-----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, G09FMFN2ZPJSBpNpSz7ksGBD5A+hmmf2zRD43oHXY2ris4zt/jt0N3fDxyGBu13a SdHW0TRXJpJIAsr1yFbMBA== 0000950170-98-002161.txt : 19981116 0000950170-98-002161.hdr.sgml : 19981116 ACCESSION NUMBER: 0000950170-98-002161 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SAZTEC INTERNATIONAL INC CENTRAL INDEX KEY: 0000801354 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROGRAMMING, DATA PROCESSING, ETC. [7370] IRS NUMBER: 330178457 STATE OF INCORPORATION: CA FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-15353 FILM NUMBER: 98747822 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 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 SEPTEMBER 30, 1998 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) 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 November 4, 1998, was 4,461,121 shares. SAZTEC INTERNATIONAL, INC. FORM 10-QSB QUARTER ENDED SEPTEMBER 30, 1998 CONTENTS PAGE ---- PART I - FINANCIAL INFORMATION Item 1. Financial Statements: Consolidated Statements of Operations - Three months ended September 30, 1998 and 1997 3 Consolidated Balance Sheets - September 30, 1998 and June 30, 1998 4 Consolidated Statement of Changes in Stockholders' Equity - September 30, 1998 5 Consolidated Statements of Cash Flows - Three months ended September 30, 1998 and 1997 6 - 7 Notes to Consolidated Financial Statements -- September 30, 1998 and 1997 8 - 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 SEPTEMBER 30, 1998 AND 1997 (UNAUDITED)
1998 1997 ----------- ----------- REVENUE $ 1,766,685 $ 1,613,471 Cost of services 1,503,209 1,316,242 ----------- ----------- GROSS PROFIT 263,476 297,229 Selling and administrative expense 509,203 496,228 ----------- ----------- LOSS FROM OPERATIONS (245,727) (198,999) Interest expense (8,156) (12,562) ----------- ----------- LOSS BEFORE PROVISION FOR INCOME TAXES (253,88 (211,561) Income tax benefit (76,601) ----------- ----------- NET LOSS APPLICABLE TO COMMON STOCKHOLDERS $ (177,282) $ (211,561) =========== =========== (LOSS) PER SHARE OF COMMON STOCK: Basic and diluted net loss applicable to common stockholders $ (.04) $ (.058) =========== =========== Weighted average number of shares 4,461,121 3,637,180 =========== ===========
See accompanying notes. 3 SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS SEPTEMBER 30, 1998 AND JUNE 30, 1998 ASSETS
SEPTEMBER 30, 1998 JUNE 30, 1998 (UNAUDITED) CURRENT ASSETS Cash and cash equivalents $ 536,058 $ 513,192 Restricted cash 31,094 172,452 Accounts receivable, less allowance for doubtful accounts of $46,953 at September 30 and $40,494 at June 30 1,355,688 1,658,274 Work in process 120,329 176,539 Prepaid expenses and other current assets 99,721 92,833 ------------ ------------ TOTAL CURRENT ASSETS 2,142,890 2,613,290 PROPERTY AND EQUIPMENT, NET 422,410 443,083 OTHER ASSETS Goodwill and other intangible assets, less accumulated amortization of $78,752 at September 30 and $75,722 at June 30 146,610 149,640 Deposits and other assets 127,768 111,856 ============ ============ TOTAL ASSETS $ 2,839,678 $ 3,317,869 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Bank note payable $ 29,682 Current portion of long-term debt and capital lease obligations $ 188,034 182,599 Accounts payable 461,684 472,132 Accrued liabilities 534,001 699,455 Customer deposits 572,253 646,544 ------------ ------------ TOTAL CURRENT LIABILITIES 1,755,972 2,030,412 LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS 121,815 146,675 ACCRUED EXPENSES, NON-CURRENT 18,119 22,362 STOCKHOLDERS' EQUITY Preferred stock-no par value; 1,000,000 authorized; no shares issued Common stock-no par value; 10,000,000 shares authorized; 4,461,121 shares issued at September 30 and June 30 12,430,811 12,430,811 Contributed capital 14,498 14,498 Accumulated deficit (11,390,499) (11,213,217) Cumulative translation adjustment (111,038) (113,672) ------------ ------------ TOTAL STOCKHOLDERS' EQUITY 943,772 1,118,420 ============ ============ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,839,678 $ 3,317,869 ============ ============
See accompanying notes 4 SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY SEPTEMBER 30, 1998
COMMON STOCK CUMULATIVE NUMBER OF CONTRIBUTED ACCUMULATED TRANSLATION SHARES AMOUNT CAPITAL DEFICIT ADJUSTMENT --------- ----------- ------------ ------------ ------------ Balance at June 30, 1998 4,461,121 $12,430,811 $14,498 $(11,213,217) $(114,915) Net loss (177,282) Translation adjustment 3,877 ====================================================================== Balance at September 30, 1998 4,461,121 $12,430,811 $14,498 $(11,390,499) $(111,038) ======================================================================
See accompanying notes. 5 SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997 (UNAUDITED)
1998 1997 --------- -------- INCREASE (DECREASE) IN CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $(177,282) $(211,561) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 53,398 62,130 Provision for bad debts (3,555) Other 21 Changes in assets and liabilities: Accounts receivable 316,366 112,350 Work in process 57,257 (64,246) Prepaid expenses and other current assets (7,391) (49,034) Deposits and other assets (19,458) (1,506) Accounts payable (13,364) 14,733 Accrued liabilities (174,445) (26,481) Customer deposits and non-current accrued expenses (85,074) (1,332) --------- --------- NET CASH USED IN OPERATING ACTIVITIES (53,548) (164,926) --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Additions to property and equipment (23,317) (27,034) Payments received on notes receivable 5,567 4,937 Decrease (Increase) in restricted cash 141,358 92,842 --------- --------- NET CASH PROVIDED BY INVESTING ACTIVITIES 123,608 70,745 --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Principal payments on debt and capital lease Obligations (23,663) (18,042) Borrowings on revolving credit line 785,995 537,049 Payments on revolving credit line (815,677) (752,506) Proceeds from common stock issue 300,000 -------- --------- NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (53,345) 66,501 --------- --------- EFFECT OF EXCHANGE RATE CHANGES ON CASH 6,151 (6,688) --------- --------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 22,866 (34,368) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 513,192 386,785 -------- --------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 536,058 $ 352,417 ========= =======--
See accompanying notes. 6
SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997 (UNAUDITED) 1998 1997 -------- ------ SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: Financed purchases of property and equipment through notes payable $ 3,310 ======= SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for: Interest $ 7,948 $11,600 ======== ======= Income taxes $ 4,483 =======
See accompanying notes. 7 SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 1998 AND 1997 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. COMMON STOCK Subsequent to one of the three private placements of common stock completed during the quarter ended March 31, 1994 management agreed to issue 91,666 additional shares to the participants of one of the placements. At June 30, 1995, 62,500 of the shares had been issued. On September 30, 1997 and November 6, 1997 the remaining participants filed the required agreements and on October 22 and November 6, 1997 3,333 and 20,833 shares were issued, respectively. On June 29, 1997 the Company and several current shareholders and shareholder/directors agreed to a private placement of 860,000 shares of common stock and warrants to purchase 860,000 additional shares of common stock. The cost of the shares and warrants of $860,000 was placed in escrow. The placement was contingent on the Company's shareholders consent to a one for four reverse stock split and an amendment to the Company's Restated Articles of Incorporation, which amendment increases from 5,000,000 to 10,000,000 the number of shares of common stock (on a post-reverse split basis) the Company is authorized to issue. In September, the Company and one of the participants agreed to the release of $300,000 from the participant's escrow account and 300,000 shares and warrants were issued September 10, 1997. On October 31, 1997 the Company's shareholders consented to the reverse split and the amendment, effective November 7, 1997. The remaining 560,000 shares were issued November 14, 1997. 8 NOTE 3. FOREIGN OPERATIONS AND MAJOR CUSTOMERS-SEGMENTS Revenue, loss before taxes, and identifiable assets by geographic area are shown below. United Kingdom amounts relate solely to Saztec Europe, Ltd. and its subsidiaries, whose customers are located in England, Scotland, Germany, Italy, Spain, and Belgium. Identifiable assets of Saztec Europe Ltd. located outside of Ardrossan, Scotland are immaterial.
QUARTER ENDED SEPTEMBER 30, 1998 1997 ------------------ -------------- Revenue United States $ 1,207,910 $ 818,662 United Kingdom/Western Europe 558,775 794,809 ------------------ -------------- $ 1,766,685 $ 1,613,471 ================== ============== Income (loss) before income taxes United States $ 16,441 $ (148,309) United Kingdom/Western Europe (270,324) (63,252) ------------------ ------------- $ (253,883) $ (211,561) ================== ============== Depreciation United States $ 30,274 $ 24,682 United Kingdom/Western Europe 20,094 34,418 Amortization-U.S. only 3,030 3,030 ================== ============== $ 53,398 $ 62,130 ================== ============== Identifiable Assets SEPTEMBER 30, 1998 JUNE 30, 1998 ------------------ ------------- United States $ 1,627,744 $ 1,851,102 United Kingdom 1,211,934 1,466,767 ------------------ ------------- $ 2,839,678 $ 3,317,869 ================== ==============
NOTE 4. EARNINGS (LOSS) PER SHARE At September 30, 1998 and 1997 the following potentially dilutive securities were outstanding:
1998 1997 NUMBER PRICE RANGE NUMBER PRICE RANGE Employee options 237,250 .315 - 4.13 155,500 .68 - 4.13 Other options 418,750 .315 - 1.00 106,250 .68 - 4.13 Warrants 860,000 2.00 721,000 2.00
9 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Revenue for the three months ended September 30, 1998 increased 9.4% to $1,766,685 from $1,613,471 for the quarter ended September 30, 1997. U.S. revenue for the quarter increased 47.5% and European revenue decreased 30% compared to the prior year first quarter. The sales mix in the United States continued to change in favor of increased scanning projects; revenue from Europe was relatively unchanged from the prior year period. Revenue from foreign sources comprised 31.6% of consolidated revenues for the first three months of the current year as compared with 49.2% in the prior year. Management expects revenue in both Europe and the United States to improve in the second quarter of the current fiscal year. Gross profit for the quarter of $263,476 was $33,753 lower and gross margin of 14.9% was 3.5% lower than results from the first quarter of the prior year, due to continued underutilized capacity. Selling and administrative (S&A) expenses for the current year quarter increased $12,975 to $509,203 from $496,228 for the same period in the prior year. As a percentage of sales, S&A decreased to 28.8% from the 30.7% ratio of the prior year. Revenue earned for the quarter ended September 30, 1998 was $635,459 lower than for the quarter ended June 30, 1998. As a result, collections on accounts receivable produced an increase in cash on the cash flows statement for the quarter. This more than offset the effect of paying down accrued liabilites, reducing the cash decrease from the net operating loss of $177,282 to a figure of $53,548 of net cash used in operating activities. The release of restricted cash to operations exceeded both the net cash used in operating activities and the amount needed to make required payments on notes payable and repay all advances on the line of credit. The combined effect resulted in a net increase in cash of $22,866. The Company has analyzed its exposure to potential data processing "Year 2000" problems and formulated a plan to ensure its systems are in compliance by June 30, 1999. This will be effected through replacement of PC-level hardware and an upgrade to a third-party software package which has been certified as Year 2000 compliant. Total planned cost is $125,000, and is a subset of ongoing systems upgrades to increase production performance. The Company is also in the process of compiling certifications of Y2K compliance from its vendors. No external consulting resource requirements are expected. The Company's operations will be affected by the introduction of the euro on January 1, 1999. A material amount of revenue generated by the sales and production facilities in the United Kingdom is derived from customers located in countries adopting the common currency. The Company will continue to be subject to exchange rate risk as a result of the pound sterling's fluctuations against the new currency and may encounter pricing pressure from competitors located in countries participating in its adoption. CAPITAL RESOURCES AND LIQUIDITY The Company's revolving credit agreement is secured by accounts receivable, work in process, property and equipment and other assets, bearing interest at the lender's prime rate plus 4.0% (12.5% at September 30, 1998). The note maturing on July 1, 1997 was renewed through October 1, 1997, April 1 and October 1, 1998, and April 1, 1999. Maximum borrowings under the agreements decline $10,000 per month from $270,000 on November 1, 1997. Available borrowing is restricted to 70% of domestic trade receivables less than 90 days old. This restriction has not reduced the borrowing ceiling during the periods. The Company was in compliance with the covenants contained in the agreement throughout the periods and at September 30, 1998. Outstanding borrowings were $29,682 at June 30, 1998. There were no advances against the 10 agreement outstanding at September 30, 1998. Available borrowings were $160,000 at September 30 and $150,000 beginning October 1, 1998 and for the month of October. The Company's unrestricted cash balance of $513,192 at June 30 increased $22,866 to $536,058 at September 30, 1998. Working capital decreased $195,960 during the quarter, primarily due to the operating loss for the period. 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. SEPTEMBER 30, 1998 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 None. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (A) EXHIBITS The following Exhibits are 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: 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: November 4, 1998 SAZTEC INTERNATIONAL, INC. -------------------------------- (Registrant) By:/s/ THOMAS K. O'LOUGHLIN ----------------------------- Thomas K. O'Loughlin Treasurer 13 EXHIBIT INDEX EXHIBIT DESCRIPTION - ------- ----------- 27 Financial Data Schedule EX-27 2
5 1 3-MOS JUN-30-1998 JUL-1-1998 SEP-30-1998 536,058 0 1,402,641 46,953 120,329 2,142,890 3,562,692 3,140,282 2,839,678 1,755,972 121,815 0 0 12,430,811 (96,540) 2,839,678 0 1,766,685 0 1,503,209 509,203 0 8,156 (253,883) (76,601) (177,282) 0 0 0 (177,282) (.04) (.04)
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