment on notes payable-related parties (40,000)
Payment on notes payable and capital leases (15,000) (1,850,000)
----------- -----------
Net cash provided by financing activities 659,000 3,740,000
INCREASE IN CASH AND CASH EQUIVALENTS 215,000 2,040,000
CASH AND CASH EQUIVALENTS,
beginning of period 369,000 231,000
----------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 584,000 $ 2,271,000
=========== ===========
SUPPLEMENTAL SCHEDULE OF CASH
FLOW INFORMATION:
Cash payments for interest $ 16,000 $ 231,000
=========== ===========
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 through 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. Offering 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)
one broker warrant for each 20 unit sold at a price of $4.50. As of March
31, 1997, the Company had closing on the private placement of $1,371,000
net of offering costs of $243,000. No warrants had been issued to brokers
or registered representatives as of March 31, 1998.
6
<PAGE>
COMPREHENSIVE INCOME
In June, 1997 the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No 130, Reporting Comprehensive Income ("FAS
130"). FAS 130, which is effective for fiscal years beginning after
December 15, 1997, defines comprehensive income as all changes in
shareholder equity exclusive of transactions with owners, such as capital
investments. Comprehensive income includes net income or loss, changes in
certain assets and liabilities that are reported directly in equity such as
translation adjustments on investments in foreign subsidiaries, and certain
changes in minimum pension liabilities. The Company's comprehensive income
(loss) was equal to its net income (loss) for the three month periods ended
March 31, 1998 and 1997.
NOTES PAYABLE
Notes payable at March 31, 1997, consists of the following:
Note payable to a bank, interest at prime plus1/2%
(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. $ 3,000
7
<PAGE>
Item 2
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Cautionary Statement Regarding Forward Looking Statements. The matters
discussed here and elsewhere in this Prospectus, 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 elsewhere
in this Prospectus.
Overview
The Company was organized as ACI Systems, Inc. in July 1993 and changed its
name to NAVIDEC, Inc. in July 1996 when it acquired IPI, a designer and
developer of Internet World Wide Web sites. 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 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., 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, 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. Management
believes that, based on the current product mix, the Company's new Wheels
solution will provided for the majority of its increased revenues in 1998 and
years to follows. The Wheels solution combines the companies two core
competencies of Internet/Intranet solutions and product distribution. Wheels is
designed on a state of the art platform that allows it to distribute electronic
information out to consumers through regional wheels web sites, individual
dealer web sites, remote automotive kiosks and also in mobile sales laptops. 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
8
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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 JCA. 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 $3,436,000 (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 April 1998, the Company raised net proceeds of
approximately $2,229,750 from the issuance of 594,500 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 when the Company's Common
Stock on 20 consecutive trading days has closed above $8.40 per share and there
is an effective registration statement on file with the Securities and Exchange
Commission.
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.
Three Months Ended
March 31
-------------------------------------------------
1998 1997
---- ----
Net Sales 100% $ 1,702,000 100% $ 1,363,000
Cost of Sales 62 1,055,000 63 857,000
Gross Margin 38 647,000 37 506,000
Operating Expense 65 1,112,000 56 769,000
Other Income (Expense) (1) (16,000) (20) (271,000)
Net Income (Loss) (28) (481,000) (39) (534,000)
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 Company's 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.
Gross margin was 38% during first quarter of 1998, an increase of 1% over a
gross margin of 37% during the same quarter in 1997. The increase in the
Company's gross margin was attributed to management's elimination of several
distribution products that carried low gross margin and the strong gross margin
on Internet/Intranet Solutions.
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
$270,000 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.
Liquidity and Capital Resources
Through March 31, 1998, the Company funded its operations primarily through
equity investments, from 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.
9
<PAGE>
Cash used in operating activities for the Company totaled $336,000 and
$1,603,000 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.
Cash from financing activities in fiscal 1998 consisted of advances from
factoring arrangements of $402,000 net of repayments of $382,000, 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.
10
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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
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FORM MARCH 31,
1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 584,000
<SECURITIES> 0
<RECEIVABLES> 739,000
<ALLOWANCES> 50,000
<INVENTORY> 294,000
<CURRENT-ASSETS> 2,071,000
<PP&E> 1,176,000
<DEPRECIATION> 433,000
<TOTAL-ASSETS> 3,203,000
<CURRENT-LIABILITIES> 1,186,000
<BONDS> 0
0
0
<COMMON> 7,422,000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 3,203,000
<SALES> 1,702,000
<TOTAL-REVENUES> 1,702,000
<CGS> 1,055,000
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,112,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16,000
<INCOME-PRETAX> (481,000)
<INCOME-TAX> (481,000)
<INCOME-CONTINUING> (481,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (481,000)
<EPS-PRIMARY> (.15)
<EPS-DILUTED> (.15)
</TABLE>
