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 ended November 30, 1997
[ ] 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 December 31, 1997 was 1,559,955 shares. Transitional Small
Business Disclosure Format (check one):
Yes No X
<PAGE>
INDEX
Page
PART I FINANCIAL INFORMATION
Item 1 FINANCIAL STATEMENTS:
CONSOLIDATED CONDENSED BALANCE
SHEETS as of November 30, 1997 (unaudited)
and May 31, 1997 3
UNAUDITED CONSOLIDATED CONDENSED
STATEMENTS OF OPERATIONS for the three and six
months ended November 30, 1997 and November 30, 1996 5
UNAUDITED CONSOLIDATED CONDENSED
STATEMENTS OF CASH FLOWS for the six
months ended November 30, 1997 and November 30, 1996 6
NOTES TO CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS 7
Item 2 MANAGEMENT'S DISCUSSION AND
ANALYSIS OR PLAN OF OPERATION 11
PART II OTHER INFORMATION 17
Item 1 LEGAL PROCEEDINGS 17
Item 2 CHANGES IN SECURITIES 17
Item 3 DEFAULTS UPON SENIOR SECURITIES 17
Item 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS 17
Item 5 OTHER INFORMATION 17
Item 6 EXHIBITS AND REPORTS ON FORM 8-K 17
Page 2 of 18
<PAGE>
Sandata, Inc. and Subsidiaries
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
UNAUDITED AUDITED
November 30, May 31,
1997 1997
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
CURRENT ASSETS
Cash and cash equivalents $1,572,534 $ 1,200,014
Accounts receivable, net of allowance for doubtful accounts
of $250,800 and $331,000 respectively 1,194,772 1,254,589
Receivables from affiliates 620,389 949,906
Receivable from former affiliate 711 12,074
Notes receivable - officers --- 102,867
Inventories 62,057 16,335
Prepaid expenses and other current assets 658,680 212,114
------- -------
TOTAL CURRENT ASSETS 4,109,143 3,747,899
FIXED ASSETS, NET 5,789,414 5,279,512
OTHER ASSETS
Note receivable 100,000 100,000
Cash surrender value of officer's life insurance, security
deposits and other 474,746 411,137
------------ ----------
TOTAL ASSETS $10,473,303 $9,538,548
=========== ==========
</TABLE>
See notes to consolidated condensed financial statements
Page 3 of 18
<PAGE>
Sandata, Inc. and Subsidiaries
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
UNAUDITED AUDITED
November 30, May 31,
1997 1997
---- ----
LIABILITIES AND SHAREHOLDERS' EQUITY:
CURRENT LIABILITIES
<S> <C> <C>
Accounts payable and accrued expenses $2,092,651 $1,691,456
Current portion of long-term debt 156,228 267,864
Deferred/unearned revenue 31,073 2,733
Deferred income 160,614 237,202
------- ----------
TOTAL CURRENT LIABILITIES 2,440,566 2,199,255
LONG-TERM DEBT --- 1,034,201
DEFERRED INCOME 176,491 243,305
DEFERRED INCOME TAXES 501,699 370,000
------- ----------
TOTAL LIABILITIES 3,118,756 3,846,761
--------- ---------
SHAREHOLDERS' EQUITY
Common stock 1,560 1,216
Additional paid in capital 4,133,347 2,795,801
Retained earnings 3,219,640 3,031,656
--------- ---------
7,354,547 5,828,673
Less Treasury stock --- (136,886)
------------ --------
TOTAL SHAREHOLDERS' EQUITY 7,354,547 5,691,787
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $10,473,303 $9,538,548
=========== ==========
</TABLE>
See notes to consolidated condensed financial statements
Page 4 of 18
<PAGE>
<TABLE>
Sandata Inc. and Subsidiaries
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
NOVEMBER 30, NOVEMBER 30,
1997 1996 1997 1996
---- ---- ---- ----
REVENUES:
<S> <C> <C> <C> <C>
Service fees $2,972,524 $2,622,024 $5,947,431 $5,110,874
Real estate rental income --- 53,160 --- 134,700
Other income 71,732 85,291 143,433 168,557
Interest income 12,057 1,999 46,337 4,979
----------- ------------ ----------- ------------
3,056,313 2,762,474 6,137,20 5,419,110
COSTS AND EXPENSES:
Service Fees:
Operating 1,869,484 1,538,327 3,850,754 2,970,362
Selling, general and administrative 645,073 551,894 1,241,448 1,016,183
Depreciation and amortization 346,394 294,061 676,645 597,001
Interest expense 13,646 50,994 36,162 104,937
----------- ----------- ----------- ----------
2,874,597 2,435,276 5,805,009 4,688,483
--------- --------- --------- ---------
Real Estate:
Operating --- 93,177 --- 246,894
Depreciation and amortization --- 18,944 --- 47,302
Interest expense --- 52,378 --- 133,918
Real estate taxes --- 32,012 --- 71,012
--- 196,511 --- 499,126
--- ----------- --- ---------
TOTAL COSTS AND EXPENSES 2,874,597 2,631,787 5,805,009 5,187,609
--------- --------- --------- ---------
Earnings from operations
before income taxes 181,716 130,687 332,192 231,501
Income tax expense 78,000 57,685 144,209 102,185
------------ ------------- ------------ ------------
NET EARNINGS $ 103,716 $ 73,002 $ 187,983 $ 129,316
============= ============ ========= ===========
EARNINGS PER COMMON SHARE $ 0.05 $ 0.04 $ 0.09 $ 0.07
---------------- -------------- ------------ --------------
Weighted average common shares
outstanding 2,340,098 1,724,757 2,340,098 1,724,757
=========== ========= ========= =========
</TABLE>
See notes to consolidated condensed financial statements
Page 5 of 18
<PAGE>
<TABLE>
Sandata, Inc. and Subsidiaries
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
<CAPTION>
SIX MONTHS ENDED
NOVEMBER 30,
1997 1996
<S> <C> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net earnings $ 187,983 $129,316
Adjustments to reconcile net earnings to net cash
provided by (used in) operating activities:
Depreciation and amortization 676,645 644,303
(Gain) on disposal of fixed assets --- (268,340)
(Gain ) on transfer of facility --- (15,586)
(Decrease) in allowance for doubtful
accounts receivable (80,200) (57,195)
(Decrease) in deferred income (143,402) (139,408)
Increase (decrease) in deferred revenue 28,340 (10,547)
(Increase) in operating assets (415,880) (162,181)
Increase in operating liabilities 320,352 533,432
------- -------
Net cash provided by operating activities 573,838 653,794
------- -------
Cash flows from investing activities:
Collection of note receivable - officer 102,867 ---
Purchases of fixed assets (1,186,547) (948,074)
Increases in advances from affiliates 329,517 ---
Collections of note receivable-former affiliates 11,363 77,100
Proceeds from sale/leaseback transaction ---- 925,000
---- --------------
Net cash provided by (used in) investing activities (742,800) 54,026
--------- ------
Cash flows from financing activities:
Proceeds from private placement offering 260,076
Proceeds from stock 1,575,683 ---
Principal payments on term loan (350,718)
Proceeds from line of credit 1,750,000
Principal payments on line of credit (1,034,201) (2,188,000)
Proceeds from notes payable - affiliates 2,560,000
Principal payments on notes payable - affiliates ---- (2,175,000)
---- ------------
Net cash (used in) provided by financing activities 541,482 (143,642)
------- ---------
Increase in cash and cash equivalents 372,520 564,178
Cash and cash equivalents at beginning of period 1,200,014 368,400
--------- -------
Cash and cash equivalents at end of period $1,572,534 $ 932,578
========== =============
</TABLE>
Supplemental Disclosure of Noncash Investing and Financing Activities:
As of July 31, 1995 the Company assumed lease obligations totaling $4,143,140 as
disclosed in the Notes to the Consolidated Condensed Financial Statements in
conjunction with the acquisition of a facility. As of November 1, 1996 a company
affiliated with the Directors of the Company assumed certain lease obligations
relative to the transfer of a facility in the amount of $3,140,884 as disclosed
in the Notes to the Consolidated Condensed Financial Statements.
See notes to consolidated condensed financial statements
Page 6 of 18
<PAGE>
Sandata, Inc. and Subsidiaries
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
The Consolidated Condensed Balance Sheets as of November 30, 1997, the
Consolidated Condensed Statements of Operations for the three and six month
periods ended November 30, 1997 and 1996 and the Consolidated Condensed
Statement of Cash Flows for the six month periods ended November 30, 1997 and
1996 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 November 30, 1997 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, 1997. Results of Operations for the period ended November 30, 1997
are not necessarily indicative of the operating results expected for the full
year.
2. RELATED PARTY TRANSACTIONS
On June 1, 1994, BFS Sibling Realty, Inc. ("BSRI") formerly known as Brodsky
Sibling Realty, Inc., a company affiliated with the Company's Directors,
borrowed $3,350,000 in the form of Industrial Development Revenue Bonds
("Bonds") to finance costs incurred in connection with the acquisition of the
Company's facility ("Facility") from the Nassau County Industrial Development
Agency ("NCIDA"), and for renovating and equipping the Facility. These Bonds
were subsequently purchased by a bank (the "Bank"). The aggregate cost incurred
by BSRI in conjunction with such acquisition, renovation and equipping was
approximately $4,377,000. In addition, the Company incurred approximately
$500,000 of indebtedness to affiliates of Mr. Brodsky in connection with
additional capital improvements. The Bonds bore interest at prime plus 3/4 of 1%
until August 11, 1995, at which time the interest rate became fixed at 9% for a
five-year term through September 1, 2000. At that time, the interest rate will
be adjusted to a rate of either prime plus 3/4 of 1%, or the applicable fixed
rate if offered by the Bank. As a condition to the issuance of the Bonds, the
NCIDA obtained title to the Facility which it then leased to BSRI.
On June 21, 1994 (as of June 1, 1994), the Company and its Chairman guaranteed
the full and prompt payment of principal and interest of the Bonds and the
Company granted the Bank a security interest and lien on all the assets of the
Company. In connection with the issuance and sale of the Bonds, the Company
entered into a sublease agreement (the "First Sublease") with BSRI, whereby the
Company, as sublessee, leased the Facility for the conduct of its business and,
in consideration therefor, was obligated to make lease payments in at least
equal amounts due to satisfy the underlying Bond obligations.
Page 7 of 18
<PAGE>
Sandata, Inc. and Subsidiaries
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
On July 31, 1995, by an Assignment and Assumption and First Amendment to Lease
between the Company and BSRI, the Company assumed the obligations of BSRI under
the lease and became the direct tenant and the beneficial owner of the Facility
(collectively the "First Amendment"). In connection with the First Amendment,
the First Sublease was terminated. During the period commencing July 1, 1995 and
ending October 31, 1996 the Company paid rent for the Facility to the NCIDA in
the amount of $48,600 per month, subject to adjustment based upon the then
effective interest rate of the Bonds, among other things. In connection with the
First Amendment, the Company obtained the right to acquire the Facility upon
expiration of the Lease with the NCIDA and became directly liable to the NCIDA
for amounts due thereunder. Furthermore, in connection with the First Amendment,
the Company assumed certain indebtedness owed to affiliates of the Company's
Chairman as follows: (i) the $364,570 remaining balance of a 48-month term loan
bearing interest at 8.7% per annum, and (ii) the $428,570 remaining balance of a
42-month term loan bearing interest at 8.91%. Each of the foregoing loans were
incurred in connection with the construction of improvements to the Facility,
are collateralized by the assets of the primary obligor and are guaranteed by
the Company's Chairman.
On August 11, 1995, the Company entered into a $750,000 loan agreement with the
Long Island Development Corporation ("LIDC"), under a guarantee by the U.S.
Small Business Administration ("SBA") (the "SBA Loan"). The entire $750,000
proceeds were used to repay a portion of the Bonds. The Company entered into the
First Amendment primarily to satisfy certain requirements of the SBA. The SBA
Loan is payable in 240 monthly installments of $6,255, which includes principal
and interest at a rate of 7.015%.
As of November 1, 1996, the Company entered into a Second Amendment with BFS
Realty, LLC ("BFS") (which succeeded to the interest of BSRI with respect to the
Second Amendment), the NCIDA and the Bank. In connection with the Second
Amendment, (i) BFS assumed all of the Company's obligations under the Lease with
the NCIDA and entered into the Second Sublease with the Company, as sublessee,
for the Facility; and (ii) the Company conveyed to BFS the right to become the
owner of the Facility upon expiration of the Lease. In addition, pursuant to the
Second Sublease, the Company has assumed certain obligations owed by BFS to the
NCIDA under the Lease. BFS has indemnified the Company with respect to certain
obligations relative to the Lease and the Second Amendment.
As a result of the Second Amendment and related transactions discussed above,
the Company reduced its fixed assets, consisting of land, building and
improvement costs, by the amount of the cost thereof, net of accumulated
depreciation, in the amount of $3,125,298 and reduced its long term debt by
$3,140,884, which was assumed by BFS; the net difference was recorded as other
income in the financial statements. Amounts owed to affiliates of the Company in
connection with the construction and improvements were not assumed by BFS. The
Company and its Chairman have guaranteed the above obligation to the SBA and
NCIDA in connection with the foregoing.
Page 8 of 18
<PAGE>
Sandata, Inc. and Subsidiaries
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
3. NET EARNINGS PER COMMON SHARE
Earnings per share for the three and six months ended November 30, 1997 includes
the dilutive effect of outstanding stock options and warrants. The number of
common stock equivalents determined by applying the modified treasury stock
method included in the calculation of earnings per share for the three and six
months ended November 30, 1997 was 866,101. Earnings per share for the three and
six months ended November 30, 1996 include the dilutive effect of outstanding
stock options and warrants. The number of common stock equivalents determined by
applying the modified treasury stock method included in the calculation of
earnings per share for the three and six months ended November 30, 1996 was
894,135.
4. STOCKHOLDERS' EQUITY
In October, 1996, the Company commenced a private offering, on a "best efforts
- -all or none" basis, to raise $1,500,000 by issuing an aggregate of 300,000
shares of Common Stock and five year warrants for the purchase of 150,000 shares
of Common Stock, at an exercise price of $7.00 per share. In February 1997, the
Company completed such private offering. The net proceeds received in connection
with the sale of 300,000 shares of its common stock were $1,256,415 after
payment of expenses related to the offering. Contemporaneously with the
execution and delivery by the Company of the letter of intent with regard to
such private offering, certain assignees of the placement agent acquired 100,000
shares of the Company's Common Stock at a purchase price of $3.00 per share; the
net proceeds from the sale of such 100,000 shares were $260,076.
In connection with the closing of such private offering, an affiliate of the
placement agent entered into a financial consulting agreement with the Company,
pursuant to which, among other things, such affiliate will receive aggregate
annual payments of $36,000 and certain assignees of such affiliate received
warrants to purchase an aggregate of 200,000 shares of Common Stock exercisable
as follows: 100,000 shares at $5.00 per share and 100,000 shares at $7.00 per
share, such warrants were to be exercisable for one year (with respect to the
warrants exercisable at $5.00 per share) and two years (with respect to the
warrants exercisable at $7.00 per share). In September 1997 the warrants issued
to affiliates of the placement agent were modified so that they will be
redeemable upon notice from the Company without regard to the market price of
the Company's common stock. The Company has extended the expiration date of the
$5.00 warrants for thirty days, until January 21, 1998.
In August 1997 the Board of Directors of the Company authorized the redemption
of certain warrants. Prior to redemption 48,500 warrants were exercised at $7.00
per share, generating proceeds of $339,500.
During the three months ended November 30, 1997, 117,500 warrants were exercised
at $7.00 per share generating proceeds of $822,500. Treasury stock of 52,772
shares were utilized for stock issuances pursuant to the warrant exercises.
Page 9 of 18
<PAGE>
Sandata, Inc. and Subsidiaries
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Pursuant to the terms of the Company's incentive stock option plan, on August 8,
1997, certain officers of the Company exercised 206,667 options at an exercise
price of $1.79 per share and 23,333 options at an exercise price of $1.875 per
share. The total proceeds generated from option exercises were $413,683.
Page 10 of 18
<PAGE>
Sandata, Inc. and Subsidiaries
Item - 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Results of Operations
Revenues were $3,056,313 and $6,137,201 for the three and six months ended
November 30, 1997 as compared to $2,762,474 and $5,419,110 for the three and six
months ended November 30, 1996, increasing $293,839 and $718,091 respectively.
Service fee revenues were $2,972,524 and $5,947,431 for the three and six months
ended November 30, 1997 as compared to $2,622,024 and $5,110,874 for the three
and six months ended November 30, 1996, increasing $350,500 and $836,557
respectively. The increase was attributable to the Santrax product.
Real estate rental income was $0 for the three and six months ended November 30,
1997 as compared to $53,160 and $134,700 for the three and six months ended
November 30, 1996.
The decreases relating to rental income resulted from the Company becoming the
beneficial owner and Lessee of the Facility as of July 31, 1995 in addition to
the effect of the subsequent Second Amendment transaction as of November 1,
1996, whereby the Company became the Sublessee of the Facility.
Other income was $71,732 and $143,433 for the three and six months ended
November 30, 1997 as compared to $85,291 and $168,557 for the three and six
months ended November 30, 1996, decreasing $13,559 and $25,124 respectively.
Expenses Related to Services
Operating expenses were $1,869,484 and $3,850,754 for the three and six months
ended November 30, 1997 as compared to $1,538,327 and $2,970,362 for the three
and six months ended November 30, 1996, increasing $331,157 and $880,392
respectively.
Programming and payroll costs relating to existing applications and costs
associated with Santrax and its operations, including telephone and expenses
related to equipment, were the primary factors for the increase in operating
expenses.
Selling, general and administrative expenses were $645,073 and $1,241,448 for
the three and six months ended November 30, 1997, as compared to $551,894 and
$1,016,183 for the three and six months ended November 30, 1996, an increase of
$93,179 and $225,265 respectively. The increase was primarily due to increased
selling effort and increased legal fees.
Page 11 of 18
<PAGE>
Sandata, Inc. and Subsidiaries
Item - 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Depreciation and amortization expenses were $346,394 and $676,645 for the three
and six months ended November 30, 1997 as compared to $294,061 and $597,001 for
the three and six months ended November 30, 1996, an increase of $52,333 and
$79,644 respectively. The increase was primarily attributable to fixed asset
additions, including software capitalization costs.
Interest expenses were $13,646 and $36,162 for the three and six months ended
November 30, 1997 as compared to $50,994 and $104,937 for the three and six
months ended November 30, 1996, a decrease of $37,348 and $68,775 respectively.
This decrease was due primarily to less debt.
Expenses Related to Real Estate Operations
Expenses relating to real estate operations were $0 for the three and six months
ended November 30, 1997 as compared to $196,511 and $499,126 for the three and
six months ended November 30, 1996.
The decreases in expenses relating to the operation of the Facility resulted
from the Company becoming the beneficial owner and lessee of the Facility as of
July 31, 1995 in addition to the effect of the subsequent Second Amendment
transaction as of November 1, 1996 (as described below), whereby the Company
became the sublessee of the Facility.
The Company has reported real estate operating expenses only through the period
ended November 1, 1996. The Company does not expect to incur any costs in the
future that relate to real estate operations.
Income Tax Expenses
Income tax expenses were $78,000 and $144,209 for the three and six months ended
November 30, 1997 as compared to $57,685 and $102,185 for the three and six
months ended November 30, 1996, and increase of $20,315 and $42,024.
Liquidity and Capital Resources
The Company's working capital was $1,668,577 as of November 30, 1997 as compared
to $1,548,644, as of May 31, 1997, an increase of $119,933.
The Company has spent approximately $1,186,547 in fixed asset additions,
including software capitalization costs in connection with revenue growth and
new product development. The Company expects the current levels of capital
expenditures to continue.
In October, 1996, the Company commenced a private offering, on a "best efforts
- -all or none" basis, to raise $1,500,000 by issuing an aggregate of 300,000
shares of Common Stock and five year warrants for the purchase of 150,000 shares
Page 12 of 18
<PAGE>
Sandata, Inc. and Subsidiaries
Item - 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
of Common Stock, at an exercise price of $7.00 per share. In February 1997, the
Company completed such private offering. The net proceeds received in connection
with the sale of 300,000 shares of its common stock were $1,256,415 after
payment of expenses related to the offering. Contemporaneously with the
execution and delivery by the Company of the letter of intent with regard to
such private offering, certain assignees of the placement agent acquired 100,000
shares of the Company's Common Stock at a purchase price of $3.00 per share; the
net proceeds from the sale of such 100,000 shares were $260,076.
In connection with the closing of such private offering, an affiliate of the
placement agent entered into a financial consulting agreement with the Company,
pursuant to which, among other things, such affiliate will receive aggregate
annual payments of $36,000 and certain assignees of such affiliate received
warrants to purchase an aggregate of 200,000 shares of Common Stock exercisable
as follows: 100,000 shares at $5.00 per share and 100,000 shares at $7.00 per
share, such warrants to be exercisable for one year (with respect to the
warrants exercisable at $5.00 per share) and two years (with respect to the
warrants exercisable at $7.00 per share).In September 1997 the warrants issued
to affiliates of the placement agent were modified so that they will be
redeemable upon notice from the Company without regard to the market price of
the Company's common stock. The Company has extended the expiration date of the
$5.00 warrant for thirty (30)days until January 21, 1998.
In August 1997 the Board of Directors of the Company authorized the redemption
of certain warrants. Prior to redemption, 48,500 warrants were exercised at
$7.00 per share, generating proceeds of $339,500.
During the three months ended November 30, 1997 117,500 warrants were exercised
at $7.00 per share generating proceeds of $822,500. Treasury stock of 52,772
shares were utilized for stock issuances pursuant to the warrant exercises.
As discussed above in Note 2 to the Consolidated Condensed Financial Statements,
in November 1996, in connection with the Second Amendment of the Lease for the
Company's Facility, the Company assumed certain obligations of BFS and BFS has
indemnified the Company with respect to such assumed obligations.
On April 18, 1997, the Company's wholly owned subsidiary, Sandsport, entered
into the Credit Agreement with 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
Page 13 of 18
<PAGE>
Sandata, Inc. and Subsidiaries
Item - 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
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 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 Mr. Brodsky. All of the Group 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,
under prior agreements with the Bank, failed to meet these net worth and
financial ratios, and the Bank has granted the Group waivers. No assurance can
be given that the Group will be able to meet these net worth and financial
requirements in the future, and/or that the Bank will continue to grant to the
Group waivers. Although in the past the Bank has renewed its loans to the
Company when they matured, there can be no assurance that it will continue to do
so or that the Company, if the Bank does not renew the loan, will be able to
arrange alternative financing on terms satisfactory to it.
As of November 30, 1997, the outstanding balance on the Credit Agreement with
the Bank was $0.
The Company believes the results of its continued operations, together with the
available Credit Line and proceeds from the recent private offering should be
adequate to fund presently foreseeable working capital requirements.
IDA/SBA Financing
On June 1, 1994, BFS Sibling Realty, Inc. ("BSRI") formerly known as Brodsky
Sibling Realty, Inc., a company affiliated with the Company's Directors,
borrowed $3,350,000 in the form of Industrial Development Revenue Bonds
("Bonds") to finance costs incurred in connection with the acquisition of the
Company's Facility from the NCIDA, and for renovating and equipping the
Facility. These Bonds were subsequently purchased by a bank (the "Bank"). The
aggregate cost incurred by BSRI in conjunction with such acquisition, renovation
and equipping was approximately $4,377,000. In addition, the Company incurred
approximately $500,000 of indebtedness to affiliates of Mr. Brodsky in
connection with additional capital improvements. The Bonds bore interest at
prime plus 3/4 of 1% until August 11, 1995, at which time the interest rate
became fixed at 9% for a five-year term through September 1, 2000. At that time,
the interest rate will be adjusted to a rate of either prime plus 3/4 of 1%, or
the applicable fixed rate if offered by the Bank. As a condition to the issuance
of the Bonds, the NCIDA obtained title to the Facility which it then leased to
BSRI.
On June 21, 1994 (as of June 1, 1994), the Company and its Chairman guaranteed
the full and prompt payment of principal and interest of the Bonds and the
Page 14 of 18
<PAGE>
Sandata, Inc. and Subsidiaries
Item - 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Company granted the Bank a security interest and lien on all the assets of the
Company. In connection with the issuance and sale of the Bonds, the Company, as
sublessee, entered into a sublease agreement (the "First Sublease") with BSRI,
whereby the Company leased the Facility for the conduct of its business and, in
consideration therefor, was obligated to make lease payments in at least equal
amounts due to satisfy the underlying Bond obligations.
On July 31, 1995, by an Assignment and Assumption and First Amendment to Lease
between the Company and BSRI, the Company assumed the obligations of BSRI under
the lease and became the direct tenant and the beneficial owner of the Facility
(collectively the "First Amendment"). In connection with the First Amendment,
the First Sublease was terminated. During the period commencing July 1, 1995 and
ending October 31, 1996 the Company paid rent for the Facility to the NCIDA in
the amount of $48,600 per month, subject to adjustment based upon the then
effective interest rate of the Bonds, among other things. In connection with the
First Amendment, the Company obtained the right to acquire the Facility upon
expiration of the Lease with the NCIDA and became directly liable to the NCIDA
for amounts due thereunder. Furthermore, in connection with the First Amendment,
the Company assumed certain indebtedness owed to affiliates of the Company's
Chairman as follows: (i) the $364,570 remaining balance of a 48-month term loan
bearing interest at 8.7% per annum, and (ii) the $428,570 remaining balance of a
42-month term loan bearing interest at 8.91%. Each of the foregoing loans were
incurred in connection with the construction of improvements to the Facility,
are collateralized by the assets of the primary obligor and are guaranteed by
the Company's Chairman.
On August 11, 1995, the Company entered into a $750,000 loan agreement with the
Long Island Development Corporation ("LIDC"), under a guarantee by the U.S.
Small Business Administration ("SBA") (the "SBA Loan"). The entire $750,000
proceeds were used to repay a portion of the Bonds. The Company entered into the
First Amendment primarily to satisfy certain requirements of the SBA. The SBA
Loan is payable in 240 monthly installments of $6,255, which includes principal
and interest at a rate of 7.015%
As of November 1, 1996, the Company entered into the Second Amendment with BFS
(which succeeded to the interest of BSRI with respect to the Second Amendment),
the NCIDA and the Bank. In connection with the Second Amendment, (i) BFS assumed
all of the Company's obligations under the Lease with the NCIDA and entered into
the Second Sublease with the Company, as sublessee, for the Facility; and (ii)
the Company conveyed to BFS the right to become the owner of the Facility upon
expiration of the Lease. In addition, pursuant to the Second Sublease, the
Company has assumed certain obligations owed by BFS to the NCIDA under the
Lease. BFS has indemnified the Company with respect to certain obligations
relative to the Lease and the Second Amendment.
As a result of the Second Amendment and related transactions discussed above,
the Company reduced its fixed assets, consisting of land, building and
improvement costs, by the amount of the cost thereof, net of accumulated
depreciation, in the amount of $3,125,298 and reduced its long term debt by
Page 15 of 18
<PAGE>
Sandata, Inc. and Subsidiaries
Item - 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
$3,140,884, which was assumed by BFS; the net difference was recorded as income
in the financial statements. Amounts owed to affiliates of the Company in
connection with the construction and improvements were not assumed by BFS. The
Company and its Chairman have guaranteed the above obligation to the SBA and
NCIDA in connection with the foregoing.
Page 16 of 18
<PAGE>
Sandata, Inc. and Subsidiaries
PART II - OTHER INFORMATION
Item 1 - LEGAL PROCEEDINGS:
Reference is made to Form 10-QSB, August 31, 1997.
Item 2 - CHANGES IN SECURITIES:
Reference is made to "Part I, Item 2 - Management's Discussion and Analysis or
Plan of Operation" for a discussion of a private offering to accredited
investors.
Item 3 - DEFAULTS UPON SENIOR SECURITIES:
None
Item 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS:
None
Item 5 - OTHER INFORMATION:
On January 12, 1998 the number of directors constituting the entire Board of the
Company was increased to five members. Paul Konigsberg and Ronald Fish were
elected to the Board. In addition, both Mssrs. Konigsberg and Fish will serve on
the Company's Audit Committee.
Mr. Fish serves as the Administrator, Treasurer and Director of Unlimited Care,
Inc., a privately held company, since 1975.
Mr. Konigsberg serves as the Senior Partner and President of Konigsberg, Wolf &
Co. P.C., CPA's since 1975. Mr. Konigsberg previously served on the Board of
Directors of the Company from November 1987 through August 1995.
Item 6 - EXHIBITS AND REPORTS ON FORM 8-K:
Exhibit 27 - Financial Data Schedule (Electronic Filing Only)
Page 17 of 18
<PAGE>
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: By: /s/ Bert E. Brodsky
Bert E.Brodsky
Chairman of the Board
President, Chief Executive Officer,
Chief Financial Officer
Page 18 of 18
<PAGE>
January 15, 1998
Securities and Exchange Commission
450 5th Street, N.W.
Dear Sir or Madam:
Transmitted herewith through the EDGAR system is Form 10-QSB for the quarter
ending November 30, 1997 for Sandata Inc. If you have any questions or comments,
please contact me at (516)484-4400, extension 215.
Very truly yours,
Linda Scarpantonio
Legal Coordinator
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