United states
securities and exchange commission
Washington, D.C. 20549
Form 10-QSB/a
amendment #1
[x] Quarterly Report PURSuant to Section 13 or 15 (d) of the Securities Exchange
Act of 1934
For the quarterly period ended April 30, 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
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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
incorporation or organization) (IRS Employer Identification No.)
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.
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Compuflight, Inc. and subsidiaries
Six Months Ended April 30, 1999
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I n d e x
Page
Number
Part I. Financial Information
Item 1. Unaudited Financial Statements
Condensed Consolidated Balance Sheet(Unaudited)as of April 30, 1999....3
Consolidated Statements of Operations and Comprehensive Income
(Unaudited) for the Six Months Ended and the Three Months Ended
April 30, 1999 and April 30, 1998....................................4
Condensed Consolidated Statements of Cash Flows (Unaudited)
for the Six Months Ended and the Three Months Ended
April 30, 1999 and April 30, 1998....................................5
Notes to Condensed Consolidated Financial Statements...................6
Item 2. Management's Discussion and Analysis
or Plan of Operation...................................................7
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Compuflight, Inc. and SUBSIDIARIES
Condensed Consolidated Balance Sheet
(Unaudited)
April 30,
1999
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ASSETS
CURRENT ASSETS
Accounts receivable, net of allowance for doubtful accounts of $314,048 $ 414,999
Investment tax credits receivable, net of allowance 484,774
Prepaid expenses and other 12,923
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Total current assets 912,696
FIXED ASSETS, NET 311,616
RESTRICTED CASH 50,000
DUE FROM RELATED PARTY 398,740
OTHER ASSETS 19,896
$ 1,692,948
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Cash Overdraft $ 13,604
Bank revolving demand loans 78,327
Accounts payable and accrued liabilities 1,443,360
Deferred lease inducements - current portion 14,808
Due to related parties - current portion 124,640
Long term debt - current portion 171,383
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Total current liabilities 1,846,122
DUE TO RELATED PARTIES 78,080
LONG TERM DEBT 162,788
DEFERRED LEASE INDUCEMENTS 96,253
MINORITY INTERESTS 243,970
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
Accumulated other comprehensive income 57,487
Accumulated deficit (2,474,199)
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(734,625)
$ 1,692,948
See notes to unaudited condensed consolidated financial statements.
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Part I, Item 1
Page 3
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Compuflight, Inc. and SUBSIDIARIES
Consolidated Statements of Operations and Comprehensive Income
(Unaudited)
Six Months Ended Three Months Ended
April 30, April 30,
1999 1998 1999 1998
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Revenue
Service fees $ 2,232,151 $ 1,534,685 $ 1,152,823 $ 781,107
Hardware, software and license sales 314,706 3,159 314,716 -
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2,546,857 1,537,844 1,467,529 781,107
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Costs and Expenses
Operating 1,877,890 1,221,156 976,841 604,760
Research and development, net of
Investment Tax Credits 11,534 12,516 5,833 6,254
Selling, general and administrative 396,848 380,590 180,726 205,847
Depreciation and amortization 42,477 70,418 22,002 34,599
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2,328,749 1,684,680 1,185,402 851,460
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Operating profit (loss) 218,108 (146,836) 282,127 (70,353)
Other income (expense)
Interest income 25,841 11,847 13,293 5,925
Interest expense - related parties (24,853) (18,741) (13,340) (9,581)
Interest expense - other (160,420) (54,949) (88,990) (31,514)
Realized foreign exchange (loss) gain (30,375) (1,087) (11,893) (5,381)
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NET EARNINGS (LOSS) 28,301 (209,766) 181,197 (110,904)
Other comprehensive income (expense)
Foreign currency translation adjustment 37 4,674 2,021 (4,620)
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COMPREHENSIVE INCOME (LOSS) $ 28,338 $ (205,092) $ 183,218 $ (115,524)
========= ========== ========== =========
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Net earnings (loss) per share $ 0.01 $ (0.12) $ 0.09 $ (0.07)
========= ========== ========= =========
Weighted Average Number of Common
Shares Outstanding 2,001,980 1,701,980 2,001,980 1,701,980
========= =========== ============ ============
See notes to unaudited condensed consolidated financial statements.
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Part I, Item 1
Page 4
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Compuflight, Inc. and subsidiaries
Condensed Consolidated Statements of Cash Flow
(Unaudited)
Six Months Ended April 30, 1999 1998
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Cash flows from operating activities
Net earnings (loss) $ 28,301 $ (209,766)
Adjustments to reconcile net earnings (loss) to net cash provided
by operating activities
Depreciation and amortization 42,477 70,418
Provision for uncollectable accounts 3,491 9,196
Decrease (increase) in operating assets - net 59,284 92,965
Increase in operating liabilities - net 93,703 86,782
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Net cash provided by operating activities 227,256 49,595
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Cash flows from investing activities
Purchase of fixed assets (31,018) (5,874)
Advances to Parent Company (86,447) (46,903)
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Net cash used in investing activities (117,495) (52,777)
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Cash flows from financing activities
Cash Overdraft (44,927) 6,289
Payment of long term debt (20,495) (21,561)
Proceeds from long term debt 58,413 6,289
Advances from (payments to) related parties (61,473) 17,962
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Net cash used in financing activities (68,482) 2,690
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Effect of foreign translations on cash (41,279) 492
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NET CHANGE IN CASH AND EQUIVALENTS - -
Cash and equivalents at beginning of year - -
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Cash and equivalents at end of period $ - $ -
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See notes to unaudited condensed consolidated financial statements.
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Part I, Item 1
Page 5
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Compuflight, Inc. and subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
Six Months Ended April 30, 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 April 30, 1999, and the
consolidated statements of earnings for the three and six months ended April 30,
1999 and 1998, and the condensed consolidated statements of cash flow for the
six months ended April 30, 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 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 six months ended April 30,
1999 are not necessarily indicative of the operating results for the full year.
Part I, Item 1
Page 6
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Compuflight, Inc. and subsidiaries
Management's Discussion and Analysis or Plan of Operation
Six Months Ended April 30, 1999
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ITEM 2: management discussion and analysis or plan of operation
Results of operations
Revenue
Revenue from service fees was approximately $2.2 million in the six months ended
April 30, 1999 compared with approximately $1.5 million for the six months ended
April 30, 1998, an increase of approximately 45%, or approximately $697,000.
This increase is primarily attributable to increases in fees from existing
customers of approximately $694,000 in weather and NOTAMs fees from the Monterey
facility (which commenced operations in July 1998). These increases were offset
by the loss of revenue of approximately $151,000 from customers who had provided
the Company with one-time fees in the six months ended April 30, 1998 and the
loss of fees of approximately $118,000 from customers who ceased operations in
prior quarters.
Revenue from hardware, software and license sales increased approximately
$312,000, from approximately $3,000 for the six months ended April 30, 1998 to
approximately $315,000 for the six months ended April 30, 1999. This was
primarily due to the completed installation of two AURORA flight planning
systems during the three months ended April 30,1999.
Costs and expenses
Operating expenses increased approximately 54%, or approximately $657,000, from
approximately $1.2 million for the six months ended April 30, 1998 to
approximately $1.9 million for the six months ended April 30, 1999. This change
is primarily attributable to an increase in salaries and benefits of
approximately $389,000 and an increase in communications costs of approximately
$202,000. A significant portion of these increases relates to the increased
costs of the Monterey facility. Furthermore, royalty expenses of approximately
$49,000 was increased during the six months ended April 30, 1999 for the use of
the weather and NOTAMs software in the Monterey facility. Other operating
expenses increased by approximately $17,000.
Research and development expenditures decreased approximately $5,000, during the
six months ended April 30, 1999 over the same period in fiscal 1998. 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 six months ended April 30, 1998.
The Company has claimed scientific research and experimental development credits
of approximately $25,000 in the six months ended April 30, 1999 as compared to
approximately $27,000 for the six months ended April 30, 1998.
Selling, general and administrative expenses increased approximately 4%, or
approximately $16,000, from approximately $381,000 for the six months ended
April 30, 1998 to approximately $397,000 for the six months ended April 30,
1999. The increase is primarily attributable to the increased travel costs of
approximately $43,000 associated with maintaining locations in Waterloo, Ontario
and Monterey, California. The increase in travel costs is offset by a reduction
in management fees of approximately $34,000 from an agreement that ended in July
1998 and a net increase in other selling, general and administrative costs of
approximately $7,000.
Part I, Item 2
Page 7
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Other income (expense)
The Company recorded a loss of approximately $30,000 on realized foreign
exchange transactions for the six months ended April 30, 1999. 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 Earnings
The unaudited consolidated financial statements reflect net earnings of
approximately $28,000 for the six months ended April 30, 1999 compared to a net
loss of approximately $210,000 for the six months ended April 30, 1998. The
change is due to the increase in revenues, and specifically the sale of two
AURORA systems, as offset by a smaller increase in costs and expenses
Liquidity and Capital Resources
The Company had no cash resources in either the six months ended April 30, 1998,
nor 1997. In addition, at April 30, 1999, the Company had a working capital
deficiency of $933,426 as compared to $1,222,816 as of October 31, 1998.
Cash flows from operations accounted for an increase in cash of $227,256,
primarily as a result of the decrease in operating assets and the increase in
operating liabilities as well as the impact of net earnings for the period. Cash
flows from investing activities for the six months ended April 30, 1999
represent a net outflow of $117,495, primarily due to advances made to the
Company's parent. Cash flows from financing activities for the six months ended
April 30, 1999 represent a net outflow of $68,482, all of which relates to long
term repayments and advances.
As of April 30, 1999, the Company had no significant 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 or technologies.
As of April 30, 1999, the Company's bank indebtedness, net of the restricted
cash held by the bank as security for its loans, equaled $41,931.
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).
Part I, Item 2
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PLAN OF OPERATION
The Company's liquidity at April 30, 1999 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.
Management Team Development and Structure
The Company has continued to strengthen the skill set of its management team.
While the Company has always had significant strength in the areas of product
development and technical and operational support, the recruitment focus has
been on intermediate and senior managers that could bring experience in the
areas of people management, project planning and implementation, and business
strategy. The result of these activities has been realized in the development of
a true business culture that includes product planning strategies, software
development programs, detailed resource management, and more rigid internal
controls and procedures.
Trade Creditors
The Company's objective is to be current with all of its trade creditors. As an
interim step, the Company has renegotiated payment terms with several larger
trade creditors including its key suppliers of communication services and with
federal tax authorities. The Company is continuing to actively pursue additional
extensions with its creditors.
Renegotiation of Demand Loans
During the past year, the company has been successful in renegotiating two of
its demand loans, resulting in payment terms that reflect reduced interest rates
and fixed payment dates.
Increase Revenues from Existing Customers
The Company's products and services are used by more than 70 customers
worldwide. By leveraging its solid market reputation, the Company has focussed
its efforts on expanding current customer revenues by providing additional
products and services, by licensing additional users, and by upgrading customers
to higher level products as their needs arise. The introduction of the Company's
account management group has given the Company the ability to more readily
identify these potential revenue opportunities, and to be proactive in
supplementing the efforts of the sales group. The addition of weather and
NOTAMs, and the related integration of these systems into the Company's
products, has provided another key component in the Company's plans to become
the premier aviation flight operations systems supplier in the mid-range market.
Part I, Item 2
Page 9
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Expanded Sales and Marketing Efforts
Sales and Marketing activities have increased significantly during the past
year, as the Company's product strategy has been implemented. The Company has
added sales staff to provide more representation in our traditional North
American market, while also establishing Agent relationships to provide more
focus in other areas of the world including Asia and Europe. This successful
beginning of this plan has been evident by the Company's success with the sales
programs of its largest new product offering, the Aurora Flight Planning system.
Business Rationalization
With new management in place, the Company has implemented a number of programs
aimed at more effectively utilizing the business's assets, while shedding
redundant activities. Some of these projects include the closure of a small
regional office, the subletting of unutilized office space, and the migration to
more cost-effective production equipment in the Monterey facility. While some of
these projects may have resulted in short term cost increases, the long term
cost savings are expected to be significant.
Summary
The Company's management team is committed to implementing and enhancing the
above noted activities. At the same time, a business evaluation process has been
put in place to regularly review these activities and to develop and implement
new programs as needed.
The benefits of these projects have been immediate, however the Company will
require additional funding to achieve its stated plans and objective. As such,
various financing sources, including debt or equity offerings, will be
investigated when and if such financing is available to the Company. No
assurances can be given that any required financing will be available with
commercially reasonable terms or otherwise. In addition, no assurances can be
given that the Company's activities, as set forth above, will be successful
whether due to 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 complementary product lines or market regions,
and ultimately enhancing shareholder value. These business combinations may
include mergers and acquisitions of businesses or technologies, as well as
strategic technology and marketing alliances.
Part I, Item 2
Page 10
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Compuflight, Inc. and subsidiaries
Six Months Ended April 30, 1999
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Signatures
In accordance with Section 13 or 15(d) of the Securities Exchange Act
of 1934, the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Dated: December 3, 1999
COMPUFLIGHT, INC.
By: /s/ Duncan Macdonald
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Duncan Macdonald
Chief Executive Officer
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