<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
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WASHINGTON, DC 20549
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FORM 10-QSB-A
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AMENDMENT NO. 1
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[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
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OF THE SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended January 31,1994
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[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d)
OF THE EXCHANGE ACT
For the transition period from to
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Commission File Number 0-15362
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COMPUFLIGHT, INC.
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(Exact name of small business issuer as specified in its charter)
Delaware 11-2883366
- ------------------------------------ ---------------------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
99 Seaview Drive, Port Washington, NY 11050
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(Address of principal executive offices) (Zip code)
Issuer's telephone number 516-625-0202
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(Former name, former address and former fiscal year, if changed since last
report)
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 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 No X
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APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13, or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by court.
Yes No
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APPLICABLE ONLY TO CORPORATE ISSUERS
The number of shares outstanding of the issuer's common stock, as of March 31,
1994, and November 15, 1995, was 1,576,980 shares.
Page 1 of 17
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COMPUFLIGHT, INC.
THREE MONTHS ENDED JANUARY 31, 1994
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I N D E X
Page
Number
PART I. FINANCIAL INFORMATION
Item 1. Unaudited Financial Statements
Condensed Consolidated Balance Sheet as of January 31,
1994. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Consolidated Statements of Operations for the Three Months
Ended January 31, 1994 and January 31, 1993 . . . . . . . . . . . . 4
Condensed Consolidated Statements of Cash Flows for the
Three Months Ended January 31, 1994 and January 31, 1993. . . . . . 5
Notes to Condensed Consolidated Financial Statements. . . . . . . . 6
Item 2. Management's Discussion and Analysis
or Plan of Operation. . . . . . . . . . . . . . . . . . . . . . . . 12
PART II. OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . 16
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Page 2 of 17
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<TABLE>
<CAPTION>
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COMPUFLIGHT, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
JANUARY 31,
1994
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<S> <C>
ASSETS
Current assets
Cash and cash equivalents $ 32,936
Trade receivables, net of allowance 352,572
Current portion of long term licensing agreements receivable
(Note 4) 248,867
Income taxes receivable (Note 5) 289,628
Prepaid expenses and other current assets 54,950
---------------
Total current assets 978,953
Investment in Skyplan Services, Ltd. (Note 6) 243,527
Fixed assets, net of accumulated depreciation 471,615
Other assets 5,400
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$ 1,699,495
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LIABILITIES AND SHAREHOLDERS' DEFICIENCY
Current liabilities
Bank indebtedness - Line of credit $ 144,388
Payables and accruals (Note 7) 685,405
Support shareholder demand loans (Note 8) 67,680
Global demand loan payable (Note 9) 11,362
Current portion of loans payable - related parties (Note 10) 13,794
Current portion of note payable - former affiliate (Note 11) 240,000
---------------
Total current liabilities 1,162,629
Long term liabilities
Loans payable - related parties (Note 10) 90,240
Note payable - former affiliate (Note 11) 435,653
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Total long term liabilities 525,893
Minority Interest in Navtech Systems Support Inc. 65,411
SHAREHOLDERS' DEFICIENCY
Capital stock, $.001 par value 1,562
Additional paid-in capital 1,769,503
Note receivable - former Chairman (Note 3) (795,977)
Due from related company, net of allowance (Note 12) (398,221)
Cumulative foreign currency translation adjustment 58,936
Deficit (690,241)
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(54,438)
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$ 1,699,495
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</TABLE>
See notes to condensed consolidated financial statements.
Page 3 of 17
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<TABLE>
<CAPTION>
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COMPUFLIGHT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
FOR THE THREE MONTHS ENDED JANUARY 31, 1994 1993
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<S> <C> <C>
Revenue
Service fees $ 544,731 $ 124,651
Hardware, software and license sales 12,456 3,188
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557,187 127,839
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Costs and Expenses
Operating 441,783 98,058
Selling, general & administrative 187,818 27,740
Research and development 64,464 114,329
Depreciation and amortization 37,148 8,764
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731,213 248,891
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Operating loss (174,026) (121,052)
Other income (expense)
Interest income 9,065 7,875
Interest expense (35,075) (14,957)
Realized foreign exchange income (loss) 28,999 (32,318)
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Loss before taxes and minority interest (171,037) (160,452)
Income tax benefit (Note 5) 22,548 40,030
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Loss before minority interest (148,489) (120,422)
Minority Interest 15,402 -
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Net loss $ (133,087) $(120,422)
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Net Loss per Share $ (0.09) $ (0.08)
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Weighted Average Number of Common
Shares Outstanding 1,561,980 1,561,980
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</TABLE>
See notes to condensed consolidated financial statements.
Page 4 of 17
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<TABLE>
<CAPTION>
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COMPUFLIGHT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(UNAUDITED)
FOR THE THREE MONTHS ENDED JANUARY 31, 1994 1993
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<S> <C> <C>
Operating Activities
Net (loss) $ (133,087) $ (120,422)
Adjustments to reconcile net loss to net
cash provided by (used in) operating
activities
Depreciation and amortization 37,148 8,764
Minority interest (15,402) -
Changes in operating assets and liabilities net of the effects
of the acquisition of Compuflight, Inc.
Increase in assets - net (88,668) (47,100)
Increase in liabilities - net 145,410 15,870
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Net cash used in operating activities (54,599) (142,888)
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Investing Activities
Purchase of fixed assets (5,881) (1,960)
Repayment of note receivable - director and officer 7,183 -
Increase in advance to related company - (22,177)
Partial redemption of Investment in Skyplan Services, Inc. 11,348 -
------------ ------------
Net cash provided by (used in) investing activities 12,650 (24,137)
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Financing Activities
Net cash on acquisition of Compuflight, Inc. 84,242 -
(Decrease) increase in bank indebtedness (14,234) 52,726
Proceeds from loans 508 -
Proceeds from Support shareholder demand loans - 115,498
Increase (decrease) in long term loans payable 1,444 (1,241)
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Net cash provided by financing activities 71,960 166,983
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Effect of Translation Adjustments on Cash 2,925 42
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Net Increase in Cash and Cash Equivalents 32,936 -
Cash and Cash Equivalents at Beginning of Year - -
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Cash and Cash Equivalents at End of Period $ 32,936 $ -
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</TABLE>
See notes to condensed consolidated financial statements.
Page 5 of 17
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COMPUFLIGHT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
THREE MONTHS ENDED JANUARY 31, 1994
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1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The condensed consolidated balance sheet as of January 31, 1994, and the
consolidated statements of operations and cash flows for the three months ended
January 31, 1994, and 1993, have been prepared by the Company without audit. In
the opinion of management, all adjustments (which include only normal recurring
accrual adjustments) necessary to present fairly the financial position, results
of operations and cash flow at January 31, 1994, and for all periods presented,
have been made.
For information concerning the Company's significant accounting policies,
reference is made to the Company's Annual Report on Form 10-KSB for the year
ended October 31, 1993. Results of operations for the three months ended
January 31, 1994 are not necessarily indicative of the operating results for the
full year.
2. SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements include the accounts of Compuflight, Inc.
(the "Company") and its subsidiaries since the date of acquisition described in
Note 3 below. All material intercompany balances and transactions have been
eliminated. In accordance with Statement of Financial Accounting Standards
(SFAS) No. 52, assets and liabilities of foreign operations are translated at
current rates of exchange while results of operations are translated at average
rates in effect for the period. Unrealized translation gains and losses are
shown as a separate component of stockholders' equity.
3. BASIS OF PRESENTATION
ACQUISITION OF EFFICIENT AVIATION SYSTEMS INC. AND NAVTECH SYSTEMS SUPPORT INC.
On December 1, 1993, the Company and its former Chairman consummated a stock
purchase agreement, dated as of October 31, 1993, with Ray English & Associates
Inc. ("RE&A"), formerly Navtech Systems Consulting Inc., among others. Pursuant
to the agreement, as of January 31, 1994, the Company had issued 1,099,644
shares of the Company's common stock (valued at $.56 per share) and assumed an
$800,000 obligation of RE&A to the Company's former Chairman (valued at
$133,768; the decrement in value, $666,232, was charged to Compuflight's fiscal
1993 operations) as discussed below for all of the outstanding stock of
Efficient Aviation Systems Inc. ("EAS", a wholly-owned subsidiary of RE&A) and
approximately 87% of the outstanding common shares of Navtech Systems Support
Inc. ("Support", a company controlled by RE&A and its principal shareholders).
Pursuant to the agreement, subsequent to January 31, 1994, the Company issued an
additional 15,000 shares of common stock.
Contemporaneously with the stock purchase agreement, the Company's former
Chairman and his immediate family sold their 238,872 shares of the Company's
common stock to RE&A in exchange for an $800,000 note payable to the Company's
former Chairman. In connection with the Company's acquisition of EAS, the
Company has assumed RE&A's note payable to the Company's
Page 6 0f 17
<PAGE>
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COMPUFLIGHT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
THREE MONTHS ENDED JANUARY 31, 1994
- --------------------------------------------------------------------------------
former Chairman and as a result the former Chairman's indebtedness to the
Company was reduced to $804,000. Such indebtedness is payable in equal monthly
installments over a ten year period, together with interest at 4 1/2% per annum.
Further, the Company entered into a ten year consulting agreement with its
former Chairman providing for fees payable, substantially upon the same terms as
the indebtedness repayment, and, accordingly, this note has been presented as a
component of Shareholders' Deficiency.
The Company also granted the remaining Support common shareholder the right to
acquire 125,000 shares of the Company's stock on the same basis as accorded to
RE&A and the other Support shareholders. In addition, the Company agreed that
its previously existing public shareholders of record on December 11, 1993 would
have the right to purchase one share of the Company's common stock for each
share then held at a price of $1.29. Such rights expired on February 28, 1995.
As a result of the above, RE&A and the other former shareholders of Support
acquired approximately 87% of the Company's common stock, and accordingly, the
Company has accounted for the above transactions as a recapitalization of
Support and EAS with Support and EAS as the acquirer of the Company for
financial reporting purposes. Accordingly, Support and EAS's combined net
assets have been presented at historical cost and the Company's net assets have
been recorded at their fair market value, which has been determined to
approximate historical cost. The historical operating results are those of the
acquirer (Support and EAS) and the Company's operating results have been
included from the effective date of the acquisition (November 1, 1993).
Presented below are the unaudited pro forma condensed operating results for the
three months ended January 31, 1993, as if the transactions had been consummated
on November 1, 1992.
<TABLE>
<S> <C>
Revenue $ 538,719
Costs and expenses 727,202
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Loss before minority interest (188,483)
Minority interest 15,655
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Net loss $ (172,828)
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Net loss per share $ (0.11)
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Average shares outstanding 1,561,980
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</TABLE>
4. LONG TERM LICENSING AGREEMENTS
Support licenses the use of its computer software products under long-term
licensing agreements. In cases where a licensing agreement transfers
substantially all of the risks and benefits of ownership of said license to a
licensee, the licensing agreement is recorded as a software sale in the period
in which the software is installed and operational. Amounts due under long-term
licensing agreements, $248,867 at January 31, 1994, are recorded net of
estimated amounts related to ongoing software support.
Page 7 of 17
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COMPUFLIGHT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
THREE MONTHS ENDED JANUARY 31, 1994
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5. INCOME TAXES RECEIVABLE
Income taxes receivable consist of:
<TABLE>
<S> <C>
Scientific Research and Experimental Development
Investment Tax Credits recoverable $ 284,349
Other income taxes receivable 5,279
----------
$ 289,628
----------
----------
</TABLE>
SCIENTIFIC RESEARCH AND EXPERIMENTAL DEVELOPMENT ELIGIBLE EXPENDITURES
(INVESTMENT TAX CREDITS)
Support is engaged in Scientific Research and Experimental Development
activities directed toward developing new software functionality. Under the
Income Tax Act (Canada), Support is entitled to claim investment tax credits for
certain eligible current and capital expenditures. These amounts are reported
as a component of income tax expense (benefit).
6. INVESTMENT IN SKYPLAN SERVICES, LTD. ("SKYPLAN")
The investment in shares of Skyplan Systems, Ltd., of Calgary, Alberta, Canada,
$243,527 at January 31, 1994, represents redeemable preferred stock received by
the Company in settlement of a receivable from the sale of a license for the use
of its computer software product FOMS (Flight Operations Management Software).
The shares are valued at their stated cost of $5.00 Canadian per share. Prior
to June 1994, the shares of Skyplan were being redeemed at varying amounts on an
irregular repayment schedule. Pursuant to a revised licensing agreement signed
in June 1994, the remaining 56,000 Series N shares of Skyplan are to be redeemed
at $5.00 Canadian per share at a rate of $18,000 Canadian per month.
7. PAYABLES AND ACCRUALS
Payables and accruals at January 31, 1994 consist of the following:
<TABLE>
<S> <C>
Trade payables $ 391,133
Accrued liabilities 81,168
Accrued interest - related parties 47,407
Deferred salaries 165,697
----------
$ 685,405
----------
----------
</TABLE>
Page 8 of 17
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COMPUFLIGHT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
THREE MONTHS ENDED JANUARY 31, 1994
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8. SUPPORT SHAREHOLDER DEMAND LOANS
Support shareholder demand loans are unsecured and bear interest at 15% per
annum. The loans are due on demand and, accordingly, they have been classified
as current. The shareholders have the option to convert these loans into common
shares of Support at various amounts per share.
9. GLOBAL DEMAND LOAN PAYABLE
On February 8, 1994, Global Weather Dynamics, Inc. ("Global"), Compuflight and
Support entered into a Loan Agreement providing for a loan of $200,000 from
Global to Compuflight and Support. Additional amounts, including interest on
the outstanding balance, were advanced after that date. In December 1994, the
loan was paid in full through the early discounted repayment of the complete
balance of the long term software licensing agreement between the Company and
Emery Worldwide Airlines, Inc. Previous to February 8, 1994, Global had
advanced funds with substantially the same terms as the loan described above.
10. LOANS PAYABLE - RELATED PARTIES
Loans payable - related parties includes a chattel mortgage on specific computer
equipment in the amount of $120,000 Canadian ($90,240 U.S. at January 31, 1994)
due to a company owned by the brother of a shareholder of the Company. The
mortgage is due May 10, 1997, and bears interest at 15% per annum payable
monthly. Also included is a separate chattel mortgage on specific computer
equipment, due to the above noted brother personally, which bears interest at
15% per annum and is repayable in monthly installments of principal and interest
of $1,078 Canadian. The outstanding balance at January 31, 1994, was $18,344
Canadian ($13,794 U.S.) The balance in its entirety was repaid in July 1995.
11. NOTE PAYABLE - FORMER AFFILIATE
At July 31, 1993, the Company had outstanding accounts payable due to Sandata,
Inc. ("Sandata"), an affiliate of Bert E. Brodsky, the Company's former
Chairman, in the approximate amount of $676,000. On such date, the Company
delivered to Sandata a promissory note in such approximate principal amount
payable with interest at the rate of 1% over the prime rate in equal monthly
payments of principal and interest of $20,000 until April 1994, when the balance
of such obligation was to become due (the "Sandata Note"). The Sandata Note
replaced the Company's accounts payable obligation to Sandata for the same
amount. The Company had made $60,000 in payments against this promissory note
as of November 1, 1993. Effective November 1, 1993, the Sandata Note was
modified so that it is repayable in equal monthly installments of principal in
the amount of $20,000, together with accrued interest thereon at the rate of 10%
per annum, commencing February 28, 1994. In addition to such monthly payments
on the Sandata Note, the Company is required to pay to Sandata an amount equal
to (a) 20% of all monies received from stand-alone commercial system sales
and/or licensing of flight planning software by the Company, EAS or Support or
any subsidiary thereof and (b) 75% of all monies received by Compuflight from
Harris Corporation (see MD&A "Harris Corporation") with respect to the Company's
claims discussed herein. Payment of
Page 9 of 17
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COMPUFLIGHT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
THREE MONTHS ENDED JANUARY 31, 1994
- --------------------------------------------------------------------------------
the Sandata Note is secured by a first lien on substantially all of
Compuflight's assets as they were recorded at the date of acquisition.
12. DUE FROM RELATED COMPANY, NET OF ALLOWANCE
In 1993, Support charged its parent company, RE&A, a management and marketing
fee in connection with the management of the Military and Air Traffic Control
("ATC") versions of the FOMS software. Support also advanced funds to RE&A in
order to assist RE&A in meeting its obligations. Substantially all such fees
were incurred and funds were advanced prior to the acquisition discussed in Note
3. The Company has taken an allowance of $225,600 against the total receivable
to show a net amount believed by the Company to be equivalent approximately to
the net worth of RE&A as of January 31, 1994 (such net worth being substantially
based upon the shares of the Company beneficially owned by RE&A as of such
date).
RE&A is owned by Raymond F. English, a former Chairman of the Company, who
resigned from that position on October 31, 1994. RE&A was engaged in managing
and marketing the Military and ATC versions of FOMS, especially as it related to
large scale Canadian Government traffic management projects. With the transfer
of the software rights for the Military and ATC versions of FOMS to the
Company's subsidiary, EAS, as part of the acquisition, RE&A has turned its
efforts to a marketing representative arrangement under which RE&A will
represent FOMS to a defined account base comprised of large national and
international air carriers. This arrangement is defined under the terms and
conditions of a Consulting and Management Agreement between RE&A and Support
dated January 1, 1995.
Effective July 15, 1995, RE&A executed and delivered to Support a promissory
note in the principal amount of $750,000 Canadian (the "RE&A Note") to evidence
a certain obligation to Support as of such date (net of certain amounts payable
through May 31, 1995 pursuant to the Consulting and Marketing Agreement referred
to above). The RE&A Note is payable on July 15, 2005 (or sooner as provided
below) and provides for interest at the rate of 5% per annum payable annually.
The Consulting and Marketing Agreement provides that Support shall have the
right to offset $3,500 Canadian per month against compensation otherwise payable
to RE&A thereunder as a payment of amounts due under the RE&A Note. The
Consulting and Marketing Agreement also provides for commissions and finder's
fees for the introduction to potential clients or the sale of a FOMS software
license. Such agreement provides for additional payment of the RE&A Note on the
following basis:
i) 15% of the first $10,000 Canadian of commissions or finder's fees
earned during a contract year ;
ii) 20% of the next $10,000 Canadian of commissions and finder's fee
earned during a contract year; and,
iii) 25% of any earned commissions or finder's fees exceeding $20,000
Canadian in a contract year.
Page 10 of 17
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COMPUFLIGHT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
THREE MONTHS ENDED JANUARY 31, 1994
- --------------------------------------------------------------------------------
Since the amount due from RE&A is in all likelihood recoverable only from
amounts payable by Support, the amount due from related company, net of
allowance, has been classified as an element of Shareholders' Deficiency.
Concurrent with the signing of the RE&A Note, RE&A also transferred all of its
common stock of the Company to a Voting Trust ("Trust") under the sole
administration of Dorothy A. English. Mrs. English is an Executive Vice
President of the Company and the spouse of Raymond F. English, Chairman and CEO
of RE&A. RE&A has the ability to recover its stock from the Trust upon the full
payment of the RE&A Note and all accrued interest. Furthermore, while the RE&A
Note remains outstanding, all dividends accruing to RE&A's common stock held in
the Trust will be applied against the balance owing on the RE&A Note.
Page 11 of 17
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COMPUFLIGHT, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
THREE MONTHS ENDED JANUARY 31, 1994
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As discussed in the notes to the Company's financial statements included herein,
due to the change in control resulting from the Company's acquisitions of EAS
and Support, the Company's statements of operations and cash flows for the three
months ended January 31, 1993, reflect the combined operations of EAS and
Support (and not Compuflight) for such period; however, Compuflight's operations
are included in the three months ended January 31, 1994. Accordingly, the
significant variances in revenue and costs and expenses between the three months
ended January 31, 1994, and 1993, are primarily the result of such accounting
treatment. The pro forma discussion below reflects the operations of the
Company (i.e., EAS, Support and Compuflight) for the three months ended January
31, 1993, as if the acquisitions had occurred as of November 1, 1992.
RESULTS OF OPERATIONS
Revenue from service fees and hardware, software and license sales increased
from $127,839 during the three months ended January 31, 1993 to $557,187 for the
three months ended January 31, 1994, primarily due to the inclusion of
Compuflight's service fee revenue of approximately $409,500.
Other income (excluding interest income and expense) for the three months ended
January 31, 1994 was $28,999 as compared to a loss of $32,318 for the same three
month period ending January 31, 1993. The increase was due mainly to realized
fluctuations in exchange rates between transactions and settlement dates.
Operating expenses for the three months ended January 31, 1994 increased
$343,725 or 351% as compared to the three month period ended January 31, 1993,
primarily due to the inclusion of Compuflight's operating expenses of
approximately $273,000 for the current period. On a pro forma basis, operating
expenses decreased approximately $79,244 during the three months ended January
31, 1994, as compared to the three months ended January 31, 1993, and as a
percentage of revenue decreased from approximately 112% to 79%.
Selling, general and administrative expenses for the three months ended January
31, 1994 increased $160,078 or 577% as compared to the three month period ended
January 31, 1993. The increase was primarily due to the inclusion of
Compuflight's selling, general and administrative expenses of approximately
$137,000 for the current period. On a pro forma basis, selling, general and
administrative expenses increased approximately $56,000 during the three months
ended January 31, 1994, as compared to the three months ended January 31, 1993,
and as a percentage of revenue increased from approximately 28% to 34%. Such
increase was primarily the result of increases in professional and consulting
fees.
The net loss for the three months ended January 31, 1994 increased $12,665 as
compared to the three month period ended January 31, 1993. The increase was
primarily due to an increase in the operating loss and interest expense as well
as a reduction in claimable investment tax credits for the period. On a pro
forma basis, the net loss for the three months ended January 31, 1994 was
$133,087 as compared to a $172,828 loss the three months ended January 31, 1993.
This change was due to decreased losses of Compuflight of approximately $40,000.
Page 12 of 17
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COMPUFLIGHT, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
THREE MONTHS ENDED JANUARY 31, 1994
- --------------------------------------------------------------------------------
LIQUIDITY AND CAPITAL RESOURCES
At January 31, 1994, the Company had a working capital deficiency of $183,676.
The Company's operations for the three months ended January 31, 1994 used cash
flows of $54,599 primarily due to the net loss of $133,087 for the period.
Investing activities for the same period provided $12,650 primarily due to a
partial redemption of its investment in Skyplan Services, Ltd. Financing
activities accounted for an additional provision of $71,960 primarily due to the
net cash provided by the reverse acquisition of Compuflight, Inc. The Company
had no material non-working capital commitments as of January 31, 1994.
COMMITMENT
SUPPORT CLASS B SPECIAL SHAREHOLDERS REDEMPTION
In 1987 and 1989, Support issued a total of 3,600 Class B special shares for
$358,200 Canadian. These shares are non-voting, entitled to non-cumulative
dividends of $8 Canadian per share and are redeemable at the option of Support
for $100 Canadian each plus a bonus amount. As at January 31, 1994, no
dividends have been paid or declared on these shares. The bonus amount is
dependent on the length of time the shares are outstanding. The aggregate
amount required to redeem such shares is as follows:
<TABLE>
<CAPTION>
If redeemed at: $ Canadian
-------------- ----------
<S> <C>
January 31, 1994 492,000
October 31, 1994 528,000
October 31, 1995, and thereafter 540,000
</TABLE>
PLAN OF OPERATION
The Company's liquidity at January 31, 1994 was insufficient to meet operating
requirements. The Company has therefore undertaken the following initiatives
and actions to reduce its working capital deficiency and alleviate cash flow
demands:
DEMAND LOAN FROM GLOBAL WEATHER DYNAMICS, INC.
As previously indicated, in February 1994, Global, Compuflight and Support
entered into a Loan Agreement providing for a loan of $200,000 from Global to
Compuflight and Support. The loan, along with additional advances and accrued
interest thereon, was repaid in December 1994.
HARRIS CORPORATION
On December 31, 1980, the Company entered into a fixed price subcontract with
Harris Corporation ("Harris") for the development of flight planning software,
training and related documentation for the United States Air Force ("Air
Force"). The total fixed price for the 24 month subcontract was $2,168,268. As
of October 31, 1993, the full fixed price subcontract had been billed and
collected. During the course of the contract, Harris and the Company undertook
additional work effort
Page 13 of 17
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COMPUFLIGHT, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
THREE MONTHS ENDED JANUARY 31, 1994
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requested by the Air Force, which Harris and the Company considered beyond
the scope of the statement of work of the fixed price contract. As of
September 1995, the Company has filed with Harris claims aggregating $736,687
for services which the Company considered beyond the scope of the
subcontract. The Company is continuing to actively pursue its claims against
Harris. Such claims are not accounted for in the determination of estimated
earnings on the Harris subcontract and will be recognized only when and if
realized.
Harris has advised the Company that it will pay such claims on a
proportionate basis to the extent it receives payment from the Air Force. The
Company and Harris are currently negotiating the terms of a Joint Recovery
Agreement pursuant to which the Harris claims would be submitted to the
Air Force (which claims would include the claims of the Company).
No assurances can be given that such an Agreement will be entered
into or that any amounts will be received by the Company as a result
of its claims.
TRADE CREDITORS
The Company has successfully negotiated extended repayment terms with several
large trade creditors. Although the Company's objective is to be current with
all its creditors, these extensions have ensured the continued viability of the
Company. The Company is continuing to pursue additional extensions with its
creditors.
DEFERRED SALARIES
The Company is continuing its efforts to have deferred salaries ($165,697 at
January 31, 1994) waived in addition to those previously waived ($82,991 at
April 30, 1993).
CORPORATE STRATEGY
In an effort to increase working capital and expand market share, the Company
has adopted the following key strategies:
EXPAND WORLDWIDE DISTRIBUTION. The Company plans to continue to expand its
sales efforts both in domestic and international markets. The Company has also
established and intends to continue expanding alternate channels of distribution
through teaming agreements, joint marketing agreements and strategic alliances
with major aviation software vendors, leading consulting firms and systems
integrators. In particular, Support established a joint marketing agreement
with Transquest, an Atlanta, Georgia based systems integrator, on May 11, 1994,
under which Transquest will market Support's software and services
internationally and domestically.
EXPAND PRODUCT BREADTH AND FUNCTIONALITY. The Company intends to continue
adding new features and applications and enhancing existing features to meet the
marketplace demands. To this end, the Company intends to incorporate new
technologies and standards as they are embraced by the aviation industry.
LEVERAGE EXISTING CUSTOMER BASE. The Company's products and services are used
by more than 40 customers worldwide. The Company is seeking to expand its
customer relationships by providing additional products and services, by
licensing additional users and by upgrading customers from service bureau to in-
house systems.
Page 14 of 17
<PAGE>
- --------------------------------------------------------------------------------
COMPUFLIGHT, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
THREE MONTHS ENDED JANUARY 31, 1994
- --------------------------------------------------------------------------------
MANAGEMENT
The Company has experienced significant changes in its business, such as the
integration of the operations of the Support, the establishment of new and
demanding joint marketing relationships, and the expansion of its products and
services. Such changes have placed, and may continue to place, a significant
strain on the Company's management and operations In order to manage such
changes, the Company has added a number of new staff positions including a Chief
Financial Officer, a Vice President of Marketing and Sales and a Director of
Finance.
The Company must also continue to improve its operational, financial and
business systems and hire the required management to implement the systems and
manage change effectively.
SUMMARY
Management will continue to aggressively pursue its objectives of integrating
the Canadian operations, improving customer service and maximizing shareholder
return. To this end, management is committed to implementing and enhancing the
above noted plans on an ongoing basis. While these plans have resulted in some
immediate benefits, the Company may require additional funding to completely
achieve its objectives and intends to seek such from various sources, including
debt or equity offerings when and if such financing is available to the Company.
No assurance can be given that any required financing will be available on
commercially reasonable terms or otherwise. In addition, no assurances can be
given that the Company's Plan of Operation as set forth above will be successful
(whether due to a lack of required financing or otherwise).
Page 15 of 17
<PAGE>
- --------------------------------------------------------------------------------
COMPUFLIGHT, INC.
OTHER INFORMATION
THREE MONTHS ENDED JANUARY 31, 1994
- --------------------------------------------------------------------------------
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:
None
Page 16 of 17
<PAGE>
- --------------------------------------------------------------------------------
COMPUFLIGHT, INC.
THREE MONTHS ENDED JANUARY 31, 1994
- --------------------------------------------------------------------------------
SIGNATURES
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.
COMPUFLIGHT, INC.
----------------------------------------
(Registrant)
Date: November 22, 1995 By: /s/ Russell K. Thal
---------------------- ------------------------------------
Chief Executive Officer
Date: November 22, 1995 By: /s/ Duncan Macdonald
---------------------- ------------------------------------
Chief Financial Officer
Page 17 of 17
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<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1994
<PERIOD-START> NOV-01-1993
<PERIOD-END> JAN-31-1994
<CASH> 32,936
<SECURITIES> 0
<RECEIVABLES> 352,572
<ALLOWANCES> 0
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<CURRENT-ASSETS> 978,953
<PP&E> 471,615
<DEPRECIATION> 0
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<CURRENT-LIABILITIES> 1,162,629
<BONDS> 0
<COMMON> 1,562
0
0
<OTHER-SE> (56,000)
<TOTAL-LIABILITY-AND-EQUITY> 1,699,495
<SALES> 0
<TOTAL-REVENUES> 557,187
<CGS> 0
<TOTAL-COSTS> 731,213
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 35,075
<INCOME-PRETAX> (171,037)
<INCOME-TAX> (22,548)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
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<NET-INCOME> (133,087)
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