-----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, Q5Ix8B0myRshgAn8uBeN49acI/5v3BiCq8k2ywZHTBkLED/MIsYxoyIYwLKHDBqk sMBMikwwQjqUF4zXJO5X5A== 0000912057-95-009721.txt : 19951119 0000912057-95-009721.hdr.sgml : 19951119 ACCESSION NUMBER: 0000912057-95-009721 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951113 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: SAZTEC INTERNATIONAL INC CENTRAL INDEX KEY: 0000801354 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER INTEGRATED SYSTEMS DESIGN [7373] IRS NUMBER: 330178457 STATE OF INCORPORATION: CA FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-15353 FILM NUMBER: 95590165 BUSINESS ADDRESS: STREET 1: 43 MANNING ROAD CITY: BILLERICA STATE: MA ZIP: 01821-3966 BUSINESS PHONE: 5082629600 MAIL ADDRESS: STREET 1: 43 MANNING ROAD CITY: BILLERICA STATE: MA ZIP: 01821-3966 10-Q 1 10-Q 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, 1995 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) 43 MANNING ROAD, BILLERICA, MASSACHUSETTS 01821 (Address of Principal Executive Office) 508-262-9600 (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 November 10, 1995, was 12,533,851 shares. SAZTEC INTERNATIONAL, INC. FORM 10-QSB QUARTER ENDED SEPTEMBER 30, 1995 CONTENTS -------- Page ---- PART I - FINANCIAL INFORMATION - ------------------------------ Item 1. Financial Statements: Consolidated Statements of Operations -- Three months ended September 30, 1995 and 1994 3 Consolidated Balance Sheets -- September 30, 1995 and June 30, 1995 4 Consolidated Statements of Cash Flows -- Three months ended September 30, 1995 and 1994 5 - 6 Notes to Consolidated Financial Statements -- September 30, 1995 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 - 9 PART II - OTHER INFORMATION - --------------------------- Item 1. Legal Proceedings Not Applicable Item 2. Changes in Securities Not Applicable Item 3. Defaults Upon Senior Securities 10 Item 4. Submission of Matters to a Vote of Security Holders Not Applicable Item 5. Other Information 10 Item 6. Exhibits and Reports on Form 8-K 10 Signatures 11 2 SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994 (Unaudited) 1995 1994 ---- ---- REVENUES $2,359,115 $3,446,796 Cost of services 1,868,369 2,993,874 ---------- ----------- GROSS PROFIT 490,746 452,922 Selling, general & administrative expense 916,907 942,173 ---------- ----------- LOSS FROM OPERATIONS (426,161) (489,251) Interest expense (38,987) (42,284) Gain on sale of divisions 231,154 -- ---------- ----------- LOSS BEFORE PROVISION FOR INCOME TAXES (233,994) (531,535) Provision (benefit) for income taxes -- (10,626) ---------- ----------- NET LOSS $ (233,994) $(520,909) ---------- ----------- ---------- ----------- LOSS PER SHARE OF COMMON STOCK: Net loss applicable to common stockholders $(.02) $(.05) ---------- ----------- ---------- ----------- Weighted average number of shares 12,533,851 10,680,464 ---------- ----------- ---------- ----------- See accompanying notes.
3 SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS SEPTEMBER 30, 1995 AND JUNE 30, 1995
ASSETS SEPT.30, JUNE 30, 1995 1995 ------------- ------------ (Unaudited) CURRENT ASSETS Cash and cash equivalents $ 383,898 $ 644,101 Restricted cash 32,973 38,010 Accounts receivable, less allowance for doubtful accounts 1,704,061 2,215,771 Work in process 586,133 580,842 Prepaid expenses and other current assets 148,184 160,076 ------------- ------------ Total current assets 2,855,249 3,638,800 PROPERTY AND EQUIPMENT, NET 895,179 1,164,048 OTHER ASSETS Goodwill and other intangible assets, less accumulated amortization 193,468 208,182 Deposits and other assets 143,060 144,632 ------------- ------------ Total assets $ 4,086,956 $ 5,155,662 ------------- ------------ ------------- ------------ LIABILITIES AND STOCKHOLDERS' EQUITY SEPT. 30, JUNE 30, 1995 1995 ------------- ------------ (Unaudited) CURRENT LIABILITIES Notes payable $ 649,876 $ 650,091 Common stock subject to repurchase 100,000 100,000 Accounts payable 1,233,592 1,028,708 Accrued liabilities 571,082 1,350,596 Customer deposits 642,678 1,085,479 Current portion long-term debt and capital lease obligations 170,428 193,320 ------------- ------------ Total current liabilities 3,367,656 4,408,194 CUSTOMER DEPOSITS, NON-CURRENT 145,897 -- ACCRUED EXPENSES, NON-CURRENT 59,904 -- LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS 99,197 105,686 STOCKHOLDERS' EQUITY Preferred stock-no par value; 1,000,000 shares authorized; no shares issued -- -- Common stock-no par value; 20,000,000 shares authorized; 12,533,851 shares issued at September 30, 1995, and 12,543,851 shares issued at June 30, 1995 11,134,811 11,134,811 Contributed capital 14,498 14,498 Accumulated deficit (10,607,195) (10,373,201) Cumulative translation adjustment (127,812) (134,326) ------------- ------------ Total stockholders' equity 414,302 641,782 ------------- ------------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 4,086,956 $ 5,155,662 ------------- ------------ ------------- ------------
See accompanying notes. 4 SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994 (Unaudited)
1995 1994 ------------ ----------- CASH FLOWS FROM OPERATING ACTIVITIES Net loss $ (233,994) $ (520,909) Adjustments to reconcile net loss to net cash (used in) provided by operating activities: Depreciation and amortization 183,971 266,739 Provision for bad debts 4,732 -- Gain on sale of assets (25,439) -- Gain on sale of assets of divisions sold (231,154) -- Other 928 82,912 Changes in assets and liabilities: Accounts receivable 498,489 529,596 Work in process (51,562) 5,464 Prepaid expenses and other current assets 7,434 (82,724) Deposits and other assets 1,572 (1,039) Accounts payable 204,884 (140,775) Accrued liabilities (598,196) (51,951) Customer deposits and non-current accrued expenses 32,527 29,282 Income taxes payable -- (11,826) ------------ ----------- NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES (205,808) 104,769 ------------ ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Additions to property and equipment (29,718) (71,092) Proceeds from the sale of property and equipment 17,169 -- Decrease in restricted cash 5,037 131,608 ------------ ----------- NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES (7,512) 60,516 ------------ ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Payment received on notes receivable 4,127 13,247 Principal payments on debt and capital lease obligations (41,182) (92,168) Borrowings on notes payable 1,023,533 1,218,650 Payments on notes payable (1,032,987) (1,551,861) Proceeds from issuance of common stock, net of issuance costs -- 150,000 ------------ ----------- NET CASH USED IN FINANCING ACTIVITIES (46,509) (262,132) ------------ ----------- EFFECT OF EXCHANGE RATE CHANGES ON CASH (374) (10,977) ------------ ----------- NET DECREASE IN CASH (260,203) (107,824) CASH AT BEGINNING OF PERIOD 644,101 386,263 ------------ ----------- CASH AT END OF PERIOD $ 383,898 $ 278,439 ------------ ----------- ------------ -----------
See accompanying notes. Certain amounts in the prior year have been reclassified to permit comparison. 5 SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994 (Unaudited)
1995 1994 ------- -------- SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: Purchase of property and equipment through issuance of notes payable and capital lease obligations $83,631 $ 77,794 ------- -------- ------- -------- SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid (received) during the period for: Interest $38,987 $ 31,246 ------- -------- ------- -------- Income taxes $ -- $ -- ------- -------- ------- -------- Common stock subscription receivable $ -- $600,000 ------- -------- ------- --------
See accompanying notes. 6 SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 1995 AND 1994 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 reclassifications have been made in the fiscal 1995 financial statements to conform with the current year's presentation. NOTE 2. COMMON STOCK In connection with the Company's acquisition of the outstanding minority interest of Saztec Europe, Ltd. in 1991, the Company granted a put option to the selling shareholders to repurchase 120,000 shares at $2.00 per share. The put option is exerciseable at 10,000 shares ($20,000) per quarter through April, 1996. During the quarter ended September 30, 1995, 10,000 shares of common stock totaling $20,000 were repurchased by the Company pursuant to the terms of the put option. Of the stock repurchased this period and in prior periods, $40,000 remained payable to the selling shareholders at September 30, 1995. NOTE 3. SALE OF DIVISIONS In August 1995, management agreed to sell the assets of the Knightswade Microfilm Division, based in Winchester, England, and the Marketing Fulfillment Division based in Billerica, Massachusetts. The sales of both divisions were completed on August 31, 1995. The operating results of both divisions for the three months ended September 30, 1995 and 1994 were as follows:
1995 1994 -------- -------- Revenue $312,965 $650,288 Gross profit (loss) (13,102) 101,194 Operating loss (45,173) (1,424) Gain on sale of divisions 231,154 --
Gain on sale of divisions includes gains and losses on sales of assets, severance costs, and related closedown costs. A loss provision of $145,000 for the sale of the Knightswade Microfilm Division was previously recognized in the year ended June 30, 1995. In June, 1995, the Company completed the sale of the U.K.-based Financial Transaction Processing Division. For the period of three months ending September 30, 1994, the division generated revenue of $409,259, gross loss of $(20,841), and operating loss of $(42,680). 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Revenue for the quarter ended September 30, 1995, declined to $2,359,115 from $3,446,796 for the quarter ended September 30, 1994, a decrease of $1,087,681, or (31.6%). Excluding the revenue of divisions sold since September 30, 1994 (see Note 3), revenue for the quarter ended September 30, 1995, was $2,046,150, compared to $2,387,249 for the quarter ended September 30, 1994, a decrease of $341,099, or (14.3%). U.S. revenue, excluding the divisions sold, declined to $926,935 in the quarter ending September 30, 1995, from $1,150,060 in the prior year quarter, a decrease of $223,125, or (19.4%). European revenue, excluding the divisions sold, declined to $1,119,215 in the quarter ending September 30, 1995, from $1,237,189 in the prior year quarter, a decrease of $117,974, or (9.5%). The decline in U.S. revenue was due primarily to reduced sales of off-shore, brokered data conversion services. The decline of revenue in Europe was primarily due to the completion in early calendar 1995 of certain large library retrospective conversion projects. The volume of library projects in Europe is now starting to recover, with major new projects beginning in Switzerland, Germany, and the U.K. Management expects revenue in Europe to improve gradually through the second quarter, with larger gains appearing during the first half of calendar 1996. In the U.S. data conversion market, management anticipates an improvement in revenues through the second and third quarter of the 1996 fiscal year. Gross profit for the three months ending June 30, 1995, increased to $490,746 from $452,922 for the same period in the prior year, an increase of 8.3%. For the quarter ended September 30, 1995, the gross profit percentage was 20.8% as compared to 13.1% for the same period in the prior year. The improvement in gross profit percentage was primarily due to consolidations in operations and disposals of unprofitable divisions that have taken place since September 30, 1994. As a dollar amount, selling, general and administrative (SG&A) expenses decreased to $916,907 from $942,173 for the same period in the prior year, a decline of $25,266, or (2.7%). As a percentage of revenue, SG&A increased to 38.9% of revenues in the quarter ended September 30, 1995, from 27.3% in the same period of the prior year. Selling expenses declined (6.0%) to $357,816 for the quarter ended September 30, 1995, compared to $380,618 for the period in the prior year. Administrative expenses declined (5.8%) to $611,290 for the quarter ended September 30, 1995, compared to $648,835 for the period in the prior year. The decreases in both selling and administrative expenses were primarily the result of disposals of divisions since the prior year period. Other income for the quarter ended September 30, 1995, was $52,199, consisting primarily of favorable adjustments to prior-period accruals. Other income for the same period in the prior year was $87,280, consisting primarily of a reduction in a bonus accrual for nonperformance. Operating loss decreased to $426,161 for the quarter ended September 30, 1995, compared to a loss of $489,251 for the same period in the prior year. Excluding the divisions sold, the operating loss for the quarter ended September 30, 1995, was $380,988 compared to $445,147 for the same quarter in the prior year. Net loss for the quarter ended September 30, 1995, was $233,994, which included the benefit of a $231,154 gain on the sale of divisions. Net loss for the same period in the prior year was $520,909. 8 CAPITAL RESOURCES AND LIQUIDITY The Company has a revolving credit agreement secured by accounts receivable, work in process, property and equipment and other assets, bearing interest at the lender's prime rate plus 4.0%. Available borrowings are determined by a specified percentage of qualified domestic trade receivables, with an aggregate maximum borrowing level that declines in steps from $650,000 on August 15, 1995, to $450,000 on November 30, 1995. On September 30, 1995, the Company had borrowed $597,843 under the credit line. The credit line will be payable in full on December 31, 1995, unless an additional renewal is obtained. The credit agreement at September 30, 1995, contains various restrictive covenants that require, among other things, the maintenance of a minimum level of stockholders' equity. Due to the losses incurred through September 30, 1995, the Company is not in compliance with that level and is technically in default of the agreement. However, the lender is continuing to extend borrowings to the Company under the credit agreement. The Company's unrestricted cash balance was $383,898 on September 30, 1995, compared to $644,101 on June 30, 1995. As of September 30, 1995, the Company's working capital deficit was $512,407, compared to a deficit of $769,394 at June 30, 1995. The improvement in working capital on September 30, 1995, was primarily due to the reclassification from current to non-current liabilities of certain customer deposits and accrued expenses, totaling $205,801, that relate to revenue or transactions to be realized more than one year beyond September 30, 1995. The Company's working capital deficit at June 30, 1995, reflected a decrease of $1,387,253 from the positive level of $617,859 on June 30, 1994, primarily due to net operating losses. The Company's working capital deficit could be further adversely affected in fiscal 1996 by (i) the failure to eliminate losses in the second quarter of fiscal 1996, (ii) the scheduled maturity of the revolving credit facility on December 31, 1995, and (iii) additional working capital requirements to support projected revenue increases during the remainder of fiscal 1996. The Company's continued existence is dependent upon resolving its liquidity problem in the near future. The Company is exploring opportunities to alleviate the liquidity pressures, including further extension of the maturity of the revolving credit facility, additional private placements, the sale or closedown of unprofitable business activities, and the sale of profitable business operations that are not in line with the long-term strategy of the Company. There can be no assurance that the Company will be successful in these or any other efforts. The failure of the Company to solve its short-term liquidity pressures could directly affect the ability of the Company to operate as a going concern. 9 SAZTEC INTERNATIONAL, INC. SEPTEMBER 30, 1995 FORM 10-QSB PART II - OTHER INFORMATION ITEM 3. DEFAULT UPON SENIOR SECURITIES The Company has a revolving credit agreement that contains various restrictive covenants which require, among other things, the maintenance of a minimum level of stockholders' equity. Due to the losses incurred through September 30, 1995, the Company is not in compliance with that level and is technically in default of the agreement. ITEM 5. OTHER INFORMATION As of November 10, 1995, the Company was not in compliance with the NASDAQ SmallCap Market capital and surplus requirements. The Company has been granted a hearing before an NASD panel on November 10, 1995, to present a plan for achieving compliance. If the Company does not obtain an exception to the continuing inclusion criteria, the Company's common stock will be delisted from the NASDAQ SmallCap Market. However, the Company's stock may continue to be listed in the OTC Bulletin Board. Donald J. Campbell, Chief Financial Officer, Vice President, Secretary, and Treasurer of the Company will leave the Company after November 17, 1995, for personal reasons. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) EXHIBITS The following Exhibit is filed by attachment to this Form 10-QSB: Exhibit Number Description of Exhibit Page - ------ ----------------------- ---- 27 Financial Data Schedule 12 (b) REPORTS ON FORM 8-K: None 10 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 10, 1995 SAZTEC INTERNATIONAL, INC. -------------------------- (Registrant) By: /s/ Donald J. Campbell ---------------------- Donald J. Campbell Chief Financial Officer, Vice President, Secretary, Treasurer 11 EX-27 2 EXHIBIT 27
5 3-MOS JUN-30-1995 SEP-30-1995 383,898 0 1,792,119 88,058 586,133 2,855,249 4,107,267 3,212,088 4,086,956 3,367,656 99,197 11,134,811 0 0 (113,314) 4,086,956 0 2,359,115 0 1,868,369 (231,154) 0 38,987 (233,994) 0 (233,994) 0 0 0 (233,994) (.02) (.02)
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