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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-QSB
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended January 31, 2002
|_| 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.)
2340 Garden Road, Monterey, California 93940
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (519) 747-1170
Indicate by check mark 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 |X| No |_|
The number of shares outstanding of the issuer's common stock as
of February 28, 2002 was 4,326,988 shares.
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NAVTECH, INC.
FORM 10-QSB
For the Quarter Ended January 31, 2002
INDEX
Part I. Financial Information
Item 1. Financial Statements Page
a) Consolidated Statements of Operations
for the Three Months Ended January 31, 2002 and 2001............ 1
b) Consolidated Balance Sheets
as of January 31, 2002 and October 31, 2001..................... 2
c) Consolidated Statement of Stockholders' Equity (Deficiency)
for the Three Months Ended January 31, 2002..................... 3
d) Consolidated Statements of Cash Flow
for the Three Months Ended January 31, 2002 and 2001............ 4
e) Notes to Consolidated Financial Statements...................... 5
Item 2. Management's Discussion and Analysis or Plan of Operation.... 9
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K............................. 13
Signatures................................................................ 14
Part I. Financial Information
Item 1. Consolidated Financial Statements
NAVTECH, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
---------------------------------
Three Months Ended January 31, 2001 2002
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REVENUE
Service fees $ 1,361,171 $ 1,412,111
Software license fees - 226,311
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Total revenue 1,361,171 1,638,422
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COSTS AND EXPENSES
Cost of services 908,441 775,369
Cost of software license fees - 49,243
Research and development 95,347 58,404
Selling & marketing 273,201 180,418
General and administrative 498,930 455,192
Amortization of goodwill 2,800 2,799
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Total costs and expenses 1,778,719 1,521,425
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Income (loss) from operations (417,548) 116,997
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Other income (expense)
Interest revenue - 827
Interest expense (34,814) (45,987)
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(34,814) (45,160)
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Income (loss) before income taxes (452,362) 71,837
Income taxes (recovery) (116,394) -
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Net earnings (loss) $ (335,968) $ 71,837
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Net earnings (loss) per share
Basic and diluted $ (0.10) $ 0.02
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See accompanying notes.
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NAVTECH, INC. 1
NAVTECH, INC.
CONSOLIDATED BALANCE SHEETS
---------------- -----------------
October 31, January 31,
2001 2002(1)
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ASSETS
Current assets
Cash $ 22,011 $ 109,147
Accounts receivable (net of allowance for bad debts of $154,764; 687,952 646,604
2001 - $144,025)
Accounts receivable - related parties (net of allowance for bad debts 111,111 116,082
of $231,778; 2001 - $231,778)
Investment tax credits receivable 22,186 22,036
Prepaid expenses and other 63,972 62,401
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907,232 956,270
Capital assets 574,384 536,095
Notes Receivable from related parties (net of allowance for bad debts of
$170,000; 2001 - $170,000) 30,000 30,000
Goodwill (net of accumulated amortization of $69,748; 98,439 95,640
2001 - $66,949)
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$ 1,610,055 $ 1,618,005
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LIABILITIES
Current liabilities
Accounts payable and accrued liabilities $ 1,227,956 $ 1,312,853
Note payable - factoring 165,519 122,810
Income taxes payable 34,886 40,943
Due to related parties - current portion 129,748 135,257
Long-term debt - current portion 149,115 119,257
Obligations under capital lease - current portion 2,865 2,966
Deferred lease inducements - current portion 13,776 13,683
Deferred revenue 83,774 36,200
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1,807,609 1,783,969
Due to related parties 179,631 143,209
Long-term debt 30,198 20,491
Obligations under capital lease 2,755 1,954
Deferred lease inducements 55,104 51,309
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2,075,297 2,000,932
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Commitments and contingencies
STOCKHOLDERS' EQUITY
Share capital 4,835 4,835
Authorized - 20,000,000, Par Value $0.001,
Issued - 4,834,906 (2001 - 4,834,906)
Treasury stock (950,131) (950,504)
Additional paid-in capital 4,057,984 4,057,984
Accumulated other comprehensive income 48,466 59,317
Accumulated deficit (3,626,396) (3,554,559)
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(465,242) (382,927)
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$ 1,610,055 $ 1,618,005
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(1) Unaudited
See accompanying notes.
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NAVTECH, INC. 2
NAVTECH, INC.
NAVTECH, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
(In US Dollars)
Accumulated Total
Share Capital Additional Other Stockholders' Total
----------------- Paid-In Comprehensive Treasury Accumulated Equity/ Comprehensive
Shares Amount Capital Income (Loss) Stock Deficit (Deficiency) Income (Loss)
- ------------------------------------- --------- ------- ---------- ------------- ---------- ------------ ------------ -------------
Balances, October 31, 2000 3,917,523 $3,917 $3,133,472 $45,766 $(942,686) $(1,778,490) $ 461,979
Issuance of shares 759,883 760 811,594 812,354
Stock options exercised 157,500 158 63,827 63,985
Issuance of warrants upon acquisition
ofAirware Solutions Inc. 49,091 49,091
Treasury shares (7,445) (7,445)
Translation adjustments 2,700 2,700 $ 2,700
Net loss (1,847,906) (1,847,906) (1,847,906)
- ------------------------------------- --------- ------- ---------- ------------- ---------- ------------ ------------ -------------
Balances, October 31, 2001 4,834,906 $4,835 $4,057,984 $48,466 $(950,131) $(3,626,396) $ (465,242) $(1,845,206)
- ------------------------------------- --------- ------- ---------- ------------- ---------- ------------ ------------ -------------
Treasury shares (373) (373)
Translation adjustments 10,851 10,851 $ 10,851
Net earnings 71,837 71,837 71,837
- ------------------------------------- --------- ------- ---------- ------------- ---------- ------------ ------------ -------------
Balances, January 31, 2002 4,834,906 $4,835 $4,057,984 $59,317 $(950,504) $(3,554,559) $ (382,927) $ 82,688
- ------------------------------------- --------- ------- ---------- ------------- ---------- ------------ ------------ -------------
NAVTECH, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
---------------- -----------------
Three Months Ended January 31, 2001 2002
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OPERATING ACTIVITIES
Net earnings (loss) $ (335,968) $ 71,837
Adjustments to reconcile net earnings (loss) to net
cash provided by (used in) operating activities:
Depreciation 41,812 39,833
Amortization of goodwill 2,800 2,799
Gain on sale of capital assets - (100)
Provision for uncollectible accounts 12,784 13,082
Deferred lease inducements (3,569) (3,416)
Changes in operating assets and liabilities:
Accounts receivable (18,178) 16,471
Prepaid expenses and other (40,066) 1,014
Accounts payable, accrued liabilities and other liabilities 243,748 91,943
Deferred revenue - (46,905)
Income taxes payable (114,905) 6,284
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(211,538) 192,842
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INVESTING ACTIVITIES
Repayment from former parent company, net 37,164 -
Proceeds on sale of capital assets - 100
Purchase of capital assets (35,554) (4,593)
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1,610 (4,493)
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FINANCING ACTIVITIES
Redemption of shares - (373)
Repayment of factored receivables - (41,523)
Issuance of common shares 20,625 -
Repayment of bank loans (18,462) (9,897)
Repayment of loans (8,530) (29,236)
Repayment of notes to related parties (37,806) (30,597)
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(44,173) (111,626)
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EFFECT OF FOREIGN EXCHANGE RATES ON CASH 1,267 10,413
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Net cash flow (252,834) 87,136
Cash, beginning of period 371,639 22,011
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Cash, end of period $ 118,805 $ 109,147
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Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ (29,775) $ (30,772)
Cash paid during the period for income taxes $ - $ -
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See accompanying notes.
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NAVTECH, INC. 4
NAVTECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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DESCRIPTION OF BUSINESS AND ORGANIZATION
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. Airware Solutions Inc. (Airware), a wholly-owned
subsidiary of Navtech-US, was incorporated in the Province of Quebec in 1986.
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 NASD OTC Electronic Bulletin Board under the symbol "NAVH". For investor
information, we can be reached at (519) 747-1170.
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.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The consolidated balance sheets as of January 31, 2002, and the consolidated
statements of operations and consolidated statements of cash flows for the three
months ended January 31, 2002 and 2001, have been prepared by us without audit.
In our opinion, all adjustments (which include only normal recurring accrual
adjustments) necessary to present fairly the financial position, results of
operations and cash flows at January 31, 2002, and for all periods presented,
have been made.
The consolidated financial statements include the accounts of Navtech-US and its
wholly owned subsidiaries, Navtech-Canada, Navtech-UK and Airware. 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 our significant accounting policies, reference is
made to our Annual Report on Form 10-KSB for the year ended October 31, 2001.
Results of operations for the three months ended January 31, 2002 are not
necessarily indicative of the operating results for the full year.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
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" ("FAS 140"). FAS 140 revises the standards for
accounting for securitizations and other transfers of financial assets and
collateral. The accounting standards of FAS 140 are effective for transfers and
servicing of financial assets and extinguishments of liabilities occurring after
March 31, 2001. We have determined that the adoption of FAS 140 had no material
impact on our financial position or results of operations in this fiscal
quarter.
In June 2001, the FASB issued SFAS No. 141, "Business Combinations", and SFAS
No. 142, "Goodwill and Other Intangible Assets" ("FAS 141" and "FAS 142"). FAS
141 requires that the purchase method of accounting be used for all business
combinations initiated after June 30, 2001. FAS 141 also specifies the criteria
by which intangible assets acquired in a purchase method business combination be
recognized and reported separately from goodwill. FAS 142 will require that
goodwill and intangible assets with indefinite useful lives no longer be
amortized, but instead be tested for impairment at least annually. FAS 142 will
also require the intangible assets with definite useful lives be amortized over
their respective estimated useful lives, and reviewed for impairment in
accordance with SFAS No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of".
We are required to adopt the provisions of FAS 141 effective July 1, 2001 and
FAS 142 effective November 1, 2002. Furthermore, any goodwill and any intangible
asset determined to have an indefinite useful life that are acquired in a
purchase business combination completed after June 30, 2001 will not be
amortized, but will continue to be evaluated for impairment in accordance with
previously existing accounting literature. Goodwill and intangible assets
acquired in a business combination completed before July 1, 2001 will continue
to be amortized prior to the adoption of FAS 142. We have not yet assessed the
impact the new standards will have on future financial statements. During the
three months ended January 31, 2002, the amortization expense associated with
goodwill was $2,799. The balance of goodwill at January 31, 2002 was $95,640.
In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets" ("FAS 144") which supersedes SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of" ("FAS 121"). FAS 144 also supersedes certain aspects of the
Accounting Principles Board Opinion No. 30 ("APB 30"), "Reporting the Results of
Operations--Reporting the Effects of Disposal of a Segment, and Extraordinary,
Unusual and Infrequently Occurring Events and Transactions," as related to the
reporting of the effects of a disposal of a segment of a business. FAS 144 will
require expected future operating losses from discontinued operations to be
displayed in discontinued operations in the period incurred rather than as of
the measurement date as presently required by APB 30. Additionally, more
dispositions may qualify as discontinued operations. Adoption of FAS 144 is
required for our fiscal year beginning on November 1, 2002. We have not yet
determined the effect FAS 144 will have on our financial statements.
NAVTECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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EARNINGS (LOSS) PER SHARE
Basic and diluted earnings (loss) per share are calculated as follows:
Three Months ended January 31,
--------------------------------------
2001 2002
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Numerator:
Net earnings (loss) (A) $ (335,968) $ 71,837
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Denominator:
Denominator for basic earnings (loss) per share - weighted average
number of common shares outstanding (B) 3,454,757 4,326,988
Effect of dilutive securities:
Employee stock options - -
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Denominator for diluted earnings (loss) per share - adjusted weighted
average number of common shares outstanding (C) 3,454,757 4,326,988
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Earnings (loss) per share - basic (A)/(B) $ (0.10) $ 0.02
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Earnings (loss) per share - diluted (A)/(C) $ (0.10) $ 0.02
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Dilutive securities consist of employee stock options and warrants. Specific
employee stock options and warrants are excluded if their effect is
antidilutive.
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NAVTECH, INC.
NAVTECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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COMMITMENTS AND CONTINGENCIES
Legal Proceedings
On September 13, 1999, we received a demand from the attorneys for the Chapter
11 Creditors Committee for Southern Air Transport, Inc. for alleged preferential
payments of $88,850.09 made to Navtech-Canada within 90 days of the filing of
the bankruptcy petition by Southern Air in the United States Bankruptcy Court
for the Southern District of Ohio on October 1, 1998. The complaint was filed on
September 21, 2000; however, a summons appears to have never been purchased. We
have not been served with a summons and complaint. We are of the view that the
payments received were for contemporaneous consideration and were therefore not
preferential payments.
CONTINUING OPERATIONS
We have an accumulated deficit of approximately $3.6 million at January 31, 2002
and a cash balance of approximately $109,000. During the fiscal year ended
October 31, 2001, we incurred significant costs related to the expansion of our
global sales and marketing effort, the acquisition of Airware Solutions Inc. and
the development of new products. Current cash balances are insufficient to fund
operations in 2002. These factors raise substantial doubt about our ability to
continue as a going concern. The accompanying consolidated financial statements
do not include any adjustments relating to the recoverability and classification
of asset carrying amounts or the amount and classification of liabilities that
might result from the outcome of the uncertainty.
We have developed a plan to address these liquidity issues (see "Plan of
Operation" below). Such plan includes raising capital and restructuring
operations in the attempt to reduce certain costs.
COMPARATIVE FIGURES
Certain accounts for the comparative period have been reclassified to conform
with the presentation adopted in the current year.
NAVTECH, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
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Item 2. Management's Discussion and Analysis or Plan of Operation
FORWARD-LOOKING STATEMENTS
This Quarterly Report contains forward-looking statements as that term is
defined in the federal securities laws. The events described in forward-looking
statements contained in this Quarterly Report 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 to 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. Our actual results,
performance and achievements could differ materially from those expressed or
implied in these forward-looking statements. We undertake no obligation to
publicly update or revise any forward-looking statements, whether from new
information, future events or otherwise. The following discussion should be read
in conjunction with the financial statements and notes found in Item 1 of Part I
of this Form 10-QSB. All financial information is based on our fiscal calendar.
Results of operations
Revenue
Revenue from service fees was approximately $1.4 million for the three months
ended January 31, 2002, consistent with approximately $1.4 million for the three
months ended January 31, 2001. Changes in 2002 include an increase in fees from
existing customers of approximately $34,000 and an increase in fees from new
customers of approximately $164,000. These increases were offset by the loss in
fees of approximately $87,000 from customers who ceased operations in prior
quarters and the loss of revenue totaling approximately $60,000 from customers
who terminated our services in prior quarters and one-time customers in 2001.
Revenue from software license fees was approximately $226,000 for the three
months ended January 31, 2002 as compared to nil during the three months ended
January 31, 2001. We completed a sale of Airware's CLASS bidding system in the
three months ended January 31, 2002 compared with no license sales in the three
months ended January 31, 2001. Software licensing efforts terminated in fiscal
2001 as we moved completely to an ASP marketing philosophy. However, our
customer requested another pricing option when assessing our product. In order
to better meet the needs of our customer and to complete the sale, we deviated
from the ASP marketing philosophy. The ASP model is expected to yield long-term
benefits since monthly revenues will be higher than those under a license sale
philosophy. Further explanation regarding our switch to an ASP marketing
philosophy can be found in the "Plan of Operation - Sales Initiatives" section.
Costs and expenses
Cost of services decreased approximately 15%, or approximately $133,000, from
approximately $908,000 for the three months ended January 31, 2001 to
approximately $775,000 for the three months ended January 31, 2002. This change
is primarily attributable to a decrease in salaries and benefits of
approximately $92,000 and a decrease in communications costs of approximately
$63,000. Offsetting these decreases was an increase in facilities costs of
approximately $7,000 as well as net increases in other operating expenses of
approximately $15,000. The decrease in salaries and benefits is due both to the
staff reductions made in the fourth quarter of 2001 (see "Plan of Operation -
Salaries and Benefits" below) and staff time devoted to the implementation of
the CLASS system sold in the three months ended January 31, 2002. The decrease
in communication costs was achieved through the renegotiation of contracts with
our largest supplier (see "Plan of Operation - Communications" below) and the
elimination of duplication in certain network services. While the number of
facilities decreased in 2002 along with the space rented in current facilities,
rent expense increased in the three months ended January 31, 2002 due to the
accrual for costs required to close two additional offices this fiscal year.
Cost of software license fees was approximately $49,000 for the three months
ended January 31, 2002 as compared to nil during the three months ended January
31, 2001. We completed the sale of Airware's CLASS bidding system in the three
months ended January 31, 2002 compared with no license sales in the three months
ended January 31, 2001. Cost of software license fees consist primarily of
installation time and related travel expenses.
Research and development expenditures decreased approximately 39%, or
approximately $37,000, from approximately $95,000 for the three months ended
January 31, 2001 to approximately $58,000 for the three months ended January 31,
2002. This decrease is due primarily to the suspension of one major development
project that employed five people in 2001.
Selling and marketing expenses decreased approximately 34%, or approximately
$93,000, from approximately $273,000 for the three months ended January 31, 2001
to approximately $180,000 for the three months ended January 31, 2002. This
decrease is attributable to a decrease in salaries and benefits of approximately
$40,000, a decrease in marketing expenses of approximately $20,000 and a
decrease in travel costs of approximately $33,000. The decrease in salaries and
benefits and travel expenses is due to the staff reductions made in the fourth
quarter of 2001 (see "Plan of Operation - Salaries and Benefits; and Travel"
below). As planned, marketing expenses decreased in the three months ended
January 31, 2002 as we discontinued certain marketing initiatives that were
active in the three months ended January 31, 2001 (see "Plan of Operation -
Marketing" below).
General and administrative expenses decreased approximately 9%, or approximately
$44,000, from approximately $499,000 for the three months ended January 31, 2001
to approximately $455,000 for the three months ended January 31, 2002. This
decrease is due primarily to a decrease in corporate travel costs of
approximately $83,000, a decrease in professional fees of approximately $52,000
and a net decrease in other general and administrative expenses of approximately
$11,000. Offsetting these decreases was an increase in salaries and benefits of
approximately $13,000 and an increase in bad debts of approximately $89,000. Our
travel expenses have decreased as we reduced the number of corporate trips
required for our operations (see "Plan of Operation - Travel" below). Salaries
and benefits increased marginally in the three months ended January 31, 2002
despite corporate staff reductions (see "Plan of Operation - Salaries and
Benefits" below). This is due to an accrual of approximately $71,000
representing all amounts owing to Duncan Macdonald, our former CEO, under his
settlement and release agreement. Bad debts increased in the three months ended
January 31, 2002 due to the bankruptcy of threecustomers. It is anticipated that
insurance expenses, which were approximately $25,000 during the three months
ended January 31, 2002, will increase to approximately $49,000 per quarter
during the remainder of fiscal 2002. This amount is an estimate based on current
insurance quotes received and subject to change.
Provision for Income Taxes
We have not recorded a provision for income taxes on net earnings of
approximately $72,000 for the three months ended January 31, 2002. This is due
to income earned in the United States and Quebec, Canada where we have
sufficient losses in prior years to offset our taxable income.
Net earnings (loss)
The unaudited consolidated financial statements reflect net earnings of
approximately $72,000 for the three months ended January 31, 2002 as compared to
a net loss of approximately $336,000 for the three months ended January 31,
2001.
NAVTECH, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
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Liquidity and Capital Resources
As of January 31, 2002, our available funds consisted of $109,147 in cash. At
January 31, 2002, we had a working capital deficiency of $829,653 as compared to
a working capital deficiency of $900,377 as at October 31, 2001.
Cash flows from operations accounted for a net inflow of $192,842, primarily
based on the net earnings for the quarter, the adjustment for non-cash items of
approximately $52,000, a net decrease in operating assets of approximately
$18,000 and an increase of approximately $51,000 in operating liabilities.
Cash flows from investing activities for the three months ended January 31, 2002
represent a net outflow of $4,493, primarily due to the purchase of capital
assets.
Cash flows from financing activities for the three months ended January 31, 2002
represent a net outflow of $111,626, primarily due to repayments of existing
loans of approximately $39,000, repayments of related party notes of
approximately $31,000 and repayments of outstanding factored accounts receivable
of approximately $42,000.
As of January 31, 2002, we had no significant capital commitments.
PLAN OF OPERATION
Beginning in the fourth quarter of 2001, we implemented the following plan to
reduce our working capital deficiency:
Salaries and Benefits
We have reduced our global workforce by over 30% from a peak of 106 employees in
June 2001 to 71 employees at January 31, 2002 through a combination of
terminations and resignations. Although reductions occurred at all locations and
across all functional areas, we focused our reductions in our sales and
marketing and development staff. In addition to the staff reductions, we
implemented a temporary reduction in salary for remaining employees of between 3
- - 5%.
On November 29, 2001, we accepted the resignation of our Chief Executive
Officer, Duncan Macdonald. We have named Chief Financial Officer, David Strucke,
as our President and Chief Executive Officer.
Travel
With the staff reductions mentioned above, travel expenses will be reduced,
especially in corporate and sales related travel. Also, travel is being
rationalized for our remaining staff.
Communications
In fiscal 2001 we incurred communications costs of approximately $936,000. We
have renegotiated contracts with our largest communications supplier that we
expect will result in cost savings of approximately 12%. We plan to negotiate
similar contracts with our remaining suppliers. We are currently analyzing
alternative or advanced communications solutions in order to further rationalize
our communications costs.
Marketing
We are currently reviewing the trade shows that we plan to attend in the current
year. Some of these shows will be eliminated from our budget as we focus our
marketing efforts on shows that will provide us the maximum exposure to our
potential customers. We are currently evaluating an option to host small
regional user-conferences aimed directly at our current and prospective
customers as an alternative to attending large trade shows. Additional marketing
projects have been suspended until our financial position strengthens.
Facilities
We have closed our sales office in Denver, Colorado and our development facility
in Ottawa, Ontario. In addition, we have reduced the rentable space in our
Monterey, California office by approximately 80%, resulting in annual rent
savings of approximately $40,000, and in our Waterloo facility by approximately
10% resulting in annual rent saving of approximately $9,500. We are currently
reviewing plans to eliminate or maximize space in our current facilities in
order to further reduce our fixed expenses.
Equity
We anticipate that we will need to raise additional equity over the next three
months to fund our working capital needs that include improving the average age
of our accounts payable.
Accounts Receivable Factoring
Navtech-Canada currently has a facility to factor accounts receivable to a limit
of $350,000 Canadian at a rate of 0.1% per day and a minimum of 1.6%. This
facility is subject to certain covenants and we are in compliance with these
covenants. This is a temporary financing facility aimed at giving us more
flexibility in meeting our accounts payable and short term financing demands. It
is anticipated that the cost savings from the above mentioned plans will give us
the ability to terminate this facility and consider more attractive financing
facilities once our financial position improves. We anticipate that financing
requirements specific to acquisitions of complementary businesses, products or
technologies would be dealt with using debt specific to those transactions.
Sales Initiatives
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.
We have historically marketed our products in two ways: (1) the licensing of our
software, or (2) acting as an application service provider (ASP). Under the
license sales philosophy, we received one-time revenues for the license sale;
under the ASP philosophy we receive monthly recurring revenue. Our sales efforts
for our rebranded products are now focused on the ASP philosophy only. The ASP
model is expected to yield long-term benefits since monthly revenue will be
higher than under the license sale model. As an ASP, we manage and distribute
our software-based services and solutions to our customers across a network from
a central data center. We have successfully used the ASP philosophy for over six
years and have extensive experience in deploying and supporting software under
this approach.
Other
We have recently completed a shareholder oddlot repurchase program and an
escheatment program for unexchanged shares. These programs were designed to
reduce costs in connection with shareholder communications.
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K:
(a) Exhibits
3(A) Certificate of Incorporation, as amended (1)
3(B) By-Laws, as amended (2)
(b) Reports on Form 8-K
We filed one Current Report on Form 8-K during the quarter ended
January 31, 2002 as follows:
Date of Report: November 29, 2001 (Items 5 and 7 reported)
Items 1 through 5 are not applicable and have been omitted.
(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
Quarterly Report on Form 10-QSB for the fiscal period ended April 30, 2001.
(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, 1999.
Signatures
Pursuant to the requirements of the Exchange Act, the registrant caused this
report to be signed on its behalf by the undersigned thereunto duly authorized.
Navtech, Inc.
Date: March 1, 2002 By: /s/ David Strucke
-----------------------------------
David Strucke
President, Chief Executive Officer,
Chief Financial Officer, Secretary, and
Director
(Principal Executive Officer, Principal
Financial Officer, Principal
Accounting Officer, and Duly
Authorized Officer)