<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 1995
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[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d)
OF THE EXCHANGE ACT
For the transition period from ____________________ to _____________________
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
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(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
----- -----
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
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS
The number of shares outstanding of the issuer's common stock as of April 15,
1996 was 1,701,980 shares.
Page 1 of 12
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COMPUFLIGHT, INC.
SIX MONTHS ENDED APRIL 30, 1995
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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 April 30, 1995. . . . . 3
Consolidated Statements of Operations - For the Six and
Three Months Ended April 30, 1995 and April 30, 1994 . . . . . . . 4
Condensed Consolidated Statements of Cash Flows - For the
Six Months Ended April 30, 1995 and April 30, 1994 . . . . . . . . 5
Notes to Condensed Consolidated Financial Statements . . . . . . . 6
Item 2. Management's Discussion and Analysis
or Plan of Operation . . . . . . . . . . . . . . . . . . . . . . . 7
PART II. OTHER INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . .11
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 12
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COMPUFLIGHT, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
APRIL 30,
1995
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<S> <C>
ASSETS
CURRENT ASSETS
Cash and equivalents $ 103,477
Accounts receivable, net of allowance for doubtful
accounts of $155,056 570,149
License fees receivable 112,091
Prepaid expenses and other 43,590
----------
Total current assets 829,307
INVESTMENT TAX CREDITS RECEIVABLE 353,242
LICENSE FEES RECEIVABLE 285,491
FIXED ASSETS, NET 370,677
OTHER ASSETS 9,000
-----------
$ 1,847,717
-----------
-----------
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payables and accrued liabilities $ 543,611
Deferred salaries 190,243
Note payable 17,732
Due to related parties - current portion 435,064
-----------
Total current liabilities 1,186,650
DUE TO RELATED PARTIES 163,915
MINORITY INTERESTS 338,691
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Capital stock, par value $.001 per share; authorized 2,500,000
shares; issued and outstanding, 1,576,980 shares 1,577
Additional paid-in capital 1,469,061
Notes receivable - former Chairmen (1,095,870)
Cumulative foreign translation adjustment 20,437
Accumulated deficit (236,744)
-----------
158,461
-----------
$ 1,847,717
-----------
-----------
</TABLE>
See notes to unaudited condensed consolidated financial statements.
Page 3 of 12
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COMPUFLIGHT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED THREE MONTHS ENDED
APRIL 30, APRIL 30,
1995 1994 1995 1994
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<S> <C> <C> <C> <C>
Revenue
Service fees $1,604,159 $ 993,545 $ 838,568 $ 448,814
Hardware, software and license sales 37,920 49,087 12,691 36,631
---------- ---------- ---------- ----------
1,642,079 1,042,632 851,259 485,445
---------- ---------- ---------- ----------
Costs and Expenses
Operating 884,887 939,292 464,630 497,509
Research and development 86,008 119,401 54,657 54,937
Selling, general and administrative 437,629 356,938 189,932 169,120
Depreciation and amortization 65,209 74,438 33,279 37,290
---------- ---------- ---------- ----------
1,473,733 1,490,069 742,498 758,856
---------- ---------- ---------- ----------
Operating income (loss) 168,346 (447,437) 108,761 (273,411)
Other income (expense)
Interest income 18,717 17,972 8,915 8,907
Interest expense - related parties (32,365) (40,430) (15,396) (19,068)
Interest expense - other (27,544) (25,944) (13,165) (12,231)
Realized foreign exchange gain 40,161 108,480 44,426 79,481
Scientific research and development
credits 49,671 36,621 31,565 14,073
Other (3,483) 14,959 (108) 14,959
---------- ---------- ---------- ----------
Earnings (loss) before minority interests 213,503 (335,779) 164,998 (187,290)
(Earnings) loss of minority interests (2,301) 31,713 (8,916) 16,311
---------- ---------- ---------- ----------
NET EARNINGS (LOSS) $ 211,202 $ (304,066) $ 156,082 $ (170,979)
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
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Net earnings (loss) per share $ 0.13 $ (0.19) $ 0.10 $ (0.11)
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Weighted Average Number of Common
Shares Outstanding 1,576,980 1,576,980 1,576,980 1,576,980
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
See notes to unaudited condensed consolidated financial statements.
Page 4 of 12
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COMPUFLIGHT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED APRIL 30, 1995 1994
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<S> <C> <C>
Cash flows from operating activities
Net earnings (loss) $ 211,202 $(304,066)
Adjustments to reconcile net earnings (loss) to net cash provided
by (used in) operating activities
Depreciation and amortization 65,208 74,438
Provision for uncollectible accounts 10,512 -
Minority interests 2,301 (31,713)
Consulting fees, net 33,685 -
Increase in operating assets - net (57,579) (63,548)
Increase in operating liabilities - net 42,694 156,095
--------- ---------
Net cash provided by (used in) operating activities 308,023 (168,794)
--------- ---------
Cash flows from investing activities
Cash acquired of Compuflight - 84,242
Purchase of fixed assets (32,446) (15,233)
Repayments from (advances to) RE&A - net 17,832 (4,313)
Repayment of note receivable - director and officer - 7,183
--------- ---------
Net cash provided by (used in) investing activities (14,614) 71,879
--------- ---------
Cash flows from financing activities
Payment of notes - former affiliate (140,506) -
Decrease in cash overdraft - (60,892)
Payment of Global demand loan (203,789) -
Proceeds from notes - 204,490
Payment of loans (3,831) (60,528)
--------- ---------
Net cash provided by (used in) financing activities (348,126) 83,070
--------- ---------
Effect of foreign translations on cash 18,243 24,556
--------- ---------
NET INCREASE (DECREASE) IN
CASH AND EQUIVALENTS (36,474) 10,711
Cash and equivalents at beginning of year 139,951 -
--------- ---------
Cash and equivalents at end of period $ 103,477 $ 10,711
--------- ---------
--------- ---------
</TABLE>
See notes to unaudited condensed consolidated financial statements.
Page 5 of 12
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COMPUFLIGHT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
SIX MONTHS ENDED APRIL 30, 1995
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NOTE A. DESCRIPTION OF BUSINESS AND ORGANIZATION
Compuflight, Inc. ("Compuflight") and subsidiaries, Navtech Systems Support Inc.
("Support") and Efficient Aviation Systems Inc. ("EAS") (herein referred to
collectively as the "Company"), are engaged in the business of (1) providing
computerized flight planning service to all segments of the aviation industry,
but principally to commercial airlines and corporate aircraft users and (2)
licensing customized versions of their proprietary software to end users mainly
throughout the United States and Canada.
NOTE B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The condensed consolidated balance sheet as of April 30, 1995, the consolidated
statements of operations for the three and six months ended April 30, 1995 and
1994, and the condensed consolidated statements of cash flow for the six months
ended April 30, 1995 and 1994 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 flows at April 30, 1995, and for all
periods presented, have been made.
The condensed consolidated financial statements include the accounts of
Compuflight, its 88%-owned subsidiary, Support, and its wholly-owned subsidiary,
EAS. All material intercompany balances and transactions have been eliminated.
In accordance with Statement of Financial Accounting Standards No. 52, "Foreign
Currency Translations," 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 that period. Unrealized translation
gains or losses are shown as a separate component of shareholders' equity.
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, 1994. Results of operations for the six months ended
April 30, 1995 are not necessarily indicative of the operating results for the
full year.
Page 6 of 12
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COMPUFLIGHT, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
SIX MONTHS ENDED APRIL 30, 1995
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RESULTS OF OPERATIONS
REVENUE
Revenue from service fees was approximately $1.6 million in the six months ended
April 30, 1995 compared with approximately $1.0 million for the six months ended
April 30, 1994, an increase of 60% or approximately $600,000. The increase in
service fees is attributed primarily to the addition of a systems integration
customer in February 1994 representing a per quarter revenue stream of
approximately $100,000, as well as increased usage service fees for existing
customers of Support aggregating to an additional approximate billing of
$200,000 in the period and an increase in the fees for performance engineering
services.
Revenue from hardware sales and software licenses was approximately $38,000
for the six months ended April 30, 1995 as compared with approximately
$49,000 for the six months ended April 30,1994.
COSTS AND EXPENSES
Operating expenses decreased approximately 6% or $54,000 from approximately
$939,000 for the six months ended April 30, 1994 to approximately $885,000 for
the six months ended April 30, 1995. This change is primarily attributable to
the reduction in third party computer services costs related to the
relocation of service bureau operations to the Waterloo, Ontario facility
during the quarter ended October 31, 1994.
Research and development costs were approximately $86,000 for the six months
ended April 30, 1995 as compared to an expenditure of $120,000 for the six
Months ended April 30, 1994. This decrease in expenditure levels is due to
the completion of a number of projects initiated prior to the year ended
October 31, 1994. The market for the Company's products is characterized by
continuing technological change and the increasing demands of airline
customers for software that responds to the operational issues faced by them.
As a result, the Company believes that substantial expenditures for research
and development will continue to be required in future quarters.
Selling, general and administrative expenses increased approximately 23% or
$81,000 from approximately $357,000 for the six months ended April 30, 1994 to
approximately $438,000 for the six months ended April 30, 1995. This increase
is primarily attributable to an increase in consulting fees (including payments
required under the marketing contract with Ray English and Associates Inc.
("RE&A")) of approximately $34,500, an increase in professional fees of
approximately $5,000 to implement new accounting procedures and controls and an
increase in travel related to ongoing efforts to increase sales of approximately
$40,000.
OTHER INCOME (EXPENSE)
The Company recorded a gain of approximately $40,000 on realized foreign
exchange transactions for the six months ended April 30, 1995 as compared to a
gain of approximately $108,000 for the six months ended April 30, 1994.
Gains and losses in foreign exchange are attributable to the difference
Page 7 of 12
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COMPUFLIGHT, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
SIX MONTHS ENDED APRIL 30, 1995
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in rates between the transaction date and the settlement date and cannot
readily be compared between periods.
NET EARNINGS
The unaudited consolidated financial statements reflect net earnings of
approximately $211,000 for the six months ended April 30, 1995 as compared to a
net loss of approximately $304,000 for the six months ended April 30, 1994.
This represents a change of approximately $515,000 and is primarily attributable
to the increase in revenues noted above along with overall expenses remaining
generally constant for each of the two periods presented.
LIQUIDITY AND CAPITAL RESOURCES
The Company showed a net decrease in cash resources of $36,474 for the six
months ended April 30, 1995 as compared to a net increase of $10,711 for the
six months ended April 30, 1994. In addition, at April 30, 1995, the Company
had a working capital deficiency of $357,343.
Cash flows from operations for the six months ended April 30, 1995 accounted for
an increase in cash of approximately $308,000, primarily as a result of the
early payment of a license fee receivable. Cash flows from investing activities
for the six months ended April 30, 1995 represented a net outflow of $14,614,
primarily due to the purchase of fixed assets (offset by net repayments from
RE&A). Cash flows from financing activities for the six months ended April 30,
1995 represent a net outflow of $348,126. A substantial portion of this outflow
relates to the repayment of the Global loan in December 1994 and the payment
of amounts due to Sandata Inc.
The Company currently has no significant capital commitments but may, from time
to time, consider acquisitions of complementary businesses, products or
technologies; it has no present understandings, commitments or agreements with
respect to any such acquisitions.
As of April 30, 1995, the Company's available funds consisted of $103,477 in
cash.
COMMITMENTS AND CONTINGENCIES
SUPPORT CLASS B 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 a current aggregate amount of $540,000 Canadian. As at April 30, 1995, no
dividends had been paid or declared on these shares.
EMPLOYMENT AND CONSULTING AGREEMENTS
The Company has entered into employment and consulting agreements with its
Chairman, former Chairmen and a Director of the Company which provide for
current annual compensation of approximately $300,000. The Company's
obligations under such agreements expire at various times during the period from
March 1997 through March 31, 2004. Further, the employment agreement with the
Company's Chairman, as amended subsequent to fiscal 1994, provides for the
obtaining of an annuity and/or insurance policy under which 60 consecutive
monthly payments of $10,000 would be payable upon his retirement on March 31,
1999 and $600,000 would be payable upon his death through March 31, 2004 (which
amount decreases to the extent of the $10,000 payments).
Page 8 of 12
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COMPUFLIGHT, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
SIX MONTHS ENDED APRIL 30, 1995
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PLAN OF OPERATION
The Company believes that its existing cash resources and credit
availability, as well as cash generated from operations, are insufficient to
finance operations and product development objectives. Planning is ongoing to
secure external financing during 1996. Management is continually streamlining
the Company's operations with a view toward reducing fixed costs, extending
credit terms and expanding its marketing and sales efforts. Specific
initiatives to reduce the working capital deficiency include:
SOFTWARE CONTRACT CLAIM
On January 31, 1991, the Company was awarded 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 requested by the Air Force, which Harris and the Company
considered beyond the scope of the subcontract work of the fixed price contract.
In January 1995, the Company filed with Harris claims aggregating $736,687 for
services which the Company considered beyond the scope of the subcontract.
Harris has advised the Company that a portion of the Company's claim ($612,000)
together with Harris' separate claim has been submitted to the Air Force and
that Harris will pay the Company's revised claim on a proportionate basis, to
the extent it receives payment from the Air Force. However, no assurances can
be given that Harris will be successful in obtaining any amounts from the Air
Force or that the Company will be successful in collecting any amounts from
Harris. The Company is continuing to actively pursue its claims against Harris.
Such claims have not been accounted for in the determination of estimated
earnings on the Harris subcontract and will be recognized only when and if
realized.
The Company is required to make a prepayment of the promissory note due to
Sandata, Inc. (the principal balance of which was $315,653 as of April 30, 1995
and which comprises a portion of "Due to Related Parties") to the extent of 75%
of all monies received from Harris. Such prepayment is to be applied to the
last amounts due under the note.
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 ($190,243 at
April 30, 1995) waived in addition to those previously waived.
Page 9 of 12
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COMPUFLIGHT, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
SIX MONTHS ENDED APRIL 30, 1995
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ACCOUNTS RECEIVABLE
Accounts receivable increased by approximately $218,000 or 62% between the
three months ended January 31, 1995 and the six months ended April 30, 1995.
Management is increasing its efforts to collect outstanding accounts
receivable through the addition of a staff member dedicated to the billing
and collections function.
INCREASE REVENUES FROM EXISTING CUSTOMERS
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.
SUMMARY
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).
In carrying out its future growth strategy, the Company will also continue to
investigate possible business combinations aimed at improving the operating
efficiencies of the Company and enhancing stockholder value. These business
combinations may include mergers and acquisitions as well as strategic
technology and marketing alliances.
Page 10 of 12
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COMPUFLIGHT, INC.
OTHER INFORMATION
SIX MONTHS ENDED APRIL 30, 1995
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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
3(A) Certificate of Incorporation and amendments thereto
including Certificate of Ownership and Merger(1)
3(B) By-Laws(2)
27 Financial Data Schedule
(b) Reports on Form 8-K
None
(1) Incorporated by reference to the Company's Annual Report on Form 10-KSB
for the fiscal year ended October 31, 1994 (File No. 0-15362).
(2) Incorporated by reference to the Company's Registration Statement on Form
S-18 (Registration No. 2-93714-NY).
Page 11 of 12
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COMPUFLIGHT, INC.
SIX MONTHS ENDED APRIL 30, 1995
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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: April 22, 1996 By: /s/ Russell K. Thal
--------------- --------------------------------
Chairman of the Board
Date: April 22, 1996 By: /s/ Duncan Macdonald
--------------- --------------------------------
Chief Executive Officer
and Chief Financial Officer
Page 12 of 12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-START> NOV-01-1994
<PERIOD-END> APR-30-1995
<CASH> 103,477
<SECURITIES> 0
<RECEIVABLES> 725,205
<ALLOWANCES> 155,056
<INVENTORY> 0
<CURRENT-ASSETS> 829,307
<PP&E> 669,715
<DEPRECIATION> 299,038
<TOTAL-ASSETS> 1,847,717
<CURRENT-LIABILITIES> 1,186,650
<BONDS> 0
0
0
<COMMON> 1,577
<OTHER-SE> 156,884
<TOTAL-LIABILITY-AND-EQUITY> 1,847,717
<SALES> 0
<TOTAL-REVENUES> 1,642,079
<CGS> 0
<TOTAL-COSTS> 1,473,733
<OTHER-EXPENSES> (102,765)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 59,909
<INCOME-PRETAX> 211,202
<INCOME-TAX> 0
<INCOME-CONTINUING> 211,202
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 211,202
<EPS-PRIMARY> 0.13
<EPS-DILUTED> 0
</TABLE>
