United States
Ssecurities 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, 1999
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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.
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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 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)
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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 10
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Compuflight, Inc. and Subsidiaries
Three Months Ended January 31, 1999
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I n d e x
Page
Numbers
Part I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheet (Unaudited)
as of January 31, 1999...............................................3
Consolidated Statements of Earnings (Unaudited ) for the
Three Months Ended January 31, 1999 and January 31, 1998.............4
Condensed Consolidated Statements of Cash Flow (Unaudited)
for the Three Months Ended January 31, 1999 and January 31, 1998.....5
Notes to Condensed Consolidated Financial Statements.................6
Item 2. Management's Discussion and Analysis or Plan of Operation............7
Part II. Other Information...................................................10
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 10
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Compuflight, Inc. and Subsidiaries
Condensed Consolidated Balance Sheet
(Unaudited)
January 31,
1999
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ASSETS
<S> <C>
CURRENT ASSETS
Accounts receivable, net of allowance for doubtful accounts of $311,057 $ 345,736
Investment tax credits receivable, net of allowance 458,561
Prepaid expenses and other 17,521
------------
Total current assets 821,818
FIXED ASSETS, NET 317,303
DUE FROM RELATED PARTY 316,875
RESTRICTED CASH 50,000
OTHER ASSETS 20,475
$ 1,526,471
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Cash Overdraft $ 25,946
Bank revolving demand loans 75,785
Accounts payable and accrued liabilities 1,501,050
Deferred lease inducements - current portion 14,328
Due to related parties - current portion 137,927
Long term debt - current portion 121,367
------------
Total current liabilities 1,876,403
DUE TO RELATED PARTIES 92,084
LONG TERM DEBT 142,701
DEFERRED LEASE INDUCEMENTS 96,712
MINORITY INTERESTS 236,054
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' DEFICIENCY
Capital stock, par value $.001 per share; authorized 2,500,000
shares; issued and outstanding 2,001,980 shares 2,002
Additional paid-in capital 1,680,445
Cumulative foreign translation adjustment 55,466
Accumulated deficit (2,655,396)
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(917,483)
$ 1,526,471
See notes to unaudited condensed consolidated financial statements.
Part I, Item 1. Page 3 of 10
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Compuflight, Inc. and subsidiaries
Consolidated Statements of Earnings
(Unaudited)
For The Three Months Ended January 31, 1999 1998
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Revenue
Service fees $ 1,079,328 $ 753,578
Hardware, software and license sales - 3,159
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1,079,328 756,737
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Costs and Expenses
Operating 901,049 616,396
Research and development, net of
Investment Tax Credits 5,701 6,262
Selling, general and administrative 216,122 174,743
Depreciation and amortization 20,475 35,819
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1,143,347 833,220
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Operating loss (64,019) (76,483)
Other income (expense)
Interest income 12,548 5,922
Interest expense - related parties (11,513) (9,160)
Interest expense - other (71,430) (23,435)
Realized foreign exchange gain (loss) (18,482) 4,294
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NET LOSS $ (152,896) $ (98,862)
============ =========
Net loss per share $ (0.08) $ (0.06)
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Weighted Average Number of Common
Shares Outstanding 2,001,980 1,701,980
============ =========
See notes to unaudited condensed consolidated financial statements.
Part I, Item 1. Page 4 of 10
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Compuflight, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flow
(Unaudited)
For The Three Months Ended January 31, 1999 1998
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<S> <C> <C>
Cash flows from operating activities
Net loss $ (152,896) $ (98,862)
Adjustments to reconcile net loss to net cash (used in) provided
by operating activities
Depreciation and amortization 20,475 35,819
Provision for uncollectible accounts 2,891 -
Decrease in operating assets - net 120,843 41,317
Increase (decrease) in operating liabilities - net 174,269 (28,758)
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Net cash (used in) provided by operating activities 165,582 (50,484)
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Cash flows from investing activities
Purchase of fixed assets (23,425) (4,738)
Payments from (Advances to) Related Party (54,123) 1,162
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Net cash used in investing activities (77,548) (3,576)
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Cash flows from financing activities
Cash overdraft (35,127) 61,879
Payment of long term debt (29,001) (10,788)
Payment of notes (27,866) (307)
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Net cash used in financing activities (91,994) 50,784
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Effect of foreign translations on cash (3,960) 3,276
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NET INCREASE (DECREASE) IN
CASH AND EQUIVALENTS - -
Cash and equivalents at beginning of year - -
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Cash and equivalents at end of period $ - $ -
============ ============
See notes to unaudited condensed consolidated financial statements.
Part I, Item 1. Page 5 of 10
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Compuflight, Inc. and subsidiaries
Three Months Ended January 31, 1999
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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, 1999, and the
consolidated statements of earnings and cash flows for the three months ended
January 31, 1999 and 1998, 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, 1999, 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, 1998. Results of operations for the three months ended January
31, 1999 are not necessarily indicative of the operating results for the full
year.
Part I, Item 2. Page 6 of 10
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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 $1.1 million in the three months
ended January 31, 1999 as compared with approximately $754,000 for the three
months ended January 31, 1998, an increase of approximately 43%, or
approximately $326,000. This increase is primarily due to increases in fees from
existing customers of approximately $149,000, the inclusion of fees from new
flight planning customers of approximately $38,000 and the inclusion of
approximately $300,000 in weather and NOTAMS fees from the Monterey operation
(which commenced in July 1998). These increases were offset by the loss of
revenue of approximately $84,000 from one-time customers in 1998 and the loss in
fees of approximately $77,000 from customers who ceased operations in prior
quarters.
The Company has recorded approximately $119,000 in deferred revenue related to a
system sale to be delivered in the second quarter of 1999.
Costs and expenses
Operating expenses increased approximately 46% or approximately $285,000 from
approximately $616,000 for the three months ended January 31, 1998 to
approximately $901,000 for the three months ended January 31, 1999. This change
is primarily attributable to an increase in salaries and benefits of
approximately $148,000, an increase in communications costs of approximately
$96,000 as well as net increases in other operating expenses of approximately
$41,000. These increases pertain mainly to expenses related to the Monterey
location.
Net research and development expenditures decreased approximately $600, during
the three months ended January 31, 1999 over the same period in fiscal 1998. The
Company has claimed scientific research and experimental development credits of
approximately $12,000 in the three months ended January 31, 1999 as compared to
approximately $14,000 for the three months ended January 31, 1998.
Selling, general and administrative expenses increased approximately 24%, or
approximately $41,000, from approximately $175,000 for the three months ended
January 31, 1998 to approximately $216,000 for the three months ended January
31, 1999. This increase is primarily attributable to an increase in travel
expenses of approximately $41,000, which relates mainly to travel to the
Company's Monterey location.
Other income (expense)
The Company recorded a loss of approximately $18,000 on realized foreign
exchange transactions for the three months ended January 31, 1999 as compared to
a gain of approximately $4,000 for the same period in 1998. 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.
Part I, Item 2. Page 7 of 10
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Net (loss) earnings
The unaudited consolidated financial statements reflect a net loss of
approximately $153,000 for the three months ended January 31, 1999 as compared
to a net loss of approximately $99,000 for the three months ended January 31,
1998. 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.
Liquidity and Capital Resources
The Company had no cash resources at either January 31, 1999 or October 31,
1998. In addition, at January 31, 1999, the Company had a working capital
deficiency of $1,054,585 as compared to $1,222,816 as of October 31, 1998.
Cash flows from operations accounted for a net inflow of $165,582, primarily as
a result of the net loss for the quarter as offset by the depreciation
adjustment and a net decrease in operating assets. Cash flows from investing
activities for the three months ended January 31, 1999 represent a net outflow
of $77,548, primarily due to the purchase of fixed assets and advances to a
related party. Cash flows from financing activities for the three months ended
January 31, 1999 represent a net outflow of $91,994, a substantial portion of
which relates to payments on existing loans and related party notes.
As of January 31, 1999, 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. Furthermore, the Company may, from time to time, consider
additional acquisitions of complementary businesses, products and technologies.
As of January 31, 1999, the Company's bank indebtedness, net of the restricted
cash held by the bank as security for its loans, equaled $51,731.
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 the previous
employment agreement, as amended, and calls for, among other things, the payment
of $600,000 in 96 semimonthly 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).
PLAN OF OPERATION
The Company's Plan of Operation is discussed in its Form 10QSB for the period
ended July 31, 1999, which is being filed contemporaneously herewith.
Part I, Item 2. Page 8 of 10
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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 9 of 10
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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
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Chairman of the Board
Date: October 20, 1999 By:/s/ Duncan Macdonald
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Chief Executive Officer
Date: October 20, 1999 By:/s/ Rainer Vietze
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Chief Financial Officer
Page 10 of 10
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<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-Mos
<FISCAL-YEAR-END> Oct-31-1999
<PERIOD-START> Nov-01-1998
<PERIOD-END> Jan-31-1999
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 656,793
<ALLOWANCES> 311,057
<INVENTORY> 0
<CURRENT-ASSETS> 821,818
<PP&E> 1,091,685
<DEPRECIATION> 774,382
<TOTAL-ASSETS> 1,526,471
<CURRENT-LIABILITIES> 1,876,403
<BONDS> 0
0
0
<COMMON> 2,002
<OTHER-SE> (919,485)
<TOTAL-LIABILITY-AND-EQUITY> 1,526,471
<SALES> 0
<TOTAL-REVENUES> 1,079,328
<CGS> 0
<TOTAL-COSTS> 1,143,347
<OTHER-EXPENSES> 5,934
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 82,943
<INCOME-PRETAX> (152,896)
<INCOME-TAX> 0
<INCOME-CONTINUING> (152,896)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (152,896)
<EPS-BASIC> (0.08)
<EPS-DILUTED> 0
</TABLE>
