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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 April 30, 2004
|_| 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
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, Suite 207, Monterey, California 93940
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (519) 747-1170
N/A
(Former name, former address and former fiscal year,
if changed since last report)
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS
Check whether the registrant 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 |_|
The number of shares outstanding of the issuer's common stock as of May 28, 2004
was 4,247,988 shares.
Transitional Small Business Disclosure Format. Yes |_| No |X|
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NAVTECH, INC.
FORM 10-QSB
For the Quarter Ended April 30, 2004
INDEX
Part I. Financial Information
Item 1. Financial Statements Page
----
a) Consolidated Statements of Operations for the Three Months and
Six Months Ended April 30, 2004 and 2003...................................... 1
b) Consolidated Balance Sheets as of April 30, 2004 and October 31, 2003......... 2
c) Consolidated Statement of Stockholders' Equity for the Six Months
Ended April 30, 2004.......................................................... 3
d) Consolidated Statements of Cash Flow for the Six Months Ended
April 30, 2004 and 2003....................................................... 4
e) Notes to Consolidated Financial Statements.................................... 5
Item 2. Management's Discussion and Analysis or Plan of Operation......................... 7
Item 3. Controls and Procedures........................................................... 11
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders............................... 12
Item 6. Exhibits and Reports on Form 8-K.................................................. 12
Signatures...................................................................................... 13
Part I. Financial Information
Item 1. Financial Statements
NAVTECH, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In US Dollars)
(Unaudited)
----------------------------------------------------------
Three months ended April 30, Six months ended April 30,
2004 2003 2004 2003
- --------------------------------------------------------------------------------------------------------------------
REVENUE
Service fees $ 2,019,488 $ 1,653,991 $ 3,872,983 $ 3,194,319
Software license fees - - - 63,000
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Total revenue 2,019,488 1,653,991 3,872,983 3,257,319
- --------------------------------------------------------------------------------------------------------------------
COSTS AND EXPENSES
Cost of service fees 1,093,457 1,011,221 2,145,470 1,830,360
Cost of software license fees - - - 1,500
Research and development 228,545 101,192 440,003 259,590
Sales and marketing 295,826 253,331 607,106 492,362
General and administrative 350,833 254,887 588,734 533,837
Recovery of bad debt - related party - (159,361) - (159,361)
- --------------------------------------------------------------------------------------------------------------------
1,968,661 1,461,280 3,781,313 2,958,298
- --------------------------------------------------------------------------------------------------------------------
Earnings from operations 50,827 192,711 91,670 299,021
- --------------------------------------------------------------------------------------------------------------------
Other expense
Interest expense 8,699 13,791 17,402 31,691
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Earnings before income taxes 42,128 178,920 74,268 267,330
Income taxes (recovery) (6,123) (24,115) (19,838) (23,315)
- --------------------------------------------------------------------------------------------------------------------
Net earnings $ 48,251 $ 203,035 $ 94,106 $ 290,645
====================================================================================================================
Net earnings per share
Basic $ 0.01 $ 0.05 $ 0.02 $ 0.07
Diluted $ 0.01 $ 0.04 $ 0.02 $ 0.06
====================================================================================================================
See accompanying notes.
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NAVTECH, INC. 1
NAVTECH, INC.
CONSOLIDATED BALANCE SHEETS
(In US Dollars)
----------------- ----------------
April 30, October 31,
2004(1) 2003
- -------------------------------------------------------------------------------- ----------------- ----------------
ASSETS
Current assets
Cash $ 75,495 $ 138,785
Accounts receivable (net of allowance for bad debts of $143,257; 1,103,425 889,576
2003 - $94,919)
Investment tax credits receivable 8,746 91,866
Prepaid expenses and other 234,238 138,590
- -------------------------------------------------------------------------------- ----------------- ----------------
1,421,904 1,258,817
Deferred tax assets 256,849 267,274
Capital assets 470,814 531,826
- -------------------------------------------------------------------------------- ----------------- ----------------
$ 2,149,567 $ 2,057,917
===================================================================================================================
LIABILITIES
Current liabilities
Accounts payable and accrued liabilities $ 964,380 $ 923,308
Income taxes payable - 11,360
Long-term debt - current portion 16,530 19,403
Obligations under capital lease - current portion 33,292 33,390
Deferred lease inducements - current portion 15,846 16,489
Deferred revenue 411,147 365,431
- -------------------------------------------------------------------------------- ----------------- ----------------
1,441,195 1,369,381
Long-term debt - 6,700
Obligations under capital lease 22,404 40,843
Deferred lease inducements 23,767 32,976
- -------------------------------------------------------------------------------- ----------------- ----------------
1,487,366 1,449,900
- -------------------------------------------------------------------------------- ----------------- ----------------
Commitments and contingencies
STOCKHOLDERS' EQUITY
Share capital 4,856 4,843
Authorized - 20,000,000, Par Value $0.001,
Issued - 4,855,906 (2003 - 4,842,406)
Treasury stock (608) (608)
Additional paid-in capital 3,083,973 3,080,190
Accumulated other comprehensive income (loss) (7,959) 35,759
Accumulated deficit (2,418,061) (2,512,167)
- -------------------------------------------------------------------------------- ----------------- ----------------
662,201 608,017
- -------------------------------------------------------------------------------- ----------------- ----------------
$ 2,149,567 $ 2,057,917
====================================================================================================================
(1) Unaudited
See accompanying notes.
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NAVTECH, INC. 2
NAVTECH, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(In US Dollars)
Accumulated
Additional Other Total
Issued Share Paid-In Comprehensive Treasury Accumulated Stockholders' Comprehensive
Shares Capital Capital Income (Loss) Stock Deficit Equity Income
- ---------------------------- --------- ------- ----------- ------------- -------- ------------ ------------- -------------
Balances, October 31, 2003 4,842,406 4,843 3,080,190 35,759 (608) (2,512,167) 608,017
Stock options exercised 13,500 13 3,783 3,796
Translation adjustments (43,718) (43,718) (43,718)
Net earnings 94,106 94,106 94,106
- ---------------------------- --------- ------- ----------- ------------- -------- ------------ ------------- -------------
Balances, April 30, 2004 4,855,906 $4,856 $3,083,973 $ (7,959) $ (608) $(2,418,061) $662,201 $ 50,388
(Unaudited)
============================ ========= ======= =========== ============= ======== ============ ============= =============
See accompanying notes.
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NAVTECH, INC. 3
NAVTECH, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In US Dollars)
(Unaudited)
---------------- -----------------
Six months ended April 30, 2004 2003
- ----------------------------------------------------------------------- ---------------- -----------------
OPERATING ACTIVITIES
Net earnings $ 94,106 $ 290,645
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation 91,132 79,644
Provision for uncollectable accounts 21,841 (2,168)
Provision for bad debt - related party - (159,351)
Deferred lease inducements (8,244) (7,158)
Changes in operating assets and liabilities
Accounts receivable (251,021) 98,268
Investment tax credits receivable 82,766 (33,869)
Prepaid expenses and other (95,779) (128,494)
Accounts payable and accrued liabilities 54,416 (14,236)
Deferred revenue 51,267 (42,771)
Income taxes payable (11,360) -
- ----------------------------------------------------------------------- ---------------- -----------------
29,124 80,510
- ----------------------------------------------------------------------- ---------------- -----------------
INVESTING ACTIVITIES
Purchase of capital assets (66,964) (53,421)
- ----------------------------------------------------------------------- ---------------- -----------------
(66,964) (53,421)
- ----------------------------------------------------------------------- ---------------- -----------------
FINANCING ACTIVITIES
Repayment of bank loans - (16,789)
Repayment of capital leases (16,277) (11,154)
Repayment of loans (8,902) (79,353)
Issuance of common shares on exercises under stock option plan 3,796 -
- ----------------------------------------------------------------------- ---------------- -----------------
(21,383) (107,296)
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Effect of foreign exchange rates on cash (4,067) 15,021
- ----------------------------------------------------------------------- ---------------- -----------------
Net cash flow (63,290) (65,186)
Cash, beginning of period 138,785 207,610
- ----------------------------------------------------------------------- ---------------- -----------------
Cash, end of period $ 75,495 $ 142,424
==========================================================================================================
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 17,402 $ 32,635
Cash received (paid) during the period for income taxes $ 91,243 $ (10,305)
Assets acquired through capital leases $ - $ 72,198
- ----------------------------------------------------------------------- ---------------- -----------------
See accompanying notes.
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NAVTECH, INC. 4
NAVTECH, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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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. When we refer to Navtech, we are speaking of
Navtech-US and its subsidiaries.
Our head office is located at 2340 Garden Road, Suite 207, Monterey, CA 93940.
Our principal operations are based at 175 Columbia Street West, Suite 102,
Waterloo, Ontario, Canada, N2L 5Z5. We maintain a website at www.navtechinc.com.
Our common stock is publicly traded on the OTC 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 sheet as of April 30, 2004, the consolidated statements
of operations for the three and six months ended April 30, 2004, the
consolidated statements of cash flows for the six months ended April 30, 2004
and 2003 and the consolidated statement of stockholders' equity for the six
months ended April 30, 2004 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 April 30, 2004, 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 and Navtech-UK. All material
inter-company 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
accumulated in comprehensive income (loss), which is a separate component of
equity.
Our deferred revenue includes the value of services invoiced in advance. These
services will be provided in the following quarterly period. At April 30, 2004,
a portion of these invoices remains outstanding.
For information concerning our significant accounting policies, reference is
made to our Annual Report on Form 10-KSB for the year ended October 31, 2003.
Results of operations for the six months ended April 30, 2004 are not
necessarily indicative of the operating results for the full year.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
Prior to fiscal 2003, as permitted under SFAS No. 123 "Accounting for
Stock-based Compensation" (SFAS 123), we applied APB No. 25 "Accounting for
Stock Issued to Employees" (APB 25), and related interpretations in accounting
for our stock-based compensation plans. SFAS 123 required disclosure of pro
forma amounts to reflect the impact if we had elected to adopt the optional
recognition provisions of SFAS 123 for our stock option plans.
In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure, an amendment to FASB Statement No.
123" (SFAS 148). SFAS 148 requires expanded and more prominent presentation of
the pro forma disclosures previously required by SFAS 123. The new presentation
is required for financial statements for fiscal years ending after December 15,
2002. We adopted the provisions of SFAS 148 effective November 1, 2002. We have
determined that SFAS 148 will have no material impact on our future financial
statements.
We have elected to continue to follow the intrinsic value method of APB 25 in
accounting for stock-based compensation.
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NAVTECH, INC. 5
NAVTECH, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
SFAS 148 also required quarterly disclosure of the impact of stock-based awards
as if the awards had been accounted for using fair-value methods. Had we applied
the fair value based method to all stock-based awards, reported net earnings and
earnings per share would have decreased to the pro forma amounts indicated below
for each of the six months ended:
- ---------------------------------------------------------------------------- -------------------- -------------------
April 30, 2004 April 30, 2003
- ---------------------------------------------------------------------------- -------------------- -------------------
Net earnings - reported $ 94,106 $ 290,645
Pro forma stock-based compensation (1,127) -
- ---------------------------------------------------------------------------- -------------------- -------------------
Net earnings - pro forma $ 92,979 $ 290,645
- ---------------------------------------------------------------------------- -------------------- -------------------
Basic earnings per share - reported 0.02 0.07
Diluted earnings per share - reported 0.02 0.06
Pro forma stock-based compensation - -
- ---------------------------------------------------------------------------- -------------------- -------------------
Basic earnings per share - pro forma $ 0.02 $ 0.07
Diluted earnings per share - pro forma $ 0.02 $ 0.06
- ---------------------------------------------------------------------------- -------------------- -------------------
The fair value of stock options used to compute the pro forma net earnings and
earnings per share was the estimated fair value at grant date using the
Black-Scholes option-pricing model with the following weighted average
assumptions for the six months ended:
- ------------------------------------------------------------------------------------------------- -------------------
April 30, 2004
- ------------------------------------------------------------------------------------------------- -------------------
Black-Scholes weighted-average assumptions
Expected dividend 0.00%
Expected volatility 173%
Risk-free interest rate 4%
Expected option life in years 4
Weighted average stock option fair value option granted $ 0.36
- ------------------------------------------------------------------------------------------------- -------------------
Assumption disclosures are not applicable to 2003 as there were no stock options
granted during the year and the total amount of pro forma stock-based
compensation related to all stock options granted prior to fiscal year 2003 were
included in the 2002 disclosure.
EARNINGS PER SHARE
Basic and diluted earnings per share are calculated as follows:
---------------------------------------------------------
Three months ended April 30, Six months ended April 30,
2004 2003 2004 2003
- ---------------------------------------------------------------------------------------------------------------------
Numerator:
Net earnings (A) $ 48,251 $ 203,035 $ 94,106 $ 290,645
- ---------------------------------------------------------------------------------------------------------------------
Denominator:
Denominator for basic earnings per share - weighted average
number of common shares outstanding (B) 4,240,307 4,226,988 4,246,255 4,226,988
Effect of dilutive securities:
Employee stock options and warrants 861,265 372,500 861,265 372,500
- ---------------------------------------------------------------------------------------------------------------------
Denominator for diluted earnings per share adjusted weighted
average number of common shares outstanding (C) 5,101,572 4,599,488 5,107,520 4,599,488
- ---------------------------------------------------------------------------------------------------------------------
Earnings per share - basic (A)/(B) 0.01 0.05 0.02 0.07
- ---------------------------------------------------------------------------------------------------------------------
Earnings per share - diluted (A)/(C) 0.01 0.04 0.02 0.06
- ---------------------------------------------------------------------------------------------------------------------
Dilutive securities consist of employee stock options and warrants. Specific
employee stock options and warrants are excluded if their effect is
antidilutive.
- --------------------------------------------------------------------------------
NAVTECH, INC. 6
NAVTECH, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
- --------------------------------------------------------------------------------
Item 2. Management's Discussion and Analysis or Plan of Operation
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-QSB 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 that 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. 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
RESULTS OF OPERATIONS
Revenues
- --------
Revenue from service fees increased approximately $679,000, or approximately
21%, to approximately $3,873,000 for the six months ended April 30, 2004,
compared with approximately $3,194,000 for the six months ended April 30, 2003.
The increase in service fees in the first six months of fiscal 2004 was
primarily due to an increase in fees from new customers of approximately
$369,000 and an increase in fees from existing customers of approximately
$490,000. These increases were partially offset by the loss in fees of
approximately $180,000 from customers who ceased operations in prior quarters.
Revenue from software license fees was nil for the six months ended April 30,
2004 as compared to $63,000 during the six months ended April 30, 2003. Software
licensing efforts were significantly reduced in previous fiscal years as we
moved predominantly to a monthly service fee pricing model. However, occasional
customers will request a software license pricing option when assessing our
products.
Costs and expenses
- ------------------
Overall, the recent decline of the US Dollar has increased our total costs and
expenses as reported in US Dollars. The majority of our expenditures, including
personnel costs, originate in Canada or the United Kingdom. Consequently, the
relatively stronger currencies in those countries have effectively increased our
costs and expenses as stated in US Dollars. For the six months ended April 30,
2004, the relative decline in the US Dollar has resulted in an increase in our
total costs and expenses by approximately $280,000 as compared to the same
period in fiscal year 2003.
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NAVTECH, INC. 7
NAVTECH, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
- --------------------------------------------------------------------------------
Cost of service fees
The following table shows the major components of the cost of service fees for
the six months ended April 30, 2004 and 2003 (in thousands except percentage
amounts):
- ------------------------ ------------- ------------- ---------------
2004 2003 Percentage
Change
- ------------------------ ------------- ------------- ---------------
Salaries and benefits $ 1,284 $ 1,137 13%
Communication costs 406 363 12
Rent 119 102 17
Royalties 102 73 40
Hardware and travel 75 22 241
Agent Costs 23 2 1,050
Depreciation 64 58 10
Other 72 73 (1)
- ------------------------ ------------- ------------- ---------------
$ 2,145 $ 1,830 17%
- ------------------------ ------------- ------------- ---------------
The relative decline in the value of the US Dollar has increased the cost of
service fees by approximately $120,000 for the six months ended April 30, 2004
compared to the same period in fiscal year 2003. The remaining changes in the
cost of service fees are discussed below.
After accounting for the impact of changes in relative currency value, salaries
and benefits were approximately the same for the six months ended April 30, 2004
as the same period in fiscal 2003.
After accounting for the impact of changes in relative currency values,
communication costs for the six months ended April 30, 2004 increased 6%
compared to the same period in fiscal 2003. This increase was due to the
additional communication lines and data volume required for the increased number
of customers utilizing monthly services.
After accounting for the impact of changes in relative currency values, rent
expense was approximately the same for the six months ended April 30, 2004 as
the same period in fiscal 2003.
Royalty costs, which are all denominated in US dollars, increased by 40% for the
six months ended April 30, 2004 compared to the same period in fiscal 2003 as a
direct result of an increase in monthly service volumes.
The increase in hardware and travel was a result of an increase in expenses
directly related to the implementation of new services at new or existing
customers. These costs refer to the cost of hardware and travel that is
generally re-billed to customers as part of an implementation.
Agent costs are historically variable in nature, as these expenses are incurred
based on certain flight planning service requests from some of our European and
African customers. The increase in agent costs for the six months ended April
30, 2004 compared to the same period in fiscal year 2003 is a direct result of
an increase in requests for these services.
No further significant increases in the cost of our services are expected in
future quarters. However, with respect to the volume of opportunities currently
being pursued, successful completion of these opportunities may result in
additional support staff or infrastructure being required.
Research and development expenditures increased approximately $180,000, or
approximately 69%, for the six months ended April 30, 2004 compared to the same
period in fiscal 2003. After accounting for the change in relative currency
values, research and development expenditures increased approximately $125,000,
or approximately 48%. Improved market conditions through 2003 improved our
ability to return to a focus on new development aimed at improving the
competitiveness of our products and expanding our product suite. We anticipate
research and development will continue to be an area of focus through the
remainder of fiscal 2004.
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NAVTECH, INC. 8
NAVTECH, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
- --------------------------------------------------------------------------------
Sales and marketing expenses
The following table shows the major components of the sales and marketing
expenses for the six months ended April 30, 2004 and 2003 (in thousands except
percentage amounts):
- ------------------------------ ------------- -------------- --------------
2004 2003 Percentage
Change
- ------------------------------ ------------- -------------- --------------
Salaries and benefits $ 452 $ 350 29%
Travel 120 66 82
Marketing expenses 23 62 (63)
Other 12 14 (14)
- ------------------------------ ------------- -------------- --------------
$ 607 $ 492 23%
- ------------------------------ ------------- -------------- --------------
After accounting for the change in relative currency values, sales and marketing
expenses for the six months ended April 30, 2004 increased approximately
$57,000, or approximately 17%, compared to the same period in fiscal 2003.
Salaries and benefits and travel expenses have increased as a result of a larger
sales and account management team and an expanded geographic focus. Marketing
expenses declined as a result of the timing of certain industry events during
the 2004 or 2003 fiscal years.
General and administrative expenses
The following table shows the major components of the general and administrative
expenses for the six months ended April 30, 2004 and 2003 (in thousands except
percentage amounts):
- --------------------------------- -------------- -------------- ----------------
2004 2003 Percentage
Change
- --------------------------------- -------------- -------------- ----------------
Salaries and benefits $ 227 $ 162 40%
Insurance 102 95 7
Professional fees 99 86 15
Telephone 77 34 126
Travel 27 14 93
Provision for bad debts 22 44 (50)
(Gain) Loss on foreign exchange (1) 46 (102)
Depreciation 14 10 40
Other 22 43 (49)
- --------------------------------- -------------- -------------- ----------------
$ 589 $ 534 10%
- --------------------------------- -------------- -------------- ----------------
After accounting for the change in relative currency values, general and
administrative expenses for the six months ended April 30, 2004 increased
approximately $10,000, or approximately 2%, compared to the same period in
fiscal 2003.
After accounting for the change in relative currency values, salaries and
benefits for the six months ended April 30, 2004 increased approximately $36,000
or 22% compared to the same period in fiscal 2003 due to an increase in
compensation costs for general and administrative personnel.
The increase in insurance costs was a direct result of increases in premiums on
existing policies.
After accounting for the change in relative currency values, telephone costs for
the six months ended April 30, 2004 increased approximately $37,000 or 109%
compared to the same period in fiscal 2003. This increase was due to
telecommunication costs associated with a broader geographic focus.
- --------------------------------------------------------------------------------
NAVTECH, INC. 9
NAVTECH, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
- --------------------------------------------------------------------------------
After accounting for the impact of changes in relative currency values, travel
costs for the six months ended April 30, 2004 increased approximately $9,000 or
64% compared to the same period in fiscal 2003. This increase was due to
increased overseas travel as a result of our expanded geographic focus.
We incurred a gain on foreign exchange of approximately $1,000 for the six
months ended April 30, 2004 compared to a loss of approximately $46,000 in the
same period in fiscal 2003 due to the strengthening of the US dollar in the last
part of the second quarter of 2004.
Other expense
- -------------
Interest expense decreased approximately $14,000, or 45%, to approximately
$17,000 during the six months ended April 30, 2004 from approximately $32,000
during the six months ended April 30, 2003. The reduction in interest expense
was due to the maturity of long-term debt during fiscal 2003 and a decrease in
the usage of short-term financing during 2004.
Income taxes (recovery)
- -----------------------
The recovery of approximately $20,000 of income taxes during the six months
ended April 30, 2004 represents the reassessment of investment tax credits from
prior fiscal years in excess of the amount recorded as receivable.
Net earnings
- ------------
The unaudited consolidated financial statements reflect net earnings of
approximately $94,000 for the six months ended April 30, 2004 as compared to net
earnings of approximately $291,000 for the six months ended April 30, 2003, a
decrease of approximately $197,000 or 68%. Net earnings for the six months ended
April 30, 2003 included a recovery of bad debt from a related party, Global
Weather Dynamics, Inc., of approximately $160,000.
LIQUIDITY AND CAPITAL RESOURCES
As of April 30, 2004, our available funds consisted of approximately $75,000 in
cash as well as an unutilized operating line of credit as noted in the last
paragraph below. At April 30, 2004, we had a working capital deficiency of
approximately $19,000 as compared to approximately $111,000 at October 31, 2003.
Eliminating this deficiency remains as one of our top priorities.
Cash flows from operations for the six months ended April 30, 2004 accounted for
a net inflow of approximately $29,000, primarily based on the net earnings for
the period, depreciation of approximately $91,000 and provision for
uncollectable accounts of approximately $22,000,offset by an increase in
non-cash working capital of approximately $170,000. The increase in non-cash
working capital was a result of an increase in accounts receivable balances for
large sales in the last part of the second quarter of 2004, and the timing of
payments for annual insurance premiums.
Cash flows from investing activities for the six months ended April 30, 2004
represent a net outflow of approximately $67,000 due to the purchase of capital
assets.
Cash flows from financing activities for the six months ended April 30, 2004
represent a net outflow of approximately $21,000 due to repayments of existing
loans and capital leases.
At April 30, 2004, we had no significant capital commitments. However, we may,
from time to time, consider acquisitions of complementary businesses, products
or technologies.
We renewed our banking facility with the RBC Royal Bank in June 2004 for an
operating line of credit of $500,000. There was no balance outstanding on the
facility at April 30, 2004. The facility is secured by the assets of
Navtech-Canada.
OFF-BALANCE SHEET ARRANGEMENTS
Not applicable.
- --------------------------------------------------------------------------------
NAVTECH, INC. 10
Item 3. Controls and Procedures
Our Chief Executive Officer and Chief Financial Officer conducted an evaluation
of the effectiveness of our disclosure controls and procedures. Based on this
evaluation, the Chief Executive Officer and Chief Financial Officer concluded
that our disclosure controls and procedures were effective as of April 30, 2004
in alerting them in a timely manner to material information required to be
included in our SEC reports. In addition, no change in our internal control over
financial reporting occurred during the fiscal quarter ended April 30, 2004 that
has materially affected, or is reasonably likely to materially affect, our
internal control over financial reporting.
- --------------------------------------------------------------------------------
NAVTECH, INC. 11
NAVTECH, INC.
- --------------------------------------------------------------------------------
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders
Our Annual Meeting of Shareholders was held on April 5, 2004. The following
persons were elected as directors of the Company, such persons to hold office
until their successors are elected or qualified:
Number of Shares
For Withheld
------------------------
David Strucke 2,353,948 2,662
Thomas D. Beynon 2,351,663 4,947
Michael Jakobowski 2,353,663 2,947
Michael Ueltzen 2,353,722 2,888
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)
31(A) Rule 13a-14(a)/15d-14(a) Certification of Chief Executive
Officer, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
31(B) Rule 13a-14(a)/15d-14(a) Certification of Chief Financial
Officer, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
32 Certification of Chief Executive Officer and Chief Financial
Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.
(b) Reports on Form 8-K
We did not file any Current Reports on Form 8-K during the quarter ended
April 30, 2004.
Items 1 through 3 and 5 are not applicable and have been omitted.
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(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.
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NAVTECH, INC. 12
NAVTECH, INC.
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Signatures
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Dated: June 14, 2004 NAVTECH, INC.
By: /s/ David Strucke
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David Strucke,
Chief Executive Officer
By: /s/ Gordon Heard
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Gordon Heard,
Chief Financial Officer