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, 2000
[ ] Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from to
Commission file number 0-14401
SANDATA, INC.
(Exact Name of Small Business Issuer as Specified 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)
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 ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS
Check whether the registrant 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 the issuer's common stock, as of
January 10, 2001 was 2,506,473 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 3
as of November 30, 2000 (unaudited)and May 31, 2000
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS 5
for the three and six months
ended November 30, 2000 and November 30, 1999
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS 6
for the six months ended November 30, 2000 and November 30, 1999
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS 7
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION 13
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 18
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K 18
<PAGE>
<TABLE>
SANDATA, INC. AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
CONSOLIDATED CONDENSED BALANCE SHEETS
<S> <C> <C>
UNAUDITED AUDITED
November 30 May 31
2000 2000
---- ----
ASSETS:
CURRENT ASSETS
Cash and cash equivalents $ 401,791 $ 1,229,718
Accounts receivable, net of allowance for doubtful accounts
of $484,000 and $448,000, respectively 1,929,249 2,308,901
Receivables from affiliates 623,207 405,732
Other receivables 548,343 ---
Inventories 18,123 17,165
Prepaid expenses and other current assets 307,331 413,119
------- -------
TOTAL CURRENT ASSETS 3,828,044 4,374,635
FIXED ASSETS, NET 9,071,259 8,911,655
OTHER ASSETS
Notes receivable 120,333 126,221
Cash surrender value of officer's life insurance,
security deposits and other 836,891 832,988
------- -------
TOTAL ASSETS $13,856,527 $14,245,499
=========== ===========
SEE NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
</TABLE>
<PAGE>
SANDATA, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<S> <C> <C>
UNAUDITED AUDITED
November 30, May 31,
2000 2000
---- ----
LIABILITIES AND SHAREHOLDERS' EQUITY:
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 2,043,193 $ 2,580,143
Deferred/unearned revenue 42,088 38,848
Deferred income 331,684 322,678
-------- -------
TOTAL CURRENT LIABILITIES 2,416,965 2,941,669
LONG TERM DEBT 2,850,000 2,750,000
DEFERRED INCOME 257,684 315,253
DEFERRED INCOME TAXES 778,361 702,158
------- -------
TOTAL LIABILITIES 6,303,010 6,709,080
--------- ---------
COMMITMENTS & CONTINGENCIES
SHAREHOLDERS' EQUITY
Common stock 2,506 2,506
Additional paid in capital 5,803,704 5,803,704
Retained earnings 3,266,966 3,249,868
Notes receivable-officers (1,519,659) (1,519,659)
--------- ---------
TOTAL SHAREHOLDERS' EQUITY 7,553,517 7,536,419
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 13,856,527 $14,245,499
============== ===========
SEE NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
</TABLE>
<PAGE>
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<S> <C> <C> <C> <C>
THREE MONTHS ENDED SIX MONTHS ENDED
NOVEMBER 30, NOVEMBER 30,
2000 1999 2000 1999
---- ---- ---- ----
REVENUES:
Service fees $ 4,523,115 $4,432,021 $8,952,255 $8,506,145
Other income 90,724 98,604 184,392 186,620
Interest income 46,911 39,929 95,519 80,258
------------ -------- ---------- ----------
4,660,750 4,570,554 9,232,166 8,773,023
--------- --------- --------- ---------
COSTS AND EXPENSES:
Operating 2,732,176 2,876,549 5,349,576 5,470,287
Selling, general and administrative 1,111,536 970,951 2,290,066 1,909,310
Depreciation and amortization 695,262 614,172 1,359,217 1,186,875
Interest expense 77,725 63,932 128,990 112,052
-------- --------- --------- ---------
TOTAL COSTS AND EXPENSES 4,616,699 4,525,604 9,127,849 8,678,524
--------- --------- --------- ---------
EARNINGS FROM OPERATIONS BEFORE
INCOME TAXES 44,051 44,950 104,317 94,499
Income tax expense 36,221 18,230 87,219 38,745
--------- -------- --------- ---------
NET EARNINGS $ 7,830 $ 26,720 $ 17,098 $ 55,754
============ =========== ============ ============
BASIC EARNINGS PER SHARE $ .01 $ .01 $ .01 $ .02
------------ ----------- ------------ -----------
DILUTED EARNINGS PER SHARE $ .01 $ .01 $ .01 $ .02
------------ ----------- ------------ -----------
</TABLE>
SEE NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
<PAGE>
Sandata, Inc. and Subsidiaries
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<S> <C> <C>
SIX MONTHS ENDED
NOVEMBER 30,
2000 1999
---- ----
Cash flows from operating activities:
Net earnings $ 17,098 $ 55,754
Adjustments to reconcile net earnings to net cash provided by (used in)
operating activities:
Depreciation and amortization 1,359,217 1,186,875
Gain on disposal of fixed assets (122,956) (219,973)
Increase in allowance for doubtful accounts receivable (36,964) (61,831)
Increase (decrease) in deferred revenue 3,240 (13,233)
(Decrease) increase in deferred income (48,563) 40,060
Decrease in operating assets 523,431 880,705
Decrease in operating liabilities (460,747) (1,187,439)
-------- -----------
Net cash provided by operating activities 1,233,756 680,918
--------- ---------
Cash flows from investing activities:
Purchases of fixed assets (1,944,208) (3,091,039)
(Increase)decrease in receivables from affiliates (217,475) 289,065
Proceeds from sale/leaseback transaction 0 1,115,000
---------- ---------
Net cash used in investing activities (2,161,683) (1,686,974)
---------- ----------
Cash flows from financing activities:
Proceeds from term loan 100,000
Principal payments on term loan (100,000) ---
Proceeds from line of credit 200,000 1,800,000
Principal payments on line of credit (100,000) (1,600,000)
-------- -----------
Net cash provided by financing activities 100,000 200,000
-------- ----------
Decrease in cash and cash equivalents (827,927) (806,056)
Cash and cash equivalents at beginning of period 1,229,718 1,533,576
----------- -----------
Cash and cash equivalents at end of period $ 401,791 $ 727,520
=========== ============
</TABLE>
Supplemental Disclosure of Non-Cash Transaction
On November 22, 2000, the Company entered into a sale/leaseback of certain fixed
assets (principally computer hardware and equipment) with Macrolease
International Corporation. The fixed assets, which had a net book value of
approximately $421,500, were sold for $548,300. The resulting gain of
approximately $126,800 was recorded as deferred income and is being recognized
over the life of the lease, which is thirty-six (36) months. The sale proceeds,
which are shown as other receivables in the financial statements, were received
in December 2000.
SEE NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
<PAGE>
SANDATA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
The Consolidated Condensed Balance Sheet as of November 30, 2000, the
Consolidated Condensed Statements of Operations for the three and six month
periods ended November 30, 2000 and 1999 and the Consolidated Condensed
Statement of Cash Flows for the six month periods ended November 30, 2000 and
1999 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, 2000 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, 2000. Results of Operations for the period ended November 30, 2000
are not necessarily indicative of the operating results expected for the full
year.
2. RELATED PARTY TRANSACTIONS
The Company entered into an agreement in November, 1996 with an affiliate of the
Company's Chairman of the Board (the "Affiliate"), the Nassau County Industrial
Development Agency ("NCIDA") and a bank (the "Agreement"). In connection with
the Agreement, the Affiliate assumed all of the Company's obligations under a
lease with the NCIDA and entered into a sublease with the Company for its
facility. The Company conveyed to the Affiliate the right to become owner of the
facility upon expiration of the lease. In addition, pursuant to a sublease, the
Company has assumed certain obligations owed by the Affiliate to the NCIDA under
the lease. The Affiliate has indemnified the Company with respect to certain
obligations relative to the lease and the Agreement. The Company made rent
payments for its facility amounting to $140,320 and $281,220 for the three and
six months ended November 30, 2000 as compared to $170,266 and $340,456 for the
three and six month ended November 30, 1999. The reduction is the result of a
verbal agreement between the Company and the Affiliate to reduce the rent
$150,000 on an annual basis effective June 1, 2000.
The Company makes various lease payments to affiliates of the Company's Chairman
of the Board. The payments for equipment rental amounted to $105,807 and
$204,397 for the three and six months ended November 30, 2000 as compared to
$98,407 and $196,723 for the three and six months ended November 30, 1999.
The Company derives revenue from National Medical Health Card Systems, Inc.
("Health Card"), a company affiliated with the Company's Chairman of the Board,
for providing data base and operating system support, hardware leasing,
maintenance and related administrative services. The revenues generated from
Health Card amounted to $701,555 and $1,260,579 for the three and six months
ended November 30, 2000 as compared to $482,986 and $927,150 for the three and
six months ended November 30, 1999. At November 30, 2000, the Company was owed
$391,104 by Health Card.
At November 30, 2000, the Company owed Health Card $500,000 pursuant to a
promissory note, dated May 31, 2000, made payable by the Company to the order of
Health Card in the original principal amount of $500,000 plus interest at the
rate of 9-1/2%, payable quarterly. The note, which was originally due and
payable on June 1, 2001, was subsequently amended to extend such due date to
September 1, 2001 and amended by Second Amendment to extend such due date to
March 31, 2002. At November 30, 2000 the Company owed interest of $3,956 to
Health Card, which was subsequently paid.
Medical Arts Office Services, Inc. ("MAOS"), a corporation of which the
Company's Chairman of the Board is the sole shareholder, provided the Company
with accounting, bookkeeping and paralegal services. The payments made by the
Company to MAOS amounted to $84,141 and $143,574 for the three and six months
ended November 30, 2000 as compared to $74,097 and $133,131 for the three and
six months ended November 30, 1999.At November 30, 2000 the Company owed $22,933
to MAOS, which was subsequently paid.
3. NET EARNINGS PER COMMON SHARE
In 1997, the Financial Accounting Standards Board issued Standard No. 128 ("SFAS
No. 128"), "Earnings per Share". SFAS No. 128 replaced calculation of primary
and fully diluted earnings per share with basic and diluted earnings per share.
Basic earnings per share has been computed using the weighted average number of
shares of common stock outstanding. Diluted earnings per share has been computed
using the basic weighted average shares of common stock issued plus outstanding
stock options.
Basic earnings per share are based on the weighted-average number of shares of
common stock outstanding, which were 2,506,473 and 2,481,476 at November 30,
2000 and 1999, respectively. Diluted earnings per share are based on the
weighted-average number of shares of common stock adjusted for the effects of
assumed exercise of options and warrants under the treasury stock method, which
were 2,707,676 and 2,481,476 at November 30, 2000 and 1999, respectively.
Options to purchase 870,500 shares of common stock in the calendar year 2000
were outstanding at November 30, 2000 and were not included in the computation
of diluted earnings per share because the exercise price of the options was
greater than the average market price of the common stock for the respective
period.
4. SALE/LEASEBACK TRANSACTION
On November 22, 2000, the Company entered into a sale/leaseback of certain fixed
assets (principally computer hardware and equipment) with Macrolease
International Corporation. The fixed assets, which had a net book value of
approximately $421,500, were sold for $548,300. The resulting gain of
approximately $126,800 was recorded as deferred income and is being recognized
over the life of the lease, which is thirty-six (36) months. The sale proceeds,
which are shown as other receivables in the financial statements, were received
in December 2000.
5. COMMITMENTS AND CONTINGENCIES
On October 19, 1999, the Company and Pro-Health Systems, Inc. ("Pro-Health")
brought an action against Provider Solutions Corporation ("Provider"), Michael
Milvain and Charlotte Fritchie, in Supreme Court, New York County, Index No.
99-26033, based on breach of contract, fraudulent misrepresentation and other
causes of action, demanding damages of approximately $10,000,000 (the "State
Action").
On October 22, 1999, Provider brought a federal action in the United States
District Court, Eastern District (the "Federal Action"), seeking to enjoin the
Company and Pro-Health from (i) hiring certain named employees; (ii) soliciting
any present or former employees of Provider; and (iii) using, without Provider's
permission, any trade secret or other proprietary information belonging to
Provider. The Federal Action also sought to enjoin employees from (i) divulging
to the Company, Pro-Health or any other third party, any trade secret or other
proprietary information; and (ii) accepting employment from the Company,
Pro-Health or any other customer or competitor of Provider. The amended
complaint ultimately served on the Company and Pro-Health on March 31, 2000
demanded relief in the form of a permanent injunction and damages against the
Company and Pro-Health for total amounts ranging from $10,000,000 to
$15,000,000. The Complaint alleges claims of declaratory judgment, copyright
infringement, breach of fiduciary duty, breach of contract, and misappropriation
of trade secrets, among others. The State Action was removed and consolidated
with the Federal Action.
The Company and Pro-Health asserted various counterclaims in the Federal Action,
demanding damages of $10,000,000, seeking an injunction and declaratory
judgment, and asserting claims based on, among other things, Imposition of
Constructive Trust, Breach of Contract, and Unfair Competition.
To date, substantial discovery has taken place and is continuing. The Company
has asserted claims and defenses against Provider and intends to continue its
prosecution of its claims and to vigorously defend all claims against it.
Notwithstanding the foregoing, because of the uncertainties of litigation, no
assurances can be given as to the outcome of this litigation. If the Company
were not to prevail in this litigation, the Company could be required to pay
significant damages to Provider and could be enjoined from taking those certain
actions specified above. In addition, a negative outcome in the Provider
litigation could have a material adverse affect on the Company, including, but
not limited to, its business, operations and financial condition.
The Company entered into an employment agreement with Stephen Davies effective
October 17, 2000. Pursuant to this agreement, Mr. Davies has agreed to serve as
President and Chief Operating Officer at an annual salary of $175,000,
increasing to $200,000 on January 31, 2001. The agreement also provides for
certain termination benefits, which, depending upon the reason for termination,
can equal up to six months salary. In connection with his employment, the
Company granted to Mr. Davies incentive stock options to purchase an aggregate
of 250,000 shares of common stock at an exercise price of $3.00 per share, with
vesting periods ranging from December, 2000 to seven years.
6. SHAREHOLDERS' EQUITY
The Company has stock options outstanding under four stock option plans as
follows:
Employees' Incentive Stock Option Plan (the "1984 Plan")
At November 30, 2000, there were 2,536 options outstanding under the 1984 Plan.
Options granted under the 1984 Plan were granted at exercise prices not less
than fair market value on the date of grant. Options outstanding expire in 2001
and no additional options may be granted under the 1984 Plan.
1995 Stock Option Plan (the "1995 Plan")
At November 30, 2000, there were 590,500 incentive options outstanding under the
1995 Plan, which provides for both incentive and nonqualified stock options and
reserves 1,000,000 shares of common stock for grant. Options granted under the
1995 Plan were granted at exercise prices not less than the fair market value at
the date of grant. All options outstanding under the 1995 Plan are currently
exercisable at prices ranging from $1.41 to $2.61 per share over a period of
five years from date of grant.
1998 Stock Option Plan (the "1998 Plan")
At November 30, 2000, there were 965,958 incentive options outstanding under the
1998 Plan, which provides for both incentive and nonqualified stock options and
reserves 1,000,000 shares of common stock for grant. All options outstanding
under the 1998 Plan vest over three to six year periods and are exercisable at
prices ranging from $1.31 to $3.00 per share over periods of five and ten years
from date of grant. At November 30, 2000 there were 354,125 options currently
exercisable.
On July 14, 1998, the Company's Chairman of the Board, certain officers,
directors and a former director and the spouse of an officer and an employee of
Sandsport Data Services, Inc. ("Sandsport'), the Company's wholly owned
subsidiary, exercised their respective options and warrants to purchase an
aggregate of 921,334 shares of Common Stock under the 1998 Plan at exercise
prices ranging from $1.38 to $2.61 per share for an aggregate cost of
$1,608,861. Payment for such shares was made to the Company in the amount of
$921 representing the par value of the shares, and a portion in the form of
non-recourse promissory notes due in July 2001, with interest at eight and
one-half percent (8-1/2%) per annum, payable annually, and secured by the number
of shares exercised. The Company has received interest payments on such notes in
the amount of $160,600. At November 30, 2000, the outstanding balance on such
notes, including principal and accrued but unpaid interest, was $1,653,493.
2000 Stock Option Plan (the "2000 Plan")
On October 17, 2000 the Board of Directors approved the adoption of the
2000 Plan. The 2000 Plan was subsequently adopted by Shareholders at the
Company's Annual Meeting on November 20, 2000. At November 30, 2000, there were
150,000 incentive options outstanding under the 2000 Plan, which provides for
both incentive and nonqualified stock options and reserves 1,500,000 shares of
common stock for issuance in connection with option grants. Options outstanding
under the 2000 Plan vest over a seven-year period commencing December 31, 2000
and ending December 31, 2007 and are exercisable at $3.00 per share over a
period of ten years from the date of grant. At November 30, 2000 there were no
options currently exercisable.
2000 Restricted Stock Grant Plan
On September 1, 2000 the Board of Directors approved the adoption of the
Company's 2000 Restricted Stock Grant Plan (the "Stock Grant Plan"). The Stock
Grant Plan was subsequently adopted by the Shareholders at the Company's Annual
Meeting on November 20, 2000. The Stock Grant Plan provides for the issuance of
shares that are subject to both standard restrictions on the sale or transfer of
such shares (e.g., the standard seven year vesting schedule set forth in the
Stock Grant Plan) and/or restrictions that the Board may impose, such as
restrictions relating to length of service, corporate performance, or other
restrictions. As of November 30, 2000 no grants had been made under the Stock
Grant Plan and, therefore, no shares had vested under it. There are 700,000
shares of Common Stock reserved for issuance in connection with grants made
under the Stock Grant Plan.
7. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In December 1999, the Securities and Exchange Commission staff issued Staff
Accounting Bulletin ("SAB") No. 101, Revenue Recognition, which provides
guidance on the recognition and disclosure of revenues. Adoption of SAB No. 101
is required by the fourth quarter of fiscal 2001. The Company is in the process
of evaluating the effect adoption of SAB No. 101 will have on the Company's
consolidated financial position and results of operations.
In March 2000, the FASB issued Interpretation No. 44, "Accounting for Certain
Transactions Involving Stock Compensation." Among other issues, this
Interpretation clarifies (a) the definition of employee for purposes of applying
Opinion 25, (b) the criteria for determining whether a plan qualifies as a
noncompensatory plan, (c) the accounting consequence of various modifications to
the terms of a previously fixed stock option or award, and (d) the accounting
for an exchange of stock compensation awards in a business combination. The
Company has adopted this pronouncement.
<PAGE>
SANDATA, INC. AND SUBSIDIARIES
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
----------------------------------------------------------
RESULTS OF OPERATIONS
Revenue
Revenues were $4,660,750 and $9,232,166 for the three and six months ended
November 30, 2000 as compared to $4,570,554 and $8,773,023 for the three and six
months ended November 30, 1999, increasing $90,196 and $459,143, respectively.
Service fee revenues were $4,523,115 and $8,952,255 for the three and six months
ended November 30, 2000 as compared to $4,432,021 and $8,506,145 for the three
and six months ended November 30, 1999, increasing $91,094 and $446,110
respectively. The increases are primarily attributable to a change in the
pricing structure in the SHARP and SanTrax(R) products offset by some decreases
in sales this quarter in SandataNET(R).
Other income was $90,724 and $184,392 for the three and six months ended
November 30, 2000 as compared to $98,604 and $186,620 for the three and six
months ended November 30, 1999, decreasing $7,880 and $2,228 respectively. The
decrease is attributable to a reduction in income recognized on sale/leaseback
transactions.
Expenses Related to Services
Operating expenses were $2,732,176 and $5,349,576 for the three and six
months ended November 30, 2000 as compared to $2,876,549 and $5,470,287 for the
three and six months ended November 30, 1999, decreasing $144,373 and $120,711
respectively. The primary factors for the decreases in operating expenses were
reductions in staff, which resulted in reductions in payroll and related
expenses, and the expiration of certain equipment leases, which resulted in
reduced equipment rental payments.
Selling, general and administrative expenses were $1,111,536 and $2,290,066 for
the three and six months ended November 30, 2000, as compared to $970,951 and
$1,909,310 for the three and six months ended November 30, 1999, an increase of
$140,585 and $380,756 respectively. The increases were primarily due to
increases in consulting, payroll and commission expenses relative to expanded
efforts to increase sales in the SanTrax(R) and SandataNET(R) product lines, and
certain royalties payable to MCI Communications Corporation.
Depreciation and amortization expenses were $695,262 and $1,359,216 for the
three and six months ended November 30, 2000 as compared to $614,172 and
$1,186,875 for the three and six months ended November 30, 1999, an increase of
$81,090 and $172,341 respectively. The increases were primarily attributable to
fixed asset additions, including computer hardware and software capitalization
costs in connection with ongoing computer system upgrades.
Interest expenses were $77,725 and $128,990 for the three and six months ended
November 30, 2000 as compared to $63,932 and $112,052 for the three and six
months ended November 30, 1999 an increase of $13,793 and $16,938 respectively.
This increase was a result of incurring indebtedness under the promissory note
with Health Card and increased borrowings on the Company's revolving credit
agreement.
Income Tax Expenses
Income tax expenses were $36,221 and $87,219 for the three and six months ended
November 30, 2000 as compared to $18,230 and $38,745 for the three and six
months ended November 30, 1999, an increase of $17,991 and $48,474 respectively.
The increase is due to tax treatment of software development costs, depreciation
and amortization, and revenues from sale/leaseback transactions, offset by net
operating loss carry forwards.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash decreased at November 30, 2000 to $401,791 as compared to
$1,229,718 at May 31, 2000. The primary factors that contributed to this
decrease were the acquisition of fixed assets and an increase in other
receivables relating to the sale/leaseback transaction described in Note 4 to
the financial statements included herein. Had the proceeds from such transaction
been received prior to November 30, the decrease in cash would have been only
approximately $279,000. The increases in fixed assets and other receivables were
partially offset by decreases in both accounts receivable and accounts payable.
The Company's working capital decreased as of November 30, 2000 to $1,411,079,
as compared with $1,432,966 at May 31, 2000. Although working capital has
remained relatively stable, there was a slight decrease, due primarily to
decreases in cash, described above.
For the six months ended November 30, 2000, the Company has spent approximately
$1,944,000 in fixed asset additions, including (i) computer hardware and
software for upgrades and new installations and (ii) software capitalization
costs in connection with new product development. The Company expects the
current levels of capital expenditures to continue.
On July 14, 1998, the Company's Chairman of the Board, certain officers,
directors and, a former director and the spouse of an officer and an employee of
Sandsport Data Services, Inc. ("Sandsport"), a wholly owned subsidiary of the
Company, exercised their respective options and warrants to purchase an
aggregate of 921,334 shares of Common Stock under the 1998 Plan at exercise
prices ranging from $1.38 to $2.61 per share for an aggregate cost of
$1,608,861. Payment for such shares was made to the Company in the amount of
$921 representing the par value of the shares, and a portion in the form of
non-recourse promissory notes due in July 2001, with interest at eight and
one-half percent (8-1/2%) per annum, payable annually, and secured by the number
of shares exercised. The Company has received interest payments on such notes in
the amount of $160,600. At November 30, 2000, the outstanding balance on such
notes, including principal and accrued but unpaid interest, was $1,653,493.
On April 18, 1997, Sandsport entered into a revolving credit agreement (the
"Credit Agreement") with a bank (the "Bank") which allowed Sandsport to borrow
amounts up to $3,000,000. Interest accrued 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, at the Bank's
prime rate. The Credit Agreement required Sandsport to pay a commitment fee in
the amount of $30,000 and a fee equal to 1/4% per annum payable on the unused
average daily balance of amounts under the Credit Agreement. In addition, there
are other fees and charges imposed based upon Sandsport's failure to maintain
certain minimum balances. The Credit Agreement has been amended by the Bank to
permit Sandsport to borrow amounts up to $4,500,000 and to extend the
termination date to February 14, 2003. Interest accrues at the same rate as the
original Credit Agreement. The indebtedness under the Credit Agreement is
guaranteed by the Company and Sandsport's sister subsidiaries (the "Group"). All
of the Group's assets are pledged to the Bank as collateral for the amounts due
under the Credit Agreement, which pledge is secured by a first lien on all
equipment owned by members of the Group, as well as a collateral assignment of
$2,000,000 of life insurance payable on the life of the Company's Chairman of
the Board. The Group's guaranty to the Bank was modified to include all
indebtedness incurred by the Company under the amended 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. At May 31, 2000 the Group
failed to meet these net worth and financial ratios, and the Bank has granted
the Group a waiver. There can be no assurance that the Bank will continue to
grant waivers if the Group fails to meet the net worth and financial ratios in
the future. If such waivers are not granted any loans outstanding under the
Credit Agreement become immediately due and payble, which may have an adverse
effect on the Company's business, operations or financial condition. At November
30, 2000, the outstanding balance on the Credit Agreement with the Bank was
$2,350,000.
At November 30, 2000, the Company owed Health Card $500,000 pursuant to a
promissory note, dated May 31, 2000, made payable by the Company to the order of
Health Card in the original principal amount of $500,000 plus interest at the
rate of 9-1/2%, payable quarterly. The note, which was originally due and
payable on June 1, 2001, was subsequently amended to extend such due date to
September 1, 2001 and amended by Second Amendment to extend such due date to
March 31, 2002. At November 30, 2000 the Company owed interest of $3,956 to
Health Card, which was subsequently paid.
The Company believes the results of its continued operations, together with the
available credit line, should be adequate to fund presently foreseeable working
capital requirements.
<PAGE>
SANDATA, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS:
Reference is made to the information previously reported in "Part I - Item 3 -
Legal Proceedings" of the Company's Form 10-KSB for the fiscal year ended May
31, 2000 ; reference is also made to Note 5 of the Notes to Consolidated
Condensed Financial Statements in Part I hereof.
ITEM 2 - CHANGES IN SECURITIES:
During the fiscal quarter ended November 30, 2000, the Company granted
incentive stock options under the 1998 Stock Option Plan (the "Plan") to
purchase up to 62,878 shares of common stock for $3.00 per share. Such options
vest over a three year period commencing upon the completion of one year of
employment with the Company and terminate after five years. At November 30, 2000
an aggregate of 965,958 options had been granted under the Plan.
During the fiscal quarter ended November 30, 2000, the Company granted
incentive stock options under the 2000 Stock Option Plan (the "2000 Plan") to
purchase up to 150,000 shares of common stock for $3.00 per share. Such options
vest over a seven year period commencing December 31, 2000 and ending December
31, 2007, and are exercisable over a period of ten years from the date of grant.
At November 30, 2000 an aggregate of 150,000 options had been granted under the
2000 Plan.
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES:
None
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS:
A. The Registrant held its Annual Meeting of Shareholders on November 20,
2000.
B. Five (5) directors were elected at the Annual Meeting to serve until the
next Annual Meeting of Shareholders and until their respective successors are
duly elected and qualified, or until their earlier resignation or removal. The
names of these directors and votes cast in favor of their election and votes
withheld are as follows:
<PAGE>
Name Votes For Votes Withheld
Bert E. Brodsky 1,472,269 5,145
Hugh Freund 1,472,271 5,143
Gary Stoller 1,472,326 5,088
Paul J. Konigsberg 1,472,326 5,088
Ronald L. Fish 1,472,326 5,088
C. The adoption of the 2000 Stock Option Plan, reserving 1,500,000 shares
for issuance under such plan, was approved as set forth below:
Votes For Votes Against
1,465,277 12,137
D. The adoption of the 2000 Restricted Stock Grant Plan, reserving 700,000
shares for issuance under such plan, was approved as set forth below:
Votes For Votes Against
1,465,288 12,093
ITEM 5 - OTHER INFORMATION:
None
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K:
(a) Exhibits
3(A)(i) Certificate of Incorporation and Amendments thereto including
Certificate of Ownership and Merger (DE) and Agreement and Plan of Merger (1)
3(A)(ii) Certificate of Amendment to Certificate of Incorporation filed
July 27, 1993 (1)
3(A)(iii) Certificate of Amendment to Certificate of Incorporation filed
May 26, 1995 (1)
3(B) By-Laws (1)
4.1 Nassau County Industrial Development Agency Industrial Development
Revenue Bonds (1994 Brodsky Sibling Realty Inc. Project) dated June 1, 1994 (1)
4.2 Revolving Credit Agreement dated as of April 20, 1995 by and among
Sandsport Data Services, Inc. and Marine Midland Bank (1)
4.3 Nassau County Industrial Development Agency Industrial Development
Revenue Bonds (1994 Brodsky Sibling Realty Inc. Project) Assumption and
Amendment of Certain Agreements dated July 1, 1995 (1)
4.4 Loan Agreement dated August 11, 1995 between Sandata, Inc. and Long
Island Development Corporation (1)
4.5 "504" Note dated August 11, 1995 from the Long Island Development
Corporation to Sandata, Inc. (1)
4.6 Nassau County Industrial Development Agency Industrial Development
Revenue Bonds (1994 Brodsky Sibling Realty Inc. Project) Assumption and
Amendment of Certain Agreements dated November 1, 1996 (3)
4.7 Revolving Credit Agreement dated as of April 18, 1997 by and among
Sandsport Data Services, Inc. and Marine Midland Bank (3)
4.8 Second Amendment dated as of February 14, 2000 to Revolving Credit
Agreement by and among Sandsport Data Services, Inc. and HSBC Bank USA (6)
4.9 Letter, dated October 13, 2000, from HSBC Bank USA to Sandsport Data
Services, Inc. (7)
10.1 Software License Agreement and Distribution Agreement between Sandata
Home Health Systems, Inc. and Fastrack Healthcare Systems, Inc. dated as of June
15, 1995 (1)
10.2 Employees' Incentive Stock Option Plan (1)
10.3 First Amendment to Incentive Stock Option Plan dated April 4, 1989 (1)
10.4 Second Amendment to Incentive Stock Option Plan dated December 18,
1990 (1)
10.5 1986 Non-statutory Stock Option Plan (1)
10.6 Amendment to 1986 Non-statutory Stock Option Plan dated April 4, 1989
(1)
10.7 1995 Stock Option Plan (1)
10.8 1998 Stock Option Plan (5)
10.9 2000 Stock Option Plan
10.10 2000 Restricted Stock Grant Plan
10.11 Common Stock Purchase Warrants as issued to Bert E. Brodsky (1)
10.12 Deferred Compensation Plan dated May 1, 1992 between the Registrant
and Bert E. Brodsky (1)
10.13 Form of agreement between Sandsport Data Services, Inc. and vendor
agency (2)
10.14 Form of agreement between Sandsport Data Services, Inc. and vendor
agency (2)
10.15 Form of Subscription Agreement dated December 23, 1996 (2)
10.16 Form of Subscription Agreement dated September 12, 1996 (2)
10.17 Form of Common Stock Purchase Warrant ($5.00 Exercise Price) (2)
10.18 Form of Common Stock Purchase Warrant ($7.00 Exercise Price) (2)
10.19 Form of Redeemable Common Stock Purchase Warrant (2)
10.20 Employment Agreement dated February 1, 1997 between the Registrant
and Bert E. Brodsky (3)
10.21 Form of Pledge Agreement (4)
10.22 Form of Non-Negotiable Promissory Note (4)
10.23 Stock Option Agreement dated December 10, 1998 between the Registrant
and Bert E. Brodsky (6)
10.24 Stock Option Agreement dated February 3, 2000 between the Registrant
and Bert E. Brodsky (6)
10.25 Stock Option Agreement dated April 15, 2000 between the Registrant
and Stephen Davies (6)
10.26 Promissory Note dated May 31, 2000 between National Medical Health
Card Systems, Inc. and the Registrant (6)
10.27 Amended Promissory Note dated May 31, 2000 between National Medical
Health Card Systems, Inc. and the Registrant (7)
10.28 Second Amendment to Promissory Note dated May 31, 2000 between
National Medical Health Card Systems, Inc. and the Registrant
10.29 Employment Agreement dated October 17, 2000 between the Registrant
and Stephen Davies
10.30 Stock Option Agreement dated October 17, 2000 between the Registrant
and Stephen Davies
16 Letter re Change in Certifying Accountant (1)
27 Financial Data Schedule (for electronic filing)
---------------------------
(1) The Company hereby incorporates the footnoted Exhibit by reference in
accordance with Rule 12b-32, as such Exhibit was originally filed as an
Exhibit to the Company's Report on Form 10-KSB for the fiscal year
ended May 31, 1995.
(2) The Company hereby incorporates the footnoted Exhibit by reference in
accordance with Rule 12b-32, as such Exhibit was originally filed as an
Exhibit to Amendment No. 1 to Form S-3 Registration Statement as filed
with the Securities and Exchange Commission on May 27, 1997.
(3) The Company hereby incorporates the footnoted Exhibit by reference in
accordance with Rule 12b-32, as such Exhibit was originally filed as an
Exhibit to the Company's Report on Form 10-KSB for the fiscal year
ended May 31, 1997.
(4) The Company hereby incorporates the footnoted Exhibit by reference in
accordance with Rule 12b-32, as such Exhibit was originally filed as an
Exhibit to the Company's Report on Form 10-KSB for the fiscal year
ended May 31, 1998.
(5) The Company hereby incorporates the footnoted Exhibit by reference in
accordance with Rule 12b-32, as such Exhibit was originally filed as an
Exhibit to the Company's Report on Form 10-KSB for the fiscal year
ended May 31, 1999.
(6) The Company hereby incorporates the footnoted Exhibit by reference in
accordance with Rule 12b-32, as such Exhibit was originally filed as an
Exhibit to the Company's Report on Form 10-KSB for the fiscal year
ended May 31, 2000.
(7) The Company hereby incorporates the footnoted Exhibit by reference in
accordance with Rule 12b-32, as such Exhibit was originally filed as an
Exhibit to the Company's Report on Form 10-QSB for the period ended
August 31, 2000.
(b) Reports on Form 8-K
There were no Current Reports on Form 8-K filed by the Company during the
quarter ended November 30, 2000.
<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: January 12, 2001 By: /s/ Bert E. Brodsky
Bert E. Brodsky
Chairman of the Board
Principal Executive Officer and
Principal Financial and Accounting Officer
