United states
securities and exchange commission
Washington, D.C. 20549
Form 10-QSB
[x] Quarterly Report pursuant to Section 13 or 15 (d) of the Securities Exchange
Act of 1934
For the quarterly period ended April 30, 1998
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or
[ ] Transition report pursuant to Section 13 or 15 (d) of the securities
Exchange Act of 1934
For the transition period from to
Commission File Number 0-15362
Compuflight, Inc.
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(Exact name of small business issuer as specified in its charter)
Delaware 11-2883366
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
125 Mineola Ave., Roslyn Heights, NY 11577
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(Address of principal executive offices) (Zip code)
516-625-0202
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(Registrant's telephone number, including area code)
99 Seaview Boulevard, Port Washington, NY 11050
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(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes No X
Applicable only to issuers involved in bankruptcy
proceedings during the preceding five years
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes No
Applicable only to corporate issuers
The number of shares outstanding of the issuer's common stock as of September
30, 1999 was 2,001,980 shares.
Page 1 of 11
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Compuflight, Inc. and SUBSIDIARIES
Six Months Ended April 30, 1998
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I n d e x
Page
Numbers
Part I. Financial Information
Item 1. Unaudited Financial Statements
Condensed Consolidated Balance Sheet (Unaudited) as of
April 30, 1998.......................................................3
Consolidated Statements of Operations (Unaudited) - For the Six and
Three Months Ended April 30, 1998 and April 30, 1997.................4
Condensed Consolidated Statements of Cash Flows (Unaudited) - For the
Six Months Ended April 30, 1998 and April 30, 1997...................5
Notes to Condensed Consolidated Financial Statements.................6
Item 2. Management's Discussion and Analysis or Plan of Operation............7
Part II. Other Information...................................................10
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Page 2 of 11
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Compuflight, Inc. and SUBSIDIARIES
Condensed Consolidated Balance Sheet
(Unaudited)
April 30,
1998
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ASSETS
CURRENT ASSETS
Accounts receivable, net of allowance for
doubtful accounts of $186,744 $ 120,020
Prepaid expenses and other 16,705
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Total current assets 136,725
INVESTMENT TAX CREDITS RECEIVABLE, NET OF ALLOWANCE 508,367
FIXED ASSETS, NET 334,120
RESTRICTED CASH 50,000
OTHER ASSETS 20,962
$ 1,050,174
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Cash overdraft $ 99,958
Bank revolving demand loans 80,037
Accounts payable and accrued liabilities 1,009,451
Deferred lease inducements - current portion 15,132
Due to related parties - current portion 41,870
Long term debt - current portion 42,783
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Total current liabilities 1,289,231
DUE TO RELATED PARTIES 206,830
LONG TERM DEBT 89,131
DEFERRED LEASE INDUCEMENTS 113,487
MINORITY INTERESTS 249,296
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' DEFICIENCY
Capital stock, par value $.001 per share; authorized 2,500,000
shares; issued and outstanding 1,701,980 shares 1,702
Additional paid-in capital 1,545,745
Notes receivable - Parent Company (319,503)
Cumulative foreign translation adjustment 47,744
Accumulated deficit (2,173,489)
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(897,801)
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$ 1,050,174
==============
See notes to unaudited condensed consolidated financial statements.
Part I, Item 1. Page 3 of 11
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Compuflight, Inc. and SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
Six Months Ended Three Months Ended
April 30, April 30,
1998 1997 1998 1997
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Revenue
Service fees $ 1,534,685 $ 1,317,895 $ 781,107 $ 672,214
Hardware, software and license sales 3,159 40,700 -- 13,700
----------- ----------- ----------- -----------
1,537,844 1,358,595 781,107 685,914
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Costs and Expenses
Operating 1,221,156 1,015,992 604,760 510,236
Research and development, net of
Investment Tax Credits 12,516 39,133 6,254 21,321
Selling, general and administrative 380,590 452,476 205,847 215,351
Restructuring costs -- 42,741 -- 42,741
Office relocation expenses -- 63,463 -- 2,509
Depreciation and amortization 70,418 81,312 34,599 42,032
----------- ----------- ----------- -----------
1,684,680 1,695,117 851,460 834,190
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Operating loss (146,836) (336,522) (70,353) (148,276)
Other income (expense)
Interest income 11,847 29,064 5,925 13,847
Interest expense - related parties (18,741) (24,117) (9,581) (13,419)
Interest expense - other (54,949) (26,644) (31,514) (21,796)
Realized foreign exchange (loss) gain (1,087) (2,804) (5,381) (288)
----------- ----------- ----------- -----------
NET LOSS $ (209,766) $ (361,023) $ (110,904) $ (169,932)
=========== =========== =========== ===========
Net loss per share $ (0.12) $ (0.21) $ (0.07) $ (0.10)
=========== =========== =========== ===========
Weighted Average Number of Common
Shares Outstanding 1,701,980 1,701,980 1,701,980 1,701,980
=========== =========== =========== ===========
See notes to unaudited condensed consolidated financial statements.
Part I, Item 1. Page 4 of 11
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Compuflight, Inc. and SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Six Months Ended April 30, 1998 1997
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Cash flows from operating activities
Net loss $ (209,766) $ (361,023)
Adjustments to reconcile net earnings to net cash provided
by operating activities
Depreciation and amortization 70,418 81,312
Provision for uncollectable accounts 9,196 -
Consulting fees, net - 36,851
Decrease (increase) in operating assets - net 92,965 191,741
Increase in operating liabilities - net 86,782 224,814
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Net cash provided by operating activities 49,595 173,695
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Cash flows from investing activities
Purchase of fixed assets (5,874) (286,585)
Advances to Parent Company (46,903) 15,790
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Net cash used in investing activities (52,777) (270,795)
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Cash flows from financing activities
Cash overdraft 17,962 39,921
Proceeds from bank revolving loans - 83,249
Restricted cash - (50,000)
Payment of long term debt (21,561) -
Advances from (payments to) related parties 6,289 (22,639)
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Net cash provided by financing activities 2,690 50,531
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Effect of foreign translations on cash 492 9,217
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NET DECREASE IN CASH AND EQUIVALENTS - (37,352)
Cash and equivalents at beginning of year - 37,352
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Cash and equivalents at end of period $ - $ -
============ ============
See notes to unaudited condensed consolidated financial statements.
Part I, Item 1. Page 5 of 11
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Compuflight, Inc. and SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
Six Months Ended April 30, 1998
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NOTE A. DESCRIPTION OF BUSINESS AND ORGANIZATION
Compuflight, Inc. (the "Company"), directly or indirectly through its
wholly-owned Canadian subsidiaries, Navtech Systems Support Inc. ("Support"),
and Efficient Aviation Systems Inc. ("EAS"), is engaged in the business of
developing, marketing, licensing and supporting computerized flight planning and
aircraft performance engineering services for the aviation industry.
NOTE B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The condensed consolidated balance sheet as of April 30, 1998, and the
consolidated statements of operations for the three and six months ended April
30, 1998 and 1997, and the condensed consolidated statements of cash flows for
the six months ended April 30, 1998 and 1997 have been prepared by the Company
without audit. In the opinion of management, all adjustments (which include only
normal recurring accrual adjustments) necessary to present fairly the financial
position, results of operations and cash flows for all periods presented have
been made.
The condensed consolidated financial statements include the accounts of
Compuflight, Inc. ("Compuflight") and its wholly-owned Canadian subsidiaries,
Support and EAS. All material intercompany balances and transactions have been
eliminated. In accordance with Statement of Financial Accounting Standards No.
52, "Foreign Currency Translations," assets and liabilities of foreign
operations are translated at current rates of exchange while results of
operations are translated at average rates in effect for that period. Unrealized
translation gains or losses are shown as a separate component of shareholders'
equity.
For information concerning the Company's significant accounting policies,
reference is made to the Company's Annual Report on Form 10-KSB for the year
ended October 31, 1997. Results of operations for the six months ended April 30,
1998 are not necessarily indicative of the operating results for the full year.
Results of operations
Revenue
Revenue from service fees was approximately $1.5 million in the six months ended
April 30, 1998 compared with approximately $1.3 million for the six months ended
April 30, 1997, an increase of approximately 16%, or approximately $217,000.
This increase is primarily attributable to net increases in fees from existing
customers of approximately $329,000 and the addition of approximately $107,000
from new customers added since the end of the second quarter of 1997. These
increases are offset by the loss of approximately $135,000 related to customers
who did not renew contracts and approximately $84,000 related to customers that
have ceased operations. Furthermore, revenues for the six months ended April 30,
1997 included approximately $52,000 related to the Company's contract with the
United States Postal Service.
Revenue from hardware, software and license sales decreased approximately 92%,
or approximately $38,000, from approximately $41,000 for the six months ended
April 30, 1997 to approximately $3,000 for the six months ended April 30, 1998.
Part I, Item 2. Page 6 of 11
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Compuflight, Inc. and SUBSIDIARIES
Management's Discussion and Analysis or Plan of Operation
Six Months Ended April 30, 1998
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Revenue for the six months ended April 30, 1997 included proceeds from the sale
of a performance engineering system. There were no significant AURORA or COMRAD
license sales in the six months ended April 30, 1998.
Costs and expenses
Operating expenses increased approximately 20%, or approximately $205,000, from
approximately $1.0 million for the six months ended April 30, 1997 to
approximately $1.2 million for the six months ended April 30, 1998. This change
is primarily attributable to an increase in salaries and benefits of
approximately $330,000, which was offset by decreases in communications costs of
approximately $66,000, computer lease and maintenance expenses of approximately
$23,000, subcontracting expenses of approximately $32,000 and a net decrease in
other operating costs of approximately $4,000. A significant portion of the
increase in salaries and benefits relates to the decrease in pure research and
development activities; accordingly, those salaries are also allocated to
operating expenses.
Research and development expenditures decreased approximately 68%, or
approximately $27,000, during the six months ended April 30, 1998 over the same
period in fiscal 1997. The Company's research and development team had completed
the majority of its work on the new AURORA program, and, accordingly, this
resulted in a decline in research and development expenses during the six months
ended April 30, 1998. The Company has claimed scientific research and
experimental development credits of approximately $27,000 in the six months
ended April 30, 1998 compared to approximately $111,000 for the six months ended
April 30, 1997.
Selling, general and administrative expenses decreased approximately 16%, or
approximately $71,000, from approximately $452,000 for the six months ended
April 30, 1997 to approximately $381,000 for the six months ended April 30,
1998. This decrease is primarily attributable to a decrease in professional fees
of approximately $77,000 offset by a net increase in other selling, general and
administrative expenses of approximately $6,000. The reduction in professional
fees, in turn, is attributable to the costs expended in the six months ended
April 30, 1997 to remedy the deficient regulatory filings.
Other income (expense)
The Company recorded a loss of approximately $1,000 on realized foreign exchange
transactions for the six months ended April 30, 1998. Gains and losses in
foreign exchange are attributable to the difference in rates between the
transaction date and the settlement date and cannot readily be compared between
periods.
Net (loss) earnings
The unaudited consolidated financial statements reflect a net loss of
approximately $210,000 for the six months ended April 30, 1998 compared to a net
loss of approximately $361,000 for the six months ended April 30, 1997. The
change is due to the increase in revenues as offset by a smaller decrease in
costs and expenses. In addition, other expenses for the six months ended April
30, 1997 included one time charges for office relocation costs and restructuring
costs.
Part I, Item 2. Page 7 of 11
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Compuflight, Inc. and SUBSIDIARIES
Management's Discussion and Analysis or Plan of Operation
Six Months Ended April 30, 1998
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Liquidity and Capital Resources
The Company had no cash and equivalents as of April 30, 1998 and April 30, 1997.
In addition, at April 30, 1998, the Company had a working capital deficiency of
$1,152,506 as compared to $1,039,201 as of October 31, 1997.
Cash flows from operations accounted for an increase in cash of $49,595,
primarily as a result of a decrease in operating assets and an increase in
operating liabilities; this total is offset by the net loss for the period. Cash
flows from investing activities for the six months ended April 30, 1998
represent a net outflow of $52,777, primarily due to advances made to the
Company's parent. Cash flows from financing activities for the six months ended
April 30, 1998 represent a net inflow of $2,690, which relates to the impact of
additional financing from the Company's Canadian bank less payments on long term
debt.
As of April 30, 1998, the Company had no significant commitments. Reference is
made to the Company's Form 10-KSB for the year ended October 31, 1998 and Form
10-QSB for the period ended July 31, 1999 for a discussion of the Company's
October 1, 1999 acquisition of all of the shares of Skyplan Services (UK)
Limited. The Company may, from time to time, consider additional acquisitions of
complementary businesses, products or technologies.
As of April 30, 1998, the Company's bank indebtedness, after offsetting the
loans with restricted cash held by the bank as security, equaled $129,995.
Part I, Item 2. Page 8 of 11
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Compuflight, Inc. and SUBSIDIARIES
Management's Discussion and Analysis or Plan of Operation
Six Months Ended April 30, 1998
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COMMITMENTS AND CONTINGENCIES
Employment Agreement
Effective August 25, 1999, the Company entered into a retirement agreement with
its current Chairman, Russell K. Thal. This agreement replaces a previous
employment agreement, as amended, and calls for, among other things, the payment
of $600,000 in 96 semimonthly payments commencing shortly after Mr. Thal's
retirement on October 31, 1999. Mr. Thal will continue on as Chairman without
additional compensation (other than standard fees, if any, paid to outside
directors).
Plan of Operation
The Company's Plan of Operation is discussed in its Form 10-KSB for the year
ended October 31, 1998 and Form 10-QSB for the period ended July 31, 1999, which
are being filed concurrently with this Form 10-QSB.
Part I, Item 2. Page 9 of 11
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Compuflight, Inc. and SUBSIDIARIES
Other Information
Six Months Ended April 30, 1998
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Part II. Other Information
Item 1. Legal Proceedings:
None
Item 2. Changes in Securities:
None
Item 3. Defaults upon senior securities:
None
Item 4. Submission of matters to a vote of security holders:
None
Item 5. Other information:
None
Item 6. Exhibits and reports on form 8-K:
(a) Exhibits
3(A) Certificate of Incorporation and amendments thereto
including Certificate of Ownership and Merger (1)
3(B) By-Laws (2)
27 Financial Data Schedule
(b) Reports on Form 8-K
None.
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(1) Incorporated by reference to the Company's Annual Report on Form 10-KSB for
the fiscal year ended October 31, 1994 (File No. 0-15362).
(2) Incorporated by reference to the Company's Registration Statement on Form
S-18 (Registration No. 2-93714-NY).
Part II Page 10 of 11
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Compuflight, Inc. and SUBSIDIARIES
Six Months Ended April 30, 1998
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Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Compuflight, Inc.
(Registrant)
Date: October 20, 1999 By: /s/ Russell K. Thal
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Chairman of the Board
Date: October 20, 1999 By: /s/ Duncan Macdonald
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Chief Executive Officer
Date: October 20, 1999 By: /s/ Rainer Vietze
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Chief Financial Officer
Page 11 of 11