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 quarterly period ended January 31, 1998
--------------------------------------------------
or
[ ] 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 0-15362
Compuflight, Inc.
(Exact name of small business issuer as specified in its charter)
Delaware 11-2883366
- ---------------------------------- ---------------------------------
State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
125 Mineola Ave., Roslyn Heights, NY 11577
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(Address of principal executive offices) (Zip code)
516-625-0202
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(Registrant's telephone number, including area code)
99 Seaview Boulevard, Port Washington, NY 11050
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(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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.
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes No Applicable only to corporate issuers
The number of shares outstanding of the issuer's common stock as of September
30, 1999 was 2,001,980 shares.
Page 1 of 12
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Compuflight, Inc. and subsidiaries
Three Months Ended January 31, 1998
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I n d e x
Page
Numbers
Part I. Financial Information
Item 1. Unaudited Financial Statements
Condensed Consolidated Balance Sheet (Unaudited) as of
January 31, 1998.....................................................3
Consolidated Statements of Operations (Unaudited)-For the Three Months
Ended January 31, 1998 and January 31, 1997..........................4
Condensed Consolidated Statements of Cash Flow (Unaudited)-For the
Three Months Ended January 31, 1998 and January 31, 1997.............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. and subsidiaries
Condensed Consolidated Balance Sheet
(Unaudited)
January 31,
1998
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ASSETS
CURRENT ASSETS
Accounts receivable, net of allowance for
doubtful accounts of $176,278 $ 195,094
Prepaid expenses and other 13,112
------------
Total current assets 208,206
INVESTMENT TAX CREDITS RECEIVABLE, NET OF ALLOWANCE 485,490
FIXED ASSETS, NET 361,156
RESTRICTED CASH 50,000
OTHER ASSETS 21,541
------------
$ 1,126,393
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Cash overdraft $ 143,875
Bank revolving demand loans 78,512
Accounts payable and accrued liabilities 880,594
Deferred lease inducements - current portion 14,843
Due to related parties - current portion 15,461
Long term debt - current portion 41,968
------------
Total current liabilities 1,175,253
DUE TO RELATED PARTIES 223,011
LONG TERM DEBT 97,925
DEFERRED LEASE INDUCEMENTS 115,035
MINORITY INTERESTS 244,547
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' DEFICIENCY
Capital stock, par value $.001 per share; authorized 2,500,000
shares; issued and outstanding 1,701,980 shares 1,702
Additional paid-in capital 1,545,745
Notes receivable - Parent Company (266,604)
Cumulative foreign translation adjustment 52,364
Accumulated deficit (2,062,585)
------------
(729,378)
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$ 1,126,393
============
See notes to unaudited condensed consolidated financial statements.
Part I, Item 1. Page 3 of 12
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<TABLE>
<CAPTION>
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Compuflight, Inc. and subsidiaries
Consolidated Statements of Operations
(Unaudited)
Three Months Ended January 31, 1998 1997
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<S> <C> <C>
Revenue
Service fees $ 753,578 $ 642,681
Hardware, software and license sales 3,159 30,000
------------ ------------
756,737 672,681
------------ ------------
Costs and Expenses
Operating 616,396 505,756
Research and development, net of Investment Tax Credits 6,262 17,812
Selling, general and administrative 174,743 237,125
Office relocation expenses - 60,954
Depreciation and amortization 35,819 39,280
------------ ------------
833,220 860,927
------------ ------------
Operating loss (76,483) (188,246)
Other income (expense)
Interest income 5,922 15,217
Interest expense - related parties (9,160) (10,698)
Interest expense - other (23,435) (4,848)
Realized foreign exchange gain (loss) 4,294 (2,516)
------------ ------------
NET LOSS $ (98,862) $ (191,091)
============ ============
Net loss per share $ (0.06) $ (0.11)
============ ============
Weighted Average Number of Common Shares Outstanding 1,701,980 1,701,980
============ ============
See notes to unaudited condensed consolidated financial statements.
</TABLE>
Part I, Item 1. Page 4 of 12
<PAGE>
<TABLE>
<CAPTION>
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Compuflight, Inc. and subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Three Months Ended January 31, 1998 1997
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<S> <C> <C>
Cash flows from operating activities
Net loss $ (98,862) $ (191,091)
Adjustments to reconcile net loss to net cash provided
by operating activities
Depreciation and amortization 35,819 39,280
Provision for uncollectable accounts - 770
Consulting fees, net - 18,322
Decrease in operating assets - net 41,317 293,336
Increase (decrease) in operating liabilities - net (28,758) 119,336
------------ ------------
Net cash (used in) provided by operating activities (50,484) 279,953
------------ ------------
Cash flows from investing activities
Purchase of fixed assets (4,738) (270,123)
Payments from Parent Company 1,162 9,570
------------ ------------
Net cash used in investing activities (3,576) (260,553)
------------ ------------
Cash flows from financing activities
Cash overdraft 61,879
Payment of long term debt (10,788) -
Payment of notes (307) (15,325)
------------ ------------
Net cash provided by (used in) financing activities 50,784 (15,325)
------------ ------------
Effect of foreign translations on cash 3,276 704
------------ ------------
NET INCREASE IN CASH AND EQUIVALENTS - 4,779
Cash and equivalents at beginning of year - 37,362
------------ ------------
Cash and equivalents at end of period $ - $ 42,141
============ ============
See notes to unaudited condensed consolidated financial statements.
</TABLE>
Part I, Item 1. Page 5 of 12
<PAGE>
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Compuflight, Inc. and subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Three Months Ended January 31, 1998
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NOTE A. DESCRIPTION OF BUSINESS AND ORGANIZATION
Compuflight, Inc. (the "Company"), directly or indirectly through its
wholly-owned Canadian subsidiaries, Navtech Systems Support Inc. ("Support"),
and Efficient Aviation Systems Inc. ("EAS"), is engaged in the business of
developing, marketing, licensing and supporting computerized flight planning and
aircraft performance engineering services for the aviation industry.
NOTE B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The condensed consolidated balance sheet as of January 31, 1998, and the
consolidated statements of operations and cash flows for the three months ended
January 31, 1998 and 1997, 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 January 31, 1998, and for all periods presented,
have been made.
The condensed consolidated financial statements include the accounts of
Compuflight, Inc. ("Compuflight") and its wholly-owned Canadian subsidiaries,
Support and 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, 1997. Results of operations for the three months ended January
31, 1998 are not necessarily indicative of the operating results for the full
year.
Part I, Item 2. Page 6 of 12
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Compuflight, Inc. and subsidiaries
Management's Discussion and Analysis or Plan of Operation
(Unaudited)
Three Months Ended January 31, 1998
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ITEM 2. Management's discussion and analysis or plan of operation
Results of operations
Revenue
Revenue from service fees was approximately $754,000 in the three months ended
January 31, 1998 compared with approximately $643,000 for the three months ended
January 31, 1997, an increase of approximately 17%, or approximately $111,000.
This increase is primarily due to the inclusion of fees of approximately
$158,000 from four airline customers who had signed contracts in the last two
quarters of 1997, an increase in fees from one customer of approximately $25,000
and a net decrease in fees from other customers of approximately $73,000.
Approximately $33,000 of the net decrease relates to airlines that had ceased
business in fiscal 1997.
Revenue from hardware sales and software licenses decreased approximately 90%,
or approximately $27,000. There were no significant AURORA or COMRAD license
sales in the quarter ended January 31, 1998.
Costs and expenses
Operating expenses increased approximately 22% or approximately $110,000 from
approximately $506,000 for the three months ended January 31, 1997 to
approximately $616,000 for the three months ended January 31, 1998. This change
is primarily attributable to an increase in salaries and benefits of
approximately $176,000 and is offset by a decrease in communications costs of
approximately $40,000 and a net decrease in other operating expenses of
approximately $26,000. A significant portion of the increase in salaries and
benefits relates to the decrease in pure research and development activities;
accordingly, those salaries are also allocated to operating expenses.
Net research and development expenditures decreased approximately 65%, or
approximately $12,000, during the three months ended January 31, 1998 over the
same period in fiscal 1997. By the end of fiscal 1997, the Company's research
and development team had completed the majority of its work on the new AURORA
program, and, accordingly, this resulted in a decline in research and
development expenses during the quarter. The Company has claimed scientific
research and experimental development credits of approximately $14,000 in the
three months ended January 31, 1998 as compared to approximately $51,000 for the
three months ended January 31, 1997.
Selling, general and administrative expenses decreased approximately 26%, or
approximately $62,000, from approximately $237,000 for the three months ended
January 31, 1997 to approximately $175,000 for the three months ended January
31, 1998. This decrease is primarily attributable to a decrease in professional
fees of approximately $31,000, a decrease in travel expenses of approximately
$21,000 and a net decrease in other selling, general and administrative expenses
of approximately $10,000.
Part I, Item 2. Page 7 of 12
<PAGE>
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Compuflight, Inc. and subsidiaries
Management's Discussion and Analysis or Plan of Operation
(Unaudited)
Three Months Ended January 31, 1998
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Other income (expense)
The Company recorded a gain of approximately $4,000 on realized foreign exchange
transactions for the three months ended January 31, 1998 as compared to a loss
of approximately $3,000 for the same period in 1997. Gains and losses in foreign
exchange are attributable to the difference in rates between the transaction
date and the settlement date and cannot readily be compared between periods.
Net (loss) earnings
The unaudited consolidated financial statements reflect a net loss of
approximately $99,000 for the three months ended January 31, 1998 as compared to
a net loss of approximately $191,000 for the three months ended January 31,
1997. The change is due to the increase in revenues and is offset by a net
increase in operating expenses and in selling, general and administrative
expenses. Also, the Company incurred one-time office relocation expenses of
approximately $61,000 in the three months ended January 31, 1997, further
contributing to the reduction in losses between quarters.
Liquidity and Capital Resources
The Company had no cash and equivalents as at January 31, 1998 as compared to
$42,141 as at January 31, 1997. In addition, at January 31, 1998 the Company had
a working capital deficiency of $967,047 as compared to $1,039,201 as of October
31, 1997.
Cash flows from operations accounted for a net outflow of $50,484, primarily as
a result of the net loss for the quarter as offset by the depreciation
adjustment and a net increase in operating assets. Cash flows from investing
activities for the three months ended January 31, 1998 represent a net outflow
of $3,576, primarily due to the purchase of fixed assets. Cash flows from
financing activities for the three months ended January 31, 1998 represent a net
inflow of $50,784, which relates to the net infusion of additional funds from
the Company's Canadian bank.
As of January 31, 1998, the Company had no significant capital commitments.
Reference is made to the Company's Form 10-KSB for the year ended October 31,
1998 and Form 10-QSB for the period ended July 31, 1999 for a discussion of the
Company's October 1, 1999 acquisition of all of the shares of Skyplan Services
(UK) Limited. The Company may, from time to time, consider additional
acquisitions of complementary businesses, products and technologies.
As of January 31, 1998, the Company's bank indebtedness, after offsetting the
loans with restricted cash held by the bank as security, equaled $172,387.
Part I, Item 2. Page 8 of 12
<PAGE>
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Compuflight, Inc. and subsidiaries
Management's Discussion and Analysis or Plan of Operation
(Unaudited)
Three Months Ended January 31, 1998
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COMMITMENTS AND CONTINGENCIES
Employment Agreement
Effective August 25, 1999, the Company entered into a retirement agreement
with its current Chairman, Russell K. Thal. This agreement replaces a previous
employment agreement, as amended, and calls for, among other things, the payment
of $600,000 in 96 semi-monthly payments commencing shortly after Mr. Thal's
retirement on October 31, 1999. Mr. Thal will continue on as Chairman without
additional compensation (other than standard fees, if any, paid to outside
directors).
Part I, Item 2. Page 9 of 12
<PAGE>
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Compuflight, Inc. and subsidiaries
Management's Discussion and Analysis or Plan of Operation
(Unaudited)
Three Months Ended January 31, 1998
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Plan of Operation
The Company's Plan of Operation is discussed in its Form 10-KSB for the year
ended October 31, 1998 and Form 10-QSB for the period ended July 31, 1999,,
which are being filed concurrently with this Form 10-QSB.
Part I, Item 2. Page 10 of 12
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Compuflight, Inc. and subsidiaries
Other Information
(Unaudited)
Three Months Ended January 31, 1998
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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.
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(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).
Part II Page 11 of 12
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COMPUFLIGHT, INC.
Three Months Ended January 31, 1998
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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: October 20, 1999 By: /s/ Russell K. Thal
---------------------- ---------------------
Chairman of the Board
Date: October 20, 1999 By: /s/ Duncan Macdonald
---------------------- ---------------------
Chief Executive Officer
Date: October 20, 1999 By: /s/ Rainer Vietze
---------------------- ---------------------
Chief Financial Officer
Page 12 of 12
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-Mos
<FISCAL-YEAR-END> Oct-31-1998
<PERIOD-START> Nov-01-1997
<PERIOD-END> Jan-31-1998
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 371,372
<ALLOWANCES> 176,278
<INVENTORY> 0
<CURRENT-ASSETS> 208,206
<PP&E> 1,045,894
<DEPRECIATION> 684,738
<TOTAL-ASSETS> 1,126,393
<CURRENT-LIABILITIES> 1,175,253
<BONDS> 0
0
0
<COMMON> 1,702
<OTHER-SE> (731,080)
<TOTAL-LIABILITY-AND-EQUITY> 1,126,393
<SALES> 0
<TOTAL-REVENUES> 756,737
<CGS> 0
<TOTAL-COSTS> 833,220
<OTHER-EXPENSES> (10,216)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 32,595
<INCOME-PRETAX> (98,862)
<INCOME-TAX> 0
<INCOME-CONTINUING> (98,862)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (98,862)
<EPS-BASIC> (0.06)
<EPS-DILUTED> 0
</TABLE>
