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 September 30, 2001
Commission File Number 0-15353
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SAZTEC INTERNATIONAL, INC.
California 33-0178457
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
900 Middlesex Turnpike., Building 5, Billerica, Massachusetts 01821
(Address of Principal Executive Office)
978-901-9600
(Registrant's Telephone Number)
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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
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The number of shares outstanding of registrant's Common Stock at November 12,
2001, was 7,089,596 shares.
SAZTEC INTERNATIONAL, INC.
FORM 10-QSB
QUARTER ENDED SEPTEMBER 30, 2001
CONTENTS
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Page
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Statements of Operations -
Three months ended September 30, 2001 and 2000 3
Consolidated Balance Sheets - September 30, 2001 and June 30, 2001 4
Consolidated Statement of Changes in Stockholders' Equity -
September 30, 2001 5
Consolidated Statements of Cash Flows -
Three months ended September 30, 2001 and 2000 6-7
Notes to Consolidated Financial Statements - September 30, 2001 and 2000
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations 9-10
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 10
Item 2. Changes in Securities 10
Item 3. Defaults Upon Senior Securities 10
Item 4. Submission of Matters to a Vote of Security Holders 10
Item 5. Other Information 10
Item 6. Exhibits and Reports on Form 8-K 10
Signatures 11
2
SAZTEC INTERNATIONAL, INC.
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000
(Unaudited)
2001 2000
---- ----
Revenues $1,516,188 $1,488,873
Cost of services 1,036,723 1,411,914
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Gross profit 479,465 76,959
Selling and administrative expense 505,871 341,455
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Loss from operations (26,406) (264,496)
Interest expense 27,209 21,997
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Loss before provision for income taxes (53,615) (286,493)
Income taxes - -
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Net loss from continuing operations (53,615) (286,493)
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Discontinued Operation
Profit from discontinued segment before taxes - 74,951
Applicable Tax Expense - -
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Net Loss $ (53,615) $ (211,542)
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Loss per share basic and diluted
From continuing operations $ (0.01) $ (0.07)
Profit per share basic and diluted
From discontinued operations - $ 0.02
Net loss per share basic and diluted $ (0.01) $ (0.05)
Weighted average number of shares 6,296,064 4,515,747
See accompanying notes.
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SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2001 AND JUNE 30, 2001
ASSETS
September 30, 2001 June 30, 2001
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Unaudited Audited
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Current assets
Cash and cash equivalents $ 794,548 $969,875
Restricted cash 28,559 28,559
Accounts receivable, less allowance for doubtful accounts of $83,713 at
September 30, 2001 and $83,713 at June 30, 2001 806,571 993,080
Work in process 21,071 22,034
Prepaid expenses and other current assets 88,913 24,553
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Total current assets 1,739,662 2,038,101
Property and equipment, net 116,618 128,656
Other assets
Deposits and other assets 64,761 65,255
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Total assets $ 1,921,041 $2,232,012
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Line of Credit $ 541,300 $ 545,447
Convertible note payable - related party 0 550,000
Note payable - related party 350,000 350,000
Current portion of long-term debt and capital lease obligations 26,706 35,549
Accounts payable 1,042,112 1,328,204
Accrued liabilities 263,715 271,960
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Total current liabilities 2,223,833 3,081,160
Long-term debt and capital lease obligations less current portion
Convertible note payable - related party 300,000 0
Capital lease obligations less current portion 36,215 38,525
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Total Long-term debt and capital lease obligations less current portion 336,215 38,525
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; 6,249,928 and
7,089,596 shares issued and outstanding at June 30, 2001 and September 30, 2001 13,480,047 13,177,766
Contributed capital 14,498 14,498
Accumulated deficit (14,133,552) (14,079,937)
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Total stockholders' equity (639,007) (887,673)
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Total liabilities and stockholders' equity $ 1,921,041 $ 2,232,012
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See accompanying notes.
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SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
SEPTEMBER 30, 2001
Common Stock
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Number of Contributed Accumulated
Shares Amount Capital Deficit
--------- ----------- ---------- ------------
Balance at June 30, 2001 6,249,928 $13,177,766 $14,498 $(14,079,937)
Conversion of Note payable
and accrued interest 839,668 $302,281
Net loss (53,615)
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Balance at September 30, 2001 7,089,596 $13,480,047 $14,498 $(14,133,552)
========= =========== ========== ============
See accompanying notes.
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SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000
(Unaudited)
Increase (decrease) in cash 2001 2000
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Cash flows from operating activities:
Net loss $ (53,615) $ (211,542)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization 16,838 3,071
Recovery of bad debts - (897)
Changes in assets and liabilities:
Accounts receivable 186,509 144,388
Work in process 963 (33,297)
Prepaid expenses and other current assets (64,360) (43,123)
Deposits and other assets 494 (43,223)
Accounts payable (286,092) 30,779
Accrued liabilities (8,245) (154,230)
Customer deposits and non-current accrued expenses (10,532)
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Net cash used in operating activities (207,508) (318,606)
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Cash flows from investing activities:
(Additions) disposals to property and equipment net (4,800) 86,121
Payments received on notes receivable 4,291
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Net cash (used by) provided by investing activities (4,800) 90,412
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Cash flows from financing activities:
Principal payments on/conversion of debt and capital lease
obligations (261,153) (53,581)
Borrowings on revolving credit line 1,834,857 1,576,450
Payments on revolving credit line (1,839,004) (1,580,720)
Issuance of common stock issue 302,281 14,700
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Net cash provided by (used in) financing activities 36,981 (43,151)
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Effect of exchange rate changes on cash 1,014
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Net (decrease) in cash and cash equivalents (175,327) (270,331)
Cash and cash equivalents at beginning of period 969,875 484,294
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Cash and cash equivalents at end of period $ 794,548 $ 213,963
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See accompanying notes.
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SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000
(Unaudited)
2001 2000
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Supplemental schedule of non-cash investing and financing activities:
Financed purchases of property and equipment through notes payable $ 0 $ 0
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Converted $302,281 of debt and accrued interest for common stock $ 0 $ 0
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $17,891 $22,196
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Income taxes $ 0 $ 0
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See accompanying notes.
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SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 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.
Certain financial information and note disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. These financial statements should be
read in conjunction with the financial statements and notes thereto as of June
30,2001 appearing in the Company's annual report on Form 10-KSB for the year
ended June 30,2001.
NOTE 2. COMMON STOCK
Per a resolution adopted by the Board of Directors, the Company issued on
September 25, 2001, 839,668 shares of common stock to Datamatics Technologies
Ltd. (Datamatics). Datamatics informed the Company of its intent to convert as
per the terms of the convertible note dated September 25, 2000, $ 302,281 of the
unpaid principal and interest. The conversion was done at $ 0.36 per share.
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 6,296,064 and 4,515,747 for the
quarters ended September 30, 2001, and 2000, respectively.
NOTE 4. ECONOMIC DEPENDENCE:
The company is reliant on its parent to meet its cash flow requirements.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Revenues for the three months ended September 30, 2001 increased 1.83% to
$1,516,188 from $1,488,873 for the quarter ended September 30, 2000. Gross
profit for continuing operations increased $402,506 from $76,959 to $479,465 in
the current year, with gross margin increasing to 31.62% from the prior year
margin of 5.17%. The substantial increase in the gross margin resulted from the
implementation of the new outsource business model. Leveraging the relationship
with its parent Datamatics the Company was able to improve processes and
re-organize workflows and production methodologies. Re-structuring exercises
undertaken by management in the first half of the calendar year also contributed
to altering the production costs.
Selling and administrative (S&A) expenses for the quarter ended September 30,
2001 increased $164,416 to $505,871 from $341,455 for the same period in the
prior year. The increase is a result of the additional sales resources and
enhanced marketing efforts.
Loss from continuing operations was $(53,616) for the quarter ended September
30, 2001 compared to $(286,493) for the quarter ended September 30, 2000. Income
from discontinued operations for the quarter ended September 30, 2000 was
$74,951. The significant decrease in the net loss was largely attributable to
higher operating margins.
Capital Resources and Liquidity
At September 30, 2001 the Company had borrowed $541,300 under its revolving
credit agreement, which allows for borrowings of $1,500,000. The revolving
credit agreement provides for interest at the lender's prime rate plus 2.25%
(8.25 % at October 31, 2001). The credit agreement is collateralized by
substantially all domestic assets of the Company, and an unconditional corporate
guaranty of Datamatics. The revolving credit agreement was entered into on
August 30, 2001 and is intended to be a continuing agreement, remaining in full
effect for an initial term of two years.
On September 25, 2001 the Company extended its promissory note agreement with
Maida Vale Ltd, in the amount of $350,000 for a further six months. The note
provides for simple interest at the prime lending rate plus 2.0%. Datamatics
notified the Company of its intention to convert $302,281 of the total $602,281
unpaid principal and interest on its convertible promissory note due September
25, 2001. The Company issued 839,668 shares of the common stock of the company
at a conversion price of $0.36 per share on September 25, 2001. The unconverted
$300,000 was rolled over into a new convertible note due November 1, 2003.
Furthermore, the Company added to this new convertible note another $300,000
received as a fresh cash infusion from Datamatics in October 2001, to make the
new note amount $600,000. The note agreement provides for simple interest at the
prime lending rate plus 2.0% and is due November 1, 2003. The note may be
converted to shares of Saztec common stock at the holder's request at any time
during the term of the note at a conversion rate calculated at $.20 per share
for the outstanding principle and interest at the time of the conversion. The
Company cannot prepay the note without the consent of the holder.
The company believes that its strong cash position, unused borrowing facility
and cash flow from operations will provide sufficient liquidity and enable the
company to meet its current and foreseeable working capital requirements.
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
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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.
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. At a creditors meeting held on March 29, 2001, the
Interim Liquidator was appointed the Final Liquidator.
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
None.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
The following Exhibits are filed by attachment to this Form 10-QSB:
Exhibit
Number Description of Exhibit Page
- ------ ---------------------- ----
None
(b) Reports on Form 8-K:
None.
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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: November 12, 2001
SAZTEC INTERNATIONAL, INC.
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(Registrant)
By: /s/ Richard J. Orlando
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Richard J. Orlando
President and CEO
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