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, 2001
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)
900 Middlesex Tpk., 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, 2001,
was 5,549,928 shares.
SAZTEC INTERNATIONAL, INC.
FORM 10-QSB
QUARTER ENDED MARCH 31, 2001
CONTENTS
Page
----
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements:
Statements of Operations -
Three months ended March 31, 2001 and 2000 3
Statements of Operations -
Nine months ended March 31, 2001 and 2000 4
Consolidated Balance Sheets - March 31, 2001 and June 30, 2000 5
Consolidated Statement of Changes in Stockholders' Equity -
March 31, 2001 6
Consolidated Statements of Cash Flows -
Nine months ended March 31, 2001 and 2000 7 - 8
Notes to Consolidated Financial Statements - March 31, 2001 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 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
2
SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND 2000
(Unaudited)
2001 2000
----------- -----------
Revenues $ 1,704,256 $ 1,764,366
Cost of services 1,373,833 1,376,816
----------- -----------
Gross profit 330,423 387,550
Selling and administrative expense 471,833 547,971
----------- -----------
Loss from operations (141,410) (160,421)
Interest expense 28,570 14,103
----------- -----------
Loss before income taxes (169,980) (174,524)
Income taxes 0 3,837
----------- -----------
Loss from continuing operations $ (169,980) $ (178,361)
----------- -----------
Discontinued Operations
Income (Loss) from discontinued segment before taxes 57,820 (149,257)
Applicable Tax Expense 0 0
----------- -----------
Net Loss $ (112,160) $ (327,618)
=========== ===========
Net Loss per share basic and diluted
from continuing operations $ (.03) $ (.04)
=========== ===========
Weighted average common shares basic and diluted 5,549,928 4,469,371
=========== ===========
Net Income (Loss) per share basic and diluted
from discontinued operations $ .01 $ (.03)
=========== ===========
Weighted average common shares basic and diluted 5,549,928 4,469,371
=========== ===========
Net Loss per share basic and diluted $ (.02) $ (.07)
=========== ===========
Weighted average common shares basic and diluted 5,549,928 4,469,371
=========== ===========
See accompanying notes.
3
SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES
STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED MARCH 31, 2001 AND 2000
(Unaudited)
2001 2000
----------- -----------
Revenues $ 4,699,527 $ 5,016,717
Cost of services 3,978,669 3,776,090
----------- -----------
Gross profit 720,858 1,240,627
Selling and administrative expense 1,393,078 1,457,580
----------- -----------
Loss from operations (672,220) (216,953)
Interest expense 98,494 42,210
----------- -----------
Loss before income taxes (770,714) (259,163)
Income taxes 0 7,704
----------- -----------
Loss from continuing operations $ (770,714) $ (266,867)
----------- -----------
Discontinued Operations
Income (Loss) from discontinued segment before taxes
77,992 (390,053)
Applicable Tax Expense 0 0
----------- -----------
Net Loss $ (692,722) $ (656,920)
=========== ===========
Net Loss per share basic and diluted
from continuing operations $ (.15) $ (.06)
=========== ===========
Weighted average common shares basic and diluted 5,133,955 4,469,371
=========== ===========
Net Income (Loss) per share basic and diluted
from discontinued operations $ .02 $ (.09)
=========== ===========
Weighted average common shares basic and diluted 5,133,955 4,469,371
=========== ===========
Net Loss per share basic and diluted $ (.13) $ (.15)
=========== ===========
Weighted average common shares basic and diluted 5,133,955 4,469,371
=========== ===========
See accompanying notes.
4
SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 2001 AND JUNE 30, 2000
ASSETS
March 31, 2001 June 30, 2000
Unaudited Audited
-------------- -------------
Current assets
Cash and cash equivalents $ 485,029 $ 484,294
Restricted cash 28,559 27,230
Accounts receivable, less allowance for doubtful accounts of $42,911
at June 30, 2000 and $42,497 at March 31, 2001 1,611,928 1,442,136
Work in process 35,668 6,909
Prepaid expenses and other current assets 122,943 119,765
---------------------------------
Total current assets 2,284,127 2,080,334
Property and equipment, net 194,163 306,440
Other assets
Goodwill and other intangible assets, less accumulated amortization of
$99,962 at June 30, 2000 and $109,052 at March 31, 2001 116,310 125,400
Deposits and other assets 79,908 46,515
---------------------------------
Total assets $ 2,674,508 $ 2,558,689
=================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Line of Credit $ 597,808 $ 545,998
Convertible note payable 900,000 500,000
Current portion of long-term debt and capital lease obligations 42,580 89,102
Accounts payable 1,131,540 1,065,817
Accrued liabilities 345,766 517,990
Customer deposits 62,585 75,653
---------------------------------
Total current liabilities 3,080,279 2,794,560
Long-term debt and capital lease obligations less current portion 54,143 57,186
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
and 5,549,928 shares issued and outstanding at June 30, 2000 and
March 31, 2001 12,967,766 12,435,975
Contributed capital 14,498 14,498
Accumulated deficit (13,332,009) (12,639,287)
Other comprehensive income (110,169) (104,243)
---------------------------------
Total stockholders' equity (459,914) (293,057)
---------------------------------
Total liabilities and stockholders' equity $ 2,674,508 $ 2,558,689
=================================
See accompanying notes.
5
SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
MARCH 31, 2001
Common Stock
------------
Cumulative
Number of Contributed Accumulated Translation
Shares Amount Capital Deficit Adjustment
--------- ----------- ----------- ------------ -----------
Balance at June 30, 2000 4,469,371 $12,435,975 $14,498 $(12,639,287) $(104,243)
Stock issued pursuant to
Employee options and grants 46,376 $ 14,700
Conversion of Note Payable 1,034,181 $ 517,091
Net loss (692,722)
Translation adjustment (5,926)
------------------------------------------------------------------------------
Balance at March 31, 2001 5,549,928 $12,967,766 $14,498 $(13,332,009) $(110,169)
==============================================================================
See accompanying notes.
6
SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED MARCH 31, 2001 AND 2000
(Unaudited)
Increase (decrease) in cash 2001 2000
---- ----
Cash flows from operating activities:
Net loss $ (692,722) $ (656,920)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization 41,591 185,022
Provision for bad debts (414) 15,087
Changes in assets and liabilities:
Accounts receivable (169,378) (204,711)
Work in process (28,758) (267,069)
Prepaid expenses and other current assets (18,483) (2,619)
Deposits and other assets (33,393) 9,616
Accounts payable 65,722 453,256
Accrued liabilities (172,224) (79,738)
Customer deposits and non-current accrued expenses (13,068) (104,944)
-------------------------------
Net cash used in operating activities (1,021,127) (653,020)
-------------------------------
Cash flows from investing activities:
Disposals (additions) to property and equipment net 79,774 (65,249)
Payments received on notes receivable 15,305 0
Increase in Restricted Cash (1,329) 0
-------------------------------
Net cash provided by (used in) investing activities 93,750 (65,249)
-------------------------------
Cash flows from financing activities:
Borrowings on notes payable 4,532,330 5,634,175
Payments on notes payable (4,480,520) (4,969,616)
Payments on capital lease obligations (49,563) (69,313)
Convertible debt proceeds 400,000
Issuance of common stock 531,791 5,164
-------------------------------
Net cash provided by financing activities 934,038 600,410
-------------------------------
Effect of exchange rate changes on cash (5,926) 6,362
-------------------------------
Net increase (decrease) in cash and cash equivalents 735 (111,497)
Cash and cash equivalents at beginning of period 484,294 338,088
-------------------------------
Cash and cash equivalents at end of period $ 485,029 $ 226,591
===============================
See accompanying notes.
7
SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED MARCH 31, 2001 AND 2000
(Unaudited)
2001 2000
---- ----
Supplemental schedule of non-cash investing and financing activities:
Purchase of equipment through issuance of notes payable and
Capital lease obligations $31,606 $15,136
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $67,612 $24,780
======================
Income taxes -- $ 7,704
======================
See accompanying notes.
8
SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2001 AND 2000
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
Revenue, 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, and
Italy. Identifiable assets of Saztec Europe Ltd. located outside of Ardrossan,
Scotland are immaterial.
9 Months Ended March 31,
2001 2000
---- ----
Revenue
United States $4,699,527 $5,016,717
United Kingdom/Western Europe* 835,725 1,578,579
---------------------------------
$5,535,252 $6,595,296
=================================
Income (loss) before income taxes
United States $ (770,714) $ (259,163)
United Kingdom/Western Europe 77,992 (390,053)
---------------------------------
$ (692,722) $ (649,216)
=================================
Depreciation
United States 87,734 $ 110,667
United Kingdom/Western Europe (55,233) 65,265
Amortization-U.S. only 9,090 9,090
---------------------------------
41,591 $ 185,022
=================================
Identifiable Assets March 31, 2001 March 31, 2000
-------------- --------------
United States $2,235,948 $1,917,484
United Kingdom 438,560 1,132,356
---------------------------------
$2,674,508 $3,049,840
=================================
* Adjusted for intercompany revenue
9
NOTE 3. LOSS PER SHARE
Loss per common share is computed by dividing net loss applicable to common
stockholders by the weighted average number of shares of common stock
outstanding during each period which totaled 5,549,928 and 4,469,371 for the
three month period ended March 31, 2001, and 2000, and 5,133,955 and 4,469,371
for the nine months ended March 31, 2001 and 2000 respectively.
NOTE 4. SUBSEQUENT EVENTS:
On April 11, 2001 the Company issued 700,000 restricted shares of the Company's
common stock under Rule 144 of the 1934 Act, to certain of the Company's
Directors and Datamatics Technologies Ltd ("Datamatics"). The shares were issued
at thirty cents ($0.30) per share, following a special meeting of the
independent Directors dated April 5, 2001. The proceeds would be utilized by the
company for infrastructure enhancement and sales and marketing activities.
10
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Revenues for the nine months ended March 31, 2001 decreased to $4,699,527 from
$5,016,717 for the nine months ended March 31, 2000, a decreased of $317,190 or
6.32%. Revenues for the quarter ended March 31, 2001 were $1,704,256, down
$60,110 from the $1,764,366 reported for the quarter ended March 31, 2000. The
decrease in revenue this quarter was primarily due to re-negotiations of
existing contracts and restructuring of the services offered as result of
streamlining operations.
Gross profit for the nine months ended March 31, 2001 decreased $519,769 from
the prior year period to 15.34% of sales, compared to 24.73% of sales for the
same period of 2000. Gross profit for the quarter ended March 31, 2001 was
19.39% of sales compared to 21.97% in the same period last year. The decrease in
the gross profit was primarily due to unfavourable, contractual agreements and
production processes implemented in the first half of fiscal 2001.
Selling, and administrative expenses (S&A) for the nine months period decreased
$64,502 to $1,393,078 (29.64% of sales) from $1,457,580 (29.05% of sales) for
the same period last year. For the quarter ended March 31, 2001 S&A decreased to
$471,833 (27.69% of sales) from $547,971 (31.06% of sales) in the prior year
quarter. The company has invested in additional sales resources coupled with
increased efforts in marketing and customer relationship management. The S&A
expenses have displayed a decrease despite the new sales expenses and the
corporate expenses not being shared with its European subsidiary.
The Interest expenses increased from $14,103 to $28,570 for the three months
ended March 31, 2001 compared to the three months ended March 31, 2000. The
increase was primarily related to the increase in convertible notes aggregating
$900,000 that the Company raised in October 2000, to augment working capital.
Loss from continuing operations before income taxes was $(770,714) for the nine
months ended March 31, 2001 compared to $(266,867) for the nine months ended
March 31, 2000. Income from discontinued operations for the nine months ended
March 31, 2001 was $77,992 compared to a loss of $(390,053) for the same period
the prior year. Net Loss for the nine months ended March 31, 2001 was $(692,723)
compared to $(656,920) for the nine months ended March 31, 2000. Net loss for
the three months ended March 31, 2001 was $(112,160) compared to $(327,618) for
the three months ended March 31, 2000. The improvement in the net loss from
continuing operations for the three months ended March 31, 2001 compared to
March 31, 2000, was largely attributable to the outsourcing business model
adopted for the period, and reduction in the selling and administrative
expenses.
Cash Flow remained flat with an increased of $735 for the nine months ended
March 31, 2001 compared to a decrease of $111,497 for the same period in the
prior year. Net cash from operating activities decreased $1,021,127, and net
cash from investing activities increased $93,750. Cash flow from financing
activities of $934,038 and effect of exchange rate changes of $(5,926) make up
the balance of the change. The additional infusion of funds aggregating $900,000
in this period reinstates the continued support that the Company receives from
the promoters (Datamatics and Maida Vale).
Through the enhanced investment of Datamatics, the company has established a
strategic relationship, which will enable leveraging its strengths for providing
value added services focusing on U.S. enterprises. Datamatics is a leader in the
global outsourcing business with 2,300 employees and clients in more than 50
countries.
11
Capital Resources and Liquidity
At March 31, 2001 the Company had borrowed $597,808 under its revolving credit
agreement which allows for borrowings of $800,000. The revolving credit
agreement provides for interest at the lender's prime rate plus 2.5%. The credit
agreement is collateralized by substantially all domestic assets of the Company,
including the stock of subsidiaries. The initial term of the revolving credit
agreement was from June 22, 1999 to June 21, 2000, and was renewed for a
one-year period until June 21, 2001. Maximum borrowing under the agreement is
limited to 80% of outstanding domestic accounts receivable less than ninety days
old, up to $800,000.
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, 2001 FORM 10-QSB
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings
On January 26, 2001 Saztec Europe Limited a wholly owned subsidiary of Saztec
International Inc. filed a petition for liquidation under section 122 (a) of the
Insolvency Act 1986 U.K. It had been determined that the Company's long term
business model in Europe would not be profitable based on market conditions for
our services. This decision will enable the Company to focus in on its core
business of delivering high quality data conversion and image processing
services with resources and distribution efforts focused on major enterprises
and partners in the U.S. marketplace. Accordingly the Company, for all periods
presented, reports Saztec Europe as a discontinued segment. At a creditors
meeting held on March 29, 2001, the Interim Liquidator was appointed the Final
Liquidator. The Final Liquidator is expected to present his first status report
to the Creditors Committee in May 2001.
ITEM 2. Changes in Securities
None.
ITEM 3. Defaults Upon Senior Securities.
None.
ITEM 4. Submission of Matters to a Vote of Security Holders
None.
ITEM 5. Other Information
On February 15, 2001 Vidur V. Bhogilal joined the company as Vice President
Finance and Secretary.
As part of the management strategy to focus on core competencies the Company's
South Weymouth operations were consolidated into the Billerica operations. The
Company has ensured a seamless integration of the two operations, and expects to
bring substantial enhancements in processes and methodologies resulting in
improved customer services.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None.
(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 14, 2001
SAZTEC INTERNATIONAL, INC.
(Registrant)
By: /s/ Richard J. Orlando
---------------------------------------
Richard J. Orlando
President and CEO
14