-----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, Wl/Kcms9LI/FPKCUqi0NZ8cmkha0CuackPyK/WJWEv+CTwuTAuEpOvpS7Kn8WIuB bnrpIfBXBFSpCr/X4JGfnQ== 0000950170-96-000051.txt : 19960216 0000950170-96-000051.hdr.sgml : 19960216 ACCESSION NUMBER: 0000950170-96-000051 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960214 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: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-15353 FILM NUMBER: 96518912 BUSINESS ADDRESS: STREET 1: 43 MANNING ROAD CITY: BILLERICA STATE: MA ZIP: 01821-3966 BUSINESS PHONE: 5082629800 MAIL ADDRESS: STREET 1: 43 MANNING ROAD CITY: BILLERICA STATE: MA ZIP: 01821-3966 10QSB 1 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, 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 January 31, 1996, was 12,518,751 shares. SAZTEC INTERNATIONAL, INC. FORM 10-QSB QUARTER ENDED DECEMBER 31, 1995 CONTENTS PAGE ---- PART I - FINANCIAL INFORMATION Item 1. Financial Statements: Consolidated Statements of Operations -- Three months ended December 31, 1995 and 1994 3 Consolidated Statements of Operations -- 4 Six months ended December 31, 1995 and 1994 Consolidated Balance Sheets -- December 31, 1995 and June 30, 1995 5 Consolidated Statements of Cash Flows -- 6 - 7 Six months ended December 31, 1995 and 1994 Notes to Consolidated Financial Statements -- December 31, 1995 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9 - 11 PART II - OTHER INFORMATION Item 1. Legal Proceedings Not Applicable Item 2. Changes in Securities 12 Item 3. Defaults Upon Senior Securities Not Applicable Item 4. Submission of Matters to a Vote of Security Holders Not Applicable 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, 1995 AND 1994 (Unaudited) 1995 1994 ----------- ----------- REVENUES $ 2,997,179 $ 3,720,648 Cost of services 2,070,807 2,905,168 ----------- ----------- GROSS PROFIT 926,372 815,480 Selling, general & administrative expense 726,994 1,137,047 ----------- ----------- PROFIT (LOSS) FROM OPERATIONS 199,378 (321,567) Interest expense (36,560) (42,239) ----------- ----------- PROFIT (LOSS) BEFORE PROVISION FOR INCOME TAXES 162,818 (363,806) Provision for income taxes 9,094 14,981 ----------- ----------- NET PROFIT (LOSS) $ 153,724 $ (378,787) =========== =========== INCOME (LOSS) PER SHARE OF COMMON STOCK: Net income (loss) applicable to common stockholders $.01 $(.03) =========== =========== Weighted average number of shares 12,522,321 11,344,792 =========== =========== See accompanying notes. 3 SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE SIX MONTHS ENDED DECEMBER 31, 1995 AND 1994 (Unaudited) 1995 1994 ----------- ----------- REVENUES $ 5,356,294 $ 7,167,444 Cost of services 3,939,176 5,899,042 ----------- ----------- GROSS PROFIT 1,417,118 1,268,402 Selling, general & administrative expense 1,643,901 2,079,220 ----------- ----------- LOSS FROM OPERATIONS (226,783) (810,818) Interest expense (75,547) (84,523) Gain on sale of divisions 231,154 -- ----------- ----------- LOSS BEFORE PROVISION FOR INCOME TAXES (71,176) (895,341) Provision for income taxes 9,094 4,355 ----------- ----------- NET LOSS $ (80,270) $ (899,696) =========== =========== LOSS PER SHARE OF COMMON STOCK: Net loss applicable to common stockholders $.(01) $(.08) =========== =========== Weighted average number of shares 12,527,321 11,012,629 =========== =========== See accompanying notes. 4
SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1995 AND JUNE 30, 1995 ASSETS DEC. 31, JUNE 30, CURRENT ASSETS 1995 1995 ------------ ------------ (Unaudited) Cash and cash equivalents $ 203,580 $ 644,101 Restricted cash 58,250 38,010 Accounts receivable, less allowance for doubtful accounts 2,506,946 2,215,771 Work in process 626,450 580,842 Prepaid expenses and other current assets 131,248 160,076 ------------ ------------ Total current assets 3,526,474 3,638,800 PROPERTY AND EQUIPMENT, NET 768,984 1,164,048 OTHER ASSETS Goodwill and other intangible assets, less accumulated amortization 184,241 208,182 Deposits and other assets 142,317 144,632 ------------ ------------ TOTAL ASSETS $ 4,622,016 $ 5,155,662 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY DEC. 31, JUNE 30, CURRENT LIABILITIES 1995 1995 ------------ ------------ (Unaudited) Notes payable $ -- $ 650,091 Current portion long-term debt and capital lease obligations 303,885 193,320 Common stock subject to repurchase 36,000 100,000 Accounts payable 1,482,921 1,028,708 Accrued liabilities 521,891 1,350,596 Customer deposits 1,081,933 1,085,479 ------------ ------------ Total current liabilities 3,426,630 4,408,194 LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS 514,550 105,686 ACCRUED EXPENSES, NON-CURRENT 62,652 -- COMMON STOCK SUBJECT TO REPURCHASE 64,000 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; 12,523,851 shares issued at December 31, 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 (10,453,471) (10,373,201) Cumulative translation adjustment (141,654) (134,326) ------------ ------------ Total stockholders' equity 554,184 641,782 ------------ ------------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 4,622,016 $ 5,155,662 ============ ============
See accompanying notes 5
SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED DECEMBER 31, 1995 AND 1994 (Unaudited) 1995 1994 ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES Net loss $ (80,270) $ (899,696) Adjustments to reconcile net loss to net cash (used in) provided by operating activities: Depreciation and amortization 313,965 516,210 Provision for bad debts 9,389 24,415 Gain on sale of assets (25,238) 45,268 Gain on sale of assets of divisions sold (231,154) -- Other 928 16,286 Changes in assets and liabilities: Accounts receivable (341,295) 1,033,234 Work in process (100,391) 5,716 Prepaid expenses and other current assets 19,523 (102,698) Deposits and other assets 1,996 (2,546) Accounts payable 611,600 (361,381) Accrued liabilities (624,132) (19,136) Customer deposits and non-current accrued expenses 347,541 60,872 Income taxes payable (24,553) 2,203 ----------- ----------- NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES (122,091) 318,747 ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Additions to property and equipment (35,204) (161,808) Proceeds from the sale of property and equipment 53,210 15,692 Payments received on notes receivable 8,347 23,260 Decrease in restricted cash (20,240) 107,224 ----------- ----------- NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES 6,113 (15,632) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Principal payments on debt and capital lease obligations (86,848) (299,794) Borrowings on notes payable 1,645,500 2,551,250 Payments on notes payable (1,841,704) (2,851,565) Payments on common stock repurchase obligation (20,000) Proceeds from issuance of common stock, net of issuance costs 729,668 ----------- ----------- NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (283,052) 109,579 ----------- ----------- EFFECT OF EXCHANGE RATE CHANGES ON CASH (41,491) (2,955) ----------- ----------- NET (DECREASE) INCREASE IN CASH (440,521) 409,739 CASH AT BEGINNING OF PERIOD 644,101 386,263 ----------- ----------- CASH AT END OF PERIOD $ 203,580 $ 796,002 =========== ===========
See accompanying notes. 6
SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED DECEMBER 31, 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 $ 134,887 =========== Note payable issued in exchange for trade payables $ 139,317 =========== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid (received) during the period for: Interest $ 90,580 $ 55,561 =========== =========== Income taxes $ 38,758 ===========
See accompanying notes. 7 SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 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 quarters ended September 30 and December 31, 1995, 10,000 shares of common stock at $20,000 were repurchased by the Company in each quarter pursuant to the terms of the put option. Of the stock repurchased during the periods and in prior periods, $60,000 and $80,000 remained payable to the selling shareholders at September 30 and December 31, 1995, respectively. NOTE 3. SALE OF DIVISIONS In June 1995, management agreed to sell the assets of the Knightswade Microfilm Division, based in Winchester, England and in August 1995, the Marketing Fulfillment Division based in Billerica, Massachusetts. The sales of both divisions were completed on September 1, 1995. The operating results of both divisions for the three and six months ended December 31, 1995 and 1994 were as follows:
3 MONTHS 1995 6 MONTHS 1995 3 MONTHS 1994 6 MONTHS 1994 ------------- ------------- ------------- ------------- Revenue $ 312,965 $ 312,965 $ 713,356 $ 1,363,644 Gross profit (loss) (13,102) (13,102) 56,069 157,263 Operating loss $ (45,173) $ (45,173) $ (21,943) $ (18,790) Gain on sale of divisions 231,154 231,154
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 three and six month periods ending December 31, 1994, division performance follows: 3 MONTHS ENDED DECEMBER 31, 6 MONTHS ENDED DECEMBER 31, 1994 1994 Revenue $ 372,931 $ 782,190 Gross profit 21,190 349 Operating loss $ (54,360) $ (97,280) 8 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Revenue for the six months ended December 31, 1995, declined to $5,356,294 from $7,167,444 for the six months ended December 31, 1994, a decrease of $1,811,150, or (25.3%). Excluding the revenue of divisions sold since September 30, 1994 (see Note 3), revenue for the quarter ended December 31, 1995, was $2,997,179, compared to $2,634,361 for the quarter ended December 31, 1994, an increase of $362,818, or 13.7%. U.S. revenue for the six months ended December 31, 1995, excluding the divisions sold, compares with the six month period in the prior year, declining $10,000 from $2,190,020. The decline in U.S. revenue experienced in the first quarter as compared to the prior year first quarter was recovered in the second quarter. European revenue, excluding divisions sold, also held steady, showing an increase of $31,000 over the six month period in the prior year, to $2,863,022. The sales mix in the United States and Europe was relatively unchanged from the prior year six month period. As reported for the quarter ended September 30, 1995, the volume of library projects in Europe is starting to recover, with major new projects beginning in Switzerland, Germany, and the U.K. Management expects revenue in both Europe and the United States to improve gradually through the second half of fiscal year 1996 over the six months ended December 31, 1995. Gross profit for the six months ended December 31, 1995, net of divisions sold, increased $326,000 to 28.5% of sales from 22% for the six month period in the prior year. In particular, employee related cost of sales, net of divisions sold, decreased 22.5% for the current six months ended from the prior year six month period, with the largest reduction being realized in U.S. operations. This improvement was effected through consolidations in operations, increased efficiency of equipment put into production through June 30, 1995, compensation rate reductions and management restructuring efforts. As a dollar amount, selling, general and administrative (SG&A) expenses for the six month period decreased $435,319 to $1,643,901 from $2,079,220 for the same period in the prior year. For the quarter ended December 31, 1995 SG&A decreased to $726,994 from $916,907 in the quarter ended September 30. The increase in SG&A in the first quarter of fiscal 1996 to 38.9% of revenues as compared to 27.3% in the same period of the prior year has been reduced to 30.6% of sales for the six month period as compared to 29% for the prior year six month period. The increase in the first quarter as a percentage of sales is primarily the result of lower total revenues during the current year, the time lag between enacting cost reduction measures and receiving the benefits therefrom, and the fixed nature of many costs of operating the Company. A small decline in total dollars of selling expenses realized in the first quarter as compared to the first quarter of the prior year continued through December 31, 1995. The decrease in selling expense for the current year six month period amounted to $177,221 to a total of $608,435 as compared to $785,656 for the prior year period. Administrative expenses declined 34.92% in the second quarter to $476,375 from $732,009 for the second quarter of the prior year. Administrative expenses for the current six month period of $1,035,466 are down 21.2% from the same 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 six month period consists mainly of amounts reported for the quarter ended September 30, 1995, of $52,199. Gain on the disposition of assets in the ordinary course of business accounted for $25,439 of this amount, with the balance being primarily favorable adjustments to prior-period accruals for relocation costs from Dayton, Ohio and Kansas City, Missouri to Billerica, Massachusetts, and estimated legal fees. Other income for the same period in the prior year was $87,280, consisting primarily of reversal of annual reserves accrued over a five year period pursuant to employment contracts with four individuals. The additional compensation was contingent upon attainment of certain performance goals which were not met. 9 Loss from operations decreased to $226,783 for the six months as compared to $810,818 for the same period in the prior year. Excluding the divisions sold, the operating loss was $181,610 compared to $708,680 for the same period in the prior year. Net loss for the six months ended December 31, 1995, was $80,270, which included the benefit of a $231,154 gain on the sale of divisions reported in the quarter ended Septermber 30, 1995. Net loss for the six month period in the prior year was $899,696. Cash flow from operating activities suffered primarily from the loss for the six months and increases in accounts receivable and work in process over June 30, 1995 amounts. Cash position was further hampered by cash used in financing activities to meet required payments on equipment notes payable and to reduce the amount outstanding on the line of credit. These payments, however were crucial to negotiation of a new agreement with the Company's primary lender. 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 80% of domestic trade receivables less than 90 days old, 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 was payable in full on December 31, 1995. The credit agreement contained various restrictive covenants that required, among other things, the maintenance of a minimum level of stockholders' equity. Due to the losses incurred through December 31, 1995, the Company was not in compliance with that level and was technically in default of the agreement. However, the lender continued to extend borrowings to the Company under the credit agreement. The Company entered into a new revolving credit agreement with the lender to borrow $450,000 to replace the matured note at the lender's prime rate plus 4%. Maximum borrowings under the new agreement decline $10,000 per month beginning February 1, 1996. Unpaid principal amounts are due July 1, 1997. Available borrowing is unchanged from the above matured note. The new agreement contains covenants which require a minimum consolidated net stockholders' equity of $500,000 and a ratio of consolidated total indebtedness to consolidated net worth not to exceed 8:1. The Company was in compliance with all covenants contained in the new agreement at December 31, 1995. The Company's unrestricted cash balance was $203,580 on December 31, 1995, compared to $644,101 on June 30, 1995. As of December 31, 1995, the Company's working capital was $99,844, compared to a deficit of $769,394 at June 30, 1995. The improvement in working capital was primarily due to the reclassification from current to non-current liabilities of the $340,000 long-term portion of the note payable to the bank; a note given for trade payables of $136,317 at 8% interest, with payments of $4,000 per month through February 28, 1999, of which $97,831 is classified as long-term; and an agreement entered into to repay amounts owed on the common stock repurchase over 31 months at 8% interest, of which $64,000 is classified as long-term. 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 ability to continue as a going concern is dependent upon its ability to achieve its fiscal year 1996 operating plan. This plan includes the disposition of unprofitable operations, disposition of profitable operations not included in the Company's long-term business mission, renewal or replacement of the line of credit, decreases in production and administration costs, and increasing imaging revenues. 10 As described in Note 3, the Company has sold its Financial Transaction Processing and Knightswade Microfilm Divisions. The Marketing Fulfillment Division was also sold, which was not in line with the Company's long-term business mission. As reported above, a new borrowing facility is in place through July, 1997. As noted in the "Results of Operations" section above, decreases in production costs have been realized and are expected to continue. Administrative cost reductions are expected to be realized through the consolidation of operations in Billerica, Massachusetts in the United States and Ardrossan, Scotland in the United Kingdom. In December, 1995 the Company completed a realignment and integration of its sales force, which is expected to result in larger reductions in selling costs in the second half of fiscal year 1996. Imaging revenues increased $44,000 to $546,000 in the six month period ending December 31, 1995 over the prior year six month period. Management expects further improvement in revenues over the prior year period through the second half of fiscal year 1996. The Company's continued existence is also dependent upon improving its liquidity in the near future. Working capital could be adversely affected by the failure to eliminate losses in the final two quarters of fiscal 1996. The Company is exploring opportunities for additional private placements. There can be no assurance that the Company will be successful in these efforts. The failure of the Company to solve its liquidity pressures could directly affect the ability of the Company to operate as a going concern. 11 SAZTEC INTERNATIONAL, INC. DECEMBER 31, 1995 FORM 10-QSB PART II - OTHER INFORMATION ITEM 2. CHANGES IN SECURITIES Subsequent to December 31, 1995 the Company executed a new note to its prime lender to replace its revolving line of credit agreement. The new agreement does not change the rights of any holders of its securities. 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's common stock was subsequently delisted from the NASDAQ SmallCap Market and is now listed in the OTC Bulletin Board. Donald J. Campbell, Chief Financial Officer, Vice President, Secretary, and Treasurer of the Company left the Company November 18, 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 14 (B) REPORTS ON FORM 8-K: The Company filed a Form 8-K dated November 21, 1995. The Form reported that the Company was notified by The NASDAQ Stock Market, Inc. that the Company's Common Stock was deleted from the NASDAQ Stock Market effective the close of business November 14, 1995. The stock would continue to be traded on the OTC Bulletin Board. The Company filed a Form 8-K dated January 26, 1996. The Form reported that the Company's Board of Directors voted to appoint Grant Thornton LLP as its certifying accountants for the fiscal year ending June 30, 1996 subject to shareholder ratification at its regular annual meeting scheduled for February 22, 1996. 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 13, 1996 SAZTEC INTERNATIONAL, INC. -------------------------- (Registrant) By: /s/ THOMAS K. O'LOUGHLIN ------------------------ Thomas K. O'Loughlin Treasurer 13 EX-27 2
5 1 6-MOS JUN-30-1996 DEC-31-1995 203,580 0 2,546,089 39,143 626,450 3,526,474 4,074,815 3,305,831 4,622,016 3,426,630 514,550 0 0 11,134,811 (127,156) 4,622,016 0 5,356,294 0 3,939,176 (231,154) 0 75,547 (71,176) 9,094 (80,270) 0 0 0 (80,270) (.01) (.01)
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