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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[x] Quarterly Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the period ended September 30, 2002.
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from January 1, 2002 to September 30, 2002.
Commission file number 0-29098
NAVIDEC, INC.
(Exact name of Registrant as specified in its charter)
COLORADO 33-0502730
(State or other (IRS Employer
jurisdiction of Identification No.)
incorporation)
6399 S. Fiddler's Green Circle, Suite 300 Greenwood Village, Colorado 80111
(Address of principal executive offices)
Registrant's telephone number: 303-222-1000
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
As of November 14, 2002, Registrant had 11,697,000 shares of common stock
outstanding
NAVIDEC, INC.
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Balance Sheets as of September 30, 2002 and December 31, 2001
Statements of Operations, Three and Nine months ended
September 30, 2002 and 2001
Statements of Cash Flows, Nine months ended September 30, 2002
and 2001
Notes to Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities and Use of Proceeds
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
This report contains forward-looking statements within the meaning of Section
21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the
Securities Act of 1933, as amended, and is subject to the safe harbors created
by those sections. These forward-looking statements are subject to significant
risks and uncertainties, including those identified in the section of this Form
10-Q entitled "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Factors That May Affect Future Operating Results,"
which may cause actual results to differ materially from those discussed in such
forward-looking statements. The forward-looking statements within this Form 10-Q
are identified by words such as "believes," "anticipates," "expects," "intends,"
"may," "will" and other similar expressions. However, these words are not the
exclusive means of identifying such statements. In addition, any statements
which refer to expectations, projections or other characterizations of future
events or circumstances are forward-looking statements. The Company undertakes
no obligation to publicly release the results of any revisions to these
forward-looking statements which may be made to reflect events or circumstances
occurring subsequent to the filing of this Form 10-Q with the Securities and
Exchange Commission ("SEC"). Readers are urged to carefully review and consider
the various disclosures made by the Company in this report and in the Company's
other reports filed with the SEC that attempt to advise interested parties of
the risks and factors that may affect the Company's business.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
NAVIDEC, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
December 31, September 30,
2001 2002
------------ -------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 2,465 $ 98
Restricted cash 1,200 --
Accounts receivable, net 2,475 1,063
Costs and estimated earnings in excess of billings -- 3
Inventory 320 320
Prepaid expenses and other 32 897
------- -------
Total current assets 6,492 2,381
PROPERTY, EQUIPMENT AND SOFTWARE, net 3,497 2,308
OTHER ASSETS:
Investment in CarPoint 588 --
Other investments 17 --
Other assets 18 --
------- -------
TOTAL ASSETS $10,612 $ 4,689
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 2,511 $852
Accrued liabilities 1,153 135
Current borrowings 843 688
Deferred revenue 144 4
------- -------
Total current liabilities 4,651 1,679
NON CURRENT LIABILITIES:
Long-term borrowings 927 --
Other 67 --
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, no par value, 20,000 shares authorized,
Voting 10,939 and 10,939 shares outstanding 54,532 54,451
Non-voting stock 701 shares outstanding 5,817 5,817
Warrants for common stock 1,175 1,175
Accumulated other comprehensive income (12) (17)
Deferred compensation (191) (55)
Retained earnings (deficit) (56,354) (58,361)
------- -------
Total stockholders' equity 4,967 3,010
------- -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $10,612 $ 4,689
======= =======
The accompanying notes to consolidated financial statements are an
integral part of these balance sheets.
NAVIDEC, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
3 Months Ended 9 Months Ended
September 30, September 30,
2001 2002 2001 2002
---- ---- ---- ----
REVENUE $ 5,579 $ 756 $ 18,730 $ 4,550
COST OF REVENUE 2,738 317 10,014 2,608
------- ------ -------- -------
GROSS PROFIT 2,841 439 8,716 1,942
OPERATING EXPENSES:
Product development 564 15 3,688 117
General and administrative 1,281 439 6,280 1,611
Sales and marketing 1,216 147 6,589 813
Restructuring expenses 1,831 -- 3,851 --
Stock Expense 244 13 244 54
Loss on impairment of Capital Asset 1,057 -- 1,239 --
Depreciation and amortization 1,035 390 2,428 1,167
------- ------ -------- -------
Total operating expenses 7,228 1,004 24,319 3,762
------- ------ -------- -------
LOSS FROM OPERATIONS (4,387) (565) (15,603) (1,820)
OTHER INCOME (EXPENSE):
Other Income (123) (91) 170 (188)
Loss on
CarPoint, Inc. investment -- -- (44,903) --
------- ------ -------- -------
Total other loss, net (123) (91) (44,733) (188)
------- ------ -------- -------
NET INCOME (LOSS) BEFORE TAXES
AND EXTRAORDINARY GAIN (4,510) (656) (60,336) (2,008)
INCOME TAX BENEFIT -- -- 8,000 --
------- ------ -------- -------
NET LOSS BEFORE
EXTRAORDINARY ITEMS (4,510) (656) (52,366) (2,008)
GAIN ON REDUCTION OF DEBT -- -- 450 --
------- ------ -------- -------
NET LOSS $(4,510) $ (656) $(51,866) $(2,008)
NET LOSS BEFORE
EXTRAORDINARY ITEMS
Per Share basic and diluted $ (.39) $ (.06) $ (4.50) $ (.17)
======= ====== ======== =======
NET INCOME (LOSS)
Per Share basic and diluted $ (.39) $ (.06) $ (4.46) $ (.17)
======= ====== ======== =======
WEIGHTED AVERAGE
SHARES OUTSTANDING Basic 11,640 11,694 11,640 11,681
Diluted 11,640 11,694 11,640 11,681
The accompanying notes to consolidated financial statements are an
integral part of these statements.
NAVIDEC, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Nine Months Ended
September 30,
2001 2002
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $(51,886) $(2,008)
Adjustments to reconcile net income (loss) to net
cash used in operating activities:
Depreciation 2,428 1,167
Extraordinary Gain (450) --
Loss on sale of CarPoint, Inc. 44,903 --
Loss on impairment of assets 1,239 --
Loss on sale of assets 41 --
Income tax benefit (8,000) --
Provision for bad debt 644 110
Realized gain on investment (213) --
Non-cash stock expense 244 54
Deferred Compensation -- 82
Changes in operating assets and liabilities:
Accounts receivable 430 1302
Costs and estimated earnings in excess of billings 868 (3)
Inventory 112 --
Prepaid expenses and other assets 471 (865)
Restricted Cash -- 1,200
Accounts payable (1,001) (1,659)
Accrued liabilities -- (1,018)
Deferred revenue 12 (140)
Other -- 18
-------- -------
Net cash used in operating activities (10,158) (1,760)
-------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Sale (Purchase) of property, equipment and software (1,268) 22
Proceeds from the sale of marketable debt securities 2,990 --
Proceeds from the sale of assets 242
Repayment of Notes Receivable 1,672
Settlement of costs on sale of CarPoint (815)
Sale of equity investments 7,742 588
Other -- (67)
-------- -------
Net cash provided by investing activities 10,563 543
-------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on notes payable and capital lease obligations (1,153) (1,500)
Proceeds from notes payable -- 350
Proceeds from issuance of common stock and warrants -- --
-------- -------
Net cash used in financing activities (1,153) (1,150)
-------- -------
NET DECREASE IN CASH AND CASH EQUIVALENTS (748) (2,367)
CASH AND CASH EQUIVALENTS, beginning of period 3,475 2,465
-------- -------
CASH AND CASH EQUIVALENTS, end of period $ 2,772 $ 98
-------- -------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for interest $ 127 $ 71
Capital acquired under capital lease $ 106 $ --
The accompanying notes to consolidated financial statements are an
integral part of these statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(1) BASIS OF PRESENTATION AND MANAGEMENT OPINION
The unaudited financial statements and related notes to the financial
statements presented herein have been prepared by the management of Navidec,
Inc. and subsidiary (the "Company") pursuant to the rules and regulations of
the Securities and Exchange Commission. Accordingly, certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been omitted
pursuant to such rules and regulations. The accompanying financial statements
were prepared in accordance with the accounting policies used in the
preparation of the Company's audited financial statements included in its
Annual Report on Form 10-K for the fiscal year ended December 31, 2001, and
should be read in conjunction with such financial statements and notes thereto.
Operating results for the periods presented are not necessarily indicative of
the results that may be expected for the full year.
The accounting policies followed by the Company are set forth in Note 1 to the
Company's consolidated financial statements in the Form 10-K for the year ended
December 31, 2001. It is suggested that these unaudited condensed consolidated
financial statements be read in conjunction with the consolidated financial
statements and notes included in the Form 10-K.
In the opinion of management, all adjustments (consisting only of normal
recurring adjustments), which are necessary for a fair presentation of operating
results for the interim period presented have been made.
(2) LIQUIDITY
The Company's financial statements for the nine months ended September 30, 2002
have been prepared on a going concern basis, which contemplates the realization
of assets and the settlement of liabilities and commitments in the normal course
of business. The Company has historically reported net losses, including
reporting a loss from operations of $2,008,000 for the nine months ended
September 30, 2002 and has a working capital of $1,841,000 as of September 30,
2002. At September 30, 2002, the Company had $307,000 outstanding under its term
credit facility. At September 30, 2002 the Company had $125,000 outstanding
under its line of credit agreement with the Bank. During the third quarter of
2002, the company was out of compliance with the covenants of its loan and as
such it not able to draw additional amounts against its line of credit, in
addition the Bank accelerated the term note, which is now due monthly with
principal and interest payments through September 2003. Subsequent to September
30, 2002, entered into an agreement with Interactive Capital to raise a minimum
of $500,000 to a maximum of $5,000,000 subject to shareholder approval.
Management cannot provide assurance that the Company will ultimately achieve
profitable operations or be cash positive or raise necessary additional debt
and/or equity capital. Management believes that if the Company can obtain
additional funding, as described above, the Company will have adequate capital
resources to continue operating and maintain its business strategy during the
next 12 months. If substantial losses continue and/or the Company is unable to
raise additional capital, liquidity problems could cause the Company to curtail
operations, liquidate assets, seek additional capital on less favorable terms
and/or pursue other such actions that could adversely affect future operations.
These financial statements do not include any adjustments relating to the
recoverability and classification of assets or the amounts and classification of
liabilities that might be necessary should the company be unable to continue as
a going concern.
(3) COMPREHENSIVE INCOME
Comprehensive income includes net income or loss and changes in equity from
non-owner transactions. The Company's comprehensive losses for the three-month
period and six-month period ended June 30, 2001 and 2002 were:
For the Three Months Ended
September 30
(in thousands)
2001 2002
---- ----
Net income (loss) $(4,510) $(656)
Unrealized gain (loss), net of taxes
and reclassification adjustments (23) --
------- -----
Comprehensive income (loss) $(4,533) $(656)
For the Nine Months Ended
September 30
(in thousands)
2001 2002
---- ----
Net income (loss) $(51,886) $(2,008)
Unrealized gain (loss), net of taxes
and reclassification adjustments (810) (4)
-------- -------
Comprehensive income (loss) $(52,696) $(2,012)
(4) RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 2001 the FASB issued SFAS No. 141, "Business Combinations." Under this
statement all business combinations must be accounted for under the purchase
method. The pooling method is no longer allowed. The statement also establishes
criteria to assess when to recognize intangible assets separately from goodwill.
At this time the Company has no pending business combinations that would be
affected by the adoption of this statement.
In June 2001 the FASB issued SFAS No. 142, "Goodwill and Other Intangible
Assets." The statement addresses how goodwill and other intangible assets should
be accounted for when acquired by some means other than a business combination.
It also addresses the accounting for and disclosure about goodwill and other
intangible assets after they have been initially recognized in the financial
statements and provides specific guidance for testing goodwill and other
intangible assets for impairment. This statement is effective for fiscal years
beginning after December 15, 2001. The Company does not anticipate that the
adoption of this statement will have a material effect on the Company's
financial position or results of operations.
In July 2001 the FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations." This statement requires companies to recognize the fair value of
an asset retirement liability in the financial statements by capitalizing that
cost as part of the cost of the related long-lived asset. The asset retirement
liability should then be allocated to expense by using a systematic and rational
method. The statement is effective for fiscal years beginning after June 15,
2002. Adoption of this statement is not expected to have a significant impact on
the Company's financial position or results of operations.
In August 2001 the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets." This statement provides a single accounting
model for long-lived assets to be disposed of and changes the criteria that
would have to be met to classify an asset as held-for-sale. The statement also
requires expected future operating losses from discontinued operations to be
recognized in the periods in which the losses are incurred, which is a change
from the current requirement of recognizing such operating losses as of the
measurement date. The statement is effective for fiscal years beginning after
December 15, 2001. The Company does not anticipate that the adoption of the
statement will have a material effect on the Company's financial position or
results of operations.
In April 2002, the FASB approved for issuance Statements of Financial Accounting
Standards No. 145, "Rescission of FASB Statements No. 4, 44 and 64, Amendment of
SFAS 13, and Technical Corrections" ("SFAS 145"). SFAS 145 rescinds previous
accounting guidance, which required all gains and losses from
extinguishment of debt be classified as an extraordinary item. Under SFAS 145
classification of debt extinguishment depends on the facts and circumstances of
the transaction. SFAS 145 is effective for fiscal years beginning after May 15,
2002 and adoption is not expected to have a material effect on the Company's
financial position or results of its operations.
In July 2002, the FASB issued Statements of Financial Accounting Standards No.
146, "Accounting for Costs Associated with Exit or Disposal Activities" (SFAS
146). SFAS 146 requires companies to recognize costs associated with exit or
disposal activities when they are incurred rather than at the date of a
commitment to an exit or disposal plan. Examples of costs covered by SFAS 146
include lease termination costs and certain employee severance costs that are
associated with a restructuring, discontinued operation, plant closing, or other
exit or disposal activity. SFAS 146 is to be applied prospectively to exit or
disposal activities initiated after December 31, 2002. The adoption of SFAS 146
is not expected to have a material effect on the Company's financial position or
results of its operations.
(5) COSTS AND ESTIMATED EARNINGS IN EXCESS OF BILLINGS
Costs and estimated earnings in excess of billings as of September 30, 2002 and
2001 are comprised of the following (in thousands):
June 30,
2002 2001
---- ----
Costs incurred on contracts in progress $21 $ 607
Estimated earnings 25 983
--- ------
46 1,590
Less progress billings (43) (913)
--- ------
$ 3 $ 677
=== ======
(6) INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out) or market, and
consist primarily of products held for resale and use in on-line solutions.
(7) NET INCOME (LOSS) PER SHARE
Basic net loss per share is computed by dividing net loss for the period by the
weighted average number of common shares outstanding for the period. Diluted net
loss per share is computed by dividing the net loss for the period by the
weighted average number of common and potential common shares outstanding during
the period if the effect of the potential common shares is dilutive. The Company
has excluded common stock issuable upon conversion of all warrants and stock
options from the computation of diluted earnings per share, as the effect of all
such securities is anti-dilutive for all periods presented. Shares issuable
under warrants and options were 1,160,000 and 823,000 as of September 30, 2001
and 2002, respectively.
(8) SEGMENT REPORTING
The Company historically has operated in three different segments: eSolutions,
DriveOff.com ("Automotive") and Product Distribution. With the sale of
DriveOff.com in October 2000 and the discontinuation of Product Distribution in
September 2001, the Company now operates solely in the eSolutions segment.
Management has chosen to organize the Company around these segments based on
differences in products and services.
eSolutions provides custom solutions, including the architecture, design,
development and integration of high tech solutions, utilizing web technology.
Product Distribution provides the resale and configuration of third party
software and hardware components, graphical printers and supplies.
Segment operations are measured consistent with the accounting policies used in
these consolidated financial statements.
The following provides information on the Company's segments (unaudited):
For the Three Months Ended
September 30, 2001
(in thousands)
Product
eSolutions Distribution Corporate Total
Revenues from external
customers.................. $5,492 $ 87 $ -- $ 5,579
Loss from operations....... $ (189) $(31) $(4,167)(1) $(4,387)
Identifiable assets........ $4,861 $124 $ 8,722(2) $13,707
For the Three Months Ended
September 30, 2002
(in thousands)
Product
eSolutions Distribution Corporate Total
Revenues from external
customers................. $ 756 $ -- $ -- $ 756
Loss from operations...... $ (162) $ -- $ (494)(1) $ (656)
Identifiable assets....... $1,066 $ -- $3,623(2) $4,689
For the Nine Months Ended
September 30, 2001
(in thousands)
Product
eSolutions Distribution Corporate Total
Revenues from external
customers................. $18,336 $ 394 $ -- $ 18,730
Loss from operations...... $(7,669) $(172) $(7,762)(1) $(15,603)
Identifiable assets....... $ 4,861 $ 124 $ 8,722(2) $ 13,707
For the Nine Months Ended
September 30, 2002
(in thousands)
Product
eSolutions Distribution Corporate Total
Revenues from external
customers................. $4,550 $ -- $ -- $ 4,550
Loss from operations...... $ (599) $ -- $(1,409)(1) $(2,008)
Identifiable assets....... $1,066 $ -- $ 3,623(2) $ 4,689
(1) Corporate loss from operations represents depreciation expense,
restructuring charges, non-cash stock compensation expense and impairment of
assets.
(2) Corporate assets are those that are not directly identifiable to a
particular segment and includes cash, restricted cash, notes receivable,
prepaids, property and equipment, and other assets.
(9) NOTES RECEIVABLE IN DEFAULT
In March, June, July and August of 2000, the Company funded four Promissory
Notes to Westar Financial, Inc. for $1.2 million, $1 million, $1 million and
$500,000, respectively. The notes carried an interest rate of 9% annually and
are unsecured. The March and June notes were paid in full at the scheduled due
dates of March 31, 2001 and June 5, 2001. The July 2000 note was due on July 5,
2001 and the August 2000 note was due on August 25, 2001; and Westar Financial
has not paid these notes. On December 22, 2001 Westar filled for reorganization
under Chapter 11. Accrued interest on the two remaining notes receivable of
$1,500,000 was $161,000. In December, 2001 the Company wrote off the balance of
the Note and accrued interest and has included the charge in other (expense)
income in the accompanying consolidated statement of operations. The Company is
pursuing recovery on these notes through the bankruptcy court.
(10) RESTRUCTURING AND OTHER RELATED CHARGES
During the first nine months of 2001, Navidec recorded restructuring and other
related charges of approximately $5.1 million for headcount reductions and
losses related to cancellation and renegotiation of operating leases. These
headcount reductions and lease changes were taken to align Navidec's cost
structure with changing market conditions and to create a more flexible and
efficient organization. The plan resulted in a headcount reduction of
approximately 170 employees, which was comprised 60% of non-billable staff and
40% of billable staff.
The Company paid $3,337,000 to the terminated employees during the nine months
ended September 30, 2001. The remaining $1.8 million of restructuring charges
consists primarily of exit costs associated with the Company's termination of
its lease for office space, which is no longer needed due to the reduced
headcount, including $1.2 million of abandoned leasehold improvements. During
the quarter ended September 30, 2001, the Company took an impairment charge of
$182,000 to write-down leased workstations to their estimated fair value of
$75,000. Fair value was determined based upon current negotiations to sell the
workstations.
(11) CARPOINT INVESTMENT
In March 2001, Navidec concluded there had been an other than temporary
impairment in its CarPoint investment and wrote-down its shares to their
estimated fair value of $0.63 per share. This write-down resulted in a charge of
approximately $43.5 million in the quarter ended March 31, 2001.
In May 2001, Navidec sold 12,258,300 shares of CarPoint, Inc. for net proceeds
of $6.9 million. The sale of the stock resulted in a recognized loss on sale of
the investment of $858,000. In connection with the sale, the Company's Board of
Directors authorized the payment of a bonus of approximately $513,000. The
remaining shares where written-down to $0.56 per share, the price received for
the shares sold. This resulted in a charge of $49,000 for the second quarter
ended June 30, 2001. As of December 31, 2001, the Company held 1,050,000 shares
valued at $588,000. These shares were sold on March 31, 2002 to one of the
majority shareholders at CarPoint.
The net results of the above transactions have been included in impairment of
investments of $44.9 million in the accompanying consolidated statements of
operations.
(12) SUBSEQUENT EVENTS
Navidec signed an agreement with Interactive Capital, Inc. that will allow it to
draw up to $5 million over the next two years. Interactive Capital's initial
debenture will be for $250,000 with a conversion price of $.10 per common share.
Future purchases will also take the form of convertible debentures priced to
convert at the market at the time the debentures are purchased. The Company will
be seeking shareholder approval to permit the balance of the financing.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
CRITICAL ACCOUNTING POLICIES
We have identified the policies below as critical to our business operations and
the understanding of our results from operations. The impact and any associated
risks related to these policies on our business operations is discussed
throughout Management's Discussion and Analysis of Financial Conditions and
Results of Operations where such policies affect our reported and expected
financial results. For a detailed discussion on the application of these and
other accounting policies, see Note 2 in the Notes to the Consolidated Financial
Statements in Item eight of this Annual Report on Form 10-K, beginning on page
F-8. Note that our preparation of this Annual Report on Form 10-K requires us to
make estimates and assumptions that affect the reported amount of assets and
liabilities, disclosure of contingent assets and liabilities at the date of our
financial statements, and the reported amounts of revenue and expenses during
the reporting period. There can be no assurance that actual results will not
differ from those estimates.
- -Revenue recognition. Our revenue recognition policy is significant because our
revenue is a key component of our results of operations. In addition, our
revenue recognition determines the timing of certain expenses, such as
commissions. We follow very specific and detailed guidelines in measuring
revenue, however, certain judgments affect the application of our revenue
policy. Revenue results are difficult to predict, and any shortfall in revenue
or delay in recognizing revenue could cause our operating results to vary
significantly from quarter to quarter and could result in future operating
losses. Approximately 60% and 50% of our revenue was generated from fixed-price,
fixed completion date work for the year 2001 and the first six months of 2002
respectively. Revenue for this work is recognized on a percentage-of-completion
basis using the ratio of direct costs incurred to the estimated total direct
costs of the engagement. Estimates of the total direct costs of the engagement
require judgments about the time needed to complete the project and the level of
personnel involved. Management regularly reviews its estimates and underlying
assumptions for contracts in progress. The remaining 40% and 50% of revenue for
2001 and the first six months of 2002 respectively was from time and materials
contracts for which revenue is recognized as the work is completed. Revenue
recognition for time and materials contracts is not significantly impacted by
judgments and estimates.
- -Reserves for Bad Debt and Revenue Contingencies. Our policy on reserves for bad
debt and revenue contingencies determines the timing and recognition of expenses
and revenue recognition.
We follow guidelines that reserve based off of historical and account specific
trends, however, certain judgments affect the application of our bad debt and
revenue reserve contingencies. Repayment is difficult to predict, and any
shortfall or delay in recognizing payment could cause operating results to vary
significantly from quarter to quarter and could result in future operating
losses. Our receivables are recorded net of an allowance for doubtful accounts
which requires management to estimate amounts due which may not be collected.
This estimate requires consideration of general economic conditions, overall
historical trends related to the Company's collection of receivables, customer
specific payment history, and customer specific factors affecting their ability
to pay amounts due. Management routinely assesses and revises its estimate of
the allowance for doubtful accounts.
OVERVIEW
Navidec provides quality integrated e-business solutions and services that
transform traditional business into e-business. Navidec's suite of proven
solutions enable an enterprise to centralize and consolidate their content and
applications onto the Internet to improve user experience, collaboration and
system administration to ensure lower operating costs and improved revenue
opportunities. This is done through the integration and extension of
best-of-breed portal, directory, security and integration software developed by
the leading internet software vendors.
Our teams of experts deliver not only extensive Internet development and system
integration experience, but also comprehensive domain knowledge within the
sectors of financial services, energy, telecommunications, utilities and
technology.
The core philosophy of Navidec is to develop long-term partnerships by
dedicating teams of experienced personnel to a client's solutions to ensure
longevity of the relationship and a consistent vision for their solution. The
result, rapid deployment of efficient, cost effective e-business solutions,
which position our customers for industry leadership.
Initially formed in July 1993 as a value-added reseller of computer products
under the name of ACI Systems, Inc., we were renamed Navidec, Inc., in July
1996, after our merger with Interactive Planet, Inc., a designer and developer
of Internet web sites. In July 1997, TouchSource, Inc., a designer and developer
of interactive kiosks was acquired. This acquisition significantly enhanced
Navidec's business model by combining expertise in traditional marketing and
distribution with Internet/Intranet technology. In December 1998, CarWizard.com
and LeaseSource.com were acquired, two prominent online automotive sites, in
order to expand Navidec's on-line automotive presence.
During the first nine months of 2002, Navidec generated revenues from its
eSolutions division. Approximately 50% of the eSolutions revenue was generated
from fixed-price, fixed completion date contracts. In developing these
contracts, consideration is given to the technical complexity of the engagement,
the resources required to complete the engagement and the extent to which we
will be able to deploy internally developed software tools to deliver the
solution. The goal is to make most eSolutions work deliverable within a ninety
(90) to one hundred twenty (120)-day time frame. Revenue for this work is
recognized on percentage-of-completion accounting basis using the ratio of
direct costs incurred as compared to the estimated total direct costs of the
engagement. The remaining 50% of revenue is from work done on a time and
materials basis. Revenue for this work is recognized as it is completed. Navidec
is focused on expanding its eSolutions services offerings and to incorporating
applications management and hosting services, which have the potential to
generate recurring revenues.
Navidec's product distribution business generated revenue through the resale of
third party software and hardware components, graphical printers and supplies.
Since product distribution is not related to our core strategy, we discontinued
these sales efforts in 2001. All of the assets associated with the product
distribution segment were sold or written off in 2001.
Navidec's operating expenses consist of product development, general and
administrative, sales and marketing and depreciation, amortization and
impairment of goodwill. Additional operating expenses were incurred in 2001 and
2002, such as non-cash stock expense, restructuring charges and losses on
impairment of assets. Product development includes salaries and out-of-pocket
expenses incurred in developing new technologies for our own use or for future
customer applications generally, as opposed to customer-specific development.
General and administrative consists primarily of salary and benefit expenses for
our non-billable employees. It also includes expenses associated with our office
facility and equipment leases. Sales and marketing includes personnel costs,
advertising costs, costs associated with participation in trade shows and direct
marketing program and related travel expenses. Non-cash stock expense relates to
employee stock options that were repriced in 2001, and warrants given to a third
party vendor for marketing services provided during the year. Restructuring
charges are related to expenses incurred in reducing employees to a level that
corresponded to current demands for services, and expenses related with
restructuring leases to meet the needs of the company. Loss on impairment of
assets is the cost of bringing assets in line with current market value.
THREE-MONTH RESULTS OF OPERATIONS
Three Months
ended September 30,
(in thousands)
2001 2002
---- ----
REVENUE:
eSolutions $5,492 $756
Product distribution 87 --
------ ----
Total revenue 5,579 756
COST OF REVENUE 2,738 317
------ ----
Gross margin 2,841 439
Three Months
ended September 30,
(in thousands)
2001 2002
---- ----
OPERATING EXPENSES:
Product development 564 15
General and administrative 1,281 439
Sales and marketing 1,216 147
------- -----
Total operating expenses before restructuring
Non-cash stock and depreciation expenses 3,061 601
------- -----
LOSS FROM OPERATIONS BEFORE
RESTRUCTURING NON CASH STOCK
AND DEPRECIATION EXPENSES (220) (162)
Restructuring expenses 2,888 --
Non-cash stock expense 244 13
Depreciation and amortization 1,035 390
------- -----
Total restructuring, non-cash stock
and depreciation expense 4,167 403
LOSS FROM OPERATIONS $(4,387) $(565)
======= =====
THREE-MONTH RESULTS OF OPERATIONS AS A PERCENTAGE OF REVENUES
Three Months
ended June 30,
2001 2002
---- ----
REVENUE:
eSolutions 98.4% 100.0%
Product distribution 1.6% 0.0%
----- -----
Total revenue 100.0% 100.0%
COST OF REVENUE 49.1% 41.9%
Gross margin 50.9% 58.1%
OPERATING EXPENSES:
Product development 10.1% 2.0%
General and administrative 23.0% 58.1%
Sales and marketing 21.8% 19.4%
----- -----
Total operating expenses before restructuring
Non-cash and depreciation expenses 54.9% 79.5%
----- -----
LOSS FROM OPERATIONS BEFORE
RESTRUCTURING NON CASH STOCK
AND DEPRECIATION EXPENSES (3.9)% (21.4)%
Restructuring expenses 51.8% 0.0%
Non-cash stock Expense 4.4% 2.0%
Depreciation and amortization 18.6% 51.6%
----- -----
Total restructuring, non-cash stock
and depreciation expense 74.7% 53.5%
LOSS FROM OPERATIONS (78.6)% (74.7)%
===== =====
Three Months Ended September 30, 2002 and 2001
Revenue for the quarter ended September 30, 2002 decreased $4.8 million, or
86.4%, from 2001 revenues of $5.6 million to $756,000 in 2002. The decrease was
primarily a result of lower market demand for IT services, the discontinuation
of hardware sales associated with eSolutions sales and a struggling economy.
Revenue in 2002 associated with eSolutions decreased $4.7 million, or 86.2%,
from 2001 revenues of $5.5 million to $756,000 in 2002. Product distribution
was discontinued in the forth quarter of 2001 resulting in a revenue decreased
$87,000.
Gross margin decreased $2.4 million, or 84.5%, from gross margin of $2.8
million in 2001 to $439,000 in 2002. As a percentage of revenue, gross profit
increased from 50.9% to 58.1%. The increase in the gross margin was a result of
discontinued hardware sales associated with eSolutions project that was
discontinued in the 2nd quarter of 2002.
Product development costs decreased $549,000 or 97.3%, from expenses of $564,000
million in 2001 to $15,000 in 2002. As a percentage of revenue, product
development costs decreased from 10.1% in 2001 to 2.0% in 2002. The decrease in
product development cost is the result of narrowed focus on the areas that
Navidec is pursuing.
General and administrative expenses decreased $842,000 or 65.7%, from general
and administrative expenses of $1.3 million in 2001 to $439,000 in 2002. As a
percentage of revenue, general and administrative expenses increased from 23.0%
in 2001 to 58.1% in 2002. The decreased spending was primarily due to decreased
overhead expenses related to lower revenues in 2002. Navidec is projecting
general and administrative expenses to decrease during the forth quarter of
2002, as a result of personnel changes and reduced overhead expenses.
Sales and marketing expenses decreased by $1.0 million, or 87.9%, from $1.2
million in 2001 to $147,000 in 2002. As a percentage of revenue, sales and
marketing expenses decreased from 21.8% to 19.4% of revenue in 2001 and 2002,
respectively.
During the quarter ended September 30, 2001, Navidec recorded restructuring
charges for employee terminations and lease exit costs of approximately $2.9
million. These restructuring charges were taken to align Navidec's cost
structure with changing market conditions and to create a more flexible and
efficient organization. The plan resulted in a headcount reduction of
approximately 170 employees including 90 in the third quarter, which was
comprised 40% of non-billable staff and 60% of billable staff.
$1.3 million was paid to the terminated employees during the three months ended
September 30, 2001. The remaining $1.6 million of restructuring charges consist
primarily of exit costs associated with the Company's termination of its lease
for office space, which is no longer needed due to the reduced headcount.
Included in the $1.6 million is $1.1 million related to abandoned leasehold
improvements.
During 2001, the Company cancelled approximately 1.3 million unexercised and
outstanding stock options and granted 883,000 replacement options with a strike
price of zero. Deferred compensation was recorded for the intrinsic value of
the options and compensation expense of $566,000 was recorded as non cash stock
expense as the deferred compensation was amortized. On September 30, 2002
$55,000 of deferred compensation remained, which will be amortized into
non-cash stock expense in future periods. During the quarter ended September
30, 2002 the Company had non-cash stock expense of $13,000. The allocation of
non cash stock expense to the same functional classification as the employees'
cash compensation is as follows:
September 30,
2002
(In Thousands)
Cost of revenue $ 3
Sales and marketing 1
General and administrative 11
---
Total non cash stock expense $15
===
Depreciation and amortization decreased $645,000 or 62.3% from $1.0 million in
2001 to $390,000 in 2002. Depreciation was down in part due to asset
impairments during the year and due to more assets becoming fully depreciated.
As a result of the items discussed above, we recorded a net loss of $656,000
for the quarter ended June 30, 2002 versus a net loss of $4.5 million in 2001.
Our basic and diluted loss per share was $0.06 in 2002 versus basic and diluted
loss per share of $0.39 in 2001.
NINE-MONTH RESULTS OF OPERATIONS
Nine Months
ended September 30,
(in thousands)
2001 2002
---- ----
REVENUE:
eSolutions $ 18,336 $ 4,550
Product distribution 394 --
-------- -------
Total revenue 18,730 4,550
COST OF REVENUE 10,014 2,608
-------- -------
Gross margin 8,716 1,942
OPERATING EXPENSES:
Product development 3,688 117
General and administrative 6,280 1,611
Sales and marketing 6,589 813
-------- -------
Total operating expenses before restructuring
Non-cash stock and depreciation expenses 16,557 2,541
-------- -------
LOSS FROM OPERATIONS BEFORE
RESTRUCTURING NON CASH STOCK
AND DEPRECIATION EXPENSES (7,841) (599)
Restructuring expenses 5,090 --
Non-cash stock expense 244 54
Depreciation and amortization 2,428 1,167
-------- -------
Total restructuring, non-cash stock
and depreciation expense 7,762 1,221
LOSS FROM OPERATIONS $(15,603) $(1,820)
======== =======
NINE-MONTH RESULTS OF OPERATIONS AS A PERCENTAGE OF REVENUES
Nine Months
ended September 30,
2001 2002
---- ----
REVENUE:
eSolutions 97.9% 100.0%
Product distribution 2.1% 0.0%
----- -----
Total revenue 100.0% 100.0%
COST OF REVENUE 55.5% 57.3%
Gross margin 46.5% 42.7%
OPERATING EXPENSES:
Product development 19.7% 2.6%
General and administrative 33.5% 35.4%
Sales and marketing 35.2% 17.9%
----- -----
Total operating expenses before restructuring
Non-cash and depreciation expenses 88.4% 55.8%
----- -----
LOSS FROM OPERATIONS BEFORE
RESTRUCTURING NON CASH STOCK
AND DEPRECIATION EXPENSES (41.9)% (13.2)%
Restructuring expenses 27.2% 0.0%
Non-cash stock Expense 1.3% 1.2%
Depreciation and amortization 13.0% 25.6%
----- -----
Total restructuring, non-cash stock
and depreciation expense 41.5% 26.8%
LOSS FROM OPERATIONS (83.3)% (40.0)%
===== =====
Nine Months Ended June 30, 2002 and 2001
Revenue for the nine months ended September 30, 2002 decreased $14.2 million,
or 75.7%, from 2001 revenues of $18.7 million to $4.6 million in 2002. The
decree was primarily a result of lower market demand for IT services, and a
struggling economy. Revenue in 2002 associated with eSolutions decreased $13.8
million, or 75.2%, from 2001, down to $4.6 million from $18.3 million. Product
distribution was discontinued in the forth quarter of 2001 resulting in a
revenue decreased $394,000.
Gross margin decreased $6.8 million, or 77.7%, from gross margin of $8.7
million in 2001 to $1.9 million in 2002. As a percentage of revenue, gross
profit decreased from 46.5% to 42.7%. The decrease in the gross margin was a
result of decreasing margins in eSolutions due to pricing pressures.
Product development costs decreased $3.6 million, or 96.8%, from expenses of
$3.7 million in 2001 to $117,000 in 2002. As a percentage of revenue, product
development costs decreased from 19.7% in 2001 to 2.6% in 2002. The decrease in
product development cost is the result of narrowed focus on the areas that
Navidec is pursuing.
General and administrative expenses decreased $4.7 million or 74.3%, from
general and administrative expenses of $6.3 million in 2001 to $1.6 million in
2002. As a percentage of revenue, general and administrative expenses increased
from 33.5% in 2001 to 35.4% in 2002. The decreased spending was primarily due
to decreased overhead expenses related to lower revenues in 2002. Navidec is
projecting general and administrative expenses to remain stable for the
remainder of 2002, as a result of personnel changes and reduced overhead
expenses.
Sales and marketing expenses decreased by $5.8 million, or 87.7%, from $6.6
million in 2001 to $813,000 in 2002. As a percentage of revenue, sales and
marketing expenses decreased from 35.2% to 17.9% of revenue in 2001 and 2002,
respectively.
During the first nine months of 2001, Navidec recorded restructuring charges
for employee terminations and lease exit costs of approximately $5.1 million.
These restructuring charges were taken to align Navidec's cost structure with
changing market conditions and to create a more flexible and efficient
organization. The plan resulted in a headcount reduction of approximately 170
employees, which was comprised 60% of non-billable staff and 40% of billable
staff.
$3.3 million was paid to the terminated employees during the nine months ended
September 30, 2001. The remaining $1.8 million of restructuring charges consist
primarily of exit costs associated with the Company's termination of its lease
for office space, which is no longer needed due to the reduced headcount.
Included in the $1.8 million is $1.2 million related to abandoned leasehold
improvements.
During 2001, the Company cancelled approximately 1.3 million unexercised and
outstanding stock options and granted 883,000 replacement options with a strike
price of zero. Deferred compensation was recorded for the intrinsic value of
the options and compensation expense of $566,000 was recorded as non-cash stock
expense as the deferred compensation was amortized. On September 30, 2002
$55,000 of deferred compensation remained, which will be amortized into
non-cash stock expense in future periods. During the nine months ended
September 30, 2002 the Company had non-cash stock expense of $54,000. The
allocation of non cash stock expense to the same functional classification as
the employees' cash compensation is as follows:
September 30,
2002
(In Thousands)
Cost of revenue $10
Sales and marketing 3
General and administrative 42
---
Total non cash stock expense $55
===
Depreciation and amortization decreased $1.3 million or 51.9% from $2.4 million
in 2001 to $1.2 million in 2002. Depreciation was down in part due to asset
impairments during the year and due to more assets becoming fully depreciated.
During the first nine months of 2001 the company reduced the carrying value of
its investment in CarPoint, Inc to net realizable value and sold 12.3 million
shares of its 13.3 million shares held. Navidec recorded an other than
temporary loss on its investment in CarPoint, Inc. of $44.5 million. The
remainder of the CarPoint stock was carried at $588,000 at December 31, 2001
and was sold in March 2002.
During the quarter ended June 30, 2001 Navidec renegotiated a note payable
resulting in an extraordinary gain of $450,000 for the quarter. No similar
transactions occurred in 2002.
The Company reversed its deferred tax liabilities during the first quarter of
2001 resulting in a non-cash benefit of $8 million.
As a result of the items discussed above, we recorded a net loss of $2.0 million
for the nine months ended September 30, 2002 versus a net loss of $51.8 million
in 2001. Our basic and diluted loss per share was $0.17 in 2002 versus basic and
diluted loss per share of $4.46 in 2001.
LIQUIDITY AND CAPITAL RESOURCES
From our inception through September 30, 2002, we funded our operations
primarily from the following sources:
- - equity proceeds through public offerings and private placements of our
securities;
- - revenue generated from operations;
- - loans from principal shareholders and employees;
- - loans and lines of credit; and
- - accounts receivable factoring arrangements made available by banks.
The Company's financial statements for the nine months ended September 30, 2002
have been prepared on a going concern basis, which contemplates the realization
of assets and the settlement of liabilities and commitments in the normal
course of business. The Company has historically reported net losses, including
reporting a loss from operations of $2,008,000 for the nine months ended
September 30, 2002 and has a working capital of $1,841,000 as of September 30,
2002. At September 30, 2002, the Company had $307,000 outstanding under its
term credit facility. At September 30, 2002 the Company had $125,000
outstanding under its line of credit agreement with the Bank. During the third
quarter of 2002, the company was out of compliance with the covenants of its
loan and as such it not able to draw additional amounts against its line of
credit, in addition the Bank accelerated the term note, which is now due
monthly with principal and interest payments through September 2003. Subsequent
to September 30, 2002, entered into an agreement with Interactive Capital to
raise a minimum of $500,000 to a maximum of $5,000,000 subject to shareholder
approval.
Management cannot provide assurance that the Company will ultimately achieve
profitable operations or be cash positive or raise necessary additional debt
and/or equity capital. Management believes that if the Company can obtain
additional funding, as described above, the Company will have adequate capital
resources to continue operating and maintain its business strategy during the
next 12 months. If substantial losses continue and/or the Company is unable to
raise additional capital, liquidity problems could cause the Company to curtail
operations, liquidate assets, seek additional capital on less favorable terms
and/or pursue other such actions that could adversely affect future operations.
These financial statements do not include any adjustments relating to the
recoverability and classification of assets or the amounts and classification
of liabilities that might be necessary should the company be unable to continue
as a going concern.
Cash, flow from operations has not historically been sufficient to sustain our
operations without the above additional sources of capital.
As of September 30, 2002, we had cash and cash equivalents of $98,000, and
working capital of $702,000. This compares with cash and cash equivalents of
$2.7 million, and working capital of $3.9 million as of September 30, 2001.
Cash used in our operating activities totaled $1.8 million for the nine months
ended September 30, 2002 compared with $10.2 million for the nine months ended
September 30, 2001. This was due to a decrease in net loss before non-cash
adjustments of $49.2 million between periods ($51.2 million in 2001 to $2.0
million in 2002) and cash used in changes in net operating assets of $1.2
million in 2002 versus cash provided of $892,000 in 2001.
Cash provided by investing activities totaled $543,000 for the nine months
ended September 30, 2002 compared with $10.6 million for the nine months ended
September 30, 2001.
Cash used in financing activities was $1.2 million during the nine months ended
September 30, 2002 and $1.2 for the nine months ended September 30, 2001.
The Company's financial statements for the nine months ended September 30, 2002
have been prepared on a going concern basis, which contemplates the realization
of assets and the settlement of liabilities and commitments in the normal
course of business. The Company has historically reported net losses, including
reporting a loss from operations of $2,008,000 for the nine months ended
September 30, 2002 and has a working capital of $1,841,000 as of September 30,
2002. At September 30, 2002, the Company had $307,000 outstanding under its
term credit facility. At September 30, 2002 the Company had $125,000
outstanding under its line of credit agreement with the Bank. During the third
quarter of 2002, the company was out of compliance with the covenants of its
loan and as such it not able to draw additional amounts against its line of
credit, in addition the Bank accelerated the term note, which is now due
monthly with principal and interest payments through September 2003. Subsequent
to September 30, 2002, entered into an agreement with Interactive Capital to
raise a minimum of $500,000 to a maximum of $5,000,000 subject to shareholder
approval.
Management cannot provide assurance that the Company will ultimately achieve
profitable operations or be cash positive or raise necessary additional debt
and/or equity capital. Management believes that if the Company can obtain
additional funding, as described above, the Company will have adequate capital
resources to continue operating and maintain its business strategy during the
next 12 months. If substantial losses continue and/or the Company is unable to
raise additional capital, liquidity problems could cause the Company to curtail
operations, liquidate assets, seek additional capital on less favorable terms
and/or pursue other such actions that could adversely affect future operations.
These financial statements do not include any adjustments relating to the
recoverability and classification of assets or the amounts and classification
of liabilities that might be necessary should the company be unable to continue
as a going concern.
Navidec is subject to various contractual obligations including long-term debt,
capital leases, and operating leases. The table below summarizes these
contractual obligations by year (in thousands):
Less than
Total 1 year 1-3 yrs. Thereafter
Long-term debt,
including current portion $ 383 $ 383 $ -- $ --
Line of Credit 125 125 -- --
Capital leases 179 179 -- --
Operating leases 1,215 540 675 --
------ ------ ---- ----
Total contractual cash obligations $1,902 $1,227 $675 $ --
====== ====== ==== ====
Item 3.
CONTROLS AND PROCEEDURES
With the participation of management, the Company's chief executive officer and
chief financial officer evaluated the Company's disclosure controls and
procedures on October 11, 2002. Based on this evaluation, the chief executive
officer and the chief financial officer concluded that the disclosure controls
and procedures are effective in connection with the Company's filing of its
quarterly report on Form 10-QSB for the quarterly period ended August 31, 2002.
Subsequent to October 11, 2002, through the date of this filing of Form 10-Q
for the quarterly period ended August 31, 2002, there have been no significant
changes in the Company's internal controls or in other factors that could
significantly affect these controls, including any significant deficiencies or
material weaknesses of internal controls that would require corrective action.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Navidec is exposed to the impact of interest rate changes and change in the
market values of its investments. Based on our market risk sensitive
instruments outstanding as of September 30, 2002, as described below, we have
determined that there was no material market risk exposure to our consolidated
financial position, results of operations, or cash flows as of such date. We do
not enter into derivatives or other financial instruments for trading or
speculative purposes.
INTEREST RATE RISK - At September 30, 2002, Navidec's exposure to market rate
risk for changes in interest rates relates primarily to its borrowings. Navidec
has not used derivative financial instruments in its credit facilities. At
December 31, 2001, the company had $1 million of debt outstanding at a floating
interest rate of Prime + 1.50% with a floor of 8.4% (8.4% at September 30,
2002). The estimated fair value of our long-term debt approximates its carrying
value because of the variable rates. The debt matures as follows: 2002 -
$150,000; 2003 - $358,000;. A hypothetical 10% increase in the Prime rate would
not be significant to the Company's financial position, results of operations,
or cash flows.
INVESTMENT RISK - Navidec has investments in equity instruments in information
technology companies for business and strategic purposes. These investments are
included in other long-term assets and are accounted for under the cost method
since ownership is less than twenty percent (20%) and Navidec does not assert
significant influence.
INFLATION
The Company does not believe that inflation will have a material impact on our
future operations.
FORWARD LOOKING INFORMATION
Information contained in this report, other than historical information, should
be considered forward looking and reflects management's current views of future
events and financial performance that involve a number of risks and
uncertainties. The factors that could cause actual results to differ materially
include, but are not limited to, the following: general economic conditions and
developments within the Internet and Intranet industries; competition; market
acceptance of our products and services; length of sales cycle; variability of
sales order flow; management of growth; and other risk factors identified from
time to time in the Company's filings with the Securities and Exchange
Commission. These filings are available on-line at http://www.sec.gov.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
In the normal course of business, the Company is subject to, and may become a
party to, other litigation. Management believes there are no other matters
currently in litigation that could have a material impact on the Company's
financial position or results of operations.
Item 2. Changes in Securities and Use of Proceeds
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
None
(b) Form 8-K
None
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
NAVIDEC, INC.
By /S/RALPH ARMIJO
Ralph Armijo
President and CEO
Date: November 14, 2002
By /S/ PAT MAWHINNEY
Pat Mawhinney
Chief Financial Officer
Date: November 14, 2002
Certification of the Chief Executive Office and Chief Financial officer of
Navidec, Inc. Pursuant to 18 U.S.C. Section 1350
We certify that, to the best of our knowledge and belief, the Quarterly report
on form 10Q of Navidec, Inc. for the period ended September 30, 2002:
1) complies with the requirements of Section 13(a) or 15(d) of
the Securities and Exchange act of 1934; and
2) the information contained in the Report fairly presents, in
all material respects, the financial condition and results of
operations of Navidec, Inc.
By /S/RALPH ARMIJO
Ralph Armijo
President and CEO
Date: November 14, 2002
By /S/ PAT MAWHINNEY
Pat Mawhinney
Chief Financial Officer
Date: November 14, 2002
I, J. Ralph Armijo, Chief Executive Officer of Navidec, Inc., certify that:
1. I have reviewed this quarterly report on Form 10-Q of Navidec,
Inc.;
2. Based on my knowledge, this annual report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
annual report; and
3. Based on my knowledge, the financial statements, and other
financial information included in this annual report, fairly present in all
material respects the financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented in this annual report.
4. The registrant's other certify officers and I are responsible for
establishing and maintaing disclosure controls and procedures (as determined
in Exchange act Rules 131-14 and 15Q-14) for the registrant and have:
a) Designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made know to us by
other within those entities, particularly during the period in
which this quarterly report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this report (the "Evaluation Date") and
c) Presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certify officers and I have disclosed,
passed on our most recent evaluation, to the registrant's auditors and the
audit committee of the registrant's board of directors;
a) all significant deficiencies in the design or
operation of internal controls which could adversely
affect the registrant's ability to record, process,
summarize and report financial data and have
identified for the registrant's auditors any material
weakness in internal controls; and
b) any fraud, whether or not material, that involves
management or other employees who have a significant
role in the registrant's internal controls; and
6. The registrant's other certify officers and I have indicated in
this quarterly report whether there where significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: November 14, 2002
/s/ J. Ralph Armijo
J. Ralph Armijo
Chief Executive Officer
I, Patrick R. Mawhinney, Chief Financial Officer of Navidec, Inc., certify that:
1. I have reviewed this quarterly report on Form 10-Q of Navidec,
Inc.;
2. Based on my knowledge, this annual report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
annual report; and
3. Based on my knowledge, the financial statements, and other
financial information included in this annual report, fairly present in all
material respects the financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented in this annual report.
4. The registrant's other certify officers and I are responsible for
establishing and maintaing disclosure controls and procedures (as determined in
Exchange act Rules 131-14 and 15Q-14) for the registrant and have:
d) Designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made know to us by
other within those entities, particularly during the period in
which this quarterly report is being prepared;
e) Evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this report (the "Evaluation Date") and
f) Presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certify officers and I have disclosed,
passed on our most recent evaluation, to the registrant's auditors and the
audit committee of the registrant's board of directors;
c) all significant deficiencies in the design or
operation of internal controls which could adversely
affect the registrant's ability to record, process,
summarize and report financial data and have
identified for the registrant's auditors any material
weakness in internal controls; and
d) any fraud, whether or not material, that involves
management or other employees who have a significant
role in the registrant's internal controls; and
6. The registrant's other certify officers and I have indicated in
this quarterly report whether there where significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: November 14, 2002
/s/ Patrick R. Mawhinney
Patrick R. Mawhinney
Chief Financial Officer