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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-KSB
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended October 31, 2000
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From _____ to ____
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Commission File Number 0-15362
NAVTECH, INC.
(Exact name of small business issuer as specified in its charter)
Delaware 11-2883366
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Suite 102, 2340 Garden Road
Monterey, California 93940
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (519) 747-9883
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 |X| No |_|
Check if disclosure of delinquent filers in response to Item 405 of Regulation
S-B is not contained in this form, and no disclosure will be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [ ]
State issuer's revenues for its most recent fiscal year (2000): $ 7,008,124
The aggregate market value of the voting stock held by non-affiliates based upon
the average bid and asked prices of such stock as of November 30, 2000 was
$1,268,619
(ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)
Check whether the issuer has 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 a court. Yes |_| No |_|
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
The number of shares outstanding of the issuer's common stock as of November 30,
2000 was 3,449,757 shares.
DOCUMENTS INCORPORATED BY REFERENCE: none
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<PAGE>
NAVTECH, INC.
FORM 10-KSB
For the Fiscal Year Ended October 31, 2000
INDEX
PART I PAGE
Item 1. Description of Business..........................................3
Item 2. Description of Property.........................................11
Item 3. Legal Proceedings...............................................12
Item 4. Submission of Matters to a Vote of Security Holders.............13
PART II
Item 5. Market for Common Equity and Related Stockholder Matters........14
Item 6. Management's Discussion and Analysis or Plan of Operation.......16
Item 7. Financial Statements............................................22
Item 8. Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure............................................23
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act...............24
Item 10. Executive Compensation..........................................27
Item 11. Security Ownership of Certain Beneficial Owners and Management..29
Item 12. Certain Relationships and Related Transactions..................31
PART IV
Item 13. Exhibits, List and Reports on Form 8-K .........................33
INDEX TO FINANCIAL STATEMENTS ...............................................F-1
SIGNATURES....................................................................35
<PAGE>
PART I
Forward Looking Statements
This document contains forward-looking statements as that term is defined in the
federal securities laws. The events described in forward-looking statements we
make in this Form 10-KSB may not occur. Generally these statements relate to
business plans or strategies, projected or anticipated benefits or other
consequences of our plans or strategies, projected or anticipated benefits from
acquisitions othat may be made by us, or projections involving anticipated
revenues, earnings or other aspects of our operating results. The words "may,"
"will," "expect," "believe," "anticipate," "project," "plan," "intend,"
"estimate," and "continue," and their opposites and similar expressions are
intended to identify forward-looking statements. We caution you that these
statements are not guarantees of future performance or events and are subject to
a number of uncertainties, risks and other influences, many of which are beyond
our control, that may influence the accuracy of the statements and the
projections upon which the statements are based.
Dollar Amounts
Whenever we state dollar amounts in this document, we mean United States dollars
(unless we specifically indicate Canadian dollars).
ITEM 1. DESCRIPTION OF BUSINESS
THE COMPANY
Navtech, Inc. (Navtech-US) was originally incorporated in the State of New York
in 1981 and then reincorporated in the State of Delaware in 1987. Navtech
Systems Support Inc. (Navtech-Canada), a wholly-owned subsidiary of Navtech-US,
was incorporated in the Province of Ontario in 1987. Navtech (UK) Limited
(Navtech-UK), a wholly-owned subsidiary of Navtech-Canada, was incorporated in
the United Kingdom in 1994. When we refer to Navtech, we are speaking of
Navtech-US and its subsidiaries.
Our head office is located at 2340 Garden Road, Suite 102, Monterey, CA 93940.
We maintain a website at www.navtechinc.com. Our common stock is publicly traded
on the OTC Electronic Bulletin Board of the National Association of Securities
Dealers under the symbol "NAVH". Our Investor Relations Department can be
reached at (519) 747-9883.
BUSINESS OF THE COMPANY
We develop, market and support flight operations management systems for the
commercial aviation industry. Our systems are designed to assist commercial
passenger and cargo air carriers in the dynamic environment of their daily
flight operations.
Our software provides on-line solutions in the following areas: o flight
planning o route of flight analysis and optimization o hi-level winds o weather
and NOTAMs (Notice to Airmen) information communications o runway analysis o
various aspects of performance engineering.
It is our objective to become the leading supplier of integrated operations
control systems to the mid-sized airlines of the world. The mid-sized carrier
segment (5 to 100 aircraft) represents nearly 600 carriers worldwide. These
carriers require the same sophisticated systems used by the larger carriers but
are unlikely to have the ability to support internal development.
We believe that our success is generally attributable to two factors. First, we
employ a highly skilled and experienced technical and flight operations
workforce that combines knowledge of both aviation and software development.
Second, we also employ a highly regarded technical support team that provides
customer service on a round-the-clock basis.
Industry Overview
The flight operations industry has been undergoing extreme changes in the last
five years with a number of trends emerging that have had a significant impact
on the market place. These trends have caused convergence of systems as it
relates to airspace management and as it relates to the different functions
required to efficiently manage airlines operations. The major trends are:
Increased Costs of Labor
United Airlines' recent settlement with its pilots and expected parallel
contracts with its other labor groups are raising the wage-expense bar across
the industry. United recently negotiated pay increases of 21.5% to 28.5%
retroactive to April 2000, plus annual 4% bonuses through 2004. It also granted
an increase in company contributions to pensions to 11% from approximately 1%
under the previous contract. Under the new accord, a B747 captain now earns
$291,700 per year. It has been reported that the cost to United of the pilot
settlement may amount to $320 million per year in additional expenses. Delta's
pilots are now asking for increases of up to 28%, Northwest mechanics want
raises averaging 117%, and even if the US Airways merger with United does not
occur.occur, US Airways may be required to increase its pilot pay by 14% because
of a "parity+1%" clause that exists in the current agreement. It is anticipated
that there will be a minimum 10% increase in business fares next year to cover
wage hikes. As a result of these increases, airlines have been forced to find
more efficient ways of optimizing crew and aircraft deployment.
Improvements in Technology
Although touching on all areas of an airline's operation, improvements in
networking, system architecture and wireless technology have had a significant
impact on the way that airlines manage their customers (including loyalty
programs and in-flight entertainment), distribute their fares and improve the
efficiency of their system. As an example, Southwest Airlines now sells more
than 30% of its tickets directly on-line at a cost of $5 per ticket compared to
an average of $30 per ticket through a traditional agent.
Airline Alliances
Airlines once developed code-sharing agreements with other carriers to open new
markets and gateways. The late 1990s saw the rise of the airline alliance. In
alliances such as the Star Alliance and OneWorld, airlines are attempting to
open new markets, keep customers with "one" carrier and reduce surplus capacity
through consolidating schedules, frequent flier programs, and gate / station
support. This trend has also led to a number of airlines attempting to market
their information technology capabilities to their alliance partners who, in
some respects, are captive customers.
Outsourcing
As with most industries, both competitive pressures and rapid changing
technologies and processes have led to airlines looking to outsource non-core
business activities as a cost reduction measure. One example of this trend was
US Airway's decision in the late 1990s to sign a 25 year, multi-billion dollar
agreement for information technology outsourcing with The Sabre Group.
Airspace Management
The intervention of governments into airspace management continues to shape
market access, cost structures and capacity.
Deregulation of the scheduled service component of the airline industry began in
the early 1990s throughout Europe and parts of Asia. The number of scheduled
airlines in these regions has risen at rates comparable to the United States
during the 1970s when it underwent deregulation. In 1997, Europe had 189
scheduled service airlines compared to 127 in 1987. Similar numbers for
Asia-Pacific were 189 and 111, respectively. The results of deregulation have
been to increase competition and to create new markets where they previously did
not exist.
The governments of the world manage their airspace primarily through civil
aviation authorities. We believe that these organizations are inefficient in
improving capacity at major centers and through areas of high airspace usage.
The result has been passenger inconvenience, increased operating costs and
reduced revenues resulting from cancelled and delayed flights. In the United
States, New York-LaGuardia and San Francisco continue to cause the worst
problems for airlines and travelers. LaGuardia in September 2000 had over 9,000
flight delays, or 25% of all delays in the United States, up from 12% the year
previous. San Francisco's solution this year has been to cut market access as it
moved to significantly reduce the landing rights of aircraft having fewer than
30 seats.
It is estimated that the worldwide impact of an inefficient air traffic
management system costs the industry in excess of $2 billion annually. To
address this issue, the primary airspace users are using technology and
processes that work together to increase airspace capacity and reduce operating
costs.
Collaborative decision making has the pilots, air traffic controllers and the
airline's operations centers working together to improve the overall efficiency
of the air traffic management system. Examples include the Flight Schedule
Monitor program in the U.S., direct online access to Eurocontrol's Central Flow
Management Unit in Europe and the work being undertaken at a number of U.S.
terminals including Dallas-Fort Worth (DFW). At DFW, both Delta and American
Airlines have access to the position, clearance time and planned arrival rates
for the flights. Knowing this information as well as information such as number
of connecting passengers, scheduled arrival times and number of international
passengers, the airline's operations control center can make decisions
concerning preferred sequencing of arrivals to maximize their operation.
The effects of convergence and the development of hardware technology, operating
systems and wireless technology should continue the trend toward the creation of
a real-time integrated operations control system wherein the air traffic control
authorities, airline operations centers and pilots all have the same information
available to make decisions and can seamlessly communicate and implement those
decisions throughout their networks.
Market for Airline Integrated Operations Control System
Trends in the airline industry have created a market for firms capable of
creating a fully integrated operations control system, or IOCS, that interfaces
well with legacy systems and performs all of the following required functions in
an integrated fashion:
o Dispatch
o Airline Schedule
o Crew Scheduling
o Maintenance
o Payload
o Navigational Data & Charting
As with most mature industries, airlines typically had functional silos for the
different parts of their operation: crew, dispatch, maintenance, and passenger
services/load control. In these organizations decision-making was inefficient
due to a lack of information or the inability to handle all of the information
presented. The early 1990s saw the emergence of a systems operations control
(SOC) philosophy in which the various functional silos would report to a single
manager for the execution of the daily flight schedule. The implementation of
the SOC philosophy has meant changes in physical location, reporting lines,
decision-making authority, business processes and technology. Although the SOC
philosophy was adopted in the large carrier segment (over 100 aircraft),
especially in North America and Western Europe, several larger carriers have
moved to an integrated operations control system as the next step.
This same IOCS philosophy, encompassing the above functionality, has now taken
hold in the mid-sized airline market (5-100 aircraft).
Navtech Solutions
Flight Plan Services
o DispatchPro. The first version of DispatchPro was released in March
1998 as AURORA and has since undergone additional development to enrich
much of its functionality. DispatchPro provides real-time mission
critical decision support to the dispatcher or airline operations
manager in the creation of a flight release and the subsequent tracking
and reporting of aircraft performance. The software is designed to
operate on the powerful, scalable, open source LINUX operating system.
DipatchPro is available through either a service bureau agreement,
where Navtech hosts the system and provides access, or through the
purchase of a license and installation at a customer site.
o DispatchExpress. DispatchExpress is a scaled-down version of
DispatchPro available to airlines whose fleet size limits the
requirement for the more sophisticated functionality of our high end
product. This product is offered through a service bureau agreement.
o e-Dispatch. e-Dispatch is our Internet-based solution that provides the
functionality of DispatchExpress to those customers unable or unwilling
to pay the higher costs involved with normal communications methods.
NOTAM and Weather Services
o DataSource. We have bundled our provision of weather and NOTAMs data,
including both textual and graphical weather charts and airport
obstacle data, under the DataSource brand. We have become a primary
provider of this data to foreign governments, marine service companies
and airlines that may not necessarily use our flight planning services.
We make access to this data available through a variety of
communications method so that customers are assured of the timely
delivery of this critical data.
Aircraft Performance Systems
o V1Plus. Our V1Plus service is an aircraft performance engineering
subscription service that is offered to airlines that do not maintain
in-house engineering departments. Our Aircraft Performance Systems
group prepares monthly manuals that provide customized updated take-off
and landing data specific to various aircraft/engine combinations, flap
settings and runways. We are currently developing an enhanced
Internet-based distribution method that would allow an airline to
publish its manual with its own resources.
o V1PlusOnboard. Our V1PlusOnboard product provides the same aircraft
performance data as V1Plus, but it is deployed on a laptop in the
cockpit. This has some inherent advantages since a pilot does not need
to scan chart after chart of manual data and perform complex
calculations. Using this product, a pilot need only enter the required
information and then lets the system calculate the maximum amount of
payload.
<PAGE>
Dispatch Management Services
o DispatchCentre. Our DispatchCentre service provides outsourced dispatch
services and also manages the acquisition of overflight/landing
permits. This service is targeted at small and start up carriers that
may not be able to afford in-house dispatch and permit management.
Ancillary Products and Services
o Customer Support. We offer comprehensive software support and customer
account management in the United States, Canada, Africa and Europe
designed to maximize the benefits and utility of the software at the
customer's location. These services include training and installation
support, software updates, including new system functionality and
ongoing enhancements, and telephone hot-line support. We believe that
quality support services are a critical component of the customer's
satisfaction level. Our customer support services are provided at our
three operations centers in Monterey, California, Waterloo, Canada and
Crawley (Gatwick), United Kingdom.
o Custom Programming Services. Design and programming services are
provided to customers that require specific custom solutions to their
flight operations requirements. We believe that there is an increased
demand in the commercial aviation market for systems integration
services that link our software to third party vendor applications. We
also provide consulting services to assist customers in optimizing the
use of the product functionality within their flight operations
process.
Customers
Our primary focus is the mid-sized carrier market, which is defined as operators
of modern aircraft with fleet sizes between 5 and 100. These carriers
increasingly have the same functional requirements as large carriers but do not
have the information technology capabilities to implement and maintain systems
to fulfill their needs. These operators also have shorter sales cycles, are less
likely to be part of an airline alliance, and are generally more willing to
switch vendors.
Our primary geographical markets are North America and Europe; these segments of
the airline market are more progressive with respect to information technology,
outsourcing and cost reduction. Secondary markets include the Middle East, the
Pacific and Latin America.
We currently have a broad customer base of over 120 airlines worldwide. Our
largest customer, Universal Weather and Aviation, Inc. accounted for
approximately 10% of our total . No other customers were in excess of 10% of our
total revenues for the fiscal year.
Competition
The market for IOCS is intensely competitive and subject to rapid change. We
expect competition to increase in the future as our new products come to market.
We believe that the principal competitive factors include product functionality,
total cost of solution, support infrastructure, underlying technology and the
financial stability of the vendor.
Our main competitors for an IOCS can be divided into four main categories:
o Major airline information technology spin-offs such as Lufthansa's
Information Technology Software GmbH, (LIDO), The Sabre Group (a former
subsidiary of American Airlines), and Atraxis, a Swissair subsidiary.
o Major systems integrators such as IBM, EDS and Unisys.
o Aviation software vendors such as Jeppesen (recently acquired by
Boeing), Honeywell, SITA (the European aviation network provider) and
ARINC (the American Aviation Network Provider).
o Smaller independent companies with annual revenue of less than US$20
million that have developed flight operations management solutions for
commercial aviation such as David Bornemann & Associates, AIMS, Carmen
Systems and AD OPT.
We believe that the larger corporations such as Jeppesen, Lufthansa, IBM,
Honeywell, SITA and ARINC have an interest in being the driving forces behind
not only the infrastructure development (i.e. onboard systems, moving map
technology, ground to air communications) but also the service delivery (i.e.
outsourcing of air traffic management responsibilities). We believe that these
corporations all require the essential flight planning component to be tightly
integrated with the other elements of an integrated operations control system.
Many of our current and potential competitors have longer operating histories
and significantly greater financial, technical and marketing resources, name
recognition and installed product base than us. There can be no assurance that
we will be able to compete effectively with current and future competitors.
Marketing and Distribution
In fiscal 2000 we hired a new Executive Vice President - Sales and Marketing to
develop and implement our new marketing strategy. As a result, we have undergone
a major rebranding and bundling of our products and services. In addition, the
Sales and Marketing group has undertaken a complete review of our market and the
methods in which we can access the market.
Direct Sales
We employ a direct sales force to market our products and services in North
America, Europe and Africa through offices in the United States, Canada and the
United Kingdom. In addition, we employ an account management team that provides
support and sells add-on services to existing customers.
Strategic Alliances
We have been providing flight planning to the corporate marketplace through a
licensing agreement with Universal Weather and Aviation, Inc., a Houston, Texas
based aviation services producer.
As well, we recently entered into a strategic alliance with a major European
Internet company, Easy Flying S.A., for the provision of flight planning,
weather and NOTAMs services through the Internet directed toward the European
market.
Product Development
The airline operations software industry is characterized by constant
technological change, which requires ever increasing sophistication and
integration of end user systems. The pace of change is accelerating as the
airlines move to introduce wireless devices into the cockpit.
Most of our software products are developed internally. We also purchase
technology and license intellectual property rights. We have established
development methodologies and procedures that provide structure to our product
development activities and allow us to track the efforts of the Product
Development group. This is especially important given Navtech-Canada's access to
tax credits for qualifying research and development.
We communicate with our customers through account managers and user group
meetings to determine the latest requirements of the operations department of an
airline. In this manner, we are also able to discover changing usage patterns
and hardware advances that may affect the direction of our development
activities.
During fiscal 1999 and 2000, we spent approximately $96,000 and $269,000,
respectively, on product research and development activities. These amounts
represented approximately 2% and 4%, respectively, of revenue in each of those
years. We applied for tax credits totaling approximately $51,000 and $119,000,
respectively, in each of fiscal 1999 and 2000. We are committed to continue our
expenditures on research and product development.
Execution of Strategy
Our objective is to be the premier provider of a complete integrated operations
control system to the mid-sized airlines of the world. To achieve this
objective, our strategy consists of a concentrated effort to grow our Integrated
Dispatch Management System organically, to acquire the crew scheduling and
maintenance components for our overall integrated operations control system and
to enter into strategic partnerships to fill out the remainder of the product
suite.
Our strategy has been divided into two phases.
In Phase I, we will:
o develop the essential components of an integrated operations control
system, including the Integrated Dispatch Management System
o add the specialized technology of emerging applications to our systems
o develop the European customer base
In Phase II, we will:
o invest in the integration of all of our systems
o develop the systems operation control application
The timing of these two phases is dependant on the availability of capital.
Integrated Dispatch Management System
Over the past two years, we have positioned ourselves to complete the
development of an Integrated Dispatch Management System. We have undertaken a
reorganization of our development area into four separate product units that
focus on the following areas of expertise:
o Flight Planning Systems
o Navtech Weather Systems
o Aircraft Performance Systems
o Dispatch Management Systems
Intellectual Property Rights
We regard all of our software products as proprietary. Our software products are
generally licensed to end users on a "right to use" basis pursuant to a
perpetual, non-transferable license that generally restricts the use of the
software to the customer's operations or third parties affiliated with the
customer. We also grant rights to third parties to market certain of our
products under a limited-scope exclusive right to a particular market segment.
See "Marketing and Distribution - Strategic Alliances."
We rely on a combination of copyright, trademark and trade secret laws,
non-disclosure agreements and other contractual provisions to establish and
maintain our proprietary rights. We have not sought patent protection for our
products. Enforcement of our intellectual property rights may be difficult,
particularly in some countries outside of the United States and Canada, in which
we market our products. In the past, we have been required to provide limited
confidential disclosure of portions of our source code for our products or to
place such source code into escrow as a condition of a license agreement.
Despite the precautions taken by us, it may be possible for unauthorized third
parties to copy certain portions of our products or to reverse engineer or
obtain or use information that we consider proprietary. Also, there can be no
assurance that our competitors will not independently develop technologies that
are perceived to be substantially equivalent or superior to our technologies.
Further, no assurance can be given that we will have the financial resources to
engage in litigation against parties who may infringe on our intellectual
property rights. While we realize that our competitive position may be affected
by our ability to legally protect our software, we believe the impact of this
protection is less significant to our commercial success than factors such as
the level of experience of our personnel, name recognition, and increased
investment in new product development.
There can be no assurances that third parties will not assert infringement
claims against us in the future, or that any such assertion will not result in
litigation, which may be costly, or require us to obtain a license for the
intellectual property rights of others. There can be no assurance that such
licenses will be available on reasonable terms or at all.
Government Regulations
We are not subject to any government regulations with respect to the flight
planning operations of our business. It is an airline's responsibility to ensure
that the flight plan meets all local civil aviation authority regulations and
requirements.
Employees
As of November 30, 2000, we had a total of 85 employees (of which 81 were full
time employees) including the following: o 19 in operations, o 4 in account
management, o 43 in research and development, o 6 in sales and marketing and o
13 in management, finance and administration.
None of our employees are represented by a labor union and we believe that our
employee relations are good. We believe that our success will depend, to a large
degree, upon our ability to attract and retain highly skilled, technical,
managerial and sales personnel, and to retain personnel with flight operations
expertise. Competition for such personnel is intense and there can be no
assurance that we will be successful in attracting and retaining the personnel
required to develop, market, service and support our products and conduct our
operations successfully.
<PAGE>
ITEM 2. DESCRIPTION OF PROPERTY
We have offices in the following locations:
Monterey, California
Our head office is located at Suite 102, 2340 Garden Road, Monterey, California.
We moved to this location in March 2000 and currently rent approximately 4,900
square feet of office space for $4,865 per month. The lease expires on December
31, 2001.
Denver, Colorado
We also lease approximately 300 square feet of space at Regent Business Centers
Denver, 1745 Shea Center Drive, Highlands Ranch, Colorado for use as a sales
office. This office was opened in November 2000 and the current monthly rent
expense is $2,674. The lease expires on May 31, 2001.
Waterloo, Ontario
Navtech-Canada leases approximately 11,000 square feet of office space at Suite
102, 175 Columbia Street West, Waterloo, Ontario. We use this location for
flight operations, software development, customer support, and administration.
The lease provides for a current monthly rent expense, inclusive of common area
rent, of approximately $17,800 Canadian (approximately $12,100 US) and
terminates on October 31, 2006.
Ottawa, Ontario
Navtech-Canada leases approximately 2,200 square feet of office space for
corporate offices and software development purposes at Suite 204, 21 Antares
Dr., Nepean, Ontario, a suburb of Ottawa, Ontario. The lease expires on
September 30, 2003, and the current monthly rent expense is approximately $2,980
Canadian (approximately $2,000 US).
Crawley, West Sussex, UK
Navtech-UK has a five year lease, expiring February 28, 2003, for the premises
located at Durand House, Manor Royal, Crawley, West Sussex, UK. This office
encompasses approximately 1,900 square feet of space and is used for flight
operations, customer support and administration. The current monthly rent
expense is approximately (pound)2,200 Pounds (approximately $3,400 US).
Our total rent expense was approximately $245,500 for the year ended October 31,
2000. We believe that the facilities are adequate for our current needs and that
suitable additional space will be available as required.
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
On September 13, 1999, we received a letter from the attorneys for the Chapter
11 Creditors Committee of Southern Air Transport, Inc. The letter demands the
return of $88,850 in payments made by Southern Air to Navtech-Canada within 90
days prior to Southern Air's filing of a bankruptcy petition in the United
States Bankruptcy Court for the Southern District of Ohio on October 1, 1998.
The demand letter alleges that the payments made were preferential payments and
must be returned. We believe that the payments received were for contemporaneous
consideration and need not be returned. No adversary proceedings have been
commenced to date.
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the quarter
ended October 31, 2000.
<PAGE>
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market Information
Our common stock is traded on the NASD OTC Electronic Bulletin under the symbol
"NAVH". The high and low closing bid prices of the common stock are listed below
by fiscal quarter. These prices represent prices between dealers; they do not
include retail markup, markdown or commission. These are bid prices only and do
not represent actual transactions.
High Low
-------------------------------------- -------------------- -- ------------
Year Ended October 31, 2000
Fourth Quarter $ 1.875 $ 0.75
Third Quarter 1.75 1.125
Second Quarter 1.875 0.3125
First Quarter 0.28125 0.125
Year Ended October 31, 1999
Fourth Quarter $ 0.13 $ 0.0625
Third Quarter 0.13 0.13
Second Quarter 0.5625 0.13
First Quarter 0.5625 0.3125
Shareholders
Our transfer agent has advised us that the approximate number of record holders
of common stock at November 30, 2000 was 824.
Dividends
We have paid no cash dividends on the common stock and we do not anticipate
paying any cash dividends in the foreseeable future.
Recent Sales of Unregistered Securities
During the quarter ended October 31, 2000, we sold the following shares without
registering them under the Securities Act of 1933:
Effective October 27, 2000, we issued to the former holders of Class B shares of
Navtech-Canada an aggregate of 192,000 shares of our common stock in exchange
for the Class B shares. In addition, contemporaneously, one of the holders of
Class B shares purchased an additional 32,000 shares of our common stock at a
purchase price of $1.00 per share. The offering of shares was exempt from the
registration requirements of the Securities Act pursuant to Regulation S
promulgated thereunder. We determined that the offer and sale of the shares
occurred outside the United States. The certificates representing the shares of
common stock bear restrictive legends permitting the transfer thereof only upon
the registration of the shares or pursuant to an exemption under the Securities
Act.
Effective October 30, 2000, we issued to Easy Flying, S.A. 500,000 shares of our
common stock at a total purchase price of $500,000. The offering of shares was
exempt from the registration requirements of the Securities Act pursuant to
Regulation S promulgated thereunder. We determined that the offering and sale of
the shares occurred outside the United States. The certificate representing the
shares of common stock bears a restrictive legend permitting the transfer
thereof only upon the registration of the shares or pursuant to an exemption
under the Securities Act.
Effective October 31, 2000, we issued to St. Andrews Capital Limited Partnership
296,543 shares of our common stock upon the conversion of indebtedness in the
amount of $111,204 (a conversion price of $.375 per share). The offering of
shares was a private transaction not involving any public offering and was
exempt from the registration requirements of the Securities Act pursuant to
Section 4(2) thereof. We determined that St. Andrews Capital was an "accredited
investor." The certificate representing the shares of common stock bears a
restrictive legend permitting the transfer thereof only upon the registration of
the shares or pursuant to an exemption under the Securities Act.
<PAGE>
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
RESULTS OF OPERATIONS
The following table shows our annual results of operations for fiscal years 2000
and 1999 (in thousands except per share amounts):
<TABLE>
<S> <C> <C> <C> <C>
Results of Operations Percentage of Total
Revenue
For the year ended For the year ended
October 31, October 31,
------------------------------------------------------
1999 2000 1999 2000
------------------------------------------------------- ------------ ------------ ------------- -------------
REVENUE
Service fees $ 4,649 $ 5,804 88% 83%
Software license fees 605 1,204 12 17
------------------------------------------------------- ------------ ------------ ------------- -------------
Total revenue 5,254 7,008 100 100
------------------------------------------------------- ------------ ------------ ------------- -------------
COSTS AND EXPENSES
Cost of services 3,776 4,593 72 66
Cost of software license fees 138 62 3 1
Research and development 96 269 2 4
Selling, general and administrative 1,114 1,492 21 21
Provision for (recovery of) bad debt - relatedparty 316 (904) 6 (13)
Amortization of goodwill 3 11 - -
------------------------------------------------------- ------------ ----------------------------------------
Total costs and expenses 5,443 5,523 104 79
------------------------------------------------------- ------------ ----------------------------------------
Income (loss) from operations (189) 148 (4) 21
------------------------------------------------------- ------------ ------------ ------------- -------------
Other income (expense)
Interest expense (350) (251) (6) (3)
Interest revenue 104 64 2 1
------------------------------------------------------- ------------ ----------------------------------------
(246) (187) (4) (2)
------------------------------------------------------- ------------ ----------------------------------------
Income (loss) before income taxes (435) 1,298 (8) 19
Income taxes (55) 194 (1) 3
------------------------------------------------------- ------------ ------------ ------------- -------------
Net earnings (loss) $ (380) $ 1,104 (7)% 16%
------------------------------------------------------- ------------ ------------ ------------- -------------
Net earnings (loss) per share
Basic $ (0.19) $ 0.43
Diluted $ (0.19) $ 0.35
------------------------------------------------------- ------------ ------------
</TABLE>
Overview
In 2000, we had net earnings of approximately $941,000, total revenues of
approximately $7,008,000 and operating income of approximately $1,485,000. This
is in comparison to 1999 when we had a net loss of approximately $380,000, total
revenue of approximately $5,254,000 and an operating loss of approximately
$189,000. The change in net earnings was accomplished due to various factors as
detailed below:
o We continued an internal restructuring program that involved the
centralization of all North American flight planning activities within
our Canadian facility, the elimination of the New York office and the
downsizing of our California facility.
o Our focus on the sale of system licenses generated four more sales
during the year. These sales result in one time software license fees
as well as ongoing fees for the provision of maintenance and support
services.
o At the end of our second fiscal quarter we terminated our receivables
factoring program which in turn reduced our financing costs for the
year.
o We negotiated a settlement with Navtech Applied Research Inc., an
affiliated company, in which they returned our common stock to our
treasury in return for a reduction in the amounts owed to us.
These gains were offset, in part, by greater marketing activities during the
year, including attendance at several prominent industry trade shows and
development of promotional and advertising materials.
Revenue
Our revenue is derived from two major sources: (i) service fees from the
provision of flight planning services, runway analysis services, weather and
NOTAMs data, and ongoing customer support and (ii) sales of software licenses.
We recognize the revenue from software license sales upon the receipt of
customer acceptance if no significant vendor obligations remain, the sales
contract fee is fixed or determinable, amounts are due within one year and
collection is probable. Contract sales that do not meet these criteria are
recorded as deferred revenues. Systems consulting and implementation fees are
recognized when services are rendered. Custom programming, communications and
database income, and service bureau and support revenue are recognized ratably
over the applicable contract periods or as services are performed. Amounts
billed but not yet earned and payments received prior to the earning of revenue
are recorded as deferred revenue.
Total revenue increased approximately $1.7 million, or approximately 33%, from
approximately $5.3 million in 1999 to approximately $7.0 million in 2000.
Geographic Analysis
The following table shows total revenues on a geographic basis for fiscal 1999
and 2000 (in thousands except percentage amounts):
<TABLE>
<S> <C> <C> <C> <C>
Total Revenue Percentage of Total Revenue
------------------------------------------------------
1999 2000 1999 2000
------------------------------------------------ ------------ ------------ ------------- -------------
United States $ 4,145 $ 4,893 79% 69%
Canada 668 893 13 13
Europe, Mexico, Africa, South America and other 441 1,222 8 16
------------------------------------------------ ------------ ------------ ------------- -------------
$ 5,254 7,008 100% 100%
------------------------------------------------ ------------ ------------ ------------- -------------
</TABLE>
Our products and services are used by airline carriers located primarily in the
United States and Canada, although our customers are also located in Europe,
Mexico, Africa, and South America.
In fiscal 2000, we derived approximately $4.9 million from sales in the United
States as compared to approximately $4.1 million in fiscal 1999. This increase
is due primarily to:
o an increase in software license fees of approximately $349,000
o an increase in fees to existing customers of approximately $567,000
o an addition of new customers representing approximately $148,000 in
revenue
Customer bankruptcies accounted for a loss in service fee revenue of
approximately $316,000 during this period.
Sales in Canada accounted for approximately $893,000 in fiscal 2000 as compared
to approximately $668,000 in fiscal 1999. This increase is due primarily to:
o an increase in fees to existing customers of approximately $205,000
o an addition of new customers representing approximately $20,000 in
revenue
Sales in other jurisdictions amounted to approximately $1,222,000 in fiscal 2000
as compared to approximately $441,000 in fiscal 1999, which represents an
increase of approximately $781,000, or approximately 177%. This increase is due
primarily to the inclusion of a full year of operations for Navtech-UK and a
software license sale made to a European customer.
Service fees
Revenue from service fees was approximately $5.8 million in 2000 as compared
with approximately $4.6 million in 1999, an increase of approximately 26%, or
approximately $1.2 million. The increase is due to:
o an increase in fees to existing customers of approximately $351,000,
resulting mainly from an increase in the use of flight planning
services as well as additional support fees from customers that
transitioned to an in-house system
o an increase of approximately $427,000 from several new service bureau
customers
o the inclusion of a full year of operations from Navtech-UK compared
with one month in 1999, resulting in an increase of approximately
$695,000
These increases were offset by decreases from the loss of customers aggregating
approximately $166,000 and the bankruptcy or non-renewal of services of
customers aggregating approximately $152,000.
Software license fees
Revenue from software license fees increased approximately $599,000, or
approximately 99%, from approximately $605,000 in 1999 to approximately
$1,204,000 in 2000. During 2000, we completed the sale of a system license to a
large US aviation services provider that was started in the last quarter of
fiscal 1999. This software license sale was worth approximately $500,000. Apart
from this significant contract, we sold three systems licenses, each for an
average sales price of approximately $200,000 in 2000, compared to two such
licenses in 1999. Each such sale provides for the provision of add-on support
and maintenance services, which is reflected in the increase in service fees
noted above.
Costs and Expenses
Cost of services
Cost of services consists mainly of personnel and other expenses related to
providing product support, service bureau operation and custom development. Also
included in operating expenses are the communication costs associated with the
provision of in-house flight planning services and customer support.
The following table shows the major components of operating expenses for fiscal
years 1999 and 2000 (in thousands except percentage amounts):
<TABLE>
<S> <C> <C> <C>
1999 2000 Percentage Change
----------------------------------------------------- ----------------- ----------------- --------------------
Salaries and benefits $ 2,626 $ 3,079 17%
Communication costs 728 902 24%
Agent costs - 132 -
Rent 204 233 14%
Royalties 91 99 9%
Depreciation 53 73 38%
Other 74 75 1%
----------------------------------------------------- ----------------- ----------------- --------------------
$ 3,776 $ 4,593 22%
----------------------------------------------------- ----------------- ----------------- --------------------
</TABLE>
The cost of services was approximately $4.6 million in 2000 compared with
approximately $3.8 million in 1999, an increase of approximately $817,000, or
approximately 22%. The major components of this increase are:
o an increase in salaries and benefits of approximately $453,000, of
which approximately $382,000 relates specifically to the inclusion of
a full year of expenses for Navtech-UK
o an increase in communication costs of approximately $174,000, of which
approximately $32,000 relates specifically to the inclusion of a full
year of expenses for Navtech-UK
o an increase of approximately $132,000 in agent fees, all of which
relate to Navtech (UK) Limited
o an increase in rent of approximately $29,000 related mainly to the
inclusion of a full year of expenses for Navtech-UK
In addition, other expenses, including royalties and depreciation, accounted for
an increase of approximately $29,000.
Cost of software license fees
The cost of software license fees was approximately $62,000 in 2000 compared
with approximately $138,000 in 1999, a decrease of approximately $76,000, or
approximately 55%. Although there were more system license sales in 2000, this
decrease is reflective of both efficiencies in the installation process and a
reduction in the amount of hardware bundled with these license sales.
Research and development
Our research and development activities are undertaken in Canada. Navtech-Canada
qualifies for scientific research and experimental development investment tax
credits on eligible research and development expenditures. Federal tax credits
are generated at a rate of 20% of qualifying expenditures and provincial tax
credits are generated at a rate of 10% of qualifying expenditures. These credits
are available to reduce income taxes payable. Investment tax credits for fiscal
2000 have been netted against the provision for income taxes.
Research and development expenses increased from approximately $96,000 in 1999
to approximately $269,000 in 2000, representing an increase of approximately
$173,000, or approximately 182%. The Company has claimed scientific research and
experimental development investment tax credits of approximately $119,000 for
the year ended October 31, 2000 as compared to a claim of approximately $51,000
for the same period in 1999.
Selling, General, and Administrative Expenses
The following table shows the major components of selling, general and
administrative expenses for fiscal 1999 and 2000 (in thousands except percentage
amounts):
<TABLE>
<S> <C> <C> <C>
1999 2000 Percentage Change
------------------------------------------------ ----------------- ------------------ -------------------
Professional and consulting $ 435 $ 472 9%
Travel 349 551 58%
Marketing 26 125 381%
Provision for bad debts 59 83 41%
Depreciation 16 22 38%
Other 229 239 4%
------------------------------------------------ ----------------- ------------------ -------------------
$ 1,114 $ 1,492 34%
------------------------------------------------ ----------------- ------------------ -------------------
</TABLE>
Selling, general, and administrative expenses increased by approximately
$378,000, or approximately 34%, from approximately $1.1 million in 1999 to
approximately $1.5 million in 2000. This increase can be attributed primarily
to:
o an increase in professional and consulting fees of approximately
$37,000, of which approximately $2,000 relates to Navtech-UK
o an increase in travel costs of approximately $202,000, of which
approximately $34,000 relates specifically to the inclusion of a full
year of expenses for Navtech-UKo an increase in marketing costs of
approximately $99,000
o an increase in bad debts of approximately $24,000
o an increase in depreciation and other expenses of approximately
$18,000
Increased travel costs are primarily attributable to the maintenance of
operations in Monterey, California, Crawley, England and Waterloo, Ontario and
an increase in marketing and sales activities in all of our geographical
segments.
The increase in professional and consulting The increase in professional and
consulting fees relates to, among other things, an increased need for legal
assistance in negotiating contracts and the expenses related to the exchange
offering made to the Navtech-Canada Class B shareholders.
Increased marketing costs are due to an increased effort to raise awareness of
our products. Our sales and marketing group attended several key aviation and
software trade shows during the year. We also focused efforts on redesigning our
logo and rebranding our products for better recognition in the marketplace.
The increase in bad debts in fiscal 2000 was due primarily to the bankruptcy of
a significant customer amounting to a loss of approximately $70,000 and losses
in Navtech-UK, but was offset by the recovery of several accounts.
Provision for bad debt - related party
During the year,fiscal 2000, we entered into an agreement with Navtech Applied
Research Inc., an affiliated party, to reduce the total debt owed to us by
transferring certain weather assets to our ownership and by transferring shares
of our common stock into our treasury. As a result, we were able to recover an
allowance of approximately $904,000 provided for in prior years (see Item 12).
Other Income (Expense)
Interest Expense
Interest expense decreased approximately $99,000, or approximately 28%, from
approximately $350,000 in 1999 to approximately $251,000 in 2000. This decrease
is primarily attributable to the termination of receivables factoring in the
third quarter of fiscal 2000 and the decreased interest payments on loans as
they near maturity.
Net Income
The financial statements reflect net income of approximately $1,104,000 for
fiscal 2000, as compared to a net loss of approximately $380,000 for fiscal
1999.
We reflected a net increase in revenue of approximately $1.8 million, as offset
by a net increase in costs and expenses of approximately $80,000, resulting in a
net increase in operating income of approximately $1.7 million. Augmenting this
gain was the decrease of approximately $99,000 in interest expense.
LIQUIDITY AND CAPITAL RESOURCES
As of October 31, 2000, we had available cash and cash equivalents of $367,234
and working capital of $187,567.
In 2000, we financed a significant part of our operations through amounts
received from software license fees, as well as through share issuances.
Our cash flows from operating activities amounted to a net outflow of $456,357
in fiscal 2000 as compared to a net inflow of $352,760 in fiscal 1999. We used
cash generated by debt and equity financing to settle a significant portion of
our accounts payable.
Our cash flows from investing activities amounted to a net cash inflow of
$375,858 in fiscal 2000 as compared to a net cash outflow of $231,676 in fiscal
1999.We advanced $68,858 to Navtech Applied Research Inc., of which $36,809
remained outstanding at year end. This year end balance is secured by a note. In
addition, we purchased capital assets in the amount of $307,500.
Our cash flows from financing activities amounted to a net inflow of $1,207,307
in fiscal 2000 as compared to a net outflow of $120,817 in fiscal 1999. During
the year we obtained $1,267,939 in equity financing and $227,720 in non-bank
debt. In turn, we made principal payments of $342,085.
As of October 31, 2000, we had no significant capital commitments. However, we
may, from time to time, consider additional acquisitions of complementary
businesses, products or technologies.
PLAN OF OPERATION
With the return to profitability and the elimination of our working capital
deficiency, we are targeting four specific areas to provide additional capital
and to further improve earnings in the next fiscal year.
Equity
During fiscal 2000 we received private subscriptions for 1,000,000 common shares
of common stock from two investors for aggregate proceeds of $1,000,000. Our
plans in 2001 are as follows:
o seek to raise additional equity capital
o seek to have our stock relisted on NASDAQ to allow for greater access
to the market for our shareholders
o launch a shareholder oddlot repurchase program designed to reduce
costs in connection with shareholder communications
Line of Credit
Navtech-Canada currently has a demand line of credit of $50,000 Canadian. We are
committed to renegotiating this operating facility based on the strength of our
financial results. In addition, we are negotiating with our U.S. bank for a line
of credit. These facilities would be used in our daily operations. Any financing
requirements specific to acquisitions of complementary businesses, products or
technologies would be dealt with using debt specific to those transactions.
Sales Force
With our product rebranding complete, we are now focusing our efforts on a new
marketing program designed to reintroduce our full product offering to the North
American, South American and European marketplaces. In fiscal 2000, we took
significant steps in this direction by hiring a new Executive Vice President -
Sales and Marketing and Director of Sales - UK. Both of these individuals bring
with them significant experience in the aviation field having worked with one of
our major competitors in senior positions.
In early November 2000, we opened our Denver, Colorado sales office. Our
Executive Vice President - Sales and Marketing is based in this office and will
coordinate our corporate sales and marketing efforts from there using staff in
all of our locations. We have hired additional staff in both the U.S. and the
U.K. in anticipation of the increased efforts.
Further Rationalization
In fiscal 2000 we carried out a detailed review and rationalization of our
operations in order to identify areas for cost reduction or elimination. Our
centralization of all flight planning functions in our Waterloo, Canada office
serves as an example of this review. We have identified further areas of cost
reduction in our fiscal 2001 budgeting process.
<PAGE>
ITEM 7. FINANCIAL STATEMENTS
The financial statements begin on Page F-1 following Item 13 hereof.
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
On April 25, 2000, we dismissed Grant Thornton LLP as our independent certified
public accountants. This decision was made by our Board of Directors.
The reports of Grant Thornton LLP on our financial statements as of October 31,
1998 and 1999 and for the years then ended neither contain an adverse opinion or
a disclaimer of opinion nor are they modified as to uncertainty, audit scope or
accounting principles, except that the opinions included an explanatory
paragraph that there were conditions that raised substantial doubt about our
ability to continue as a going concern.
During the fiscal years ended October 31, 1998 and 1999 and the period from
November 1, 1999 to April 25, 2000, there were no disagreements with Grant
Thornton LLP on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure, which, if not resolved to
the satisfaction of such firm, would have caused it to make reference to the
subject matter of the disagreement in connection with its report.
Effective April 27, 2000, we engaged Deloitte & Touche LLP as our independent
certified public accountants for the fiscal year ended October 31, 2000. Our
Board of Directors approved the engagement of Deloitte & Touche LLP.
<PAGE>
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Executive Officers and Directors
The following table sets forth the positions and offices presently held
by each of our directors and executive officers and their ages as of November
30, 2000:
============================ ========= =========================================
Name Age Positions and Offices
============================ ========= =========================================
Duncan Macdonald 41 Chairman of the Board and
Chief Executive Officer
---------------------------- --------- -----------------------------------------
Derek Dawson 31 President and Chief Operating Officer
---------------------------- --------- -----------------------------------------
David Strucke 32 Chief Financial Officer
---------------------------- --------- -----------------------------------------
Dennis Steinbeck 44 Executive Vice President -
Sales & Marketing
---------------------------- --------- -----------------------------------------
Thomas D. Beynon 59 Director
---------------------------- --------- -----------------------------------------
Prashant Gupta 40 Director
---------------------------- --------- -----------------------------------------
Martin J. Hamrogue 59 Director
---------------------------- --------- -----------------------------------------
James McGinty 58 Director
---------------------------- --------- -----------------------------------------
Denis L. Metherell 68 Secretary and Director
============================ ========= =========================================
Duncan Macdonald has served as Chief Executive Officer of Navtech since
March 1996, Chairman of the Board of Navtech since January 2000, and a Director
of Navtech since December 1999. He served as Chief Financial Officer of Navtech
from July 1995 to January 1999. Since January 1992, Mr. Macdonald has also
served as managing partner of Kintyre & Company Limited, a management consulting
firm based in Ottawa, Ontario. In addition, since December 1998, he has served
as President of St. Andrews Technology Associates, Inc., the general partner of
St. Andrews Capital Limited Partnership, a California-based investment
partnership.
Derek Dawson has served as Chief Operating Officer of Navtech since
January 1999 and President of Navtech since January 2000. Mr. Dawson has been a
business instructor, on a part-time basis, at Wilfrid Laurier University since
1997. From September 1997 to January 1999, Mr. Dawson was Vice President -
Operations of Navtech. From 1995 to 1997, he served as Manager for Corporate
Development for a large industrial contracting firm. From 1991 to 1995, Mr.
Dawson was an air navigator with the Canadian Air Force involved in strategic
and tactical airlifts as well as training duties.
David Strucke has served as Chief Financial Officer of Navtech since
January 2000. Mr. Strucke served as Vice President - Finance & Accounting of
Navtech-Canada from October 1999 to January 2000 and as its Director of Finance
and Accounting, and Business Analyst from January 1999 to October 1999. Prior to
joining us, Mr. Strucke served as a Financial Analyst focusing on mergers and
acquisitions for an automotive capital equipment manufacturer from 1997 to 1998.
From 1996 to 1997, Mr. Strucke performed financial and accounting consulting
work for manufacturing companies. Prior to 1996, he served as a Business Analyst
for a publicly traded sheet metal manufacturer.
Dennis Steinbeck has served as Executive Vice President - Sales &
Marketing of Navtech since July 2000. Prior to joining Navtech, he served as
Director - Airline Marketing and Sales with Jeppesen Sanderson, Inc. from 1998
to 2000. From 1994 to 1998 Mr. Steinbeck served as Senior Manager Airline Sales
with Jeppesen.
Thomas D. Beynon is a partner in the Waterloo law firm of McCarter
Grespan Robson Beynon Thompson LLP and a member of the Law Society of Upper
Canada. He has been with the firm since March 1996. Prior to this, Mr. Beynon
spent six years with a Canadian national law firm, Sims Clement Eastman, from
1991 to 1996. His primary focus is in the areas of commercial, corporate and
finance law with a diverse client base of both public and private Canadian
corporations. He also served on the Board of Waterloo Microsystems Inc. from
1986 to 1990. Mr. Beynon holds memberships in the Institute of Corporate
Directors and the American Bar Association and he is a founding member and
director of Communitech, a technology association in Southwestern Ontario. Mr.
Beynon has been a director of Navtech since July 2000.
Prashant Gupta served as Chief Technology Officer of CrossWorlds
Software Inc. of Burlingame, California from April 1996 to September 2000. In
addition, Mr. Gupta sits on the Board of Directors for the Open Architecture
Group (OAG), a standards organization, as well as for Global Weather Dynamics,
Inc., Intyc Solutions and Wizards. Mr. Gupta has published eight papers and
filed ten patents in the areas of networking, telecommunications and database
technology. Prior to joining CrossWorlds, Mr. Gupta was the software architect
at Illusta/Informix from December 1995 to April 1996. There he designed the
server interface that provides specialized and user-defined data type
extensibility to Informix's Universal Data Server. During his tenure at Sybase,
from June 1992 to December 1995, he served as the chief technical architect for
several key middleware and connectivity projects that established the company as
the market leader in this technology segment. Mr. Gupta has been a director of
Navtech since July 2000.
Martin J. Hamrogue is CEO and Chairman of the Board of Virgin Express
Ireland Ltd., an airline serving the European marketplace. He has served as
Virgin's CEO since its formation in 1998. Prior to Virgin, Mr. Hamrogue served
in various capacities at Trans World Airlines, including most recently as
General Manager Operations Control from 1995 to 1998. Prior to this position, he
served as Director Operations Systems where he was responsible for all computer
and communications systems for TWA's operations department. In total, Mr.
Hamrogue has over 35 years of airline management experience. Mr. Hamrogue has
been a director of Navtech since July 2000.
James McGinty is President of Cambridge Information Group, a corporate
holding company managing several internet-based information companies. Mr.
McGinty is responsible for the strategic direction and overall management of all
Cambridge companies. He previously served as President of Cambridge Scientific
Abstracts from 1992 to 2000. Prior to that time, Mr. McGinty spent over 20 years
with Dun & Bradstreet Corporation. In his last assignment with D&B, Mr. McGinty
was Managing Director of D&B North Pacific with responsibility for Business
Information Group operations in Hong Kong, Korea, Singapore, Malaysia, the
Philippines and China. Mr. McGinty has been active in the Information Industry
Association, serving on IAA's Board of Directors from 1984 to 1988. Mr. McGinty
has been a director of Navtech since July 2000.
Denis L. Metherell has served as Secretary of Navtech since October
1994 and a director of Navtech since July 1994. Mr. Metherell also served as
Treasurer of Navtech from November 1994 to March 1996 and Chief Financial
Officer from November 1994 to July 1995. He served as Vice President of
Navtech-Canada from June 1993 to July 1995 and also serves as Vice President and
a director of AVCON Associates Inc., which leases computers to Navtech-Canada.
From 1976 to 1992, Mr. Metherell served as a technical consultant to Northwest
Airlines where he was a major contributor to the IATA standard computerization
Aircraft Performance specifications. He has also been a standing member of
numerous committees with the FAA, ATA and IATA.
Each director will hold office until the next Annual Meeting of
Stockholders or until his successor is elected and qualified. Each executive
officer will hold office until the next regular meeting of the Board of
Directors following the next Annual Meeting of Stockholders or until his
successor is elected or appointed and qualified.
Section 16(a) Beneficial Ownership Reporting Compliance
Based solely on a review of copies of Forms 3, 4 and 5 furnished to us
and written representations that no other reports were required, during the
fiscal year ended October 31, 2000, all Section 16(a) filing requirements
applicable to the officers, directors and 10% stockholders were complied with,
except that Messrs. Beynon, Gupta, Hamrogue, McGinty, Steinbeck and Sosnowski
filed their respective Form 3 late. Also, Robert N. Snyder and EasyFlying S.A.,
each a 10% stockholder, filed their respective Form 3 late, and Dorothy English,
formerly an officer and director of Navtech and currently a 10% stockholder,
filed four Forms 4 late (two reporting two transactions each and two reporting
one transaction each).
<PAGE>
ITEM 10. EXECUTIVE COMPENSATION
(a) Summary Compensation Table
During the fiscal year ended October 31, 2000, none of our executive
officers had total salary and bonus in excess of $100,000. The following table
sets forth information concerning the compensation of Duncan Macdonald, our
Chief Executive Officer, for the fiscal year ended October 31, 2000:
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
================ ======== ==================================== =================================== ==============
Annual Compensation Long-Term Compensation
---------------- -------- ----------- -------- --------------- ------------------------- --------- --------------
Awards Payouts
---------------- -------- ----------- -------- --------------- ----------- ------------- --------- --------------
Common
Name and Restricted Stock
Principal Other Annual Stock Underlying LTIP All Other
Position Year Salary Bonus Compensation Award(s) Options Payouts Compensation
---------------- -------- ----------- -------- --------------- ----------- ------------- --------- --------------
Duncan
Macdonald, 2000 $81,820 -0- $ 2,500(1) -0- 50,000 -0- -0-
Chief 1999 $5,000 $20,000 $ 28,927(1) -0- -0- -0- -0-
Executive 1998 -0- -0- $106,486(1) -0- -0- -0- -0-
Officer
================ ======== =========== ======== =============== =========== ============= ========= ==============
(1) Represents amounts paid as an independent advisor to Navtech. Excludes amounts paid to Kintyre & Company Limited, an entity
controlled by Mr. Macdonald, for consulting services rendered to Navtech-Canada. See Item 12.
</TABLE>
(b) Option Grants Table
The following table sets forth certain information with regard to the
grants of stock options during the fiscal year ended October 31, 2000 to Mr.
Macdonald:
<TABLE>
<S> <C> <C> <C> <C>
=============================================================================================================
Shares of Common Stock Percent of Total Options
Underlying Options Granted to Employees in Exercise
Name Granted Fiscal Year Price/Share Expiration Date
-------------------------------------------------------------------------------------------------------------
Duncan Macdonald 50,000 3.9% $0.28125 02/07/05
=============================================================================================================
</TABLE>
(c) Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End
Option Value Table
The following table sets forth certain information concerning options
exercised by Mr. Macdonald during the fiscal year ended October 31, 2000 and the
value as of October 31, 2000 of unexercised options held by Mr. Macdonald:
<TABLE>
<S> <C> <C> <C> <C>
===================== ================== =============== ========================= ========================
Number of Unexercised Value of Unexercised
Options at In-the-Money Options
Shares Acquired October 31, 2000 at October 31, 2000
Name on Exercise Value Received
------------------------- ------------------------
Exercisable/Unexercisable Exercisable/Unexercisable
--------------------- ------------------ --------------- ------------------------- ------------------------
Duncan Macdonald 200,000 $122,750 -0-/ 50,000 -0-/ $35,938
===================== ================== =============== ========================= ========================
</TABLE>
(d) Compensation of Directors
Our By-Laws provide that Directors shall be reimbursed for travel
expenses incurred in attending any meeting of the Board or any of its
committees. The By-Laws also state that the Directors, with the exception of
salaried officers, shall be paid a fee for attending Board or committee
meetings. This fee shall be an amount as fixed by the Board. No Directors' fees
have been paid to date. Our By-Laws also provide, to the extent permitted by
law, for certain indemnification of our Directors. On August 3, 2000, Messrs
Beynon, Gupta, Hamrogue, McGinty and Metherell were each granted options for
25,000 shares of common stock at an exercise price of $1.1875 per share.
(e) Employment Contracts, Termination of Employment and Change-in-Control
Arrangements
See Item 12 for a discussion of a services agreement between Kintyre &
Company Limited, an entity controlled by Mr. Macdonald, and us.
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Our common stock is the only class of securities outstanding. Each
share is entitled to one vote. The following table sets forth certain
information regarding our outstanding common stock beneficially owned as of
November 30, 2000 by:
o each person who is known by us to own beneficially or exercise voting
or dispositive control over more than 5% of our common stock,
o each present Director,
o each person named in the Summary Compensation Table above, and o all of
our present executive officers and directors as a group
<TABLE>
<S> <C> <C>
========================================= ============================== =========================
Name and Address of Beneficial Owner Number of Shares Approximate Percentage
of Outstanding Shares
----------------------------------------- ------------------------------ -------------------------
Robert N. Snyder 815,000(1) 22.8%
#601, 7200 Wisconsin Avenue
Bethesda, Maryland
---------------------------------------- ----------------------------- ------------------------
Duncan Macdonald 546,543(2) 15.6%
21 Antares Drive
Nepean, Ontario, Canada
----------------------------------------- ------------------------------ -------------------------
EasyFlying S.A. 500,000(3) 14.5%
2 Rue Marcel Doret - Immeuble Antares
31700 Blagnac, France
----------------------------------------- ------------------------------ -------------------------
Dorothy A. English 465,000(4) 12.5%
175 Columbia Street West
Waterloo, Ontario, Canada
----------------------------------------- ------------------------------ -------------------------
St. Andrews Capital Limited Partnership 296,543(5) 8.6%
11 Bedford Crescent
Ottawa, Ontario, Canada
----------------------------------------- ------------------------------ -------------------------
Republic Electronics Corporation 250,000(3) 7.2%
5801 Lee Highway
Arlington, Virginia
----------------------------------------- ------------------------------ -------------------------
Denis L. Metherell 168,500(6)(7) 4.9%
175 Columbia Street West
Waterloo, Ontario, Canada
----------------------------------------- ------------------------------ -------------------------
Thomas D. Beynon 12,500(6) *
675 Riverbend Drive
Kitchener, Ontario, Canada
----------------------------------------- ------------------------------ -------------------------
Prashant Gupta 12,500(6) *
577 Airport Blvd, Ste 800
Burlingame, California
----------------------------------------- ------------------------------ -------------------------
Martin J. Hamrogue 12,500(6) *
Virgin House, Shannon Airport
County Clare, Ireland
----------------------------------------- ------------------------------ -------------------------
James McGinty 12,500(6) *
7200 Wisconsin Ave, Ste 601
Bethesda, Maryland
----------------------------------------- ------------------------------ -------------------------
All executive officers and directors as
a group (11 persons) 945,043(2)(6)(7)(8) 25.5%
========================================= ============================== =========================
</TABLE>
* Less than 1%
(1) Based upon Schedule 13D filed with the Securities and Exchange Commission.
Includes (i) 125,000 shares that are issuable upon the exercise of a
warrant that is currently exercisable and (ii) 40,000 shares owned by
Wyoming Investments Limited Partnership, of which Mr. Snyder is a general
partner. Also includes 150,000 shares subject to a stock purchase agreement
entered into between Mr. Snyder, as purchaser, and Navtech Applied Research
Inc., as seller. The closing of the purchase and sale of the shares is
scheduled to take place on January 12, 2001.
(2) Represents (i) 200,000 shares beneficially owned by Mr. Macdonald, (ii)
296,543 shares owned by St. Andrews Capital Limited Partnership, an entity
controlled by Mr. Macdonald, and (iii) 50,000 shares that are issuable to
Mr. Macdonald upon exercise of options that are exercisable within the next
60 days.
(3) Based upon Schedule 13G filed with the Securities and Exchange Commission.
(4) Represents (i) 205,000 shares beneficially owned by Ms. English and (ii)
260,000 shares that are issuable to Ms. English upon exercise of options
that are currently exercisable or exercisable within the next 60 days.
Excludes the 150,000 shares referred to in footnote 1 that are subject to a
stock purchase agreement between Mr. Snyder and Navtech Applied Research
Inc., an entity of which Ms. English is the Chairman, Chief Executive
Officer and sole shareholder.
(5) See footnote (2).
(6) Includes 12,500 shares that are issuable upon exercise of options that are
currently exercisable or exercisable within the next 60 days.
(7) Based upon Schedule 13D filed with the Securities and Exchange Commission.
Includes 64,670 shares owned jointly with Mr. Metherell's wife and 91,330
shares held by Mr. Metherell in a retirement trust.
(8) Includes 140,000 shares that are issuable to executive officers upon
exercise of options that are exercisable with the next 60 days.
<PAGE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
1. Dorothy English / Navtech Applied Research Inc.
General
Dorothy English is currently an employee of Navtech-Canada and until July 2000
was one of our officers and directors. She owns all of the stock of Navtech
Applied Research Inc. NARI currently owns 150,000 shares of our common stock;
these shares, however, are subject to a purchase agreement between NARI and a
third party that provides for a closing date of January 12, 2001.
As of October 23, 2000, NARI was indebted to us in the aggregate amount of
$1,288,724. This balance consisted of several promissory notes with varying
terms as well as unsecured advances. For financial reporting purposes, we had
provided for an allowance of $928,412 against this debt as of October 31, 1999
(see Item 7). The resulting net balance was believed to approximate the
estimated fair value of certain weather software assets owned by NARI at October
31, 1999.
Weather Software Assets
NARI acquired certain weather software assets on July 15, 1998 in a transaction
that included the purchase of 300,000 shares of our common stock for
distribution both to the seller of the assets and an unrelated third party as a
finder's fee. As part of the transaction, we received an assignment of the
customer contracts previously maintained by the seller. Following the
acquisition of these assets, we entered into a non-exclusive, non-transferable
software license agreement with NARI for a term commencing August 1, 1998 and
expiring initially on October 31, 1999. Under this agreement we were granted the
right to install, configure, modify and use in our business the software
acquired by NARI. In return, we were obligated to pay royalties in an amount
equal to 10% of certain revenues derived from the sale of data processed using
the licensed software. In order to finance its purchase of the assets, NARI
borrowed funds from us. Among other terms, the promissory notes it delivered to
us called for the application of any royalties due by us to NARI first to the
reduction of the amounts due under these specific promissory notes.
Debt Reduction
On October 23, 2000, we entered into a series of transactions with NARI to
recover the amount due from NARI to us as follows:
o The weather software assets were transferred to us in return for a
reduction of debt. We believe that the estimated fair value for tax
purposes of $147,651 is equivalent to the software's fair market value
at October 23, 2000, the date of the valuation.
o NARI returned 502,766 shares of our common stock to treasury in return
for a further reduction of debt. At the time of the transfer, the
shares' market value was $942,686.
o NARI signed two promissory notes in the cumulative amount of $56,400
Canadian ($36,809 US as at October 31, 2000) payable on or before
January 15, 2001 from the proceeds NARI is anticipated to receive from
the sale of its remaining 150,000 shares of our common stock (see
footnote (1) to Item o 11). Subsequent to October 31, 2000, NARI
delivered an additional promissory note of $7,000 Canadian payable in
the same manner.
o As part of the asset transfer and treasury stock transfer, for
financial reporting purposes, we reduced our allowance for doubtful
accounts by $743,014 and recorded this reduction as an addition to
other income (see Item 7).
Upon the payment of the three remaining promissory notes, there will be no
further amounts due from NARI.
2. AVCON Associates Inc.
Denis L. Metherell, our Secretary and one of our Directors, is a Vice-President
and a Director of AVCON Associates Inc. Mr. Metherell's wife is AVCON's
controlling shareholder. AVCON leases certain computer equipment to
Navtech-Canada. Under the present agreements, we are required to make varying
payments until November 2004. We believe that the lease payments, which
commenced July 1999 at $1,952 Canadian per month, are no higher than would be
payable to a nonaffiliated third party.
On October 31, 1996, we executed and delivered to AVCON a promissory note in the
principal amount of $53,000 Canadian to evidence amounts due as of such date. On
June 1, 1999, we amended the note to include additional arrears that had
accumulated on the two leases. The amended note is in the principal amount of
$90,000 Canadian, provides for interest at the rate of 18% per annum and is
payable as follows:
o interest only of $1,350 Canadian per month from July 1999 to September
2000;
o interest and principal of $2,400 Canadian per month from October 2000
to April 2005; and
o a residual payment of principal and interest of $1,263 Canadian in May
2005.
3. Duncan Macdonald
Effective December 1, 1998, we entered into a 20 month employment agreement
engaging Mr. Macdonald as our Chief Executive Officer. Mr. Macdonald was
entitled to receive a base quarterly fee of $1,250 commencing with the fiscal
quarter ended January 31, 1999. On May 1, 2000, contemporaneous with the
employment of Mr. Macdonald by Navtech-Canada on a full-time basis, the previous
employment agreement was terminated. During the fiscal year ended October 31,
2000, we paid approximately $2,500 under the aforementioned employment
agreement.
Kintyre & Company Limited
Effective January 1, 1999, Navtech-Canada entered into a two year services
agreement with Kintyre & Company Limited, a company controlled by Mr. Macdonald.
Under the agreement, Kintyre has agreed to provide the services of Mr.
Macdonald, as well as other Kintyre staff as needed, to assist us in our
strategic corporate structuring and corporate finance and accounting activities.
Kintyre is entitled to receive a base monthly fee of $23,250 Canadian, plus
additional amounts upon the meeting of certain time thresholds and an annual
bonus of $8,700 Canadian. Effective with the employment of Mr. Macdonald by
Navtech-Canada on May 1, 2000, the base amount was reduced to $11,000 Canadian
per month.
During the fiscal year ended October 31, 2000, we paid approximately $182,000
under the agreement with Kintyre.
St. Andrews Capital Limited Partnership
In April 1999, St. Andrews Capital Limited Partnership advanced $90,000 to us
for working capital purposes. Mr. Macdonald serves as President of the general
partner of St. Andrews Capital and is the controlling stockholder of such
general partner. The advance was repaid in September 2000, together with
interest at the rate of 18% per annum.
On October 1, 1999, St. Andrews Capital advanced $128,830 to us to finance our
acquisition of Skyplan Services (UK) Limited. At the time of the loan, we had
sufficient working capital to undertake the transaction, but determined that it
was prudent to obtain outside financing. St. Andrews Capital and we agreed in
principle that the loan would bear interest at the rate of 10% per annum and
would be repayable in 24 equal monthly payments of approximately $5,945
commencing November 1, 1999. We also agreed in principle that the principal
amount of the loan would be convertible into our common stock at a conversion
price of $0.375 per share effective on the first day following the approval of
an increase in our authorized share capital sufficient for such purpose. We held
an annual meeting of shareholders on January 14, 2000. At this meeting a
proposal to increase our authorized share capital was approved. This provided
sufficient share capital to permit such conversion. On October 31, 2000, St.
Andrews Capital exercised its conversion rights and converted the principal
balance of approximately $111,204 into 296,543 shares of our common stock.
<PAGE>
ITEM 13. EXHIBITS, LIST AND REPORTS ON FORM 8-K
(a) Exhibits
3(A) Certificate of Incorporation, as amended (7)
3(B) By-Laws (6)
10(A)Consulting Agreement dated as of November 1, 1993 between Compuflight,
Inc. and Bert E. Brodsky, together with amendment thereto dated
December 2, 1993 (1)
10(B)Promissory Note dated as of November 1, 1993 payable by Bert E.
Brodsky to the order of Compuflight, Inc. in the principal amount of
$804,000 (1)
10(C)Lease dated October 8, 1996 between Ferdi Investments Company Limited
and Navtech Systems Support Inc. with respect to Waterloo, Ontario
premises (3)
10(D) 1995 Key Employees and Advisors Stock Option Plan, as amended (2)
10(E)Retirement Agreement dated as of August 5, 1999, between Russell K.
Thal and Compuflight, Inc. (4)
10(F)Promissory Note dated as of August 5, 1999 payable by Compuflight,
Inc., to the order of Russell K. Thal in the principal amount of
$600,000. (4)
10(G)Promissory Note dated as of August 5, 1999 payable by Compuflight,
Inc., to the order of Russell K. Thal in the principal amount of
$60,594. (4)
10(H)Sale Purchase Agreement dated as of October 1, 1999 between Navtech
Systems Support, Inc., and Skyplan Services Limited for the shares of
Skyplan Services (UK) Limited. (4)
10(I)Forbearance and Continued Service Agreement dated as of October 1,
1999 between Navtech Systems Support and Skyplan Services Limited. (4)
10(J)Contract for Services Agreement between Navtech Systems Support Inc.
and Kintyre and Company Limited dated as of January 1, 1999. (5)
10(K)Promissory Note dated as of September 1, 2000 payable by Navtech
Applied Research, Inc., to the order of Navtech Systems Support Inc.
in the principal amount of $50,000 Canadian and Amendment thereto.
10(L)Promissory Note dated as of October 23, 2000 payable by Navtech
Applied Research, Inc., to the order of Navtech Systems Support Inc.
in the principal amount of $6,400 Canadian.
10(M)Promissory Note dated as of November 10, 2000 payable by Navtech
Applied Research, Inc., to the order of Navtech Systems Support Inc.
in the principal amount of $7,000 Canadian.
10(N)Asset Purchase Agreement and Bill of Sale dated as of October 23,
2000 between Navtech, Inc. and Navtech Applied Research Inc.
10(O)Share Transfer Agreement dated as of October 23, 2000 between
Navtech, Inc. and Navtech Applied Research Inc.
10(P)Lease dated March 20, 2000 between Mahoney-Tancredi Company and
Navtech, Inc. with respect to Monterey, California premises.
10(Q)1999 Stock Option Plan(8)
10(R)Lease Agreement dated as of June 1, 1999 between Navtech Systems
Support Inc. and AVCON Associates Inc.
21 Subsidiaries
27 Financial Data Schedules
(1) We hereby incorporate the footnoted exhibit by reference in accordance with
Rule 12b-32, as such exhibit was originally filed as an exhibit in our Current
Report on Form 8-K for an event dated December 1, 1993.
(2) We hereby incorporate the footnoted exhibit by reference in accordance with
Rule 12b-32, as such exhibit was originally filed as an exhibit in our Annual
Report on Form 10-KSB for the fiscal year ended October 31, 1994.
(3) We hereby incorporate the footnoted exhibit by reference in accordance with
Rule 12b-32, as such exhibit was originally filed as an exhibit in our Annual
Report on Form 10-KSB for the fiscal year ended October 31, 1996.
(4) We hereby incorporate the footnoted exhibit by reference in accordance with
Rule 12b-32, as such exhibit was originally filed as an exhibit in our Annual
Report on Form 10-KSB for the fiscal year ended October 31, 1997.
(5) We hereby incorporate the footnoted exhibit by reference in accordance with
Rule 12b-32, as such exhibit was originally filed as an exhibit in our Amended
Annual Report on Form 10-KSB/A for the fiscal year ended October 31, 1998.
(6) We hereby incorporate the footnoted exhibit by reference in accordance with
Rule 12b-32, as such exhibit was originally filed as an exhibit in our Annual
Report on Form 10-KSB for the fiscal year ended October 31, 1999.
(7) We hereby incorporate the footnoted exhibit by reference in accordance with
Rule 12b-32, as such exhibit was originally filed as an exhibit in our Quarterly
Report on Form 10-QSB for the fiscal quarter ended July 31, 2000.
(8) We hereby incorporate the footnoted exhibit by reference in accordance with
Rule 12b-32, as such exhibit was originally filed as an exhibit in our
Registration Statement on Form S-8 (File No. 333-32656)
b) Reports on Form 8-K
We did not file any Current Reports on Form 8-K during the quarter ended
October 31, 2000.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of Navtech, Inc.
We have audited the accompanying consolidated balance sheet of Navtech, Inc. and
subsidiaries (the "Company") as of October 31, 2000 and the related consolidated
statements of operations, stockholders' equity and cash flows for the year then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free from material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the consolidated financial position of Navtech, Inc. and
subsidiaries as of October 31, 2000, and the results of its consolidated
operations and its cash flows for the year then ended, in conformity with
accounting principles generally accepted in the United States of America.
/s/ Deloitte & Touche LLP
Chartered Accountants
Kitchener, Ontario
December 21, 2000
<PAGE>
REPORT OF INDEPENDENT CERIFIED
PUBLIC ACCOUNTANTS
Board of Directors and Shareholders
Navtech, Inc.
We have audited the accompanying consolidated balance sheet of Navtech, Inc. and
Subsidiaries (the "Company") as of October 31, 1999 and the related consolidated
statements of operations, stockholders' deficit and cash flows for the year then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Navtech, Inc. and Subsidiaries as of October 31, 1999, and the results of
consolidated operations and its cash flows for the year then ended, in
conformity with accounting principles generally accepted in the United States of
America.
The financial statements referred to above have been prepared assuming that the
Company will continue as a going concern. As shown in the financial statements,
as of October 31, 1999, the Company has a deficiency in working capital and
stockholders' equity of $1,331,098 and $1,149,122, respectively, and has
incurred a net loss of $380,244 for the year ended October 31, 1999. These
factors, among others, as described in Note 18 to the consolidated financial
statements raise substantial doubt about the Company's ability to continue as a
going concern. Management's plans in regard to these matters are also described
in Note 18. The consolidated financial statements do no include any adjustments
that might result from the outcome of this uncertainty.
/s/ Grant Thornton LLP
Melville, New York
December 10, 1999, except for Note 9
as to which the date is January 14, 2000
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<S> <C> <C>
Fiscal Year Ended October 31, 1999 2000
--------------------------------------------------------------------------------------------------------------------
REVENUE
Service fees $ 4,648,483 $ 5,803,962
Software license fees 605,093 1,204,162
--------------------------------------------------------------------------------------------------------------------
Total revenue 5,253,576 7,008,124
--------------------------------------------------------------------------------------------------------------------
COSTS AND EXPENSES
Cost of services 3,776,191 4,593,141
Cost of software license fees 137,454 62,186
Research and development 95,405 269,132
Selling, general and administrative 1,114,354 1,491,302
Provision for (recovery of) bad debt - related party (Note 5) 316,453 (904,102)
Amortization of goodwill 3,215 11,200
--------------------------------------------------------------------------------------------------------------------
Total costs and expenses 5,443,072 5,522,859
--------------------------------------------------------------------------------------------------------------------
Income (loss) from operations (189,496) 1,485,265
--------------------------------------------------------------------------------------------------------------------
Other income (expense)
Interest expense (350,292) (251,266)
Interest revenue 104,347 64,042
--------------------------------------------------------------------------------------------------------------------
(245,945) (187,224)
--------------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes (435,441) 1,298,041
Income taxes (Note 13) (55,197) 193,787
--------------------------------------------------------------------------------------------------------------------
Net earnings (loss) $ (380,244) $ 1,104,254
--------------------------------------------------------------------------------------------------------------------
Net earnings (loss) per share (Note 12)
Basic $ (0.19) $ 0.43
Diluted $ (0.19) $ 0.35
--------------------------------------------------------------------------------------------------------------------
See Notes to the Consolidated Financial Statements
<PAGE>
CONSOLIDATED BALANCE SHEETS
October 31, 1999 2000
--------------------------------------------------------------------------------- ---------------- -----------------
ASSETS
Current Assets
Cash and cash equivalents $ 4,504 $ 371,639
Accounts receivable (net of allowance for bad debts
of $122,370; 1999 - $189,329) 853,876 904,336
Prepaid expenses and other 23,786 79,681
--------------------------------------------------------------------------------- ---------------- -----------------
882,166 1,355,656
--------------------------------------------------------------------------------- ---------------- -----------------
Investment Tax Credits Receivable (Note 3) 314,603 100,238
Capital Assets (Note 4) 340,488 663,802
Due From Related Party (Note 5) 318,760 36,809
Goodwill (net of accumulated amortization of $21,362; 1999 - $10,162) 120,838 109,638
--------------------------------------------------------------------------------- ---------------- -----------------
$ 1,976,855 $ 2,266,143
--------------------------------------------------------------------------------- ---------------- -----------------
LIABILITIES
Current Liabilities
Accounts payable and accrued liabilities $ 1,286,923 $ 732,488
Note payable - factoring 191,016 -
Income taxes payable - 184,209
Due to related parties - current portion (Note 6) 265,696 133,971
Long-term debt - current portion (Note 7) 128,672 173,626
Obligations under capital lease - current portion (Note 7) - 2,525
Deferred lease inducements - current portion (Note 8) 14,764 14,196
Deferred revenue 326,193 -
--------------------------------------------------------------------------------- ---------------- -----------------
2,213,264 1,241,015
--------------------------------------------------------------------------------- ---------------- -----------------
Due To Related Parties (Note 6) 533,843 310,790
Long-Term Debt (Note 7) 47,043 175,578
Obligations Under Capital Lease (Note 7) - 5,801
Deferred Lease Inducements (Note 8) 88,584 70,980
Minority Interest 243,243 -
--------------------------------------------------------------------------------- ---------------- -----------------
3,125,977 1,804,164
--------------------------------------------------------------------------------- ---------------- -----------------
Commitments And Contingencies (Note 14)
STOCKHOLDERS' EQUITY (DEFICIENCY)
Share capital (Note 9) 2,002 3,917
Treasury stock (Note 9) - (942,686)
Additional paid-in capital 1,680,445 3,133,472
Accumulated other comprehensive income 51,175 45,766
Deficit (2,882,744) (1,778,490)
--------------------------------------------------------------------------------- ---------------- -----------------
(1,149,122) 461,979
--------------------------------------------------------------------------------- ---------------- -----------------
$ 1,976,855 $ 2,266,143
--------------------------------------------------------------------------------- ---------------- -----------------
See Notes to the Consolidated Financial Statements
</TABLE>
<PAGE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Accumulated Total
Additional Other Stockholders' Total
Share Capital Paid-In Comprehensive Treasury Equity/ Comprehensive
Shares Amount Capital Income (Loss) Stock Deficit (Deficiency) Income (Loss)
------------------------------------------------------------------------------------------------------------------------------------
Balances, November 1, 1998 2,001,980 $ 2,002 $1,680,445 $57,450 $- $(2,502,500) $(762,603)
Translation adjustments (6,275) (6,275) $ (6,275)
Net loss (380,244) (380,244) (380,244)
------------------------------------------------------------------------------------------------------------------------------------
Balances, October 31, 1999 2,001,980 2,002 1,680,445 51,175 $- (2,882,744) (1,149,122) $ (386,519)
------------------------------------------------------------------------------------------------------------------------------------
Issuance of shares (Note 9) 1,353,543 1,353 1,244,825 1,246,178
Stock options exercised 370,000 370 132,593 132,963
Issuance of shares on Navtech
B exchange (Note 9) 192,000 192 236,697 236,889
Treasury shares (Note 9) (161,088) (942,686) (1,103,774)
Translation adjustments (5,409) (5,409) (5,409)
Net earnings 1,104,254 1,104,254 1,104,254
------------------------------------------------------------------------------------------------------------------------------------
Balances, October 31, 2000 3,917,523 $3,917 $3,133,472 $ 45,766 $(942,686) $(1,778,490) $ 461,979 $1,098,845
------------------------------------------------------------------------------------------------------------------------------------
See Notes to the Consolidated Financial Statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Fiscal Year Ending October 31, 1999 2000
--------------------------------------------------------------------------------- ---------------- -----------------
OPERATING ACTIVITIES
Net earnings (loss) $ (380,244) $ 1,104,254
Adjustments to reconcile net earnings (loss) to net
cash provided by operating activities:
Depreciation 83,905 112,860
Amortization of goodwill 3,215 11,200
Provision for uncollectible accounts 59,423 (61,976)
Recovery of bad debt - former parent company - (904,102)
Loss on sale of assets - 1,218
Deferred lease inducements (14,521) (14,741)
Changes in operating assets and liabilities:
Accounts receivable (246,489) (18,105)
Prepaid expenses and other 9,174 (58,640)
Investment tax credits receivable 143,065 212,841
Accounts payable, accrued liabilities and other liabilities 183,407 (709,079)
Deferred revenue 320,809 (325,694)
Note payable - factoring 191,016 -
Income taxes payable - 193,787
--------------------------------------------------------------------------------- ---------------- -----------------
352,760 (456,177)
--------------------------------------------------------------------------------- ---------------- -----------------
INVESTING ACTIVITIES
Acquisition of Navtech-UK, net (103,166) -
Proceeds on sale of capital assets - 500
Advances to former parent company, net (51,600) (68,858)
Purchase of capital assets (76,910) (307,500)
--------------------------------------------------------------------------------- ---------------- -----------------
(231,676) (375,858)
--------------------------------------------------------------------------------- ---------------- -----------------
FINANCING ACTIVITIES
Repayment of cash overdraft (136,858) -
Restricted cash 50,000 -
Proceeds from (repayment of) bank loan, net (41,055) 53,733
Repayment of loans (168,819) (94,800)
Repayment of notes (76,915) (247,285)
Proceeds from loans 252,830 227,720
Issuance of common shares - 1,267,939
--------------------------------------------------------------------------------- ---------------- -----------------
(120,817) 1,207,307
--------------------------------------------------------------------------------- ---------------- -----------------
EFFECT OF FOREIGN EXCHANGE RATES ON CASH 4,237 (8,137)
Net cash flow 4,504 367,135
Cash and cash equivalents, beginning of year - 4,504
--------------------------------------------------------------------------------- ---------------- -----------------
Cash and cash equivalents, end of year $ 4,504 $ 371,639
--------------------------------------------------------------------------------- ---------------- -----------------
Supplemental disclosure of cash flow information:
Cash paid during the year for interest $ 320,000 $ 231,500
Cash paid during the year for income taxes $ - $ -
--------------------------------------------------------------------------------- ---------------- -----------------
See Notes to Consolidated Financial Statements
</TABLE>
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF THE BUSINESS
The Company is engaged in the business of (1) providing computerized flight
planning services to all segments of the aviation industry, but principally to
commercial airlines and corporate aircraft users and (2) selling customized
licensed versions of their proprietary software to end users mainly throughout
North America, Europe and Asia.
2. SIGNIFICANT ACCOUNTING POLICIES
A summary of significant accounting policies consistently applied in the
preparation of the consolidated financial statements follows:
Basis of presentation
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiaries, Navtech Systems Support Inc. ("Navtech-Canada")
and Navtech (UK) Limited ("Navtech-UK"). During the year ended October 31, 2000,
Efficient Aviation Systems Inc., a wholly-owned subsidiary of the Company, and
Navtech-Canada amalgamated and continued on as Navtech Systems Support Inc.
Foreign currency translation
a) Translation of foreign subsidiaries' accounts
Assets and liabilities of the Company's foreign subsidiaries are translated from
their local currencies to US dollars at the exchange rate in effect at the
balance sheet date. Revenues and expenditures are translated at the average rate
prevailing during the year. The adjustments resulting from translating the
financial statements of foreign subsidiaries are recorded in comprehensive
income as a separate component of stockholders' equity.
b) Translation of foreign currency transactions
Transactions incurred in currencies other than the functional currency are
converted to the functional currency at the transaction date. Monetary assets
and liabilities denominated in a currency other than the functional currency are
converted to the functional currency at the exchange rate in effect at each
period end. All foreign currency transaction gains and losses have been included
in earnings.
Capital assets
Capital assets are recorded at cost. Depreciation of capital assets is recorded
at the following rates:
Purchased computer software 2.5-5 years Declining balance and straight line
Computer equipment 3-5 years Declining balance and straight line
Furniture and fixtures 5-10 years Declining balance and straight line
Office furniture
under capital lease 5 years Declining balance
Office equipment 5 years Declining balance and straight line
Leasehold improvements Term of lease Straight line
Goodwill
Goodwill is recorded at cost. Amortization is computed on the straight-line
method over ten years.
Minority interest
During the year ended October 31, 2000, the Company purchased all of the
outstanding Class B special shares of Navtech-Canada as more fully described in
Note 9. As a result, as at October 31, 2000, there is no minority interest.
Asset impairment
The Company reviews the carrying value of intangible and other long-lived assets
at least annually for evidence of impairment. An impairment loss is recognized
when the estimate of undiscounted future cash flows generated by such assets is
less than the carrying amount. Measurement of the impairment loss is based on
the present value of the expected future cash flows.
Income taxes
The Company accounts for income taxes in accordance with Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"). SFAS
109 requires the determination of deferred tax assets and liabilities based on
the differences between the financial statement and income tax bases of assets
and liabilities, using enacted tax rates in effect for the year in which the
differences are expected to reverse. The measurement of a deferred tax asset is
adjusted by a valuation allowance, if necessary, to recognize tax benefits only
to the extent that, based on available evidence, it is more likely than not that
they will be realized.
Research and development costs
The Company incurs costs related to research and development of its software. To
date, the Company has not capitalized any development costs under Statement of
Financial Accounting Standards No. 86, "Accounting for the Costs of Computer
Software to be Sold, Leased or Otherwise Marketed" ("SFAS 86"). The Company has
defined the attainment of technological feasibility as completion of a working
model. The costs incurred between the time of establishment of a working model
and the time when the products are marketable are insignificant. Consequently,
costs that are eligible for capitalization are expensed in the period incurred.
Investment tax credits
Investment tax credits are recorded as a reduction of income tax expense.
Revenue recognition
The Company records revenues in accordance with the American Institute of
Certified Public Accountants ("AICPA") Statement of Position ("SOP") 97-2, as
amended by SOP 98-4 and SOP 98-9. The Company recognizes software license
revenues upon the receipt of customer acceptance if no significant vendor
obligations remain, the sales contract fee is fixed or determinable, amounts are
due within one year and collection is probable. Contract sales that do not meet
the above criteria are recorded as deferred revenue. Third-party costs incurred
by the Company that are directly related to software license contract sales are
deferred until such time as the related revenues are recognized.
Systems consulting and implementation fees are recognized upon rendering of
services. Custom programming, communications and database income, and service
bureau and support revenue are recognized ratably over applicable contract
periods or as services are performed. Amounts billed but not yet earned and
payments received prior to the earnings of the revenue are recorded as deferred
revenue.
Use of estimates
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities as of the date of the financial
statements and the reported amounts of revenues and expenses during the reported
periods. Actual results could differ from those estimates or assumptions.
Recently issued accounting pronouncement
In December 1999, the Securities and Exchange Commission (the "SEC") issued
Staff Accounting Bulletin ("SAB") 101, "Revenue Recognition in Financial
Statements," which summarizes the SEC's views in applying generally accepted
accounting principles to revenue recognition. Implementation of SAB 101 is
required no later than the fourth quarter of fiscal years beginning after
December 15, 1999. In the Company's case this would be the Company's fiscal year
commencing November 1, 2000. The Company has not completed its assessment of the
impact of SAB 101 on its revenue recognition policies.
The Financial Accounting Standards Board ("FASB") issued Statement of Financial
Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Financial
Instruments and Hedging Activities," in June 1998. SFAS No. 133 requires an
entity to recognize all derivatives and measure those instruments at fair value.
In June 1999, the FASB issued SFAS No. 137, "Accounting for Derivative
Instruments and Hedging Activities - Deferral of the Effective Date of FASB
Statement No. 133." In June 2000, the FASB issued SFAS No. 138, "Accounting for
Certain Derivative Instruments and Certain Hedging Activities," an amendment of
SFAS No. 133. Based on the revised effective date, the Company will adopt SFAS
No. 133, as amended by SFAS No. 138, on November 1, 2000. The Company does not
expect the initial adoption of SFAS No. 133 to have a material effect on its
operations or financial position.
In March 2000, the FASB issued FASB Interpretation No. ("FIN") 44, "Accounting
for Certain Transactions Involving Stock Compensation - an Interpretation of APB
Opinion No. 25." FIN 44 clarifies the application of APB Opinion No. 25 to
certain issues including: the definition of an employee for purposes of applying
APB Opinion No. 25; the criteria for determining whether a plan qualifies as a
noncompensatory plan; the accounting consequence of various modifications to the
terms of previously fixed stock options or award; and the accounting for the
exchange of stock compensation awards in a business combination. FIN 44 is
effective July 1, 2000, but certain conclusions in FIN 44 are applicable
retroactively to specific events occurring after either December 15, 1999 or
January 12, 2000. The Company has determined that the application of FIN 44 has
no material impact on the Company's financial position or results of operations.
In September 2000, the FASB issued SFAS No. 140, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities - a Replacement
of FASB Statement No. 125." SFAS No. 140 revises the standards for accounting
for securitizations and other transfers of financial assets and collateral. The
accounting standards of SFAS No. 140 are effective for transfers and servicing
of financial assets and extinguishments of liabilities occurring after March 31,
2001. The Company is in the process of evaluating the impact, if any, on its
reported financial condition or results of operations from the adoption of SFAS
No. 140.
3. INVESTMENT TAX CREDITS RECEIVABLE
Navtech-Canada has filed claims for Investment Tax Credits for its scientific
research and experimental development activities for fiscal years ended October
31, 1992 through October 31, 2000. Scientific research and experimental
Investment Tax Credits ("ITCs") are available to certain entities located in
Canada carrying out qualified research and development. Further, these credits,
since 1995, have been available at both the federal and provincial level.
Claims 1992 - 1995
All of Navtech-Canada's claims for the fiscal years ended October 31, 1992
through October 31, 1995 were subjected to both financial and technical audits
by the Canada Customs and Revenue Agency ("CCRA"), the Canadian taxing
authority. Based on its technical audit, the CCRA disallowed certain expenses
related to projects deemed non-qualifying, and accordingly, reduced the final
assessed claim. In November 2000, the CCRA rejected Navtech-Canada's Notices of
Objection to these assessments. Navtech-Canada is currently in discussions with
the District Chief of Appeals concerning their assessments, and should the
results of those discussions be unsatisfactory, it would need to appeal the
assessments to the Tax Court of Canada. The amounts in dispute (translated into
US dollars at the appropriate spot rate) are as follows:
Year ended
October 31,
1999 2000
--------------------------------------- -------------------- -------------------
Taxation year ended:
March 31, 1992 $ 26,807 $ 25,776
March 31, 1993 101,179 97,288
March 31, 1994 41,087 39,507
October 31, 1995 79,139 76,096
--------------------------------------- -------------------- -------------------
248,212 238,667
Less: Allowance 248,212 238,667
--------------------------------------- -------------------- -------------------
$ - $ -
--------------------------------------- -------------------- -------------------
At this time, the Company cannot reasonably determine the likelihood of success
in either its discussions with the District Chief of Appeals or, if required, in
appealing the reductions resulting from the technical audits and has therefore
continued to provide an allowance against its ITC receivable.
Claims 1996 - 1997
Navtech-Canada's 1996 and 1997 claims were subjected only to financial audits
resulting in only minor variances to the claimed amounts. All amounts assessed
have been received by the Company, either through application of refunds to then
existing government liabilities or in the form of cash.
Claims 1998 - 1999
Navtech-Canada's 1998 and 1999 claims were subjected to financial audits and
have not yet been assessed by CCRA.
Claims 2000
During fiscal 2000, Navtech-Canada has applied for ITCs of approximately
$119,000. These investment tax credits have been used to reduce income taxes
payable, and accordingly, are not reflected in receivables.
Investment Tax Credits Receivable
Investment tax credits receivable (translated into US dollars at the appropriate
spot rate) consist of the following amounts:
<TABLE>
<S> <C> <C>
Year ended
October 31,
1999 2000
----------------------------------------------------------------------------- -------------------- -------------------
Taxation year ended:
March 31, 1992 through October 31, 1995 (disputed) $ 248,212 $ 238,667
March 31, 1992 through October 31, 1995 (assessed) 16,825 -
October 31, 1996 (assessed) 137,334 -
October 31, 1997 (assessed) 56,197 -
October 31, 1998 (unassessed) 52,637 50,613
October 31, 1999 (unassessed) 51,610 49,625
----------------------------------------------------------------------------- -------------------- -------------------
562,815 338,905
Less: Allowance 248,212 238,667
----------------------------------------------------------------------------- -------------------- -------------------
$ 314,603 $ 100,238
----------------------------------------------------------------------------- -------------------- -------------------
</TABLE>
<PAGE>
4. CAPITAL ASSETS
<TABLE>
<S> <C> <C>
October 31,
1999 2000
----------------------------------------------------------------------------- -------------------- -------------------
Cost
Purchased computer software $ 439,071 $ 597,905
Computer equipment 465,580 564,529
Furniture and fixtures 63,224 90,533
Office furniture under capital lease - 8,709
Office equipment 104,702 155,307
Leasehold improvements 150,205 203,856
----------------------------------------------------------------------------- -------------------- -------------------
1,222,782 1,620,839
----------------------------------------------------------------------------- -------------------- -------------------
Accumulated depreciation
Purchased computer software 412,479 420,086
Computer equipment 333,641 372,034
Furniture and fixtures 39,021 44,193
Office furniture under capital lease - 291
Office equipment 45,715 62,822
Leasehold improvements 51,438 57,611
----------------------------------------------------------------------------- -------------------- -------------------
882,294 957,037
----------------------------------------------------------------------------- -------------------- -------------------
$ 340,488 $ 663,802
----------------------------------------------------------------------------- -------------------- -------------------
</TABLE>
5. DUE FROM RELATED PARTY
Navtech Applied Research Inc. ("NARI") is the former parent company of the
Company and is owned by a shareholder and employee of the Company. On October
23, 2000, total amounts due from NARI to both the Company and Navtech-Canada
amounted to $1,288,724 excluding allowances taken by Navtech-Canada in prior
periods totaling $928,412. Effective October 23, 2000, the Company entered into
a series of transactions to reduce the receivable from NARI to both the Company
and Navtech-Canada as follows:
o Software assets with an estimated fair value of $147,651 for tax
purposes were transferred to the Company in return for a reduction of
debt. The Company believes that the estimated fair value for tax
purposes is equivalent to the software's fair market value at October
23, 2000, the date of the valuation.
o NARI returned 502,766 shares of the common stock of the Company to the
Company's treasury in return for a further reduction of debt (see Note
9).
o NARI signed two promissory notes in the cumulative amount of $56,400
Canadian ($36,809 as at October 31, 2000), payable on or before January
15, 2001 from the proceeds NARI will receive from the sale of its
remaining 150,000 shares of the common stock of the Company. A purchase
agreement with a closing date of January 12, 2001 was signed by both
NARI and the third party purchaser. Interest on the notes has been
waived until January 15, 2001.
o As part of the asset transfer and transfer of stock into treasury, the
Company reduced its allowance by $904,102 and recorded this reduction
as an addition to other income.
Upon the closing of the purchase agreement and the payment of the two remaining
promissory notes, there will be no further amounts due from NARI.
<PAGE>
6. DUE TO RELATED PARTIES
Due to related parties as of October 31, 1999 and 2000 is as follows:
<TABLE>
<S> <C> <C>
October 31,
1999 2000
----------------------------------------------------------------------------- -------------------- -------------------
Note payable # 1, interest at 5%, payable in monthly payments $ 73,659 $ 26,747
of principal and interest of $5,950 Canadian through May
2001, due to a trust related to a shareholder of the
Company
Note payable # 2, interest at 18%, payable in blended weekly payments through
March 2005, due to a company related to
an officer and director of the Company 61,116 56,986
Note payable # 3, non-interest bearing note in the amount of $600,000 payable in
96 semi-monthly payments through November 2003, due to a shareholder and
former chairman of the Company. The note has been recorded at its net
present value using a discount rate of 7.5%. The Company is required to
maintain a life insurance policy on the
lender. 450,320 361,028
Note payable # 4, due to a company controlled by an officer and
director of the Company 1,191 -
Note payable # 5, due to a limited partnership related to an
officer and director of the Company 67,657 -
Note payable # 6, due to a limited partnership related to an officer and
director of the Company, convertible at the lender's option into common
shares at a rate of $0.375 per share (see Note 9). The note bore interest
at 10% per annum and was repayable in 24 blended monthly installments of
$5,945. The conversion option became exercisable on
February 1, 2000. 128,830 -
Note payable # 7, due to a former director of the Company 14,841 -
Note payable # 8, due to a relative of a shareholder 1,925 -
----------------------------------------------------------------------------- -------------------- -------------------
799,539 444,761
Less: Current portion 265,696 133,971
----------------------------------------------------------------------------- -------------------- -------------------
Long-term portion $ 533,843 $ 310,790
----------------------------------------------------------------------------- -------------------- -------------------
Maturities of related party debt as of October 31, 2000 are as follow:
----------------------------------------------------------------------------- -------------------- -------------------
2001 $ 133,971
2002 130,080
2003 152,227
2004 22,295
2005 and thereafter 6,188
----------------------------------------------------------------------------- -------------------- -------------------
$ 444,761
----------------------------------------------------------------------------- -------------------- -------------------
</TABLE>
<PAGE>
7. BANK REVOLVING AND OTHER DEMAND LOANS AND LONG-TERM DEBT
Navtech-Canada has a revolving bank demand loan facility which provides for
borrowings of up to $50,000 Canadian which are payable on demand. These demand
loans bear interest at the bank's prime rate plus 1.25%. At year-end, no amounts
were outstanding under the demand loan facility.
Long-term debt as of October 31, 1999 and 2000 is as follows:
<TABLE>
<S> <C> <C>
October 31,
1999 2000
----------------------------------------------------------------------------- -------------------- -------------------
Small business bank loan payable # 1, interest at the bank's $ 66,094 $ 23,414
prime rate plus 1.75%, payable in monthly principal
payments of $5,123 Canadian plus interest based on a 48
month amortization period.
Smallbusiness bank loan payable # 2, interest at the bank's prime rate plus
3.00%, payable in monthly principal payments of $4,250 Canadian plus
interest based on a 36
month amortization period. - 91,577
Term loan # 1, interest at 9.18%, payable in monthly payments
of principal and interest of $7,295 through November 2000. 90,562 7,295
Term loan # 2, interest at 10.5%, payable in monthly payments of principal and
interest of $10,190 through September
2002. - 211,188
Equipment note, payable in monthly payments of principal and
interest of $598 through August 2003. 19,059 15,730
----------------------------------------------------------------------------- -------------------- -------------------
175,715 349,204
Less: Current portion 128,672 173,626
----------------------------------------------------------------------------- -------------------- -------------------
Long-term portion $ 47,043 $ 175,578
----------------------------------------------------------------------------- -------------------- -------------------
</TABLE>
The small business bank loans are secured by an assignment of all fixed assets
of Navtech-Canada and a postponement of any debt owed by Navtech-Canada to
Navtech-US in the amount of $50,000 Canadian. The term loans are secured by an
interest in certain software assets and certain receivables of Navtech-US.
At year-end all loan covenants were being complied with.
As of October 31, 1999, both the Company and Navtech-Canada had factored certain
trade receivables with full recourse if not paid within 120 days. Under the
factoring agreements, the Company is required to pay an administration charge of
0.4% on the initial factored amount, a factoring commission of 3.2%, which
covers the first thirty days of the advance, and a daily charge of 0.108% on
receivables outstanding more than thirty days. The factoring agreements were
terminated during the year ended October 31, 2000
<PAGE>
Maturities of long-term debt as of October 31, 2000 are as follow:
--------------------------------------- -------------------- -------------------
2001 $ 173,626
2002 145,122
2003 30,456
2004 -
2005 and thereafter -
--------------------------------------- -------------------- -------------------
$ 349,204
--------------------------------------- -------------------- -------------------
The Company is committed under capital leases for telephone and office equipment
with terms expiring at various dates through 2003. The future minimum lease
payments under the lease agreements along with the present balance of the
obligation under the capital leases are as follow:
<TABLE>
<S> <C> <C>
October 31,
1999 2000
----------------------------------------------------------------------------- -------------------- -------------------
Minimum lease payments for year ended October 31,
2001 $ - $ 3,673
2002 - 3,673
2003 - 3,061
----------------------------------------------------------------------------- -------------------- -------------------
- 10,407
Less: Amounts representing interest - 2,081
----------------------------------------------------------------------------- -------------------- -------------------
Balance of obligation - 8,326
Less: Current portion - 2,525
----------------------------------------------------------------------------- -------------------- -------------------
Long-term portion $ - $ 5,801
----------------------------------------------------------------------------- -------------------- -------------------
</TABLE>
8. DEFERRED LEASE INDUCEMENTS
Navtech-Canada entered into a lease for its premises in Waterloo, Canada that
provided for certain lease inducements, including the provision of a leasehold
improvement allowance and a period of free rent. The Company has deferred the
recognition of these inducements and is amortizing the inducements over the
initial term of the lease set to expire October 2006. Annual amortization is
charged against rent expense. Deferred lease inducements as of October 31, 1999
and 2000 are as follow:
<TABLE>
<S> <C> <C>
October 31,
1999 2000
----------------------------------------------------------------------------- -------------------- -------------------
Deferred lease inducements $ 147,642 $ 141,964
Less: Accumulated amortization 44,294 56,788
----------------------------------------------------------------------------- -------------------- -------------------
103,348 85,176
Less: Current portion 14,764 14,196
----------------------------------------------------------------------------- -------------------- -------------------
$ 88,584 $ 70,980
----------------------------------------------------------------------------- -------------------- -------------------
</TABLE>
<PAGE>
9. SHARE CAPITAL
The authorized share capital of the Company consists of 10,000,000 common
shares, par value $0.001, and 2,000,000 preferred shares, par value $0.10. At
October 31, 2000, there were 3,917,520 common shares issued and fully paid (1999
- 2,001,980) and no preferred shares issued.
Year ended October 31, 2000
On January 12, 2000, the Company issued 25,000 common shares in settlement of an
account payable in the amount of $9,375.
On January 14, 2000, the Company's stockholders approved the change of the
Company's name to Navtech, Inc. and to increase the number of authorized common
shares to 10,000,000.
On March 16, 2000, the Company issued 150,000 common shares upon the exercise of
options for proceeds of $93,750.
On March 31, 2000, the Company issued 500,000 common shares in a private
offering at a price of $1.00 for total proceeds of $500,000. In conjunction with
this offering, the Company also issued warrants for the purchase of 125,000
common shares at an exercise price of $1.875 per share which expire March 31,
2005.
On August 9, 2000, the Company issued 200,000 common shares upon the exercise of
options for proceeds of $125,000.
On August 22, 2000, the Company issued 10,000 common shares upon the exercise of
options for proceeds of $2,813.
On October 4, 2000, the Company issued 10,000 common shares upon the exercise of
options for proceeds of $5,000.
On October 27, 2000, the Company issued 192,000 common shares, valued at $1.29
per share, for all of the outstanding Class B special shares of Navtech-Canada
under a private offering memorandum. In addition, the Company issued 32,000
common shares as part of the private offering for proceeds of $32,000.
On October 30, 2000, the Company issued 500,000 common shares in a private
offering at a price of $1.00 for total proceeds of $500,000.
On October 31, 2000, the Company issued 296,543 common shares upon the
conversion of a convertible debt.
Year ended October 31, 1999
There were no share issuances in fiscal 1999.
Treasury Stock
On October 23, 2000, Navtech Applied Research Inc. surrendered 502,766 common
shares of the Company to the Company with a fair value of $942,686 in return for
a reduction in the debt owed to the Company in the same amount.
<PAGE>
10. STOCK OPTION PLANS
In 1995, the Company adopted the 1995 Key Employees and Advisors Stock Option
Plan (the "1995 Plan"), which provides for the granting of nonqualified stock
options for the purchase of a maximum, as amended in 1996, of 700,000 shares of
the Company's common stock to key employees and advisors of the Company. Under
the terms of the 1995 Plan, the options, which expire no later that ten years
after grant, are exercisable at a price determined by the Board of Directors,
and become exercisable in accordance with terms established at the time of the
grant.
Further, in 1999, the Company adopted the 1999 Stock Option Plan (the "1999
Stock Option Plan"), as approved by the shareholders on January 14, 2000, which
provided for the granting of incentive stock options and non-statutory stock
options for the purchase of a maximum of 1,500,000 shares of the Company's
common stock to directors, employees, consultants and advisors of the Company.
Under the terms of the 1999 Stock Option Plan, the options, which expire no
later than ten years after grant, are exercisable at a price no less than the
fair market value of the Company's common stock at the date of the grant and
become exercisable in accordance with terms established at the time of the
grant.
A summary of the activity in the Option Plans is set forth below:
<TABLE>
<S> <C> <C> <C>
-------------------- --------------------
Number of Weighted Average
Shares Exercise Price
----------------------------------------------------- -------------------- -------------------- --------------------
Balance at October 31, 1998 626,376 $ 0.68
No activity in 1999 - -
----------------------------------------------------- -------------------- -------------------- --------------------
Balance at October 31, 1999 626,376 0.68
Granted 1,376,015 0.57
Canceled and expired (455,376) 0.69
Exercised (370,000) 0.61
----------------------------------------------------- -------------------- -------------------- --------------------
Balance at October 31, 2000 1,177,015 $ 0.56
----------------------------------------------------- -------------------- -------------------- --------------------
Exercisable at October 31, 1998 626,376
Exercisable at October 31, 1999 626,376
Exercisable at October 31, 2000 420,265
----------------------------------------------------- -------------------- -------------------- --------------------
</TABLE>
The following table summarizes information concerning outstanding options at
October 31, 2000:
<TABLE>
<S> <C> <C> <C> <C> <C>
------------------ ----------------- ----------------- ------------------ -----------------
Range of Exercise Prices Number of Options Weighted Average Weighted Average Number of Options Weighted Average
Remaining
Outstanding Contractual Life Exercise Price Exercisable Exercise Price
------------------------- ------------------ ----------------- ----------------- ------------------ -----------------
$0.28125 552,000 4.24 $ 0.28 20,000 $ 0.28
years
$0.375 - $0.75 384,015 4.59 $ 0.58 369,015 $ 0.57
years
$1.125 - $1.1875 241,000 4.78 $ 1.16 31,250 $ 1.19
years
------------------------- ------------------ ----------------- ----------------- ------------------ -----------------
1,177,015 420,265
------------------------- ------------------ ----------------- ----------------- ------------------ -----------------
</TABLE>
The Company's subsidiary, Navtech-Canada, has outstanding options to purchase
200,000 shares of its common stock at exercise prices ranging from $0.20 to
$0.50 Canadian per share. This represents a maximum dilution of 4.4% of
Navtech-Canada.
<PAGE>
11. STOCK BASED COMPENSATION
The Company has adopted SFAS No. 123, "Accounting for Stock-Based Compensation."
As permitted under this standard, the Company elected to continue to account for
stock-based compensation using the intrinsic value method prescribed in
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees," and related interpretations. Accordingly, compensation expense for
stock options is measured as the excess, if any, of the fair value of the
Company's stock at the date of grant over the amount an employee must pay to
acquire the stock. Pro forma information regarding net income and earnings per
share is required by SFAS 123, and has been determined as if the Company
accounted for its employee stock options under the fair value method of that
Statement. The fair value for these options was estimated at the date of grant
using a Black-Scholes option pricing model with the following weighted average
assumptions:
<TABLE>
<S> <C>
Year ended October 31,
2000
--------------------------------------------------------------------------------------------------------------------
Volatility factor of expected market price of the Company's stock 212%
Dividend yield 0%
Risk-free rate 6%
Weighted average expected life of stock options (years) 3.00
--------------------------------------------------------------------------------------------------------------------
</TABLE>
SFAS 123 requires that, for the pro forma disclosure, the compensation cost
based on the fair values of the options at the grant date be amortized over the
vesting period. If compensation cost for stock options had been determined based
on the fair value at the grant dates consistent with the method described by
SFAS 123, the Company's net earnings and earnings per share would have been
adjusted to the pro forma amounts indicated below.
<TABLE>
<S> <C>
Year ended October 31,
2000
--------------------------------------------------------------------------------------------------------------------
Net earnings
As per reported $ 1,104,254
Pro forma $ 775,185
Earnings per share, basic
As per reported $ 0.43
Pro forma $ 0.30
Earnings per share, diluted
As per reported $ 0.35
Pro forma $ 0.25
--------------------------------------------------------------------------------------------------------------------
</TABLE>
The weighted average grant date fair value for stock options granted during the
fiscal year ended October 31, 2000 was $0.53.
<PAGE>
12. EARNINGS PER SHARE
Basic and diluted earnings per share are calculated as follows:
<TABLE>
<S> <C> <C>
Year ended October
31,
1999 2000
--------------------------------------------------------------------------------------------------------------------
Numerator:
Net earnings (loss) (A) $ (380,244) $ 1,104,254
--------------------------------------------------------------------------------------------------------------------
Denominator:
Denominator for basic earnings (loss) per share - weighted average
number of common shares outstanding (B) 2,001,980 2,552,628
Effect of dilutive securities:
Employee stock options - 582,178
--------------------------------------------------------------------------------------------------------------------
Denominator for diluted earnings (loss) per share - adjusted weighted
average number of common shares outstanding (C) 2,001,980 3,134,806
--------------------------------------------------------------------------------------------------------------------
Earnings (loss) per share - basic (A)/(B) $ (0.19) $ 0.43
--------------------------------------------------------------------------------------------------------------------
Earnings (loss) per share - diluted (A)/(C) $ (0.19) $ 0.35
--------------------------------------------------------------------------------------------------------------------
</TABLE>
Dilutive securities consist of employee stock options and warrants. Specific
employee stock options and warrants are excluded if their effect is
antidilutive.
13. INCOME TAXES
The components of the provision for income taxes are as follows:
Year ended October 31,
1999 2000
--------------------------------------------------------------------------------
Current:
United States $ - $ -
Canada (50,807) 193,787
United Kingdom (4,390) -
--------------------------------------------------------------------------------
(55,197) 193,787
--------------------------------------------------------------------------------
Deferred:
United States - -
Canada - -
United Kingdom - -
--------------------------------------------------------------------------------
- -
--------------------------------------------------------------------------------
$ (55,197) $ 193,787
--------------------------------------------------------------------------------
<PAGE>
The components of the net deferred tax asset (liability) are as follows:
<TABLE>
<S> <C> <C>
October 31,
1999 2000
--------------------------------------------------------------------------------------------------------------------
Deferred income tax assets
Net operating losses carried forward $ 413,000 $ 530,000
Deferred salaries and other compensation 380,000 258,000
Allowance for doubtful accounts 456,000 32,000
Other 156,000 -
--------------------------------------------------------------------------------------------------------------------
1,405,000 820,000
--------------------------------------------------------------------------------------------------------------------
Deferred income tax liabilities
License fees receivable 35,000 -
Investment tax credits 122,000 2,000
Depreciation 26,000 93,000
--------------------------------------------------------------------------------------------------------------------
183,000 95,000
--------------------------------------------------------------------------------------------------------------------
Net deferred tax asset 1,222,000 725,000
Less: Valuation allowance 1,222,000 725,000
--------------------------------------------------------------------------------------------------------------------
Deferred tax asset, net of valuation allowance $ - $ -
--------------------------------------------------------------------------------------------------------------------
</TABLE>
The provision for income taxes varies from the expected provision at the
statutory rates for the following reasons:
<TABLE>
<S> <C> <C>
Year ended October
31,
1999 2000
---------------------------------------------------------------------------------------------------------------------
Combined basic statutory rate: 40% 40%
---------------------------------------------------------------------------------------------------------------------
Provision for (recovery of) income taxes based on the basic statutory rate $ (174,176) $ 519,000
Increase (decrease) in income taxes resulting from the following:
Effects of differing statutory rates in other countries - 53,000
Non-deductible expenses 3,000 13,000
Non-recognition of losses carried forward 115,979 69,797
Investment tax credits applied to reduce taxes payable - (115,000)
Reversal of related party debt allowance not previously deducted for
tax - (346,000)
---------------------------------------------------------------------------------------------------------------------
$ (55,197) $ 193,797
---------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
The Company and its subsidiaries have combined income tax loss carryforwards of
approximately $1,326,000 which expire as follow:
<TABLE>
<S> <C> <C> <C> <C>
Expiry Year Canada United States United Kingdom Total
------------------------------ -------------------- --------------------- -------------------- ---------------------
2011 $ - $ 157,000 $ - $ 157,000
2017 - 381,000 - 381,000
2018 - 318,000 - 318,000
2019 - 228,000 - 228,000
2020 - 242,000 - 242,000
------------------------------ -------------------- --------------------- -------------------- ---------------------
$ - $ 1,326,000 $ - $ 1,326,000
------------------------------ -------------------- --------------------- -------------------- ---------------------
</TABLE>
No recognition has been given to the potential benefit of this item when
preparing these financial statements.
14. COMMITMENTS AND CONTINGENCIES
Commitments
The Company is committed under non-cancelable operating leases for business
premises and computer equipment with terms expiring at various dates through
2006. The Company also leases certain computer equipment from a company
controlled by the spouse of an officer and director of the Company pursuant to
an agreement which expires in fiscal 2004. The future minimum amounts payable
under the lease agreements are as follows:
--------------------------------------- -------------------- -------------------
2001 $ 322,174
2002 198,931
2003 187,637
2004 163,461
2005 and thereafter 299,245
--------------------------------------- -------------------- -------------------
$ 1,171,448
--------------------------------------- -------------------- -------------------
Contingencies
On September 13, 1999, the Company received a demand from the attorneys for the
Chapter 11 Creditors Committee of Southern Air Transport, Inc. for alleged
preferential payments of $88,850 made to Navtech-Canada within 90 days of the
filing of the bankruptcy petition of the Debtor in the United States Bankruptcy
Court for the Southern District of Ohio on October 1, 1998. The Company is of
the view that the payments received were for contemporaneous consideration and
were therefore not preferential payments. The Company has further determined
that the matter is still under review and no adversary proceedings have been
launched as of December 15, 2000. At this time no determination of the eventual
outcome of potential loss has been made.
The Company is subject to various other legal proceedings, claims and
liabilities, which arise in the ordinary course of its business. In the opinion
of management, the amount of any ultimate liability with respect to these
actions will not have a material adverse effect on the Company's consolidated
results of operations, cash flow or financial position.
<PAGE>
15. FINANCIAL INSTRUMENTS
Financial instruments are comprised of cash and cash equivalents, bank
indebtedness, accounts receivable, accounts payable and accrued liabilities.
Fair value of financial instruments
At October 31, 1999 and 2000, the estimated fair value of cash and cash
equivalents, accounts receivable, accounts payable and accrued liabilities and
bank indebtedness was equal to the book value given the short-term maturity of
the items.
Foreign exchange risk
Foreign exchange risk is the risk that exchange rates will affect the Company's
operating results. The Company is exposed to foreign exchange risk in that
approximately 69% of the Company's sales contracts are denominated in US Dollars
while approximately 69% of the Company's expenditures are denominated in
currencies other than US Dollars. The Company is exposed to foreign exchange
risk with respect to net financial liabilities totaling $91,497, which are
denominated in currencies other than US Dollars.
Credit risk
The Company is exposed to credit risk through cash and accounts receivable. The
Company holds its cash positions with reputable financial institutions. Accounts
receivable credit risk is mitigated by the Company's large customer base, as
well as the use of export receivable insurance by Navtech-Canada, the source of
a substantial amount of the Company's revenue billings.
16. SEGMENTED INFORMATION
The Company operates in three geographic segments which are set out below:
<TABLE>
<S> <C> <C> <C> <C> <C>
Year ended October 31, 2000 United States Canada Europe and Other Inter-segment Consolidated
adjustments
--------------------------- ----------------- ----------------- ------------------ ----------------- -----------------
Revenue $ 1,994,850 $ 4,296,863 $ 716,411 $ - $ 7,008,124
Costs and expenses (other
than depreciation and
amortization) 1,705,144 2,966,974 726,681 - 5,398,799
--------------------------- ----------------- ----------------- ------------------ ----------------- -----------------
289,706 1,329,889 (10,270) - 1,609,325
Depreciation 29,529 71,901 11,430 - 112,860
--------------------------- ----------------- ----------------- ------------------ ----------------- -----------------
Segment income (loss) 260,177 1,257,988 (21,700) - 1,496,465
--------------------------- ----------------- ----------------- ------------------ -----------------
Amortization of goodwill 11,200
-----------------
Income from operations 1,485,265
Interest expense (251,266)
Interest revenue 64,042
-----------------
Net earnings before taxes 1,298,041
Income taxes 193,787
-----------------
Net earnings $ 1,104,254
-----------------
Total assets $ 2,433,666 $ 2,004,811 $ 277,997 $(2,450,331) $ 2,266,143
--------------------------- ----------------- ----------------- ------------------ ----------------- -----------------
Capital expenditures $ 480,888 $ 204,384 $ 19,879 $ (250,000) $ 455,151
--------------------------- ----------------- ----------------- ------------------ ----------------- -----------------
Year ended October 31, 1999 United States Canada Europe and Other Inter-segment Consolidated
adjustments
--------------------------- ----------------- ----------------- ------------------ ----------------- -----------------
Revenue $ 2,065,629 $ 3,148,497 $ 39,450 $ - $ 5,253,576
Costs and expenses (other
than depreciation and
amortization) 2,070,847 3,225,258 59,847 - 5,355,952
--------------------------- ----------------- ----------------- ------------------ ----------------- -----------------
(5,218) (76,761) (20,397) - (102,376)
Depreciation 24,806 58,289 810 - 83,905
--------------------------- ----------------- ----------------- ------------------ ----------------- -----------------
Segment loss (30,024) (135,050) (21,207) - (186,281)
--------------------------- ----------------- ----------------- ------------------ -----------------
Amortization of goodwill 3,215
-----------------
Loss from operations (189,496)
Interest expense (350,292)
Interest revenue 104,347
-----------------
Net loss before taxes (435,441)
Income taxes (55,197)
-----------------
Net loss $ (380,244)
-----------------
Total assets $ 1,616,561 $ 1,414,770 $ 259,944 $(1,314,420) $ 1,976,855
--------------------------- ----------------- ----------------- ------------------ ----------------- -----------------
Capital expenditures $ 29,705 $ 45,565 $ 1,640 $ - $ 76,910
--------------------------- ----------------- ----------------- ------------------ ----------------- -----------------
</TABLE>
<PAGE>
17. COMPARATIVE FIGURES
Certain accounts for the comparative period have been reclassified to conform
with the presentation adopted in the current year.
18. LIQUIDITY AND CAPITAL RESOURCES AS OF OCTOBER 31, 1999
The consolidated financial statements for the year ended October 31, 1999 were
prepared assuming that the Company would continue as a going concern. However,
as of October 31, 1999, the Company had a deficiency in working capital and
stockholders' equity of $1,331,098 and $1,149,122, respectively, and incurred a
net loss of $380,244 for the year ended October 31, 1999. This raised
substantial doubt about the Company's ability to continue as a going concern.
The consolidated financial statements did not include any adjustments that may
have resulted should the Company have been unable to continue business.
The Company and its senior management group were focused on three specific areas
to address both the strategic direction required and the daily operational
issues to position the Company for profitability. First, the Company was
continuing to increase its marketing endeavors to obtain new customers and would
be introducing a number of complementary products to address marketplace
demands. Second, the Company believed it was building an effective management
structure. Third, the Company continued its pursuit of financing.
As at October 31, 1999, the Company's operation was dependent upon its ability
to obtain new customers, to maintain profitable levels of service and to
maintain existing financial arrangements or obtain new financing. There were no
assurances at that time that sufficient cash flows would be generated by the
Company to avoid the further depletion of its working capital. Additionally,
there were no assurances at that time that additional debt or equity financing
would be available, if and when needed, or that if available, such financing
could be completed on commercially favorable terms. Furthermore, there were no
assurances the above plans would enable the Company to continue in existence.
As at October 31, 2000, the Company had no deficiency in either working capital
or stockholders' equity.
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: January 4, 2001 NAVTECH, INC.
By:/s/ Duncan Macdonald
------------------------------
Duncan Macdonald,
Chairman of the Board of Directors
In accordance with the Securities Exchange Act of 1934, this report has
been signed below by the following persons on behalf of the registrant and in
the capacities and on the dates indicated.
<TABLE>
<S> <C>
Signatures Capacity Date
Chairman of the Board,
/s/ Duncan Macdonald Chief Executive Officer and Director January 4, 2001
--------------------------- (Principal Executive Officer)
Duncan Macdonald
/s/ Denis L. Metherell Secretary and Director January 4, 2001
---------------------------
Denis L. Metherell
/s/ Thomas D. Beynon Director January 4, 2001
---------------------------
Thomas D. Beynon
/s/ Prashant Gupta Director January 4, 2001
---------------------------
Prashant Gupta
/s/ Martin Hamrogue Director January 4, 2001
---------------------------
Martin Hamrogue
/s/ James McGinty Director January 4, 2001
---------------------------
James McGinty
/s/ David Strucke Chief Financial Officer January 4, 2001
---------------------------
David Strucke (Principal Financial Officer and
Principal Accounting Officer)
</TABLE>
<PAGE>
EXHIBIT 10(K)
PROMISSORY NOTE
CDN$50,000 September 1, 2000
FOR VALUE RECEIVED, NAVTECH APPLIED RESEARCH INC., an Ontario
corporation (the "Maker"), with its principal place of business at 175 Columbia
Street West, Waterloo, Ontario, Canada, promises to pay on demand to the order
of NAVTECH SYSTEMS SUPPORT INC., an Ontario corporation (the "Payee"), with its
principal place of business at 175 Columbia Street West, Waterloo, Ontario,
Canada, or at such other place as the holder hereof may from time to time
designate in writing, the principal sum of FIFTY THOUSAND CANADIAN DOLLARS
(CDN$50,000). The principal sum bears no interest until October 31, 2000. On or
after October 31, 2000 the principal sum shall bear interest at a rate of 10%
per annum, calculated and compounded monthly. Interest shall be calculated based
on a year of 360 days. The Maker hereby agrees to attempt to sell a sufficient
number of shares of the common stock of Navtech, Inc. held by the Maker in order
to satisfy (a) amounts owing by the Maker to its creditors (with the exception
of any amounts owing to Navtech, Inc. and Navtech Systems Support, Inc.) and (b)
this note. This note will be payable in full upon the completion of the sale of
the last of the shares deemed by the Maker to be sufficient to satisfy the
aforementioned creditors claims and this note.
This Note may not be waived, changed, modified or discharged orally,
but only by an agreement in writing, signed by the party against whom
enforcement of any waiver, change, modification or discharge is sought.
Should this Note be placed in the hands of any attorneys for collection
upon the occurrence of an Event of Default, the Maker agrees to pay, in addition
to all other amounts due and payable hereunder, all costs and expenses of
collection, including reasonable attorneys' fees.
Except as provided for above, the Maker expressly waives presentment,
demand, protest, notice of dishonor, notice of maturity, notice of protest, and
diligence in collection.
Any notice, demand or request relating to any matter set forth herein
shall be in writing and shall be deemed effective when hand delivered, or four
(4) days following the date mailed by overnight mail or nationally recognized
overnight courier to the Maker or the Payee at its address stated herein
(provided confirmation of receipt is obtained) or at such other address of which
it or he shall have notified the party giving such notice in writing as
aforesaid.
This Note may be prepaid in whole or in part without premium or penalty
and without notice.
For the purposes of the Interest Act (Canada) a rate of interest
calculated on a 360 day year expressed as an annual rate is equivalent to the
rate so calculated multiplied by the actual number of days in the relevant
calendar year and divided by 360. The Maker acknowledges that interest on this
Promissory Note is calculated on the basis of a year of 360 days and that this
results in more interest owing than if calculated on the basis of a year of 365
or 366 days.
This Note shall be governed by, and interpreted and construed in
accordance with, the laws of the Province of Ontario, excluding choice of law
principles thereof.
IN WITNESS WHEREOF, the Maker has duly executed this Promissory Note as
of the day and year first above written.
NAVTECH APPLIED RESEARCH INC.
/s/ Dorothy English
Per:
Dorothy English
Sole Director & Treasurer
ADDRESS:
#902 140 Lincoln Road
Waterloo, Ontario N2J 4N4
<PAGE>
AMENDMENT TO
PROMISSORY NOTE FOR CDN$50,000
BETWEEN:
NAVTECH APPLIED RESEARCH INC. (the "Maker")
AND
NAVTECH SYSTEMS SUPPORT INC. (the "Payee")
October 31, 2000
WHEREAS the Maker and the Payee had entered into a certain Promissory Note on
September 1, 2000 (the "Promissory Note") whereby the Maker agreed to pay on
demand to the Payee a sum of CDN$50,000.
NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the mutual
covenants and agreements hereinafter set forth, the parties hereby agree as
follows:
The interest free period that was in effect to October 31,
2000 shall be extended to January 15, 2001. On or after
January 15, 2001 the principal sum shall bear interest at a
rate of 10% per annum as per the original Promissory Note.
IN WITNESS WHEREOF, the Payee and the Maker have duly executed this
Amendment to the Promissory Note as of the day and year first above written.
NAVTECH APPLIED RESEARCH INC.
/s/ Dorothy English
Per:
Dorothy English
Sole Director & Treasurer
NAVTECH SYSTEMS SUPPORT INC.
/s/ David Strucke
Per:
David Strucke
Chief Financial Officer
<PAGE>
EXHIBIT 10(L)
PROMISSORY NOTE
CDN$6,400 October 23, 2000
FOR VALUE RECEIVED, NAVTECH APPLIED RESEARCH INC., an Ontario
corporation (the "Maker"), with its principal place of business at 175 Columbia
Street West, Waterloo, Ontario, Canada, promises to pay on demand to the order
of NAVTECH SYSTEMS SUPPORT INC., an Ontario corporation (the "Payee"), with its
principal place of business at 175 Columbia Street West, Waterloo, Ontario,
Canada, or at such other place as the holder hereof may from time to time
designate in writing, the principal sum of SIX THOUSAND FOUR HUNDRED CANADIAN
DOLLARS (CDN$6,400). The principal sum bears no interest until January 15, 2001.
On or after January 15, 2001 the principal sum shall bear interest at a rate of
10% per annum, calculated and compounded monthly. Interest shall be calculated
based on a year of 360 days. The Maker hereby agrees to attempt to sell a
sufficient number of shares of the common stock of Navtech, Inc. held by the
Maker in order to satisfy (a) amounts owing by the Maker to its creditors (with
the exception of any amounts owing to Navtech, Inc. and Navtech Systems Support,
Inc.) and (b) this note. This note will be payable in full upon the completion
of the sale of the last of the shares deemed by the Maker to be sufficient to
satisfy the aforementioned creditors claims and this note.
This Note may not be waived, changed, modified or discharged orally,
but only by an agreement in writing, signed by the party against whom
enforcement of any waiver, change, modification or discharge is sought.
Should this Note be placed in the hands of any attorneys for collection
upon the occurrence of an Event of Default, the Maker agrees to pay, in addition
to all other amounts due and payable hereunder, all costs and expenses of
collection, including reasonable attorneys' fees.
Except as provided for above, the Maker expressly waives presentment,
demand, protest, notice of dishonor, notice of maturity, notice of protest, and
diligence in collection.
Any notice, demand or request relating to any matter set forth herein
shall be in writing and shall be deemed effective when hand delivered, or four
(4) days following the date mailed by overnight mail or nationally recognized
overnight courier to the Maker or the Payee at its address stated herein
(provided confirmation of receipt is obtained) or at such other address of which
it or he shall have notified the party giving such notice in writing as
aforesaid.
This Note may be prepaid in whole or in part without premium or penalty
and without notice.
For the purposes of the Interest Act (Canada) a rate of interest
calculated on a 360 day year expressed as an annual rate is equivalent to the
rate so calculated multiplied by the actual number of days in the relevant
calendar year and divided by 360. The Maker acknowledges that interest on this
Promissory Note is calculated on the basis of a year of 360 days and that this
results in more interest owing than if calculated on the basis of a year of 365
or 366 days.
This Note shall be governed by, and interpreted and construed in
accordance with, the laws of the Province of Ontario, excluding choice of law
principles thereof.
IN WITNESS WHEREOF, the Maker has duly executed this Promissory Note as
of the day and year first above written.
NAVTECH APPLIED RESEARCH INC.
/s/ Dorothy English
Per:
Dorothy English
Sole Director & Treasurer
ADDRESS:
#902 140 Lincoln Road
Waterloo, Ontario N2J 4N4
<PAGE>
EXHIBIT 10(M)
PROMISSORY NOTE
CDN$7,000 November 10, 2000
FOR VALUE RECEIVED, NAVTECH APPLIED RESEARCH INC., an Ontario
corporation (the "Maker"), with its principal place of business at 175 Columbia
Street West, Waterloo, Ontario, Canada, promises to pay on demand to the order
of NAVTECH SYSTEMS SUPPORT INC., an Ontario corporation (the "Payee"), with its
principal place of business at 175 Columbia Street West, Waterloo, Ontario,
Canada, or at such other place as the holder hereof may from time to time
designate in writing, the principal sum of SEVEN THOUSAND CANADIAN DOLLARS
(CDN$7,000). The principal sum bears no interest until January 15, 2001. On or
after January 15, 2001 the principal sum shall bear interest at a rate of 10%
per annum, calculated and compounded monthly. Interest shall be calculated based
on a year of 360 days. The Maker hereby agrees to attempt to sell a sufficient
number of shares of the common stock of Navtech, Inc. held by the Maker in order
to satisfy (a) amounts owing by the Maker to its creditors (with the exception
of any amounts owing to Navtech, Inc. and Navtech Systems Support, Inc.) and (b)
this note. This note will be payable in full upon the completion of the sale of
the last of the shares deemed by the Maker to be sufficient to satisfy the
aforementioned creditors claims and this note.
This Note may not be waived, changed, modified or discharged orally,
but only by an agreement in writing, signed by the party against whom
enforcement of any waiver, change, modification or discharge is sought.
Should this Note be placed in the hands of any attorneys for collection
upon the occurrence of an Event of Default, the Maker agrees to pay, in addition
to all other amounts due and payable hereunder, all costs and expenses of
collection, including reasonable attorneys' fees.
Except as provided for above, the Maker expressly waives presentment,
demand, protest, notice of dishonor, notice of maturity, notice of protest, and
diligence in collection.
Any notice, demand or request relating to any matter set forth herein
shall be in writing and shall be deemed effective when hand delivered, or four
(4) days following the date mailed by overnight mail or nationally recognized
overnight courier to the Maker or the Payee at its address stated herein
(provided confirmation of receipt is obtained) or at such other address of which
it or he shall have notified the party giving such notice in writing as
aforesaid.
This Note may be prepaid in whole or in part without premium or penalty
and without notice.
For the purposes of the Interest Act (Canada) a rate of interest
calculated on a 360 day year expressed as an annual rate is equivalent to the
rate so calculated multiplied by the actual number of days in the relevant
calendar year and divided by 360. The Maker acknowledges that interest on this
Promissory Note is calculated on the basis of a year of 360 days and that this
results in more interest owing than if calculated on the basis of a year of 365
or 366 days.
This Note shall be governed by, and interpreted and construed in
accordance with, the laws of the Province of Ontario, excluding choice of law
principles thereof.
IN WITNESS WHEREOF, the Maker has duly executed this Promissory Note as
of the day and year first above written.
NAVTECH APPLIED RESEARCH INC.
/s/ Dorothy English
Per:
Dorothy English
Sole Director & Treasurer
ADDRESS:
#902 140 Lincoln Road
Waterloo, Ontario N2J 4N4
<PAGE>
EXHIBIT 10(N)
ASSET PURCHASE AGREEMENT
BETWEEN:
Navtech Applied Research Inc., a corporation
having its registered office
in the City of Waterloo,
in the Province of Ontario, Canada
(Hereinafter referred to as "NARI")
AND:
Navtech, Inc., a corporation
having its principal office
in the City of Monterey,
in the State of California, USA
(Hereinafter referred to as "Navtech")
WHEREAS NARI owns certain Weather and NOTAM System Software (as
described in Exhibit A) (hereinafter known as the "Software") and certain assets
last acquired from Global Weather Dynamics, Inc. (collectively with the Software
known as the "Weather Assets"), which currently are being used by Navtech under
a Licensing Agreement between NARI and Navtech (the "Licensing Agreement");
AND WHEREAS NARI is indebted to Navtech and its subsidiary, Navtech
Systems Support Inc., a corporation having its registered office in the City of
Waterloo, in the Province of Ontario, Canada ("NSSI") with respect to both the
purchase of the Weather Assets and other corporate advances;
AND WHEREAS NARI wishes to sell, and Navtech wishes to purchase, the
Weather Assets;
AND WHEREAS NARI wishes to offset the purchase price against its
indebtedness to Navtech and NSSI;
NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the
mutual covenants and agreements hereinafter set forth, the parties hereby agree
as follows:
<PAGE>
Article I. Interpretation
Section 1.01 Recital Correct. The parties hereto confirm the validity and truth
of the above-noted recitals, which have the same force and effect as if repeated
herein at length.
Section 1.02 Definitions. In the Agreement and the recitals unless the context
otherwise requires:
a) Compuflight and Navtech both refer to Navtech, Inc., formerly known as
Compuflight, Inc.
b) Promissory Note #2 refers to that certain Promissory Note between NARI and
NSSI in the amount of $150,000 dated July 15, 1998. The principal and
accrued interest balance as of September 30, 2000 is $133,893.15;
c) Promissory Note #3 refers to that certain Promissory Note between NARI and
Compuflight, Inc. in the amount of $114,825.29 dated July 2, 1999. The
principal and accrued interest balance as of September 30, 2000 is
$130,208.15;
d) Unsecured Advances refers to additional advances that have been made by
both Navtech and NSSI to NARI and which aggregate approximately $531,646.69
as at September 30, 2000.
e) Software refers to the Weather and NOTAM System Software as described in
Exhibit A;
f) Software Licensing Agreement refers to that certain Software Licensing
Agreement between NARI and Navtech dated August 1, 1998 and currently
expiring July 31, 2001;
g) Weather Assets include the Software and certain fixed assets last obtained
from Global Weather Dynamics, Inc.;
h) Closing means the completion of the sale to and purchase by Navtech of the
Weather Assets pursuant to this Agreement; and,
i) Closing Date shall be October 23, 2000.
Section 1.03 Entire Agreement. This Agreement represents the entire
understanding of the parties and no modifications thereof, nor additions
thereto, will be binding unless in writing, having direct reference to this
Agreement and executed by all parties.
Section 1.04 Extended Meanings. In this Agreement, words importing the singular
include the plural and vice versa and words importing gender include all
genders. The word "person" includes an individual, partnership, association,
body corporate, trustee, executor, administrator or legal representative.
Section 1.05 Governing Law. This Agreement shall in all respects be interpreted
and construed in accordance with, and governed by, the laws in force in the
Province of Ontario without regard to the rules on conflicts of laws, and the
Agreement shall be treated as an Ontario contract. The parties exclude the
application of the 1980 United Nations Convention on Contracts for the
International Sale of Goods if otherwise applicable.
Article II. Purchase and Sale
Section 2.01 Agreement to Purchase. On the Closing Date and subject to the terms
and conditions of this Agreement, NARI shall sell to Navtech and Navtech shall
purchase from NARI, the Weather Assets, free and clear of all security
interests, claims and other encumbrances.
Section 2.02 Purchase Price and Allocation. Subject to the adjustments provided
for herein, NARI and Navtech agree that the Purchase Price for the Weather
Assets is as set out in Section 2.03.
Section 2.03 Purchase Price. The Purchase Price of the Weather Assets shall be
$147,651.00, such amount being reflective, in the opinion of both parties, of
the fair market value of the Weather Assets as at the Closing Date.
Section 2.04 Payment of Purchase Price. The Purchase Price shall be paid by the
cancellation of all amounts due under Promissory Note #2 and Promissory Note #3,
and any remaining balance shall be applied against the Unsecured Advances.
Section 2.05 Transfer of Indebtedness. In order to properly complete this
transaction it will be necessary for NSSI to transfer certain advances
receivable into Navtech's name through the use of intercorporate accounts. NARI
hereby agrees to allow such transfers to take place and to undertake all
necessary actions to assist in effecting these transfers.
Section 2.06 The transaction of purchase and sale arising from this Agreement
shall be completed on the Closing Date, at the offices of NARI, at which time
title to the Weather Assets shall be delivered to Navtech.
Section 2.07 Assumption of Liabilities and Indemnity. Navtech shall not assume
and shall not be responsible for any of the liabilities, debts or obligations of
NARI, whether or not relating to the Weather Assets, and NARI shall indemnify
and save Navtech harmless from all such liabilities and any and all costs and
expenses relating thereto (including attorney's fees). Without limiting the
generality of the foregoing, Navtech shall not be responsible for any liability
of NARI as a result of the sale of the Weather Assets to Navtech and NARI shall
indemnify and save Navtech harmless from all such liabilities and any and all
costs and expenses relating thereto (including attorney's fees), except as
otherwise provided in this Agreement.
Article III. Conditions
Section 3.01 NARI shall, at or before Closing, at its expense, discharge all
encumbrances registered against the title to the Weather Assets. In the event
NARI is unable to convey clear title without encumbrances to all of the Weather
Assets on or before the Closing Date, Navtech shall be entitled to terminate
this Agreement effective immediately.
<PAGE>
Article IV. Closing Arrangements
Section 4.01 Place and Time of Closing. The Closing shall take place at 10:00
a.m. local time on the Closing Date at the offices of NARI, or at such other
time and place as the parties may agree upon.
Section 4.02 Closing Procedures. At or before the Closing on the Closing Date,
NARI and Navtech shall take or cause to be taken all actions, steps and
corporate proceedings necessary or desirable to validly and effectively approve
or authorize the completion of the transactions herein provided for, and, upon
fulfillment of all the conditions set out in Article V hereof which have not
been waived in writing as therein provided, NARI shall deliver to Navtech:
a) Bills of Sale in registerable form whereby title to the Weather Assets is
conveyed to Navtech free from encumbrances.
b) An assignment of that certain Software License Agreement between Global
Weather Dynamics, Inc. and NARI dated July 15, 1998. There are no
obligations for either Global Weather Dynamics, Inc. nor NARI under this
Agreement.
c) An assignment of any warranties, guarantees and indemnities relating to the
Weather Assets as may be in existence at the Closing Date.
d) An assignment of such service and maintenance agreements relating to the
Weather Assets as may be in existence at the Closing Date.
e) Such corporate documentation, including, without limitation, certified
copies of resolutions of NARI approving the transaction, as Navtech may
reasonably require.
f) An opinion of NARI's attorney in form and substance satisfactory to Navtech
confirming the corporate status of NARI and confirming that the within
transaction is not in breach of any provision of the Articles, By-laws, any
unanimous shareholders' agreement, any agreements, judgments or orders.
g) Non-competition agreements executed by NARI, and its shareholder,
covenanting that they, either individually or acting in common, shall not,
for a period of two (2) years from the Closing Date worldwide, either alone
or in conjunction with any other individual, firm, corporation, association
or other entity:
i) carry on, be engaged in, concerned with or interested in, directly or
indirectly, in any capacity whatsoever a business which is the same
as, similar to or in competition with the business of Navtech (the
"Business"), except that NARI's shareholder is an employee of Navtech
Systems Support Inc.; or
ii) solicit, or enter into employment or sales representation agreements
with any present employee or salesman, or solicit or in any manner
transact business with any present customer or supplier of Navtech or
any affiliate in any manner whatsoever which is or is likely to be
prejudicial to the Business;
h) and Such further documentation as Navtech may reasonably require.
Section 4.03 California Sales Tax. Since NARI has not been in a business which
required a seller's permit in the State of California, the Weather Assets will
be sold to Navtech without the application of any California Sales Tax. Should
such tax be assessed and NARI be required to pay such tax, after having
exhausted any appeals to the assessment, Navtech will be responsible for the
payment of such tax to NARI upon presentation of an invoice from NARI.
Section 4.04 Canadian GST. Since NARI is not making a supply in Canada, this
transaction will be exempt from any Canadian Goods and Services Tax. In the
event GST is exigible then Navtech shall be solely responsible for payment of
same and shall agree to indemnify NARI in this regard.
Section 4.05 Software Licensing Agreement. At the Closing, the Software
Licensing Agreement shall be terminated and neither party shall have any further
rights or obligations thereunder.
Article V. Conditions Precedent
Section 5.01 Conditions for the Benefit of Navtech. Navtech shall not be
obligated to complete the purchase herein provided for unless, on the Closing
Date, each of the following conditions shall have been satisfied, it being
understood that the conditions are included for the exclusive benefit of Navtech
and may be waived in writing in whole or in part by Navtech at any time; and
NARI shall use its best efforts to ensure that the conditions are fulfilled on
or before the Closing Date.
a) All corporate and legal proceedings and approvals as are considered
necessary by the attorney for Navtech shall have been taken or obtained to
permit NARI to sell the Weather Assets to Navtech pursuant to this
Agreement.
b) Representations and Warranties - The representations and warranties set
forth in Section 6.01 shall be true and correct in all material respects on
the Closing Date.
c) Compliance - All of the terms, covenants and agreements set forth in this
Agreement to be complied with or performed by NARI at or before the Closing
Date shall have been complied with or performed by NARI on or before the
Closing Date.
d) Consents to Assignment - All consents or approvals from or notifications to
any third party required under the terms of any contracts or agreements
with respect to the assignment thereof to Navtech including, without
limitation, the Agreement in respect of the Weather Assets, will have been
obtained and delivered to Navtech. NARI will pay the cost of soliciting
such consents. Navtech will co-operate in obtaining such consents.
e) Certificate of Status - NARI shall have delivered to Navtech a certificate
of good standing dated as close in time as possible to the Closing Date,
showing NARI to be in good standing under its incorporating statute.
If any of the foregoing conditions shall not have been fulfilled on or
before the Closing Date, Navtech may terminate this Agreement by notice in
writing to NARI in which event Navtech shall be released from all obligations
under this Agreement and (unless Navtech can show that the condition relied upon
could reasonably have been performed by NARI) NARI shall also be released from
all obligations hereunder; but Navtech shall be entitled to waive compliance
with any such condition in whole or in part if it shall see fit to do so,
without prejudice to its rights of termination in the event of non-fulfillment
of any other condition in whole or in part.
Section 5.02 Conditions for the Benefit of NARI. NARI shall not be obligated to
consummate the transactions herein provided for unless, on the Closing Date,
each of the following conditions shall have been satisfied, it being understood
that the conditions are included for the exclusive benefit of NARI and may be
waived in writing in whole or in part by NARI at any time; and Navtech shall use
its best efforts to ensure that the conditions are fulfilled on or before the
Closing Date.
a) All corporate and legal proceedings and approvals as are considered
necessary by the counsel for NARI shall have been taken or obtained to
permit Navtech to purchase the Weather Assets from NARI pursuant to this
Agreement.
b) Navtech shall supply NARI with an Acceptance Certificate evidencing the
electronic transfer of the software source code upon Closing.
c) Representations and Warranties - The representations and warranties set
forth in Section 6.02 hereof shall be true and correct in all material
respects on the Closing Date.
d) Compliance with Agreement - All of the terms, covenants and agreements set
forth in the Agreement to be complied with or performed by Navtech at or
before the Closing Date shall have been complied with or performed by
Navtech on or before the Closing Date.
In case any of the foregoing conditions shall not have been fulfilled on or
before the Closing Date, NARI may terminate this Agreement by notice in writing
to Navtech, in which event NARI shall be released from all obligations under
this Agreement, and unless NARI can show that the conditions relied upon could
reasonably have been performed by Navtech, Navtech shall also be released from
all obligations but NARI shall be entitled to waive compliance with any such
condition in whole or in part, if it shall see fit to do so, with prejudice to
its right of termination in the event of non-fulfillment of any other condition
in whole or in part.
Article VI. Representations and Warranties
Section 6.01 Representations and Warranties of NARI. NARI represents and
warrants to Navetch as follows:
a) Good Standing - NARI is now and on the Closing Date will be a corporation:
i) duly incorporated and organized, validly subsisting and in good
standing under the laws of the Province of Ontario, and
ii) duly authorized and licensed to own its properties, and to carry on
business, as and where presently owned and carried on by it.
b) Resident of Canada - NARI is not a non-resident of Canada within the
meaning of the Income Tax Act.
c) Power and Authority - NARI has all necessary corporate power to enter into
this Agreement and to perform its obligations hereunder and the execution
and delivery of this Agreement and the completion of the transactions
contemplated in this Agreement have been duly authorized by all necessary
corporate action on the party of NARI.
d) Enforceability - This Agreement constitutes a valid and binding obligation
of NARI enforceable in accordance with its term subject to bankruptcy laws
and laws of equitable jurisdiction.
e) Absence of Conflicting Agreements - NARI is not a party to, and neither it
nor any Weather Asset is bound or affected by or subject to, any indenture,
mortgage, agreement, instrument evidencing indebtedness or other agreement,
charter or by-law provision, law, regulation, order, decree or judgment
which would be contravened or breached as a result of the execution of this
Agreement or completion of the transactions contemplated by this Agreement.
f) Collective Agreements - NARI is not now nor at the Closing will be a party
to any contract with, or commitment to, any labor union.
g) Contracts - At Closing, NARI, in respect of its business, will not be bound
by any outstanding contract or commitment, including, without limitation,
any license agreement with respect to the Software, except those which
Navtech has elected to assume.
h) Title to Assets - At Closing NARI will have a good and marketable title to
all of the Weather Assets free and clear of any and all claims, liens,
encumbrances and security interests whatsoever.
i) No Breach Caused by the Agreement. - Neither the execution nor delivery of
this Agreement nor the fulfillment or compliance with any of the terms
hereof will conflict with, or result in a breach of the terms, conditions
or provisions of, or constitute a default under, the constating documents
and by-laws of NARI or any material agreement or instrument to which NARI
is subject, or will require any consent or other action by any
administrative or governmental body.
j) Litigation - There are no known causes of action, claim or demand or other
proceedings pending or, to the knowledge of NARI, threatened before any
court or administrative agency which could materially adversely affect the
financial condition or overall operations of NARI or any judgment, order or
decree enforceable against it, other than those already disclosed to
Navtech in writing.
k) Full Disclosure - None of the foregoing representations and warranties
contains any untrue statement of material fact or omits to state any
material fact necessary to make any such representation not misleading to a
prospective purchaser of the Weather Assets seeking full information as to
the Weather Assets and NARI.
l) No Warranty Against Infringement - NARI does not make and expressly
disclaims any representations or warranties against infringement.
Section 6.02 Representations and Warranties of Navtech. Navtech represents and
warrants to NARI on its behalf that:
a) Organization - Navtech is and will, at Closing, be a corporation duly
incorporated and organized and validly subsisting under the laws of the
State of Delaware.
b) Power and Authority - Navtech will have all necessary corporate power to
enter into this Agreement and to perform its obligations hereunder and the
execution and delivery of this Agreement and the completion of the
transactions contemplated in this Agreement will be duly authorized by all
necessary corporate action on the part of Navtech.
c) Enforceability - This Agreement constitutes a valid and binding obligation
of Navtech enforceable in accordance with its terms subject to bankruptcy
laws and laws of equitable jurisdiction.
d) Absence of Conflicting Agreements - The execution and performance by
Navtech of this Agreement and any other agreement to be executed pursuant
to this Agreement will not constitute a breach or contravention of any
agreement, law or order binding on Navtech.
e) No Performance Warranty - It is acknowledged by the parties hereto that
NARI licenced the Software to Navtech on or about August 1, 2000. Navtech
is technically familiar with the said Software and any derivatives and has
continued to develop or aid in the development of the said Software with or
without NARI's knowledge or consent, as permitted under the Software
License Agreement. Further, Navtech is in possession of all of the source
code and development tools required to develop and maintain the said
Software. Accordingly, the said Software is sold to Navtech on an "as is"
and "with all faults" basis.
f) Indemnity of NARI During License Period - Navtech expressly agrees to
defend, indemnify and hold NARI free and harmless from any and all claims,
damages, costs and awards of any kind whatsoever sustained as a consequence
of the performance of the said Software or its derivatives while maintained
by Navtech in the provision of services to Navtech's weather customer base
during the license period. In the event NARI receives notice of any claim
with regard to the Software, it shall forward such notice promptly to
Navtech for the defence thereof.
Section 6.03 Non-Waiver. No investigation made by or on behalf of NARI or
Navtech at any time shall have the effect of waiving or diminishing the scope of
or otherwise affecting any representation or warranty made by the other in or
pursuant to this Agreement.
Section 6.04 Nature and Survival of Representations and Warranties. All
statements contained in any certificate or other instrument delivered by or on
behalf of any of the parties in connection with the transactions contemplated by
this Agreement shall be deemed to be made by such party. All representations,
warranties, covenants and agreements contained in this Agreement on the part of
each of the parties shall survive for a period of two (2) years from the Closing
Date after which time, if no claim shall have been made against any party with
respect to any incorrectness in or breach of any representation or warranty,
such party shall have no further liability under this Agreement with respect to
such representation or warranty.
Article VII. Covenants
Section 7.01 Actions to Satisfy Closing Conditions. Each party shall take all
such actions as are within its power to control, and shall use its best efforts
to cause other actions to be taken which are not within its power to control, so
as to ensure compliance with any conditions set forth in this Agreement which
are for the benefit of the other party.
Article VIII. Indemnification
Section 8.01 Mutual Indemnification. NARI covenants and agrees to indemnify and
save harmless Navtech, and Navtech covenants and agrees to indemnify and save
harmless NARI, as and from the Closing Date, from and against any claims (which
term includes all demands, actions, causes of action, damages, losses, costs,
liabilities and expenses, including attorney's fees) which the other party may
suffer as a result of the failure to perform any covenant or agreement on its
part under this Agreement or any incorrectness in or breach of any of its
representations and warranties contained in this Agreement or in any certificate
or other document furnished pursuant to this Agreement. The foregoing obligation
of indemnification shall be subject to the limitation mentioned in Section 6.04
respecting the survival of representations and warranties.
Article IX. Arbitration
Section 9.01 In the event that any disagreement arises between the parties
hereto with reference to this Agreement or any matter arising hereunder and upon
which the parties cannot agree, then every such disagreement shall be referred
to arbitration in accordance with the provisions of the following Subsection
9.01(a):
a) The reference to arbitration shall be to three (3) arbitrators, one of whom
shall be chosen by each party to the disagreement and the third by the two
so chosen and the third arbitrator so chosen shall be the chairperson;
provided, however, that if the parties are able to agree upon a single
arbitrator, the reference to arbitration shall be to that single
arbitrator.
b) The award may be made by the majority of the arbitrators.
c) The time allowed for the making of an award shall be limited to thirty (30)
clear days, and if the arbitrators have allowed this time to expire without
making an award or if the chairperson shall have delivered to the parties
to the arbitration a notice in writing stating that the arbitrators cannot
agree, any party to the arbitration may apply to a Court having appropriate
jurisdiction or to a judge thereof to appoint an umpire who shall have the
like power to act in the reference and to make an award as if he or she had
been duly appointed by all parties to the submission and by the consent of
all the parties who originally appointed the arbitrators thereto.
d) If an umpire is appointed pursuant to the foregoing Section 9.01(c), such
umpire shall make his or her award within one month after the original time
appointed for making the award of the arbitrators has expired or on or
before any later date to which the parties to the reference by a writing
signed by them may from time to time enlarge the time for making the award,
or if the parties have not agreed, then within such time as the Court or
judge appointing such arbitrator may deem proper.
e) No evidence of anything said or of any admission or communication made in
the course of the arbitration or any negotiation or mediation is admissible
in any legal proceeding, except with the consent of all of the parties
hereto.
f) Unless the arbitrator or arbitrators or umpire, as the case may be,
specifically order otherwise, the costs of the arbitration shall be shared
equally between the parties to the arbitration.
Section 9.02 There shall be no appeal from the award of the arbitrators or
arbitrator, or umpire, as the case may be.
Article X. General
Section 10.01 Expenses. All costs and expenses (including the fees and
disbursements of accountants and legal counsel) incurred in connection with this
Agreement and completion of the transactions contemplated by this Agreement
shall be paid by the party incurring such expenses.
Section 10.02 Time. Time shall be of the essence in all respects of this
Agreement.
<PAGE>
Section 10.03 Notices. Any notice or demand to be given to any party to this
Agreement shall be in writing and shall be either personally delivered; or sent
by telex, telecopier or similar method of recorded communication, charges
prepaid. Any notice shall be sent to the intended recipient at its address as
follows:
Navtech, Inc.
2340 Garden Road, Suite 102
Monterey, CA 93940
Attn: David Strucke, CFO
Fax: (519) 747-1003
Navtech Applied Research Inc.
902-140 Lincoln Road
Waterloo, Ontario
N2J 4N4
Attn: Dorothy English
Fax: (519) 747-1003
Any party may from time to time change its address by written notice to each
other party given in accordance with the provision of this Section 10.
Any notice given by personal delivery shall be deemed to have been
received on the date of the delivery. Any notice sent by telex, telecopier or
similar method of recorded communication shall be deemed to have been received
on the next Business Day following the date of its transmission.
Section 10.04 Benefit of Agreement. This Agreement shall enure to the benefit of
and be binding upon each party and their respective administrators, successors
and assigns.
Section 10.05 Further Assurances. The parties shall with reasonable diligence do
all things and provide all reasonable assurances as may be required to complete
the transactions contemplated by this Agreement, and each party shall provide
such further documents or instruments required by any other party as may be
reasonably necessary or desirable to give effect to this Agreement and carry out
its provisions, whether before or after Closing.
Section 10.06 Construction Clause. This Agreement has been negotiated and
approved by counsel on behalf of all parties hereto and notwithstanding any rule
or maxim of construction to the contrary, any ambiguity or uncertainty will not
be construed against any party hereto by reason of the authorship of any of the
provisions hereof.
Section 10.07 U.S. Currency. All references to dollar amounts are to the lawful
currency of the United States of America.
Sectin 10.08 Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original, both of which shall constitute one and the
same instrument. For all purposes of this Agreement, telecopied documents shall
be deemed to be originals.
Section 10.09 Independent Legal Advice. The parties hereto acknowledge that
they:
a) have each had, or had the opportunity to obtain, independent legal advice;
b) each understand their rights and obligations under this Agreement; and
c) are each signing this Agreement voluntarily.
Section 10.10 Offer. This Agreement until executed by both parties shall
constitute an offer by the initial signatory, which shall be accepted by the
other party by 5:00 p.m. on the 23rd day of October, 2000, and if not accepted
by that time, this offer shall be null and void.
IN WITNESS WHEREOF the parties hereto have set their hands and seals.
SIGNED, SEALED AND DELIVERED ) Navtech Applied Research Inc.
in the presence of: )
) /s/ Dorothy English
) Dorothy English, Secretary
)
)
) Navtech, Inc.
)
) /s/ David Strucke
) David Strucke
) Chief Financial Officer
<PAGE>
BILL OF SALE
For good and valuable consideration (receipt of which is acknowledged), Navtech
Applied Research Inc. ("NARI") hereby sells and transfers possession of the
following assets to Navtech, Inc. ("Navtech") for a total consideration equal to
One Hundred Forty Seven Thousand Six Hundred and Fifty One Dollars ($147,651)
(US)., such amount to be reflected in a reduction in the amounts owed by NARI to
Navtech.
NARI warrants that it owns and has the right to sell the assets to the Purchaser
and that the goods are free and clear of encumbrances.
NARI and Navtech agree that the total consideration shall be allocated among the
various assets as follows:
SOFTWARE $ 147,651.00
FURNITURE, FIXTURES and OTHER Nominal
Dated this 23rd day of October, 2000.
Navtech Applied Research Inc. Navtech, Inc.
Per: /s/Dorothy English Per: /s/ David Strucke
------------------------------- -----------------
Dorothy English David Strucke
<PAGE>
EXHIBIT 10(O)
SHARE TRANSFER AGREEMENT
BETWEEN:
Navtech Applied Research Inc., a corporation
having its registered office
in the City of Waterloo,
in the Province of Ontario, Canada
(Hereinafter referred to as "NARI")
AND:
Navtech, Inc., a corporation
having its principal office
in the City of Monterey,
in the State of California, USA
(Hereinafter referred to as "Navtech")
DATED: October 23rd, 2000
WHEREAS, NARI wishes to further reduce the amount of its indebtedness to
Navtech;
WHEREAS, NARI is the owner of 502,766 shares of Common Stock, par value $.001
per share, of Navtech (the "Common Shares");
WHEREAS, NARI wishes to transfer the Common Shares to Navtech to further reduce
the amounts of its indebtedness to Navtech;
NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the mutual
covenants and agreements hereinafter set forth, the parties hereby agree as
follows:
1. Navtech accept the transfer of the Common Shares from NARI;
2. that, upon the transfer of the Common Shares from NARI to Navtech, the
amount of indebtedness of NARI to Navtech be further reduced by the
fair market value of the Common Shares as of October 23, 2000 based
upon the last sale price as of such date.
3. that, after reconciliation of all accounts as of October 31, 2000,
giving effect to any further interest and royalty adjustments, the
remaining balance of all debt owing from NARI to Navtech, or its
subsidiary, Navtech Systems Support Inc., be reduced to an amount equal
to $63,400 Canadian, such amount to be paid no later than January 15,
2001.
IN WITNESS WHEREOF the parties hereto have set their hands and seals.
SIGNED, SEALED AND DELIVERED ) Navtech Applied Research Inc.
in the presence of: )
) /s/ Dorothy English
) Dorothy English, Secretary
)
)
) Navtech, Inc.
)
) /s/ David Strucke
) David Strucke
) Chief Financial Officer
<PAGE>
EXHIBIT 10(P)
COMMERCIAL LEASE AND DEPOSIT RECEIPT
AGENCY RELATIONSHIP COMFIRMATION. The following agency relationship is hereby
confirmed for this transaction and supersedes any prior agency election:
LISTING AGENT: Mahoney-Tancredi Company is the agent of (check One):
|_| the Lessor exclusively; or |X| both the Lessee and the Lessor.
LEASING AGENT:
----------------------------------------
(if not the same as the Listing Agent) is the agent of (check one):
The Lessee exclusively; or |_| the Lessor exclusively; or |X| both the lessee
and the Lessor. NOTE: This conformation DOES NOT take the place of the AGENCY
DISCLOSURE form, which may be required by law.
RECEIVED FROM Navtech, Inc., hereinafter referred to as LESSEE, the sum of $
9,973.00 (Nine thousand Nine Hundred Seventy Three and 00/100ths dollars),
evidenced by company check, as deposit which will belong to Lessor and will be
applied as follows:
<TABLE>
<S> <C> <C> <C>
TOTAL RECEIVED BALANCE DUE PRIOR
TO OCCUPANCY
Rent for the period from 3/20/00 to 04/19/00.......................$4,865.00 $4,865.00 $ 0.00
Security deposit (not applicable toward last month's rent).........$5,108.00 $5,108.00 $ 0.00
Other...........................................................$ 0.00 $ 0.00 $ 0.00
-----------------------------------------------
TOTAL..............................................................$9,973.00 $9,973.00 $ 0.00
</TABLE>
In the event this Lease is not accepted by the Lessor within N/A days, the total
deposit received will be refunded. Lessee offers to lese from Lessor the
premises situated in the City of Monterey, County of Monterey , State of
California , described as 1st floor office space and use of the building common
areas at 2340 Garden Road , consisting of approximately 4,865 +/- square feet,
upon the following terms and conditions:
1. TERM. The term will commence on (date) March 20, 2000, and end on (date)
December 31, 2001.
2. RENT. The total rent will be $ _______________, payable at $4,865.00 per
month (based on first year's rates) payable on the 1st day of each month.
All rents will be paid to Lessor or his or her authorized agent, at the
following address OPI-Office Products, Inc., 2340 Garden Road, Monterey, CA
93940, or such other places as may be designated by Lessor from time to
time. In the event rent is not paid within 10 days after due date, Lessee
agrees to pay a late charge of $100.00 plus interest at 12% per annum on
the delinquent amount. Lessee further agrees to pay a late charge of
$100.00 for each dishonored bank check. The late charge period I not a
grace period, and Lessor is entitled to make written demand for any rent if
not paid when due.
3. USE. The premises are to be used for the operation of offices for Navtech,
Inc. which may include 24/7 computer operation/monitoring and for no other
purpose, without prior written consent of Lessor, Lessee will not commit
any waste upon the premises, or any nuisance or act which may disturb the
quiet enjoyment of any tenant in the building.
4. USES PROHIBITED. Lessee will not use any portion of the premises for
purposes other than those specified. No use will be made of permitted to be
made upon the premises, not acts done, which will increase the existing
rate of insurance upon the property, or cause cancellation of insurance
policies covering the property. Lessee will not conduct or permit any sale
by auction on the premises.
5. ASSIGNMENT AND SUBLETTING. Lessee will not assign this Lease or sublet any
portion of the premises without prior written consent of the Lessor, which
will not be unreasonably withheld. Any such assignment or subletting
without consent will be void and, a the option of the Lessor, will
terminate this lease. Lessee may, however, assign this lease to a parent or
subsidiary corporation upon notice to Lessor.
6. ORDINANCES AND STATUTES. Lessee will comply with all statutes, ;ordinances,
and requirement of all municipal, state and federal authorities now in
force, or which may later be in force, regarding the use of the premises.
The commencement or pendency of any state or federal court abatement
proceeding affecting the use of the premises will, at the option of the
Lessor, be deemed a breach of this Lease.
7. MAINTENANCE, REPAIRS ALTERATIONS. Unless otherwise indicated, Lessee
acknowledges that the premises are in good order and repair. Lessee will,
at his or her own expense, maintain the premises in a good and safe
condition. The premises will be surrendered, at termination of the Lease,
in as good condition as received, normal wear an tear excepted. See
Addendum. Lessee |_| will, |X| will not maintain the property adjacent to
the premises, such as sidewalks, driveways, lawns and shrubbery, which
would otherwise be maintained by Lessor.
No improvement or alteration of the premises will be made without
written consent of the Lessor. Prior to the commencement of any substantial
repair, improvement, or alteration, Lessee will give Lessor at least tow
(2) days written notice in order that Lessor may post appropriate notices
to avoid any liability for liens.
Lessee ( Derek Dawson ) ( Luke Fry ) has read this pag
<PAGE>
Property Address 2340 Garden Road, Monterey, CA.
8. ENTRY AND INSPECTION. Lessee Will permit Lessor or Lessor's agents to enter
the premises at reasonable time and upon reasonable notice for the purpose
of inspection the premises, and will permit Lessor, at any time within
sixty (60) days prior to the expiration of this lease, to place upon the
premises any unusual "For Lease" signs, and permit person desiring to lease
the premises to inspect the premises at reasonable times.
9. INDEMNIFICATION OF LESSOR. Lessor will no be liable for any damage or
injury to lessee, or any other person, or to any property occurring on the
premises. Lessee agrees to hold Lessor harmless from any claims for damages
arising out of Lessee's use of the premises, and to indemnify Lessor for
any expense incurred by Lessor in defending any such claims.
10. POSSESION. If Lessor is unable to deliver possession of the premises at the
commencement date set forth above, Lessor will no be liable for any damage
cause by the delay, nor will this Lease be void or voidable, but Lessee
will not be liable for any rent until possession is delivered. Lessee may
terminate this Lease If possession is not delivered within 30 days of the
commencement term in Item 1.
11. LESSEE'S INSURANCE. Lessee, at his or her expense, will maintain public
liability, and property damage insurance insuring Lessee and Lessor with
minimum coverage as follows: $1,000,000.00 combined single limits. Lessee
will provide Lessor with a Certificate of Insurance showing Lessor as
Additional insured. The policy will require ten (10) days written notice to
Lessor prior to cancellation or material change of coverage.
12. LESSOR'S INSURANCE. Lessor will maintain hazard insurance covering one
hundred percent (100%) actual cash value of the improvements throughout the
Lease term. Lessor's insurance will not insure Lessee's property, leasehold
improvements, or trade fixtures.
13. SURROGATION. To the maximum extent permitted by insurance policies which
may be owned by the parties, Lessor and Lessee waive other services
delivered to the premises, except: See Addendum.
14. UTILITIES. Lessee agrees that he or she will be responsible for the payment
of all utilities, including water, gas, electricity, heat and other
services delivered to the premises, except: See Addendum.
15. SIGNS. Lessee will not place, maintain, nor permit any sign or awning on
any exterior door, wall, or window of the premises without the express
written consent of Lessor, which will not be unreasonably withheld, and of
appropriate governmental authorities.
16. ABANDONMENT OF PREMISES. Lessee will not vacate or abandon the premises at
any time during the term of this Lease. If Lessee does abandon or vacate
the premises, or is dispossessed by process of law, or otherwise, any
personal property belonging to Lessee left on the premises will be deemed
to be abandoned, at the option of Lessor.
17. CONDEMNATION. If any part of the premises in condemned for public use, and
a part remains which is susceptible of occupation by Lessee, this Lease
will, as to the part taken, terminate as of the date the condemnor acquires
possession. Lessee will be required to pay such proportion of the rent for
the remaining term as the value of the premises remaining bears to the
total value of the premises at the date of condemnation; provided, however,
that either party may, at his or her option, terminate this Lease as of the
date the condemnor acquires possession. In the event that the premises are
condemned in whole, or the remainder is not susceptible for use by the
lessee, this lease will terminate upon the date which the condemnor
acquires possession. All sums which ma be payable on account of any
condemnation will belong solely to the Lessor; except that Lessee will be
entitled to retain any amount awarded to him or her for his or he trade
fixtures and moving expenses.
18. TRADE FIXTURES. Any and all improvements made to the premises during the
term will belong to the Lessor, except trade fixtures of the Lessee. Lessee
may, upon termination, remove all his or her trade fixtures, but will pay
for all costs necessary to repair any damage to the premises occasioned by
the removal.
19. DESTRUCTION OF PREMISES. In the event of a partial destruction of the
premises during the term, from any cause except acts of omission of Lessee,
Lessor will promptly repair the premises, provided that such repairs can be
reasonable made within sixty (60) days. Such partial destruction will not
terminate this Lease, except that Lessee will be entitled to a
proportionate reduction of rent while such repairs are being made, based
upon the extent to which the making of such repairs interferes with the
business of Lessee on the premises. If the repairs cannot be made within
sixty (60) days, this Lease may be terminated at the option of either party
by giving written notice to the other party within the sixty (60) day
period.
20. HAZARDOUS MATERIALS. Lessee will not use, store or dispose of any hazardous
substances upon the premises, except the use and storage of such substances
that are customarily used in Lessee's business, and are in compliance with
all environmental laws. Hazardous substances means any hazardous waste,
substance or toxic materials regulated under any environmental laws or
regulations applicable to the property. Lessee will be responsible for the
cost of removal of any toxic contamination caused by lessee's use of the
premises.
21. INSOLVENCY. The appointment of a receiver, an assignment for the benefits
of creditors, or the filing of a petition in bankruptcy by or against
Lessee, will constitute a breach of this Lease by Lessee.
22. DEFAULT. In the event of any breach of this Lease by Lessee, Lessor may, at
his or her option, terminate the Lease and recover from Lessee (a) the
worth at the time of award of the unpaid rent which had been earned at the
time of termination, (b) the worth at the time of award of the amount by
which the unpaid rent which would have been earned after termination until
the time of the award exceeds the amount of such rental loss that the
Lessee proves could have been reasonably avoided; (c) the worth at the time
of award of the amount by which the unpaid rent for the balance of the term
after the time of award exceeds the amount of such rental loss that the
Lessee proves could be reasonably avoided; and (d) any other amount
necessary to compensate Lessor for all the detriment proximately caused by
the Lessee's failure to perform his or he obligations under the Lease or
which in the ordinary course of things would be likely to result therefrom.
Lessor may, in the alternative, continue this Lease in effect, as long
as Lessor does not terminate Lessee's right to possession, and Lessor may
enforce all of Lessor's rights and remedies under the Lease, including the
right to recover the rent as it becomes due under the Lease. If said breach
of lease continues, Lessor may, at any time thereafter, elect to terminate
the Lease.
These provisions will not limit any other rights or remedies
which Lessor may have.
Lessee ( Derek Dawson ) ( Luke Fry ) has read this page.
<PAGE>
23. SECURITY. The security deposit will secure the performance of the Lessee's
obligations. Lessor may, but will not be obligated to, apply all or
portions of the deposit on account of Lessee's obligations. Any balance
remaining upon termination will be returned to Lessee. Lessee will not have
the right to apply the security deposit in payment of the last month's
rent.
24. DEPOSIT REFUNDS. The balance of all deposits will be refunded within three
(3) weeks (or as otherwise required by law), from date possession is
delivered to Lessor or his or her authorized agent, together with a
statement showing any charges made against the deposits by Lessor.
25. ATTORNEY FEES. In any action or proceeding involving a dispute between
Lessor and Lessee arising out of this Lease, the prevailing party will be
entitled to reasonable attorney fees.
26. WAIVER. No failure of Lessor to enforce any term of this Lease will be
deemed to be a waiver.
27. NOTICES. Any notice which either party may or is required to give, will be
given by mailing the notice, postage prepaid, to Lessee at the premises, or
to Lessor at the address shown in Item 2, or at such other places as may be
designated in writing by the parties from time to time. Notice will be
effective five (5) days after mailing, or on personal delivery, or when
receipt is ad in writing.
28. HOLDING OVER. Any holding over after the expiration of this Lease, with the
consent of Owner, will be a month-to-month tenancy at a monthly rent of
$6,385.00, payable in advance and otherwise subject to the terms of this
Lease, as applicable, until either party will terminate the tenancy by
giving the other party thirty (30) days written notice.
29. TIME. Time is of the essence of this Lease.
30. HEIRS, ASSIGNS, SUCCESSORS. This Lease is binding upon and insures to the
benefit of the heirs, assigns, and successors of the parties.
31. COST OF LIVING INCREASE. The rent provided for in Item 2 will be adjusted
effective upon the first day of the month immediately following the
expiration of 12 months from date of commencement of the term, and upon the
expiration of each 12 months thereafter, in accordance with changes in the
U.S. Consumer Price Index for |X| All Urban Consumer (1982-84=100), or |_|
(other index) _____________________ ("CPI"). The monthly rent will be
increased to an amount equal to the monthly rent set forth in Item 2,
multiplied by a fraction the numerator of which is the CPI for the second
calendar month immediately preceding the adjustment date, and the
denominator of which is the CPI for the second calendar month preceding the
commencement of the Lease term; provided, however, that the monthly rent
will not be less than the amount se forth in Item 2. (nor more than 5% over
the preceding year) .
32. OPTION TO RENEW. Provided that Lessee in not in default in the performance
of this Lease, Lessee will have the option to renew the Lease for an
addition term of 36 months commencing at the expiration of the initial
Lease term. All of the terms and conditions of the Lease will apply during
the renewal term, except that the monthly rent will be the sum of $ See
Addendum which will be adjusted after commencement of the renewal term.
The option will be exercised by written notice given to Lessor not less
than 120 days prior to the expiration of the initial Lease term. If notice
is not given within the time specified, this Option will expire.
33. AMERICANS WITH DISABILITIES ACT. The parties are alerted to the existence
of the Americans With Disabilities Act, which may require costly structural
modifications. The parties are advised to consult with a professional
familiar with the requirement of the Act.
34. LESSOR'S LIABILITY. In the event of a transfer of Lessor's title or
interest to the property during the term of this Lease, Lessee agrees that
the grantee of such title of interest will be substituted as the Lessor
under this Lease, and the original Lessor will be released of al further
liability, provided, that all deposits will be transferred to the grantee.
35. ESTOPPEL CERTIFICATE.
a) On ten (10) days' prior written notice fro Lessor, Lessee will
execute, acknowledge, and deliver to Lessor a statement in writing: [1}
certifying that this Lease, as so modified, is in full force and effect (or, if
modified, stating the nature of such modification and certifying that this
Lease, as so modified, in full force and effect}, the amount of any security
deposit, and the date to which the rent and other charges are paid in advance,
if any; and [2] acknowledging that there are not, to Lessee's knowledge, any
uncured defaults the part of Lessor, or specifying such defaults if any are
claimed, Any such statement may be conclusively relied upon by any prospective
buyer or encumbrancer of the premises.
b) At Lessor's option, Lessee's failure to deliver such statement within
such time will be a material breach of this Lease or will be conclusive upon
Lessee; [1] that the Lease is in full force and effect, without modification
except as may be represented by Lessor, [2] that there are no uncured defaults
in Lessor's performance, and [3] that not more than one month's rent has been
paid in advance.
c) If Lessor desires to finance, refinance, or sell the premises, or
any part thereof, Lessee agrees to deliver to any tender or buyer designated
buyer designated by Lessor such financial statements of Lessee as may be
reasonable required by such lender or buyer. All finance statements will be
received by the Lessor or the lender of buyer in confidence and will be used
only for the purposes set forth.
Lessee ( Derek Dawson ) ( Luke Fry ) has read this page
<PAGE>
36. ENTIRE AGREEMENT.
Exhibit A: .....................FIRST ADDENDUM TO LEASE
Exhibit B:........................FLOOR PLAN
Exhibit C:
37. ADDITIONAL TERMS AND CONDITIONS.
The undersigned Lessee acknowledges that he or she has thoroughly read and
approved each of the provisions contained in this Offer, and agrees to the terms
and conditions specified.
Lessee ___________________ Date ___________
(Signed by: Derek Dawson, Chief Operating Officer/President Dated Feb 11/00)
Receipt for deposit acknowledged by ___________________________________________
Date ______________
ACCEPTANCE
The undersigned Lessor accepts the foregoing Offer and agrees to lease the
premises on the terms and conditions set forth above.
NOTICE: The amount or rate of real estate commissions is not fixed by law. They
are set by each broker individually and may be negotiable between the owner and
broker.
The Lessor agrees to pay to Per Contract, the Broker in this
transaction, the sum of $ _________________ for services rendered and authorizes
Broker to deduct said sum from the deposit received from Lessee.
In the event the Lease is extended for a definite period of time or on
a month-to-month basis after expiration of the original term, Lessor will pay to
Broker an additional commission of ________% of the total rental for the
extended period. This commission will be due and payable at the commencement of
the extended period if for a fixed term, or if on a month-to-month basis, at the
termination of Lessee's occupancy or one year, whichever is earlier.
In any action for commission, the prevailing party will be entitled to
reasonable attorney fees.
OPI- Office Products, Inc.
LESSOR_______________________________DATE _____________
Signed by: Luke Fry, February 16, 2000
Lessee acknowledges receipt of a copy of the accepted Lease on (date) _________
<PAGE>
EXHIBIT "A"
FIRST ADDENDUM TO LEASE BETWEEN NAVTECH, INC., LESSEE, AND OPI-OFFICE PRODUCTS,
INC., LESSOR, FOR THOSE PREMISES KNOWN AS 2340 GARDEN ROAD, MONTEREY,
CALIFORNIA.
1. This is a gross lease and Lessor is responsible for all expenses and
utilities, including HVAC, associated with the premises, with the exception
of any and all telephone/computer communication related charges, the
replacement of light bulbs within the suite, and the interior janitorial
service which shall be paid for by lessee.
2. Prior to lease commencement Lessor, at Lessor's sole cost and expense,
shall do the following tenant improvements:
a. Have the carpet professionally cleaned throughout.
b. Touch up or repaint where necessary throughout the premises.
c. Construct an approximate 10' x 10' office area in the northeast corner
of the suite. This office to have ceiling high partitions and an entry
door with locking hardware (see Exhibit "B" - Equipment Room).
d. Install a wall mounted or portable type air conditioning unit of
sufficient cooling capacity to maintain a constant temperature of 68
degrees fahrenheit in the equipment room.
e. Provide and install divider type partitions, including an entry door
in the area noted as "Training Room" on Exhibit "B". These partitions
to be a minimum of 8' high with sound dampening capability.
f. Throughout the term of the lease and any extension thereto, Lessor
shall allow Lessee to use the cubicles that are presently in existence
along the north wall of the suite at no charge to Lessee. Upon lease
expiration these cubicles will be returned to Lessor.
g. Lessee may be purchasing additional cubicles/work stations for this
office. Lessor has agreed to order same for Lessee to purchase or
lease at Lessor's actual cost, ie., no mark-up providing Lessor is
allowed access to the suite during normal business hours to show
prospective purchaser the work stations.
3. Lessee shall be allowed at their sole cost and expense to install one
satellite receiver/dish of approximately 3' in diameter on the roof of the
building in a location previously agreed upon between Lessor and Lessee.
4. The existing available fifty (50) pair of telephone lines will be
sufficient to accommodate Lessee's immediate occupancy, but Landlord will
have an additional cable run as soon as possible to provide for a minimum
of another 50 fair of telephone lines for Lessee's use. Any costs
associated with the addition of this cable shall be paid by Lessee.
5. Rent during the option to renew period for this 4,865 +/- square feet shall
be negotiated between the parties, but in no event shall the base rent
during the first year of this three year option to renew exceed $1.25 per
square foot, or $6081. per month.
<PAGE>
EXHIBIT 10(R)
Duncan Macdonald, CEO 01 June 1999
Navtech Systems Support Inc.
175 Columbia St. West, Suite 102
Waterloo, ON, Canada, N2L-5Z5
Dear Mr. Macdonald,
As discussed and agreed, AVCON is pleased to implement the following terms
effective 01 June 1999 for payout of arrears and continued lease of the 5-PCs,
HP printer, network cards, and the IBM-RISC computer. The terms are structured
to assist Navtech by moving the arrears out of current debt and by minimizing
Navtech's current cash flow. The restructuring is also necessary for AVCON to
avoid continuing to pay taxes on accrued but unpaid income. The terms agreed and
implemented are as follows:
1. The present Promissory Note dated 30 October 1996 with a Principal
Value of $53,000.00 due 01 June 1999, is herewith cancelled concurrent
with the implementation of a new Promissory Note dated 01 June 1999
with a Principal Value of $90,000.00 due 01 May 2005. The increase of
Principal Value reflects arrears of $7,599.68 from Invoice 99051, and
arrears of $29,375.19 from Invoice 99052, totalling $36,974.87, rounded
to $37,000. Interest payments of $1,350.00 begin 01 July 1999,
increasing to Principal plus Interest payments of $2,400.00 on 01
October 2000, with final payment due 01 May 2005. Any amount of
Principal may be paid at any time without penalty.
2. The present Equipment Schedule 006 for the 5-PCs, HP Printer, and
network cards is herewith cancelled concurrent with the implenentation
of a new Equipment Schedule 008 for a 13 month Lease with an Initial
Lease Value of $12,155.00, reflecting a $25.00 credit. Monthly lease
payments of $1,037.00 begin 01 July 1999 with final payment on 01 July
2000. Any amount of Lease Value may be paid at any time without
penalty.
3. The present Equipment Schedule 005 for the IBM-RISC is herewith
cancelled concurrent with the implementation of a new Equipment
Schedule 007 for a 65 month Lease with an Initial Lease Value of
$48,270.00. Monthly lease payments of $915.00 begin 01 July 1999,
increasing to $1,300.00 on 01 October 2000, and final payment on 01
November 2004. Any amount of Lease Value may be paid at any time
without penalty.
4. The Note and Lease payments outlined above are referenced as monthly
payments. However, the Note and Leases shall be serviced weekly, with a
minimum weekly payment of $830.00 beginning 04 June 1999 and increasing
to $900.00 on 01 September 2000. Such weekly payments are inclusive of
currently applicable GST and PST.
5. The attached payment schedule details the monthly payments and account
balance for the term of the Note and Leases.
Sincerely,
/S/ Eileen Metherell /S/ Duncan Macdonald
Eileen Metherell, President Duncan Macdonald, CEO
AVCON Associates Inc. Navtech Systems Support Inc.
<PAGE>
EXHIBIT 21 - Subsidiaries
Navtech, Inc. has the following subsidiaries:
------------------------------------- --------------------------------------
Company Name Jurisdiction of Incorporation
------------------------------------- --------------------------------------
Navtech Systems Support Inc. Ontario, Canada
------------------------------------- --------------------------------------
Navtech (UK) Limited United Kingdom
------------------------------------- --------------------------------------
