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, 2002
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 Bldg. 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 March 31, 2002,
was 7,089,596 shares.
SAZTEC INTERNATIONAL, INC.
FORM 10-QSB
QUARTER ENDED MARCH 31, 2002
CONTENTS
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Page
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PART I - FINANCIAL INFORMATION
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Item 1. Financial Statements:
Statements of Operations -
Three months ended March 31, 2002 and 2001 3
Statements of Operations -
Nine months ended March 31, 2002 and 2001 4
Consolidated Balance Sheets - March 31, 2002 and June 30, 2001 5
Consolidated Statement of Changes in Stockholders' Equity -
March 31, 2002 6
Consolidated Statements of Cash Flows -
Nine months ended March 31, 2002 and 2001 7 - 8
Notes to Consolidated Financial Statements - March 31, 2002 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
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2001
(Unaudited)
2002 2001
---- ----
Revenues $1,281,371 $1,704,256
Cost of services 905,626 1,316,146
------------------ ------------------
Gross profit 375,745 388,110
Selling and administrative expense 412,353 471,833
------------------ ------------------
Loss from operations (36,608) (83,723)
Interest expense 26,317 31,103
Interest income (4,361) (2,533)
--------------------------------------
Other income/expense - net 459 57,687
------------------ ------------------
Loss before income taxes (59,023) (169,980)
Income taxes 0 0
------------------ ------------------
Loss from continuing operations $(59,023) $(169,980)
------------------ ------------------
Discontinued Operations
Income from discontinued
segment before taxes 0 57,820
Applicable Tax Expense 0 0
------------------ ------------------
Net Loss $(59,023) $(112,160)
================== ==================
Net Loss per share basic and diluted
from continuing operations $(.01) $(.03)
================== ==================
Net Income (Loss) per share basic and diluted
from discontinued operations - $.01
================== ==================
Net Loss per share basic and diluted $(.01) $(.02)
================== ==================
Weighted average common shares basic and diluted 7,089,596 5,549,928
================== ==================
See accompanying notes.
3
SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES
STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED MARCH 31, 2002 AND 2001
(Unaudited)
2002 2001
---- ----
Revenues $4,037,091 $4,699,527
Cost of services 2,798,041 3,837,554
------------------ ------------------
Gross profit 1,239,050 861,973
Selling and administrative expense 1,405,273 1,317,340
------------------ ------------------
Loss from operations (166,223) (455,367)
Interest expense 87,513 101,027
Interest income (22,510) (7,150)
------------------ ------------------
Other income/expense - net 15,186 221,470
------------------ ------------------
Loss before income taxes (246,412) (770,714)
Income taxes 0 0
------------------ ------------------
Loss from continuing operations $(246,412) $(770,714)
------------------ ------------------
Discontinued Operations
Income from discontinued segment before taxes
0 77,992
Applicable Tax Expense 0 0
------------------ ------------------
Net Loss $(246,412) $(692,722)
================== ==================
Net Loss per share basic and diluted
from continuing operations $(.04) $(.15)
================== ==================
Net Income (Loss) per share basic and diluted
from discontinued operations -- $.02
================== ==================
Net Loss per share basic and diluted $(.04) $(.13)
================== ==================
Weighted average common shares basic and diluted 6,825,085 5,133,955
================== ==================
See accompanying notes.
4
SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 2002 AND JUNE 30, 2001
ASSETS
------
March 31, 2002 June 30, 2001
-------------- -------------
Unaudited Audited
--------- -------
Current assets
Cash and cash equivalents $497,106 $969,875
Restricted cash 30,023 28,559
Accounts receivable, less allowance for doubtful accounts of $83,716 at
March 31, 2002 and $83,713 at June 30, 2001 839,752 993,080
Work in process 19,350 22,034
Prepaid expenses and other current assets 86,291 24,553
---------------------------------------------
Total current assets 1,472,522 2,038,101
Property and equipment, net 118,863 128,656
Other assets
Deposits and other assets 60,690 65,255
---------------------------------------------
Total assets $1,652,075 $2,232,012
=============================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Line of Credit $453,258 $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 22,394 35,549
Accounts payable 790,102 1,328,204
Accrued liabilities 226,115 271,960
----------------------------------------------
Total current liabilities 1,841,869 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 42,010 38,525
----------------------------------------------
Total Long-term debt and capital lease obligations less current portion 642,010 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; 7,089,596 and 6,249,928
shares issued and outstanding at March 31, 2002 and June 30,
2001 13,480,047 13,177,766
Contributed capital 14,498 14,498
Accumulated deficit (14,326,349) (14,079,937)
----------------------------------------------
Total stockholders' equity (831,804) (887,673)
----------------------------------------------
Total liabilities and stockholders' equity $1,652,075 $2,232,012
==============================================
See accompanying notes.
5
SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
MARCH 31, 2002
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)
Conversion of Note Payable
and accrued interest 839,668 $302,281
Net loss (246,412)
---------------------------------------------------------------------
Balance at March 31, 2002 7,089,596 $13,480,047 $14,498 $(14,326,349)
=====================================================================
See accompanying notes.
6
SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED MARCH 31, 2002 AND 2001
(Unaudited)
Increase (decrease) in cash 2002 2001
---- ----
Cash flows from operating activities:
Net loss $ (246,412) $ (692,722)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization 50,136 41,591
Provision for bad debts 3 (414)
Changes in assets and liabilities:
Accounts receivable 153,325 (169,378)
Work in process 2,684 (28,758)
Prepaid expenses and other current assets (61,738) (18,483)
Deposits and other assets 4,565 (33,393)
Accounts payable (538,102) 65,722
Accrued liabilities (45,845) (172,224)
Customer deposits and non-current accrued expenses (13,068)
------------------------------------
Net cash used in operating activities (681,384) (1,021,127)
------------------------------------
Cash flows from investing activities:
(Additions) disposals to property and equipment net (40,343) 79,774
Payments received on notes receivable 15,305
Increase in Restricted Cash (1,464) (1,329)
------------------------------------
Net cash (used in) provided by investing activities (41,807) 93,750
------------------------------------
Cash flows from financing activities:
Proceeds from Borrowings 600,000 0
Principal payments debt and capital lease obligations (559,670) (49,563)
Borrowings on notes payable 4,513,875 4,532,330
Payments on notes payable (4,606,064) (4,480,520)
Convertible debt proceeds 0 400,000
Issuance of common stock 302,281 531,791
------------------------------------
Net cash provided by financing activities 250,422 934,038
------------------------------------
Effect of exchange rate changes on cash 0 (5,926)
------------------------------------
Net (decrease) increase in cash and cash equivalents (472,769) 735
Cash and cash equivalents at beginning of period 969,875 484,294
------------------------------------
Cash and cash equivalents at end of period $497,106 $485,029
====================================
See accompanying notes.
7
SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED MARCH 31, 2002 AND 2001
(Unaudited)
2002 2001
---- ----
Supplemental schedule of non-cash investing
and financing activities:
Purchase of equipment through issuance of notes
payable and Capital lease obligations $35,543 $31,606
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $49,384 $67,612
========================
Income taxes - -
========================
See accompanying notes.
8
SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2002 AND 2001
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. 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 5,549,928 for the
three month period ended March 31, 2002, and 2001, and 6,825,085 and 5,133,955
for the nine months ended March 31, 2002 and 2001 respectively.
NOTE 3. RECLASSIFICATION
Certain amounts in the 2001 period have been reclassified to conform with the
current year presentation.
9
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
- ---------------------
Revenues for the nine months ended March 31, 2002 decreased to $4,037,091 from
$4,699,527 for the nine months ended March 31, 2001, a decrease of $662,436 or
14.1%. Revenues for the quarter ended March 31, 2002 were $1,281,371, down
$422,885 from the $1,704,256 reported for the quarter ended March 31, 2001. The
decrease in revenue this quarter was primarily due to non-renewal of certain
non-profitable contracts and a reduction in business from existing customers
due to the US economic downturn.
Gross profit for the nine months ended March 31, 2002 increased by $377,077 from
the prior year period to 30.7% of sales, compared to 18.3% of sales for the same
period of 2001. Gross profit for the quarter ended March 31, 2002 was 29.3% of
sales compared to 22.8% in the same period last year. The increase in the gross
profit was primarily due to non-renewal of non-profitable contracts, increase in
offshore production and improved productivity gains in US production facilities.
Selling and administrative expenses (S&A) for the nine months period increased
by $87,933 to $1,405,273 (34.8% of sales) from $1,317,340 (28.0% of sales) for
the same period last year. For the quarter ended March 31, 2002 S&A decreased to
$412,353 (32.2% of sales) from $471,833 (27.7% of sales) in the prior year
quarter. The increase in S&A expenses for the nine months period resulted from
the investments made by the Company in additional sales and marketing efforts.
Loss from continuing operations before income taxes was $(246,412) for the nine
months ended March 31, 2002 compared to $(770,714) for the nine months ended
March 31, 2001. There was no income or loss from discontinued operations for the
nine months ended March 31, 2002 compared to an income of $77,992 for the same
period the prior year. Net Loss for the nine months ended March 31, 2002 was
$(246,412) compared to $(692,722) for the nine months ended March 31, 2001. Net
Loss for the three months ended March 31, 2002 was $(59,023) compared to
$(112,160) for the three months ended March 31, 2001. The improvement in the Net
Loss from continuing operations for the three months period was largely
attributable to the reduction in the S&A expenses and other expenses.
Cash Flow decreased $472,769 for the nine months ended March 31, 2002 compared
to an increase of $735 for the same period in the prior year. Net cash used in
operating activities was $681,384, and net cash used in investing activities was
$41,807. Cash flow provided by financing activities was $250,422.
Capital Resources and Liquidity
- -------------------------------
At March 31, 2002 the Company had borrowed $453,258 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 2.3% (7.0% at
March 31, 2002). The credit agreement is collateralized by substantially all
domestic assets of the Company, and an unconditional corporate guaranty of
Datamatics Technologies Ltd. (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.
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.
10
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.
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.
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:
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: May 14, 2002
SAZTEC INTERNATIONAL, INC.
--------------------------
(Registrant)
By: /s/ Richard J. Orlando
------------------------------
Richard J. Orlando
President and CEO
13