-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IrUPQIgXQupRZbUPeej9Vu1ntnKEo6NUGMBo+bpIJX6m8k4zJeFOCcNp5zVqTtK8 CiWfqtw4pq78AAdSpiJu3A== 0000755465-99-000023.txt : 19991018 0000755465-99-000023.hdr.sgml : 19991018 ACCESSION NUMBER: 0000755465-99-000023 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990831 FILED AS OF DATE: 19991015 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SANDATA INC CENTRAL INDEX KEY: 0000755465 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROCESSING & DATA PREPARATION [7374] IRS NUMBER: 112841799 STATE OF INCORPORATION: DE FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-14401 FILM NUMBER: 99729146 BUSINESS ADDRESS: STREET 1: 26 HARBOR PARK DR CITY: PORT WASHINGTON STATE: NY ZIP: 11050 BUSINESS PHONE: 5164849060 MAIL ADDRESS: STREET 1: 26 HARBOR PARK DR CITY: PORT WASHINGTON STATE: NY ZIP: 11050 FORMER COMPANY: FORMER CONFORMED NAME: SDS INC DATE OF NAME CHANGE: 19870818 FORMER COMPANY: FORMER CONFORMED NAME: SANDSPORT DATA SERVICES INC DATE OF NAME CHANGE: 19870520 10QSB 1 10QSB U.S. SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-QSB (Mark One) [X] Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period year ended August 31, 1999 [ ] Transition report under Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to Commission file number 0-14401 SANDATA, INC. (Name of Small Business Issuer in Its Charter) Delaware 11-2841799 (State or Other Jurisdiction of (IRS Employer Incorporation or Organization) Identification No.) 26 Harbor Park Drive, Port Washington, NY 11050 (Address of Principal Executive Offices) (Zip Code) 516-484-9060 (Issuer's Telephone Number, Including Area Code) (Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report) Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS Check whether the issuer has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. Yes No APPLICABLE ONLY TO CORPORATE ISSUERS The number of shares outstanding of each of the issuer's classes of common equity, as of October 11, 1999 was 2,481,480 shares. Transitional Small Business Disclosure Format (check one): Yes No X INDEX Page PART I - FINANCIAL INFORMATION Item 1 - FINANCIAL STATEMENTS: CONSOLIDATED CONDENSED BALANCE SHEETS as of August 31, 1999 (unaudited) and May 31, 1999 4 UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS for the three months ended August 31, 1999 and August 31, 1998 6 UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS for the three months ended August 31, 1999 and August 31, 1998 7 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS 8 Item 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION 11 PART II - OTHER INFORMATION 14 Item 1 - LEGAL PROCEEDINGS 14 Item 2 - CHANGES IN SECURITIES 14 Item 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY 14 HOLDERS Item 5 - OTHER INFORMATION 14 Item 6 - EXHIBITS AND REPORTS ON FORM 8-K 14 SANDATA, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEET UNAUDITED AUDITED August 31, May 31, ASSETS: 1999 1999 CURRENT ASSETS Cash and cash equivalents $ 814,516 $1,533,576 Accounts receivable, net of allowance for doubtful accounts of $452,000 at August 31, 1999 and $533,000 at May 31, 1999 2,091,752 2,034,248 Receivables from affiliates 485,168 924,426 Other receivables --- 1,100,000 Inventories 38,119 29,307 Prepaid expenses and other current assets 306,668 485,455 TOTAL CURRENT ASSETS 3,736,223 6,107,012 FIXED ASSETS, NET 8,432,759 7,169,002 OTHER ASSETS Notes receivable 139,093 169,608 Cash surrender value of officer's life insurance, security deposits and other 777,471 775,557 TOTAL ASSETS $13,085,546 $14,221,179 See notes to consolidated condensed financial statements
SANDATA, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEET UNAUDITED AUDITED August 31, May 31, 1999 1999 LIABILITIES AND SHAREHOLDERS' EQUITY: CURRENT LIABILITIES Accounts payable and accrued expenses $ 1,930,080 $ 3,022,395 Current portion of long-term debt --- 2,500,000 Deferred/unearned revenue 125,128 13,633 Deferred income 308,887 335,385 TOTAL CURRENT LIABILITIES 2,364,095 5,871,413 LONG TERM DEBT 2,400,000 --- DEFERRED INCOME 266,747 324,096 DEFERRED INCOME TAXES 535,000 535,000 TOTAL LIABILITIES 5,655,842 6,730,509 SHAREHOLDERS' EQUITY Common stock 2,481 2,481 Additional paid in capital 5,772,079 5,772,079 Retained earnings 3,264,803 3,235,769 Notes receivable - officers (1,519,659) (1,519,659) TOTAL SHAREHOLDERS' EQUITY 7,519,704 7,490,670 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $13,085,546 $14,221,179 See notes to consolidated condensed financial statements
SANDATA, INC. AND SUBSIDIARIES UNAUDITED CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS THREE MONTHS ENDED AUGUST 31, AUGUST 31, 1999 1998 REVENUES: Service fees $ 4,074,124 $ 3,223,510 Other income 88,016 253,328 Interest income 40,329 24,398 4,202,469 3,501,236 COSTS AND EXPENSES: Service Fees: Operating 2,593,738 2,117,828 Selling, general and administrative 938,359 892,823 Depreciation and amortization 572,703 439,360 Interest expense 48,120 5,730 TOTAL COSTS AND EXPENSES $ 4,152,920 3,455,741 Earnings from operations before income taxes 49,549 45,495 Income tax expense 20,515 16,287 NET EARNINGS $ 29,034 $ 29,208 BASIC EARNINGS PER SHARE $ .01 $ .01 DILUTED EARNINGS PER SHARE $ .01 $ .01 See notes to consolidated condensed financial statements
SANDATA, INC. AND SUBSIDIARIES UNAUDITED CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS THREE MONTHS ENDED AUGUST 31, AUGUST 31, 1999 1998 Cash flows from operating activities: Net earnings $ 29,034 $ 29,208 Adjustments to reconcile net earnings to net cash provided by (used in) operating activities: Depreciation and amortization 572,703 439,360 (Decrease) increase in allowance for doubtful accounts (81,235) 2,315 (Decrease) in deferred income (83,847) (53,204) Increase in deferred revenue 111,495 38,248 Decrease in operating assets 1,322,307 131,607 (Decrease) in operating liabilities (1,092,315) (809,148) Net cash provided by (used in) operating activities 778,142 (221,614) Cash flows from investing activities: Purchases of fixed assets (1,836,460) (1,122,559) Decrease in receivables from affiliates 439,258 63,851 Net cash (used in) investing activities (1,397,202) (1,058,708) Cash flows from financing activities: Proceeds from stock transactions --- 1,609 Principal payments on term loan --- (22,296) Proceeds from line of credit 600,000 250,000 Principal payments on line of credit (700,000) (250,000) Net cash (used in) financing activities (100,000) (20,687) (Decrease) in cash and cash equivalents (719,060) (1,301,009) Cash and cash equivalents at beginning of period 1,533,576 1,794,947 Cash and cash equivalents at end of period $ 814,516 $ 493,938 See notes to consolidated condensed financial statements
SANDATA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Unaudited) 1. CONSOLIDATED CONDENSED FINANCIAL STATEMENTS The Consolidated Condensed Balance Sheet as of August 31, 1999, the Consolidated Condensed Statements of Operations for the three month period ended August 31, 1999 and 1998 and the Consolidated Condensed Statement of Cash Flows for the three month period ended August 31, 1999 and 1998 have been prepared by Sandata, Inc. and Subsidiaries (the "Company") without audit. In the opinion of management, all adjustments (which include only normal, recurring adjustments) necessary to present fairly the financial position as of August 31, 1999 and for all periods presented have been made. For information concerning the Company's significant accounting policies, reference is made to the Company's Annual Report on Form 10-KSB for the year ended May 31, 1999. Results of Operations for the period ended August 31, 1999 are not necessarily indicative of the operating results expected for the full year. 2. RELATED PARTY TRANSACTIONS The Company entered into an agreement in November, 1996 with an affiliate of the Company's Chairman, the Nassau County Industrial Development Agency ("NCIDA") and a bank (the "Agreement"). In connection with the Agreement, the affiliate assumed allof the Company's obligations under a lease with the NCIDA and entered into a sublease with the Company for its facility. The Company conveyed to the affiliate the right to become owner of the facility upon expiration of the lease. In addition, pursuant to a sublease, the Company has assumed certain obligations owed by the affiliate to the NCIDA under the lease. The affiliate has indemnified the Company with respect to certain obligations relative to the lease and the Agreement. The Company made rent payments for its facility amounting to $170,190 and $162,090 for the three months ended August 31, 1999 and 1998, respectively. The Company makes various lease payments to affiliates of the Company's Chairman. The payments for equipment rental amounted to $98,316 and $93,483 for the three months ended August 31, 1999 and 1998, respectively. The Company derives revenue from National Medical Health Card Systems, Inc. ("Health Card"), a company affiliated with the Company's Chairman of the Board, for data base and operating system support, hardware leasing, maintenance and related administrative services. The revenues generated from this company amounted to $444,165 and $321,066 for the three months ended August 31, 1999 and 1998, respectively. As of June 1, 1998, Health Card hired 11 employees of the Company in order to provide development, enhancement, modification and maintenance services, previously provided by the Company. The Company was paid $208,000 in consideration of the Company's waiving certain rights relative to such employees. In addition, the Company leases certain computer equipment to Health Card at a monthly cost of $2,000 in addition to computer hardware for its data processing center at a monthly cost of $31,000 pursuant to a verbal agreement. Medical Arts Office Services, Inc. ("MAOS"), a company which the Company's Chairman of the Board is the sole shareholder, provided the Company with accounting, bookkeeping and paralegal services. For the three months ended August 31, 1999 and 1998, the total payments made by the Company to MAOS were $59,034 and $49,763, respectively. 3. NET EARNINGS PER COMMON SHARE In 1997, the Financial Accounting Standards Board issued Standard No. 128 ("SFAS No. 128"), "Earnings per Share". SFAS No. 128 replaced calculation of primary and fully diluted earnings per share with basic and diluted earnings per share. Basic earnings per share has been computed using the weighted average number of shares of common stock outstanding. Diluted earnings per share has been computed using the basic weighted average shares of common stock issued plus outstanding stock options, in accordance with Staff Accounting Bulletin No. 98. Basic earnings per share are based on the weighted-average number of shares of common stock outstanding, which were 2,481,481 at August 31, 1999 and 2,050,860 at August 31, 1998. Diluted earnings per share are based on the weighted-average number of shares of common stock adjusted for the effects of assumed exercise of options and warrants under the treasury stock method, which were as follows: 2,491,498 at August 31, 1999 and 2,243,866 at August 31, 1998. Options to purchase 564,156 shares of common stock in 1999 were outstanding at August 31,1999 and were not included in the computation of diluted earnings per share because the exercise price of the options was greater than the average market price of the common stock for the respective period. 4. SHAREHOLDERS' EQUITY The Company has stock options outstanding under three stock option plans. As of August 31, 1999, there were 2,536 options outstanding under an incentive stock option plan adopted in October 1984 and subsequently amended. Options granted under this plan were granted at exercise prices not less than fair market value on the date of grant. Options outstanding under this plan expire in 2001. No additional options may be granted under this plan. As of August 31, 1999, there were 590,500 incentive options outstanding under a stock option plan adopted in January 1995, which provides for both incentive and nonqualified stock options and reserves 1,000,000 shares of common stock for grant under the plan. The plan requires that options be granted at exercise prices not less than the fair market value at the date of grant, over a ten-year period. All options outstanding under this plan are currently exercisable at prices ranging from $1.41 to $2.61 per share over a period of five years from date of grant. On July 14, 1998, Messrs. Bert E. Brodsky, Hugh Freund, Gary Stoller and Paul J. Konigsberg, officers and directors of the Company, Gerald Shapiro, a former director of the Company, and Carol Freund, the spouse of Hugh Freund and an employee of Sandsport Data Services, Inc. ("Sandsport'), the Company's wholly owned subsidiary, exercised their respective options and warrants to purchase an aggregate of 921,334 shares of common stock at exercise prices ranging from $1.38 to $2.61 per share for an aggregate cost of $1,608,861. Payment for such shares was made to the Company in the amount of $921 representing the par value of the shares, and a portion in the form of non-recourse promissory notes due in July 2001, with interest at eight and one-half percent (8-1/2%) per annum, payable annually, and secured by the number of shares exercised. In October 1998, the Board of Directors approved an amendment to the Company's Certificate of Incorporation to increase the number of authorized shares of common stock from 3,000,000 to 6,000,000. In October 1998, the Company adopted a stock option plan, reserving 1,000,000 shares of common stock for grant under the plan. Stock options granted under the plan may be either incentive or non-statutory. As of August 31, 1999, an aggregate of 397,620 incentive stock options were granted under the plan at an exercise price of $3.00 and vest over a three-year period. Additionally, in October 1998, the Company granted certain directors of the Company non-statutory stock options to purchase an aggregate of 20,000 shares of the Company's common stock at an exercise price of $3.00. These options vest immediately and are exercisable over a five-year period. SANDATA, INC. AND SUBSIDIARIES Item 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations Revenues were $4,202,469 for the three months ended August 31, 1999 as compared to $3,501,236 for the three months ended August 31, 1998, an increase of $703,233 or 20.0%. Service fee revenue for the three months ended August 31, 1999 was $4,074,124 as compared to $3,223,510 for the three months ended August 31, 1998, an increase of $850,614 or 26.4%. The increase is primarily attributable to revenues derived from SanTrax(R) and SandataNET(R). Other income for the three months ended August 31, 1999 was $88,016, as compared to $253,328 for the three months ended August 31, 1998 The decrease is attributable to an amount received in the prior period from Health Card in connection with its hiring employees of the Company offset by an increase in income recognized on sales/leaseback transactions. Expenses Related to Services Operating expenses were $2,593,738 for the three months ended August 31, 1999 as compared to $2,117,828 for the three months ended August 31, 1998, an increase of $475,910 or 22.5%. Costs associated with SandataNET and other product lines, including payroll and related expenses and equipment rental payments, were the primary factors for the increase in operating expenses. Selling, general and administrative expenses were $938,359 for the three months ended August 31, 1999, as compared to $892,823 for the three months ended August 31, 1998, an increase of $45,536 or 5.1%. The increase was primarily due to increases in consulting, payroll and commission expenses relative to increased efforts to increase sales in the SanTrax product line, and certain royalties payable to MCI Telecommunication Corporation, offset by a decrease in legal expenses. Depreciation and amortization expense increased $133,343 to $572,703 for the three months ended August 31, 1999 as compared to $439,360 for the three months ended August 31, 1998. The increase was primarily attributable to fixed asset additions, including computer hardware and software capitalization costs in connection with ongoing computer system upgrades. Interest expense was $48,120 for the three months ended August 31, 1999 as compared to $5,730 for the three months ended August 31, 1998. The increase was a result of increased borrowings on the Company's Credit Agreement. Income Tax Expenses Income tax expense for the three months ended August 31, 1999 was $20,515 as compared to $16,287 for the three months ended August 31, 1998. Liquidity and Capital Resources The Company's working capital increased as of August 31, 1999 to $1,372,128, as compared with $235,599 at May 31, 1999. For the three months ended August 31, 1999, the Company spent approximately $1,836,000 in fixed asset additions, including computer hardware and software capitalization costs in connection with revenue growth and new product development. The Company expects the current levels of capital expenditures to continue. On July 14, 1998 Messrs. Bert E. Brodsky, Hugh Freund, Gary Stoller and Paul J. Konigsberg, officers and directors of the Company, Gerald Shapiro, a former director of the Company, and Carol Freund, the spouse of Hugh Freund and an employee of Sandsport Data Services, Inc. ("Sandsport"), the Company's wholly owned subsidiary, exercised their respective options and warrants to purchase an aggregate of 921,334 shares of common stock at exercise prices ranging from $1.38 to $2.61 per share for an aggregate cost of $1,608,861. Payment for such shares was made to the Company in the amount of $921 representing the par value of the shares, and a portion in the form of non-recourse promissory notes due in July 2001, with interest at eight and one-half percent (8-1/2%) per annum, payable annually, and secured by the number of shares exercised. On April 18, 1997, the Company's wholly owned subsidiary, Sandsport, entered into a revolving credit agreement (the "Credit Agreement") with a bank (the "Bank") which allows Sandsport to borrow and re-borrow amounts up to $3,000,000. Interest accrues on amounts outstanding under the Credit Agreement at a rate equal to the London Interbank Offered Rate plus 2% and will be paid quarterly in arrears or, at Sandsport's option, interest may accrue at the Bank's prime rate. The Credit Agreement required Sandsport to pay a commitment fee in the amount of $30,000 and a fee equal to 1/4% per annum payable on the unused average daily balance of amounts under the Credit Agreement. In addition, there are other fees and charges imposed based upon Sandsport's failure to maintain certain minimum balances. The Credit Agreement will expire on March 1, 2000. The Bank has approved an increase in the Credit Agreement to $4,500,000 and extended the term of the Facility an additional three years. The Company recorded the debt as a long term liability at August 31, 1999 as a result of the Bank extending the repayment date of the Credit Agreement. The indebtedness under the Credit Agreement is guaranteed by the Company and Sandsport's sister subsidiaries (the "Group"). The collateral for the Facility is a first lien on all equipment owned by members of the Group, as well as a collateral assignment of $2,000,000 of life insurance payable on the life of the Company's Chairman. All of the Group's assets are pledged to the Bank as collateral for the amounts due under the Credit Agreement. The Group's guaranty to the Bank was modified to conform covenants to comply with those in the Credit Agreement. In addition, pursuant to the Credit Agreement, the Group is required to maintain certain levels of net worth and meet certain financial ratios in addition to various other affirmative and negative covenants. The Group has, in the past, failed to meet these net worth and financial ratios, and the Bank has granted the Group waivers. As of August 31, 1999, the outstanding balance on the Credit Agreement with the Bank was $2,400,000. As of June 1, 1998, Health Card hired 11 employees of the Company in order to provide development, enhancement, modification and maintenance services, previously provided by the Company. The Company was paid $208,000 consideration of the Company's waiving certain rights relative to such employees. In addition, the Company leases certain computer equipment to Health Card at a monthly cost of $2,000 in addition to computer hardware for its data processing center at a monthly cost of $31,000 pursuant to a verbal agreement. The Company believes the results of its continued operations, together with the available credit line should be adequate to fund presently foreseeable working capital requirements. Year 2000 The Company believes that its computer systems and those of its major customers and suppliers are substantially Year 2000 compliant. The Company upgrades its computer systems from time to time as part of its ongoing operations. Accordingly, it is anticipated that the Company will incur significant expenditures in connection with such upgrades. However, the Company does not expect any material effect on its results of operations or financial position solely as a result of Year 2000 compliance issues. SANDATA, INC. AND SUBSIDIARIES 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: None Item 6 - EXHIBITS AND REPORTS ON FORM 8-K: Exhibit 27 - Financial Data Schedule (Electronic Filing Only) 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. SANDATA, INC. (Registrant) Date: October 15, 1999 By: /s/ Bert E. Brodsky Bert E. Brodsky Chairman of the Board, President Chief Executive Officer, Chief Financial Officer October 15, 1999 Securities and Exchange Commission 450 5th Street, N.W. Washington, D.C. 20549 Re: Sandata, Inc., File No. 0-14401 Dear Sir or Madam, Transmitted herewith through the EDGAR system is Form 10-QSB for the quarter ending August 31, 1999 for Sandata Inc. If you have any questions or comments, please contact me at (516)484-4400, extension 303. Very truly yours, Barbara E. Dale Paralegal EX-27 2 FDS --
5 (Replace this text with the legend) 0000755465 SANDATA, INC. 1 $ 3-MOS MAY-31-2000 JUN-01-1999 AUG-31-1999 1 814,516 0 3,028,560 451,640 38,119 3,736,223 17,076,385 8,643,626 13,085,546 2,364,095 0 0 0 2,481 4,252,420 13,085,546 4,074,124 4,202,469 0 4,104,800 0 0 48,120 49,549 20,515 29,034 0 0 0 29,034 .01 .01
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