SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED MARCH 31, 2000
COMMISSION FILE NUMBER 0-15353
----------------------------
SAZTEC INTERNATIONAL, INC.
CALIFORNIA 33-0178457
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
43 MANNING ROAD, BILLERICA, MASSACHUSETTS 01821
(Address of Principal Executive Office)
978-901-9600
(Registrant's Telephone Number)
---------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days. Yes [X] No [ ]
The number of shares outstanding of registrant's Common Stock at March 31, 2000,
was 4,469,371 shares.
SAZTEC INTERNATIONAL, INC.
FORM 10-QSB
FOR THE
QUARTER ENDED MARCH 31, 2000
PAGE
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Statements of Operations --
Three months ended March 31, 2000 and 1999 3
Consolidated Statements of Operations -- 4
Nine months ended March 31, 2000 and 1999
Consolidated Balance Sheets -- March 31, 2000 and June 30, 1999 5
Consolidated Statement of Changes in Stockholders' Equity -- 6
March 31, 2000
Consolidated Statements of Cash Flows -- 7 - 8
Nine months ended March 31, 2000 and 1999
Notes to Consolidated Financial Statements -- March 31, 2000 9 - 10
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 11 - 12
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 2. Changes in Securities 13
Item 3. Defaults Upon Senior Securities Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders Not Applicable
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
2
SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(Unaudited)
2000 1999
----------- -----------
REVENUES $ 2,364,338 $ 2,511,398
Cost of services 1,970,688 1,870,788
-------------------------
GROSS PROFIT 393,650 640,610
Selling, general & administrative expense 705,003 605,977
-------------------------
INCOME (LOSS) FROM OPERATIONS (311,353) 34,633
Interest expense 12,428 18,326
-------------------------
INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES (323,781) 16,307
Provision (benefit) for income taxes 3,837 (27)
-------------------------
NET (LOSS ) INCOME $ (327,618) $ 16,334
=========================
INCOME (LOSS) PER SHARE OF COMMON STOCK:
Basic and diluted loss applicable to common $ (.07) $ .004
stockholders
=========================
Weighted average number of shares 4,469,371 4,461,121
=========================
See accompanying notes
3
SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED MARCH 31, 2000 AND 1999
(Unaudited)
2000 1999
----------- -----------
REVENUES $ 6,595,296 $ 6,113,113
Cost of services 5,276,503 4,893,300
----------- -----------
GROSS PROFIT 1,318,793 1,219,813
Selling and administrative expense 1,943,229 1,682,332
----------- -----------
LOSS FROM OPERATIONS (624,436) (462,519)
Interest expense (income) 24,780 (1,437)
----------- -----------
LOSS BEFORE PROVISION FOR INCOME TAXES (649,216) (461,082)
Provision (benefit) for income taxes 7,704 (76,225)
----------- -----------
NET LOSS APPLICABLE TO COMMON STOCKHOLDERS $ (656,920) $ (384,857)
=========== ===========
LOSS PER SHARE OF COMMON STOCK:
Basic and diluted net loss applicable to common $ (.15) $ (.09)
stockholders
=========== ===========
Weighted average number of shares 4,469,371 4,461,121
=========== ===========
See accompanying notes.
4
SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 2000 AND JUNE 30, 1999
ASSETS
MARCH 31, JUNE 30,
2000 1999
----------------------------
(Unaudited)
CURRENT ASSETS
Cash and cash equivalents 226,591 $ 338,088
Restricted cash 26,210 26,210
Accounts receivable, less allowance for doubtful accounts of $43,242
at March 31, 2000 and $28,155 at June 30, 1999 1,802,197 1,612,573
Work in process 385,789 118,720
Prepaid expenses and other current assets 115,220 112,601
Note receivable
----------------------------
TOTAL CURRENT ASSETS 2,556,007 2,208,192
PROPERTY AND EQUIPMENT, NET 311,393 422,076
OTHER ASSETS
Goodwill and other intangible assets, less accumulated amortization
of $84,812 at March 31 and $75,722 at June 30, 1998 128,430 137,520
Deposits and other assets 54,010 63,626
----------------------------
TOTAL ASSETS $ 3,049,840 $ 2,831,414
============================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Line of Credit $ 664,559 0
Current portion long-term debt and capital lease obligations 136,340 172,375
Accounts payable 1,073,622 620,366
Accrued liabilities 648,492 728,230
Customer deposits 287,872 385,461
----------------------------
TOTAL CURRENT LIABILITIES 2,810,885 1,906,432
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS LESS CURRENT PORTION 70,761 104,039
ACCRUED EXPENSE 0 7,355
STOCKHOLDERS' EQUITY
Preferred stock-no par value; 1,000,000 shares authorized; no shares
issued
Common stock-no par value; 10,000,000 shares authorized; 4,469,371 12,435,975 12,430,811
shares issued at March 31, 2000 and 4,461,121 shares issued at
June 30, 1999
Contributed capital 14,498 14,498
Accumulated deficit (12,166,722) (11,509,802)
Cumulative translation adjustment (115,557) (121,919)
----------------------------
TOTAL STOCKHOLDERS' EQUITY 168,194 813,588
----------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 3,049,840 $ 2,831,414
============================
See accompanying notes
5
SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
MARCH 31, 2000
COMMON STOCK COMMON STOCK
SUBSCRIBED
CUMULATIVE
NUMBER OF NUMBER OF CONTRIBUTED ACCUMULATED TRANSLATION
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT ADJUSTMENT
--------- ----------- ----------- ----------- ------- ------------ ---------
June 30, 1999 4,461,121 $12,430,811 $14,498 $(11,509,802) $(121,919)
Net loss (656,920)
Stocks issued
Options and Grants
to 8,250 5,164
Employees
Translation
adjustment 6,362
--------- ----------- ----------- ----------- ------- ------------ ---------
4,469,371 $12,435,975 $14,498 $(12,166,722) $(115,557)
See accompanying notes.
6
SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED MARCH 31, 2000 AND 1999
(Unaudited)
2000 1999
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (656,920) $ (384,857)
Adjustments to reconcile net loss to net cash (used in)
provided by operating activities:
Depreciation and amortization 185,022 136,660
Provision for bad debts 15,087 (28,803)
Changes in assets and liabilities:
Accounts receivable (204,711) 9,604
Work in process (267,069) 48,378
Prepaid expenses and other current assets (2,619) (38,183)
Deposits and other assets 9,616 37,145
Accounts payable 453,256 159,445
Accrued liabilities (79,738) (82,056)
Customer deposits and non-current accrued expenses (104,944) (16,410)
--------------------------
NET CASH USED IN OPERATING ACTIVITIES (653,020) (159,077)
--------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (65,249) (87,541)
Payments received on notes receivable 0 219
Decrease in restricted cash 0 146,078
--------------------------
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES (65,249) 58,756
--------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on notes payable 5,634,175 2,046,332
Payments on notes payable (4,969,616) (2,038,634)
Principal payments on debt and capital lease (69,313) (5,001)
obligations
Proceeds from issuance of common stock, net of 5,164
issuance costs
--------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 600,410 2,697
--------------------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 6,362 (5,491)
--------------------------
NET (DECREASE) IN CASH (111,497) (103,334)
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD 338,088 513,194
--------------------------
CASH AND EQUIVALENTS AT END OF PERIOD $ 226,591 $ 409,858
==========================
See accompanying notes.
7
SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED MARCH 31, 2000 AND 1999
(Unaudited)
2000 1999
------- -------
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND
FINANCING ACTIVITIES:
Purchase of equipment through issuance of notes
payable and capital lease obligations 15,136
=======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $24,780 $23,134
======= =======
Income taxes $ 7,704 $ 5,283
======= =======
See accompanying notes.
8
SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000 AND 1999
NOTE 1. ACCOUNTING POLICIES
The accompanying unaudited consolidated financial statements include all
adjustments (consisting only of normal recurring accruals) which, in the opinion
of management, are necessary for a fair presentation of financial position,
results of operations and cash flows. Results of operations for interim periods
are not necessarily indicative of results to be expected for a full year.
NOTE 2. FOREIGN OPERATIONS AND MAJOR CUSTOMERS- SEGMENTS
Revenues, income (loss) before taxes, and identifiable assets by geographic area
are shown below. United Kingdom amounts relate solely to Saztec Europe, Ltd. and
its subsidiaries, whose customers are located in England, Scotland, Germany,
Italy, Spain, and Belgium. Identifiable assets of Saztec Europe Ltd. located
outside of Ardrossan, Scotland are immaterial.
9 MONTHS ENDED MARCH 31,
2000 1999
--------------------------
Revenue
United States $ 5,016,717 $ 4,055,439
United Kingdom/Western Europe 1,578,579 2,057,674
--------------------------
6,595,296 $ 6,113,113
==========================
Income (loss) before income taxes
United States (259,164) $ 34,766
United Kingdom/Western Europe (390,052) (495,848)
--------------------------
$ (649,216) $ (461,082)
==========================
Depreciation
United States $ 103,252 $ 71,869
United Kingdom/Western Europe 57,724 98,407
Amortization-U.S. only 9,090 9,090
--------------------------
$ 170,066 $ 179,366
==========================
Identifiable Assets MARCH 31 2000 JUNE 30, 1999
--------------------------
United States $ 1,917,484 $ 1,746,463
United Kingdom 1,132,356 1,084,951
--------------------------
$ 3,049,840 $ 2,831,414
==========================
9
NOTE 3. EARNINGS (LOSS) PER SHARE
Earnings (loss) per common share is computed by dividing net income (loss)
applicable to common stockholders by the weighted average number of shares of
common stock outstanding during each year which totaled 4,469,371 for the
quarter ended March 31, 2000, and 4,461,121 for quarter ended March 31, 1999.
BASIC EARNINGS PER SHARE
------------------------
2000 $ (.07)
1999 $ .004
10
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Revenue for the nine months ended March 31, 2000, increased to $6,595,296 from
$6,113,113 for the nine months ended March 31, 1999, an increase of $482,183 or
(7.9%). Revenue for the Quarter ended March 31, 2000 at $2,364,338 was down
$147,060 from the $2,511,398 earned for the quarter ended March 31, 1999.
U.S. revenue for the nine months ended March 31, 2000 of $5,016,717 increased
$961,278 compared with the nine-month period the prior year of $4,055,439. U.S.
revenue for the third quarter of the current year $1,764,364 was $121,849 higher
compared to $1,642,515 for the quarter ended March 31, 1999. European revenue
for the nine months ended March 31, 2000 of $1,578,579 decreased $479,115
compared with the nine-month period in the prior year of $2,057,694. European
revenue for the third quarter of the current year at $599,974 was $268,909 less
compared to $868,883 for the quarter ended March 31, 1999.
U.S. revenue continues to increase as a result of growth in scanning services
revenue and the improved growth in data entry conversion revenue. European
revenue is down compared to last year as a result in the decline in library
retrospective conversion project revenue.
Gross profit for the nine months ended March 31, 2000 increased $98,980 from the
prior year period to 20% of sales, compared to 20% of sales for the same period
of 1999. Gross profit for the quarter ended March 31, 2000 was 17% of sales
compared to 25.5% in the same period of 1999. Gross profit for U.S. operations
decreased $67,781 for the nine months ended March 31, 2000 to 22% of sales
compared to 27.7% for the same period last year. European gross profit decreased
$177,802 for the nine month period ended March 31, 2000 to 1% of sales compared
to 21.% for the same period last year.
Selling and administrative expenses (S&A) for the nine month period increased
$260,897 to $1,943,229 (29.5% of sales) from $1,682,332 (27.5% of sales) for the
same period in the prior year. For the quarter ended March 31, 2000 S&A
increased to $705,003 (29.8% of sales) from $605,977 (24.1% of sales) in the
prior year quarter.
Loss from operations was $624,436 for the nine months ended March 31, 2000
compared to $462,519 for the nine months ended March 31, 2000. Loss from
operations for the three months ended March 31, 2000 was $311,353 compared to
profit from operations of $34,633 for the same period the prior year.
Cash Flow decreased $111,497 for the nine months ended March 31, 2000 compared
to a decrease of $103,334 for the same period the prior year. Net cash from
operating activities decreased $653,020; net cash from investing activities
decreased $65,249. Cash flow from financing activities of $600,410 and effect of
exchange rate changes of $6,362 make up the balance of the change.
11
CAPITAL RESOURCES AND LIQUIDITY
The Company has a revolving credit agreement with a U.S. finance company, which
is secured by substantially all the assets of the Company, effective December
10, 1999. The agreement bears interest at the lender's prime rate plus 2.5%
(11.5% at March 31, 2000). Available borrowings are 80% of domestic trade
accounts receivable less than 90 days old and are subject to a maximum borrowing
ceiling of $800,000. The line of credit is repaid directly from a collateral
account established by the lender, through a lockbox at the Company's bank. At
March 31, 2000 the Company had total available borrowings of $800,000 and had
borrowed $664,559. At March 31, 1999 the Company had total available borrowings
of $120,000 against a previous line of credit, and had borrowed $0.
The Company was not in compliance with certain covenants contained in credit
agreements at March 31, 2000. The Company's minimum net working capital and
minimum consolidated tangible net worth were below limitations set forth in the
agreement. The Company is in compliant with all other covenants and has met all
financial obligations to date. The Company has received a waiver of these
covenants for 90 days from March 31, 2000, with the understanding that Saztec is
pursuing additional sources of capital and/or subordinated debt infusions, which
will in effect restore deficiencies to acceptable documented levels. The
revolving credit agreement is intended to be a continuing agreement and shall
remain in full effect for an initial term of one year and for any renewal term
of one year unless terminated by either party within 30 days prior to the end of
any such period. The initial term of the revolving credit agreement is from June
22, 1999 to June 21, 2000. It is anticipated that both parties will renew this
line per the terms of the agreement.
The foregoing information may contain forward-looking statements under the
Private Securities Litigation Reform Act of 1995. These forward-looking
statements are subject to known and unknown risks, uncertainties, and other
factors that may cause actual results to be materially different from those
contemplated by the forward-looking statements. Readers are cautioned not to
place undo reliance on these forward-looking statements, which speak only as of
the date of this report. The Company undertakes no obligation to publicly
release any revision to these forward-looking statements to reflect events or
circumstances after the date of this report.
12
SAZTEC INTERNATIONAL, INC.
MARCH 31, 2000 FORM 10-QSB
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS OF FORM 8-K
(a) EXHIBITS
The following Exhibit is filed by attachment to this Form 10-QSB:
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT PAGE
- ------ ---------------------- ----
27 Financial Data Schedule 16
(b) REPORTS ON FORM 8-K:
None.
13
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.
Dated: MAY 12, 2000
SAZTEC INTERNATIONAL, INC.
--------------------------
(Registrant)
By: /S/ PAUL F. PARSHLEY
-------------------------------------------
Paul F. Parshley
Vice President, Finance and Administration
14
EXHIBIT INDEX
EXHIBIT DESCRIPTION
- ------- -----------
27 Financial Data Schedule