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 December 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 Turnpike Building 5, 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 February 14,
2002, was 7,089,596 shares.
SAZTEC INTERNATIONAL, INC.
FORM 10-QSB
QUARTER ENDED DECEMBER 31, 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 December 31, 2001 and 2000 3
Consolidated Statements of Operations -
Six months ended December 31, 2001 and 2000 4
Consolidated Balance Sheets - December 31, 2001 and June 30, 2001 5
Consolidated Statement of Changes in Stockholders' Equity -
December 31, 2001 6
Consolidated Statements of Cash Flows -
Six months ended December 31, 2001 and 2000 7 - 8
Notes to Consolidated Financial Statements - December 31, 2001 and 2000 9
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 10 - 11
PART II - OTHER INFORMATION
- ----------------------------
Item 1. Legal Proceedings 12
Item 2. Changes in Securities 12
Item 3. Defaults Upon Senior Securities 12
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
2
SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED DECEMBER 31, 2001 AND 2000
(Unaudited)
2001 2000
---- ----
Revenues $1,239,534 $1,506,398
Cost of services 855,692 1,109,492
---------- ----------
Gross profit 383,842 396,906
Selling and administrative expense 483,297 504,053
-----------------------------------
Loss from operations (99,455) (107,147)
Interest expense 31,944 42,457
Interest income (4,167) (2,149)
-----------------------------------
Other income/expense - net 6,539 166,787
-----------------------------------
Loss before provision for income taxes (133,771) (314,242)
Income taxes - -
-----------------------------------
Net loss from continuing operations $ (133,771) $ (314,242)
-----------------------------------
Discontinued Operation
Loss from discontinued segment before taxes - (54,780)
Applicable Tax Expense - -
-----------------------------------
Net Loss $ (133,771) $ (369,022)
===================================
Net Loss per share basic and diluted
from continuing operations $ (.02) $ (.06)
===================================
Net Loss per share basic and diluted
from discontinued operations - $ (.01)
===================================
Net Loss per share basic and diluted $ (.02) $ (.07)
===================================
Weighted average common shares basic and diluted 7,089,596 5,356,729
===================================
See accompanying notes.
3
SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31, 2001 AND 2000
(Unaudited)
2001 2000
---- ----
Revenues $2,755,721 $2,995,271
Cost of services 1,892,415 2,521,407
-------------------------------------
Gross profit 863,306 473,864
Selling and administrative expense 985,420 845,506
-------------------------------------
Loss from operations (122,114) (371,642)
Interest expense 68,697 69,925
Interest income (6,947) (4,616)
-------------------------------------
Other income/expense - net 3,525 163,783
-------------------------------------
Loss before provision for income taxes (187,389) (600,734)
Income taxes - -
-------------------------------------
Net loss from continuing operations (187,389) (600,734)
-------------------------------------
Discontinued Operation
Income from discontinued segment before taxes
- 20,170
Applicable Tax Expense - -
-------------------------------------
Net Loss $ (187,389) $ (580,564)
=====================================
Net Loss per share basic and diluted
from continuing operations $ (.03) $ (.12)
=====================================
Net Income (Loss) per share basic and diluted
from discontinued operations - $ .004
=====================================
Net Loss per share basic and diluted $ (.03) $ (.12)
=====================================
Weighted average common shares basic and diluted 6,694,998 4,929,379
=====================================
See accompanying notes.
4
SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2001 AND JUNE 30, 2001
ASSETS
December 31, 2001 June 30, 2001
----------------- -------------
Unaudited Audited
--------- -------
Current assets
Cash and cash equivalents $ 707,431 $ 969,875
Restricted cash 28,559 28,559
Accounts receivable, less allowance for doubtful accounts of $83,751 at
December 31, 2001 and $83,713 at June 30, 2001 800,465 993,080
Work in process 19,542 22,034
Prepaid expenses and other current assets 93,159 24,553
----------------------------------------
Total current assets 1,649,156 2,038,101
Property and equipment, net 128,058 128,656
Other assets 62,644 65,255
----------------------------------------
Total assets $ 1,839,858 $ 2,232,012
========================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Line of Credit $ 431,621 $ 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 33,099 35,549
Accounts payable 981,325 1,328,204
Accrued liabilities 172,068 271,960
----------------------------------------
Total current liabilities 1,968,113 3,081,160
Long-term debt and capital lease obligations less current portion
Convertible note payable - related party 600,000 0
Capital lease obligations less current portion 44,526 38,525
----------------------------------------
Total Long-term debt and capital lease obligations less current portion 644,526 38,525
Stockholders' equity (deficit)
Preferred stock-no par value; 1,000,000 shares authorized; no shares
issued -- --
Common stock-no par value; 10,000,000 shares authorized; 7,089,596
and 6,249,928 shares issued and outstanding at December 31, 2001 and
June 30, 2001 13,480,047 13,177,766
Contributed capital 14,498 14,498
Accumulated deficit (14,267,326) (14,079,937)
----------------------------------------
Total stockholders' equity (deficit) (772,781) (887,673)
----------------------------------------
Total liabilities and stockholders' equity $ 1,839,858 $ 2,232,012
========================================
See accompanying notes.
5
SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
DECEMBER 31, 2001
Common Stock
------------
Number of Contributed Accumulated
--------- ----------- -----------
Shares Amount Capital Deficit
------ ------ ------- -------
Balance at June 30, 2001 6,249,928 $ 13,177,766 $ 14,498 $ (14,079,937)
Stock issued pursuant to
Conversion of Note Payable
and accrued interest 839,668 $ 302,281
Net loss (187,389)
------------------------------------------------------------------
Balance at December 31, 2001 7,089,596 $ 13,480,047 $ 14,498 $ (14,267,326)
==================================================================
See accompanying notes.
6
SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED DECEMBER 31, 2001 AND 2000
(Unaudited)
Increase (decrease) in cash 2001 2000
----------- -----------
Cash flows from operating activities:
Net loss $ (187,389) $ (580,564)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization 33,546 60,497
Provision for bad debts 38 565
Changes in assets and liabilities:
Accounts receivable 192,577 101,102
Work in process 2,492 (37,738)
Prepaid expenses and other current assets (68,606) (3,539)
Deposits and other assets 2,611 (33,439)
Accounts payable (346,879) 17,090
Accrued liabilities (99,892) (94,430)
Customer deposits and non-current accrued expenses (9,598)
--------------------------------
Net cash used in operating activities (471,505) (580,054)
--------------------------------
Cash flows from investing activities:
Disposals (additions) to property and equipment net (32,945) 37,316
Payments received on notes receivable 13,069
--------------------------------
Net cash (used by) provided by investing activities (32,945) 50,385
--------------------------------
Cash flows from financing activities:
Proceeds from borrowings 600,000 400,000
Principal payments on debt and capital lease obligations (546,449) (35,420)
Borrowings on revolving credit agreement 3,218,703 2,855,817
Payments on revolving credit agreement (3,332,529) (3,020,604)
Proceeds from issuance of common stock 302,281 531,791
--------------------------------
Net cash provided by financing activities 242,006 731,584
--------------------------------
Effect of exchange rate changes on cash 0 1,739
--------------------------------
Net (decrease) increase in cash and cash equivalents (262,444) 203,654
Cash and cash equivalents at beginning of period 969,875 484,294
--------------------------------
Cash and cash equivalents at end of period $ 707,431 $ 687,948
================================
See accompanying notes.
7
SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED DECEMBER 31, 2001 AND 2000
(Unaudited)
2001 2000
---- ----
Supplemental schedule of non-cash investing and financing activities:
Financed purchases of property and equipment through lease obligations 28,145 0
---------------------------
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $39,100 $39,884
===========================
Income taxes - -
===========================
See accompanying notes.
8
SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 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.
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. 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 7,089,596 and 5,356,729 for the
three month period ended December 31, 2001, and 2000, and 6,694,998 and
4,929,379 for the six months period ended December 31, 2001 and 2000
respectively.
9
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
- ---------------------
Revenue for the six months ended December 31, 2001, decreased to $2,755,721 from
$2,995,271 for the six months ended December 31, 2000, a decreased of $239,550
or 8.0%. Revenue for the quarter ended December 31, 2001 at $1,239,534 was down
$266,863 from the $1,506,397 earned for the quarter ended December 31, 2000.
Gross profit for the six months ended December 31, 2001 increased $389,442 from
the prior year period to 31.3% of sales, compared to 15.8% of sales for the same
period of 2000. Gross profit margin for the quarter ended December 31, 2001 was
31.0% of sales compared to 26.4% in the same period last year. The increase in
the Gross Profit is largely attributed to the implementation of the outsourcing
business model and increased productivity in the US operations.
Selling, and administrative expenses (S&A) for the six month period increased
$139,914 to $985,420 (35.8% of sales) from $845,506 (28.2% of sales) for the
same period last year. The increase resulted from additional sales resources
and increased marketing efforts. For the quarter ended December 31, 2001 S&A
decreased to $483,297 (39.0% of sales) from $504,053 (33.5% of sales) in the
prior year quarter.
Loss from continuing operations before income taxes was $(187,389) for the six
months ended December 31, 2001 compared to $(600,734) for the six months ended
December 31, 2000. Net Loss for the six months ended December 31, 2001 was
$(187,389) compared to $(580,564) for the six months ended December 31, 2000.
Loss from continuing operations before income taxes was $(133,771) for the three
months ended December 31, 2001 compared to $(314,242) for the three months ended
December 31, 2000. Net Loss for the three months ended December 31, 2001 was
$(133,771) compared to $(369,022) for the three months ended December 31, 2000.
Losses decreased primarily due to higher Gross Profits, and lower other
expenses.
Cash Flow decreased $262,444 for the six months ended December 31, 2001 compared
to an increase of $203,654 for the same period the prior year. Net cash from
operating activities decreased $471,505, and net cash from investing activities
decreased $32,945. Cash flow from financing activities of $242,006 makes up the
balance of the change.
10
Capital Resources and Liquidity
- -------------------------------
At December 31, 2001 the Company had borrowed $431,621 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%
(7.00 % at December 31, 2001). The credit agreement is collateralized by
substantially all domestic assets of the Company, and an unconditional corporate
guaranty of Datamatics Technologies Ltd. (Datamaics). 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.
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. The Company received $300,000 as a fresh cash infusion from
Datamatics in October 2001, to make the new convertible note amount $600,000
($300,000 was the rolled over amount). 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 and unused borrowing facility
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 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.
11
SAZTEC INTERNATIONAL, INC.
DECEMBER 31, 2001 FORM 10-QSB
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings
-----------------
None.
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
-----------------
ITEM 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
The following Exhibits are filed by attachment to this Form 10-QSB:
None
(b) Reports on Form 8-K:
None.
12
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: February 14, 2002
SAZTEC INTERNATIONAL, INC.
--------------------------
(Registrant)
By: /s/ Richard J. Orlando
---------------------------------------
Richard J. Orlando
President and CEO
13