U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
(Mark One)
[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of
1934
For the quarterly period year ended February 28, 2001
[ ] Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from to
Commission file number 0-14401
SANDATA, INC.
(Exact Name of Small Business Issuer as Specified in Its Charter)
Delaware 11-2841799
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
26 Harbor Park Drive, Port Washington, NY 11050
(Address of Principal Executive Offices)
516-484-9060
(Issuer's Telephone Number, Including Area Code)
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
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 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
APPLICABLE ONLY TO CORPORATE ISSUERS
The number of shares outstanding of the issuer's common stock, par value
$00.1, as of April 10, 2001 was 2,506,473 shares.
Transitional Small Business Disclosure Format (check one):
Yes No X
INDEX
Page
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS:
CONSOLIDATED CONDENSED BALANCE
SHEETS as of February 28, 2001 (unaudited)
and May 31, 2000 3
UNAUDITED CONSOLIDATED CONDENSED
STATEMENTS OF OPERATIONS for the three and
nine months ended February 28, 2001 and February 29, 2000 5
UNAUDITED CONSOLIDATED CONDENSED
STATEMENTS OF CASH FLOWS for the nine months
ended February 28, 2001 and February 29, 2000 6
NOTES TO CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS 7
ITEM 2 - MANAGEMENT'S DISCUSSION AND
ANALYSIS OR PLAN OF OPERATION 12
PART II - OTHER INFORMATION 15
ITEM 1 - LEGAL PROCEEDINGS 15
ITEM 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS 15
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES 15
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
ITEM 5 - OTHER INFORMATION 15
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K 15
SANDATA, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
SANDATA, INC. AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
CONSOLIDATED CONDENSED BALANCE SHEETS
UNAUDITED AUDITED
February 28, May 31,
2001 2000
--------------- -----------
ASSETS:
CURRENT ASSETS
Cash and cash equivalents $ 143,168 $ 1,229,718
Accounts receivable, net of allowance for doubtful
accounts of $350,000 and $448,000 respectively 2,459,694 2,308,901
Receivables from affiliates 692,793 405,732
Inventories 62,784 17,165
Prepaid expenses and other current assets 406,745 413,119
---------------- ------------
TOTAL CURRENT ASSETS 3,765,184 4,374,635
FIXED ASSETS, NET 9,306,370 8,911,655
OTHER ASSETS
Notes receivable 118,319 126,221
Cash surrender value of officer's life insurance,
security deposits and other 853,094 832,988
---------------- ------------
TOTAL ASSETS $ 14,042,967 $ 14,245,499
================= ============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
SANDATA, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
UNAUDITED AUDITED
February 28, May 31,
2001 2000
---------------- -------------
LIABILITIES AND SHAREHOLDERS' EQUITY:
CURRENT LIABILITIES
Accounts payable and accrued expenses $2,266,777 $2,580,143
Deferred/unearned revenue 23,032 38,848
Deferred income 319,056 322,678
----------------- -----------
TOTAL CURRENT LIABILITIES 2,608,865 2,941,669
LONG TERM DEBT 2,900,000 2,750,000
DEFERRED INCOME 183,542 315,253
DEFERRED INCOME TAXES 802,636 702,158
----------------- -----------
TOTAL LIABILITIES 6,495,043 6,709,080
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Common stock 2,506 2,506
Additional paid in capital 5,803,704 5,803,704
Retained earnings 3,261,373 3,249,868
Notes receivable-officers (1,519,659) (1,519,659)
---------------- -----------
TOTAL SHAREHOLDERS' EQUITY 7,547,924 7,536,419
---------------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 14,042,967 $ 14,245,499
=============== ==============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED NINE MONTHS ENDED
Feb. 28, Feb. 29, Feb.28, Feb. 29,
2001 2000 2001 2000
---- ---- ---- ----
REVENUES:
Service fees $ 4,304,970 $4,499,917 $13,257,225 $ 13,006,062
Other income 93,793 114,563 278,185 301,183
Interest income 45,189 38,523 140,708 118,781
------------- ------------ ------------- --------------
4,443,952 4,653,003 13,676,118 13,426,026
------------- ------------ ------------- --------------
COSTS AND EXPENSES:
Operating 2,314,056 2,917,330 7,663,632 8,387,617
Selling, general and administrative 1,355,707 971,580 3,645,773 2,880,890
Depreciation and amortization 686,021 581,022 2,045,238 1,767,897
Interest expense 60,149 64,250 189,139 176,302
------------- ------------ ------------- --------------
TOTAL COSTS AND EXPENSES 4,415,933 4,534,182 13,543,782 13,212,706
------------- ------------ ------------- --------------
EARNINGS FROM OPERATIONS
BEFORE INCOME TAXES 28,019 118,821 132,336 213,320
Income tax expense 33,612 48,716 120,831 87,461
------------- ------------ ------------- --------------
NET EARNINGS (LOSS) $ (5,593) $ 70,105 $ 11,505 $ 125,859
============= ============ ============= ==============
BASIC EARNINGS PER SHARE $ 0.00 $ 0.03 $ 0.00 $ 0.05
------------- ------------ ------------- --------------
DILUTED EARNINGS PER SHARE $ 0.00 $ 0.03 $ 0.00 $ 0.05
------------- ------------ ------------- --------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED
Feb.28 Feb. 29
2001 2000
---- ----
Cash flows from operating activities:
Net earnings $ 11,505 $ 125,859
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 2,045,238 1,767,897
Gain on disposal of fixed assets (122,956) (379,290)
Decrease in allowance for doubtful accounts 97,203 70,388
(Decrease) increase in deferred income (135,333) 93,903
(Increase) decrease in receivables from affiliates (287,061) 414,235
Decrease in deferred revenue (15,816) (5,135)
(Increase) Decrease in operating assets (299,445) 126,533
Decrease in operating liabilities (212,888) (1,258,349)
--------- -----------
Net cash provided by operating activities 1,080,447 956,041
--------- -------
Cash flows from investing activities:
Purchases of fixed assets (2,865,340) (4,445,001)
Proceeds from sale/leaseback transaction 548,343 1,953,254
------- ---------
Net cash used in investing activities (2,316,997) (2,491,747)
----------- -----------
Cash flows from financing activities:
Proceeds from term loan 100,000 ---
Principal payments on term loan (100,000) ---
Proceeds from line of credit 800,000 2,000,000
Principal payments on line of credit (650,000) (1,800,000)
--------- -----------
Net cash provided by financing activities 150,000 200,000
------- -------
Net Decrease in cash and cash equivalents (1,086,550) (1,335,706)
Cash and cash equivalents at beginning of period 1,229,718 1,533,576
---------- -----------
Cash and cash equivalents at end of period $ 143,168 $ 197,870
========== ==========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
SANDATA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
The Consolidated Condensed Balance Sheet as of February 28, 2001, the
Consolidated Condensed Statements of Operations for the three and nine month
periods ended February 28, 2001 and February 29, 2000 and the Consolidated
Condensed Statement of Cash Flows for the nine month periods ended February 28,
2001 and February 29, 2000 have been prepared by Sandata, Inc. and subsidiaries
(the "Company") without audit. In the opinion of Management, all adjustments
(which include only normal, recurring adjustments) necessary to present fairly
the financial position as of February 28, 2001 and for all periods presented
have been made. Results of Operations for the period ended February 28, 2001 are
not necessarily indicative of the operating results expected for the full year.
For information concerning the Company's significant accounting
policies,reference is made to the Company's Annual Report on Form 10-KSB for the
year ended May 31, 2000.
2. RELATED PARTY TRANSACTIONS
The Company entered into an agreement in November, 1996 (the "Agreement") with
an affiliate of the Company's Chairman of the Board (the "Affiliate"), the
Nassau County Industrial Development Agency ("NCIDA") and a bank. In connection
with the Agreement, the Affiliate assumed all of the Company's obligations under
a lease with the NCIDA and entered into a sublease with the Company for its
facility. The Company conveyed to the Affiliate the right to become owner of the
facility upon expiration of the lease. In addition, pursuant to a sublease, the
Company has assumed certain obligations owed by the Affiliate to the NCIDA under
the lease. The Affiliate has indemnified the Company with respect to certain
obligations relative to the lease and the Agreement. The Company made rent
payments for its facility amounting to $124,002 and $421,835 for the three and
nine months ended February 28, 2001 as compared to $175,863 and $516,243 for the
three and nine months ended February 29, 2000. The reduction is the result of a
verbal agreement between the Company and the Affiliate to reduce the rent
$150,000 on an annual basis effective June 1, 2000. Management anticipates that
negotiations for a new, long-term lease, on substantially similar terms (except
for market value adjustments in rent, expenses, and the like) as the present
lease, will begin in the near future.
The Company makes various lease payments to affiliates of the Company's Chairman
of the Board. The payments for equipment rental amounted to $99,893 and $297,072
for the three and nine months ended February 28, 2001 as compared to $98,590 and
$295,313 for the three and nine months ended February 29, 2000.
The Company derives revenue from National Medical Health Card Systems, Inc.
("Health Card"), a company affiliated with the Company's Chairman of the Board,
for providing data base and operating system support, hardware leasing,
maintenance and related administrative services. The revenues generated from
Health Card amounted to $493,851 and $1,754,430 for the three and nine months
ended February 28, 2001 as compared to $415,788 and $1,342,938 for the three and
nine months ended February 29, 2000. At February 28, 2001 the Company was owed
$356,569 from Health Card.
At February 28, 2001, the Company owed Health Card $500,000 pursuant to a
promissory note, dated May 31, 2000, made payable by the Company to the order of
Health Card in the original principal amount of $500,000 plus interest at the
rate of 9-1/2%, payable quarterly. The note, which was originally due and
payable on June 1, 2001, was subsequently amended to extend such due date to
September 1, 2001 and amended by Second Amendment to extend such due date to
March 31, 2002. At February 28, 2001 the Company owed interest of $3,958 to
Health Card, which was subsequently paid.
Medical Arts Office Services, Inc. ("MAOS"), a company which the Company's
Chairman of the Board is the sole shareholder, provided the Company with
accounting, bookkeeping and paralegal services. The payments made by the Company
to MAOS amounted to $96,193 and $239,767 for the three and nine months ended
February 28, 2001 as compared to $74,859 and $207,990 for the three and nine
months ended February 29, 2000. At February 28, 2001 the Company owed $21,776 to
MAOS, which was subsequently paid.
3. NET EARNINGS PER COMMON SHARE
In 1997, the Financial Accounting Standards Board issued Standard No. 128 ("SFAS
No. 128"), "Earnings per Share". SFAS No. 128 replaced calculation of primary
and fully diluted earnings per share with basic and diluted earnings per share.
Basic earnings per share has been computed using the weighted average number of
shares of common stock outstanding. Diluted earnings per share has been computed
using the basic weighted average shares of common stock issued plus outstanding
stock options.
Basic earnings per share are based on the weighted-average number of shares of
common stock outstanding, which were 2,506,473 at February 28, 2001 and
2,481,480 at February 29, 2000. Diluted earnings per share are based on the
weighted-average number of shares of common stock adjusted for the effects of
assumed exercise of options and warrants under the treasury stock method, which
were as follows: 2,617,056 at February 28, 2001 and 2,562,598 at February 29,
2000.
Options to purchase 909,796 shares of common stock were outstanding at February
28, 2001 and were not included in the computation of diluted earnings per share
because the exercise price of the options was greater than the average market
price of the common stock for the respective period.
4. SALE/LEASEBACK TRANSACTION
On November 22, 2000, the Company entered into a sale/leaseback of certain fixed
assets (principally computer hardware and equipment) with Macrolease
International Corporation. The fixed assets, which had a net book value of
approximately $421,500, were sold for $548,300. The resulting gain of
approximately $126,800 was recorded as deferred income and is being recognized
over the life of the lease, which is thirty-six (36) months. Approximately
$10,600 of the deferred gain was recognized for the three and nine months ended
February 28, 2001.
5. COMMITMENTS AND CONTINGENCIES
On October 19, 1999, the Company and Pro-Health Systems, Inc. ("Pro-Health")
brought an action against Provider Solutions Corporation ("Provider"), Michael
Milvain and Charlotte Fritchie in Supreme Court, New York County, Index No.
99-26033, based on breach of contract, fraudulent misrepresentation and other
causes of action, demanding damages of approximately $10,000,000 (the "State
Action").
On October 22, 1999, Provider brought a federal action in the United States
District Court, Eastern District (the "Federal Action"), seeking to enjoin the
Company and Pro-Health from (i) hiring certain named employees; (ii) soliciting
any present or former employees of Provider; and (iii) using, without Provider's
permission, any trade secret or other proprietary information belonging to
Provider. The Federal Action also sought to enjoin employees from (i) divulging
to the Company, Pro-Health or any other third party, any trade secret or other
proprietary information; and (ii) accepting employment from the Company,
Pro-Health or any other customer or competitor of Provider. The amended
complaint ultimately served on the Company and Pro-Health on March 31, 2000
demanded relief in the form of a permanent injunction and damages against the
Company and Pro-Health for total amounts ranging from $10,000,000 to
$15,000,000. The amended complaint alleged claims of declaratory judgment,
copyright infringement, breach of fiduciary duty, breach of contract, and
misappropriation of trade secrets, among others. The State Action was removed
and consolidated with the Federal Action.
The Company and Pro-Health asserted various counterclaims in the Federal Action,
demanding damages of $10,000,000, seeking an injunction and declaratory
judgment, and asserting claims based on, among other things, imposition of
constructive trust, breach of contract, and unfair competition.
On March 8, 2001 the Company, Pro-Health, Provider and all involved parties and
individuals settled the consolidated Federal Action, globally resolving all
issues, claims and disputes. The settlement entailed the exchange of general
releases between the Company, Pro-Health, Provider and all parties, and the
payment of $600,000 to Provider, of which $50,000 was paid by the Company. The
balance of the payment under the settlement was funded by the Company's
insurers. The settlement did not have a material effect on the Company's
financial performance. The Company has retained its proprietary interest in the
subject software.
6. SHAREHOLDERS' EQUITY
The Company has stock options outstanding under four stock option plans as
follows:
Employees' Incentive Stock Option Plan (the "1984 Plan")
At February 28, 2001, there were 2,536 options outstanding under the 1984 Plan.
Options granted under the 1984 Plan were granted at exercise prices not less
than fair market value on the date of grant. Options outstanding expire in 2001
and no additional options may be granted under the 1984 Plan.
1995 Stock Option Plan (the "1995 Plan")
At February 28, 2001, there were 590,500 incentive options outstanding under the
1995 Plan, which provides for both incentive and nonqualified stock options and
reserves 1,000,000 shares of common stock for grant. Options granted under the
1995 Plan were granted at exercise prices not less than the fair market value at
the date of grant. All options outstanding under the 1995 Plan are currently
exercisable at prices ranging from $1.41 to $2.61 per share; the majority of
such options are exercisable over a period of five years from date of grant,
with an aggregate of 70,000 such options exercisable over 10 years.
1998 Stock Option Plan (the "1998 Plan")
At February 28, 2001, there were 963,260 incentive options outstanding under the
1998 Plan, which provides for both incentive and nonqualified stock options and
reserves 1,000,000 shares of common stock for grant. All options outstanding
under the 1998 Plan vest over three to six year periods and are exercisable at
prices ranging from $1.31 to $3.00 per share over periods of five and ten years
from date of grant. At February 28, 2001 there were 426,130 options currently
exercisable.
On July 14, 1998, the Company's Chairman of the Board, certain officers,
directors and a former director who is the spouse of an officer and is also an
employee of Sandsport Data Services, Inc. ("Sandsport'), the Company's wholly
owned subsidiary, exercised their respective options and warrants to purchase an
aggregate of 921,334 shares of Common Stock under the 1998 Plan at exercise
prices ranging from $1.38 to $2.61 per share for an aggregate cost of
$1,608,861. Payment for such shares was made to the Company in the amount of
$921 representing the par value of the shares, and a portion in the form of
non-recourse promissory notes due in July 2001, with interest at eight and
one-half percent (8-1/2%) per annum, payable annually, and secured by the number
of shares exercised. The Company has received interest payments on such notes in
the amount of $160,600. At February 28, 2001, the outstanding balance on such
notes, including principal and accrued but unpaid interest, was $1,687,635.
2000 Stock Option Plan (the "2000 Plan")
On October 17, 2000 the Board of Directors approved the adoption of the 2000
Plan. The 2000 Plan was subsequently adopted by Shareholders at the Company's
Annual Meeting on November 20, 2000. At February 28, 2001, there were 150,000
incentive options outstanding under the 2000 Plan, which provides for both
incentive and nonqualified stock options and reserves 1,500,000 shares of common
stock for issuance in connection with option grants. Options outstanding under
the 2000 Plan vest over a seven-year period commencing December 31, 2000 and
ending December 31, 2007 and are exercisable at $3.00 per share over a period of
ten years from the date of grant. At February 28, 2001 there were 33,333 options
currently exercisable.
2000 Restricted Stock Grant Plan
On September 1, 2000 the Board of Directors approved the adoption of the
Company's 2000 Restricted Stock Grant Plan (the "Stock Grant Plan"). The Stock
Grant Plan was subsequently adopted by the Shareholders at the Company's Annual
Meeting on November 20, 2000. The Stock Grant Plan provides for the issuance of
shares that are subject to both standard restrictions on the sale or transfer of
such shares (e.g., the standard seven year vesting schedule set forth in the
Stock Grant Plan) and/or restrictions that the Board may impose, such as
restrictions relating to length of service, corporate performance, or other
restrictions. As of February 28, 2001 no grants had been made under the Stock
Grant Plan and, therefore, no shares had vested under it. There are 700,000
shares of Common Stock reserved for issuance in connection with grants made
under the Stock Grant Plan.
SANDATA, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
SANDATA, INC. AND SUBSIDIARIES
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
RESULTS OF OPERATIONS
Revenues were $4,443,952 and $13,676,118 for the three and nine months ended
February 28, 2001 as compared to $4,653,003 and $13,426,026 for the three and
nine months ended February 29, 2000, decreasing $209,051 and $250,092
respectively.
Service fee revenues were $4,304,970 and $13,257,225 for the three and nine
months ended February 28, 2001 as compared to $4,499,917 and $13,006,062 for the
three and nine months ended February 29, 2000, decreasing $194,947 and
increasing $251,163 respectively. The decrease is attributable to a slight
decline in the volume of calls from the SanTrax(R) division and services from
the SandataNET(R) division while the increase is due to rate increases in both
the SHARP and SanTrax(R), product lines.
Other income was $93,793 and $278,185 for the three and nine months ended
February 28, 2001 as compared to $114,563 and $301,183 for the three and nine
months ended February 29, 2000, decreasing $20,770 and $22,998 respectively. The
decrease is attributable to a decrease in income recognized on sales/leaseback
transactions as this income is recognized over the life of the lease.
Expenses Related to Services
Operating expenses were $2,314,056 and $7,663,632 for the three and nine months
ended February 28, 2001 as compared to $2,917,330 and $8,387,617 for the three
and nine months ended February 29, 2000, decreasing $603,274 and $723,985
respectively. The primary factors for the decreases in operating expenses were
reductions in staff, which resulted in reductions in payroll and related
expenses, and the expiration of certain equipment leases, which resulted in
reduced equipment rental payments.
Selling, general and administrative expenses were $1,355,707 and $3,645,773 for
the three and nine months ended February 28, 2001, as compared to $971,580 and
$2,880,890 for the three and nine months ended February 29, 2000, an increase of
$384,127 and $764,883 respectively. The increases were primarily due to
increases in consulting, payroll and commission expenses relative to expanded
efforts to increase sales in the SanTrax(R) and SandataNET(R) product lines, and
certain royalties payable to MCI Communications Corporation.
Depreciation and amortization expenses were $686,021 and $2,045,238 for the
three and nine months ended February 28, 2001 as compared to $581,022 and
$1,767,897 for the three and nine months ended February 29, 2000, an increase of
$104,999 and $277,341 respectively. The increases were primarily attributable to
fixed asset additions, including computer hardware and software capitalization
costs, in connection with ongoing computer system upgrades.
Interest expenses were $60,149 and $189,139 for the three and nine months ended
February 28, 2001 as compared to $64,250 and $176,302 for the three and nine
months ended February 29, 2000, a decrease of $4,101 and increase $12,837
respectively. The decrease is due to a lower overall average daily balance under
the Company's revolving credit agreement. The increase was a result of incurring
indebtedness under the promissory note with Health Card and increased
borrowings, later in the quarter, on the Company's revolving credit agreement.
Income Tax Expenses
Income tax expenses were $33,612 and $120,831 for the three and nine months
ended February 28, 2001 as compared to $48,716 and $87,461 for the three and
nine months period ended February 29, 2000, a decrease of $15,104 and an
increase of $33,370 respectively. The decrease is due to a lower taxable income,
which is the result of approximately $209,000 less revenue for the quarter and
$119,000 less expenses, such that the Company realized $90,000 less in earnings
before taxes than it did this time last year. The increase is due to certain tax
treatments of software development costs, depreciation and amortization, and
revenues from sale/leaseback transactions, offset by net operating loss carry
forwards.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash decreased at February 28, 2001 to $143,168 as compared to
$1,229,718 at May 31, 2000. The primary factors that contributed to the decrease
were increases in fixed assets, receivables from affiliates and accounts
receivable, and a decrease in accounts payable.
The Company's working capital decreased as of February 28, 2001 to $1,156,319 as
compared with $1,432,966 at May 31, 2000. The decrease in working capital is the
result of a decrease in current assets, primarily cash, that was greater than
the decrease in current payables.
For the nine months ended February 28, 2001, the Company spent approximately
$2,865,000 in fixed asset additions, including (i) computer hardware and
software for upgrades and new installations and (ii) software capitalization
costs in connection with new product development. The Company expects the
current levels of capital expenditures to continue.
On July 14, 1998, the Company's Chairman of the Board, certain officers,
directors and, a former director who is the spouse of an officer and is also an
employee of Sandsport Data Services, Inc. ("Sandsport"), a wholly owned
subsidiary of the Company, exercised their respective options and warrants to
purchase an aggregate of 921,334 shares of Common Stock under the 1998 Plan at
exercise prices ranging from $1.38 to $2.61 per share for an aggregate cost of
$1,608,861. Payment for such shares was made to the Company in the amount of
$921 representing the par value of the shares, and a portion in the form of
non-recourse promissory notes due in July 2001, with interest at eight and
one-half percent (8-1/2%) per annum, payable annually, and secured by the number
of shares exercised. The Company has received interest payments on such notes in
the amount of $160,600. At February 28, 2001, the outstanding balance on such
notes, including principal and accrued but unpaid interest, was $1,687,635.
On April 18, 1997, Sandsport entered into a revolving credit agreement (the
"Credit Agreement") with a bank (the "Bank") which allowed Sandsport to borrow
amounts up to $3,000,000. Interest accrues on amounts outstanding under the
Credit Agreement at a rate equal to the London Interbank Offered Rate plus 2%
and will be paid quarterly in arrears or, at Sandsport's option, at the Bank's
prime rate. The Credit Agreement required Sandsport to pay a commitment fee in
the amount of $30,000 and a fee equal to 1/4% per annum payable on the unused
average daily balance of amounts under the Credit Agreement. In addition, there
are other fees and charges imposed based upon Sandsport's failure to maintain
certain minimum balances. The Credit Agreement has been amended by the Bank to
permit Sandsport to borrow amounts up to $4,500,000 and to extend the
termination date to February 14, 2003. Interest accrues at the same rate as the
original Credit Agreement. The indebtedness under the Credit Agreement is
guaranteed by the Company and Sandsport's sister subsidiaries (the "Group"). All
of the Group's assets are pledged to the Bank as collateral for the amounts due
under the Credit Agreement, which pledge is secured by a first lien on all
equipment owned by members of the Group, as well as a collateral assignment of
$2,000,000 of life insurance payable on the life of the Company's Chairman of
the Board. The Group's guaranty to the Bank was modified to include all
indebtedness incurred by the Company under the amended Credit Agreement.
In addition, pursuant to the Credit Agreement, the Group is required to maintain
certain levels of net worth and meet certain financial ratios in addition to
various other affirmative and negative covenants. At May 31, 2000 the Group
failed to meet these net worth and financial ratios, and the Bank granted the
Group a waiver. There can be no assurance that the Bank will continue to grant
waivers if the Group fails to meet the net worth and financial ratios in the
future. If such waivers are not granted any loans outstanding under the Credit
Agreement become immediately due and payble, which may have an adverse effect on
the Company's business, operations or financial condition. At February 28, 2001,
the outstanding balance on the Credit Agreement with the Bank was $2,400,000.
At February 28, 2001 the Company owed Health Card $500,000 pursuant to a
promissory note, dated May 31, 2000, made payable by the Company to the order of
Health Card in the original principal amount of $500,000 plus interest at the
rate of 9-1/2%, payable quarterly. The note, which was originally due and
payable on June 1, 2001, was subsequently amended to extend such due date to
September 1, 2001 and amended by Second Amendment to extend such due date to
March 31, 2002. At February 28, 2001 the Company owed interest of $3,958 to
Health Card, which was subsequently paid.
The Company believes the results of its continued operations, together with the
available credit line, should be adequate to fund presently foreseeable working
capital requirements.
SANDATA, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS:
Reference is made to Footnote 5 to the Financial Statements in Part I
of this Quarterly Report on Form 10-QSB.
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:
None
ITEM 5 - OTHER INFORMATION:
None
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K:
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SANDATA, INC.
-------------------------------
(Registrant)
Date: April 13, 2001 By: /s/ Bert E. Brodsky
-----------------------
Bert E. Brodsky
Chairman of the Board
Chief Executive Officer