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, 1999
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 15,
1999, was 4,461,121 shares.
<PAGE>
SAZTEC INTERNATIONAL, INC.
FORM 10-QSB
QUARTER ENDED SEPTEMBER 30, 1999
CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Statements of Operations -
Three months ended September 30, 1999 and 1998 3
Consolidated Balance Sheets - September 30, 1999 and June 30, 1999 4
Consolidated Statement of Changes in Stockholders' Equity -
September 30, 1999 5
Consolidated Statements of Cash Flows -
Three months ended September 30, 1999 and 1998 6 - 7
Notes to Consolidated Financial Statements - September 30, 1999 and 1998 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
</TABLE>
2
<PAGE>
SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(Unaudited)
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
REVENUE $ 2,181,781 $ 1,766,685
Cost of services 1,635,683 1,503,209
----------- -----------
GROSS PROFIT 546,098 263,476
Selling and administrative expense 579,508 509,203
----------- -----------
LOSS FROM OPERATIONS (33,410) (245,727)
Interest expense 10,864 8,156
----------- -----------
LOSS BEFORE PROVISION FOR INCOME TAXES (44,274) (253,883)
Income tax benefit -- (76,601)
----------- -----------
NET LOSS APPLICABLE TO COMMON STOCKHOLDERS $ (44,274) $ (177,282)
=========== ===========
(LOSS) PER SHARE OF COMMON STOCK:
Basic and diluted net loss applicable to common
stockholders $ (.01) $ (.04)
=========== ===========
Weighted average number of shares 4,461,121 4,461,121
=========== ===========
</TABLE>
See accompanying notes.
3
<PAGE>
SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1999 AND JUNE 30, 1999
<TABLE>
<CAPTION>
SEPTEMBER 30, 1999 JUNE 30, 1999
------------------ -------------
ASSETS (Unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 214,985 $ 338,088
Restricted cash 26,210 26,210
Accounts receivable, less allowance for doubtful accounts of $39,904
at September 30 and $28,155 at June 30 1,716,218 1,612,573
Work in process 202,851 118,720
Prepaid expenses and other current assets 122,079 112,601
------------ ------------
TOTAL CURRENT ASSETS 2,282,343 2,208,192
PROPERTY AND EQUIPMENT, NET 388,564 422,076
OTHER ASSETS
Goodwill and other intangible assets, less accumulated amortization of
$90,872 at September 30 and $87,842 at June 30 134,490 137,520
Deposits and other assets 61,156 63,626
------------ ------------
TOTAL ASSETS $ 2,866,553 $ 2,831,414
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Bank note payable $ 328,291 $ 0
Current portion of long-term debt and capital lease obligations 169,030 172,375
Accounts payable 674,290 620,366
Accrued liabilities 528,015 728,230
Customer deposits 298,629 385,461
------------ ------------
TOTAL CURRENT LIABILITIES 1,998,255 1,906,432
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS 85,346 104,039
ACCRUED EXPENSES, NON-CURRENT 4,389 7,355
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 (11,554,160) (11,509,886)
Cumulative translation adjustment (112,586) (121,835)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 778,563 813,588
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,866,553 $ 2,831,414
============ ============
</TABLE>
See accompanying notes.
4
<PAGE>
SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
COMMON STOCK
-------------------------- CUMULATIVE
NUMBER CONTRIBUTED ACCUMULATED TRANSLATION
OF SHARES AMOUNT CAPITAL DEFICIT ADJUSTMENT
--------- ------------ -------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Balance at June 30, 1999 4,461,121 $ 12,430,811 $ 14,498 $(11,509,886) $ (121,835)
Net loss (44,274)
Translation adjustment 9,249
---------------------------------------------------------------------------------------
Balance at September 30, 1999 4,461,121 $ 12,430,811 $ 14,498 $(11,554,160) $ (112,586)
=======================================================================================
</TABLE>
See accompanying notes.
5
<PAGE>
SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(Unaudited)
<TABLE>
<CAPTION>
INCREASE (DECREASE) IN CASH 1999 1998
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (44,274) $ (177,282)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization 59,117 53,398
Provision for (recovery of) bad debts 11,749 (3,555)
Changes in assets and liabilities:
Accounts receivable (115,394) 316,366
Work in process (84,131) 57,257
Prepaid expenses and other current assets (9,478) (7,391)
Deposits and other assets 332 (19,458)
Accounts payable 53,924 (13,364)
Accrued liabilities (203,181) (174,445)
Customer deposits and non-current accrued expenses (86,832) (85,074)
------------------------------
NET CASH USED IN OPERATING ACTIVITIES (418,168) (53,548)
------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (22,575) (23,317)
Payments received on notes receivable 2,138 5,567
Decrease in restricted cash 0 141,358
------------------------------
NET CASH PROVIDED BY (USED BY) INVESTING ACTIVITIES (20,437) 123,608
------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on debt and capital lease Obligations (22,038) (23,663)
Borrowings on revolving credit line 1,751,487 785,995
Payments on revolving credit line (1,423,195) (815,677)
Proceeds from common stock issue
------------------------------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES 306,254 (53,345)
------------------------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 9,248 6,151
------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (123,103) 22,866
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 338,088 513,192
------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 214,985 $ 536,058
==============================
</TABLE>
See accompanying notes.
6
<PAGE>
SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(Unaudited)
<TABLE>
<CAPTION>
1999 1999
------- -------
<S> <C> <C>
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Financed purchases of property and equipment through notes payable $ 0 $ 3,310
=====================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $14,957 $ 7,948
=====================
Income taxes $ 0 $ 4,483
=====================
</TABLE>
See accompanying notes.
7
<PAGE>
SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 AND 1998
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. 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.
<TABLE>
<CAPTION>
QUARTER ENDED SEPTEMBER 30,
1999 1998
---- ----
<S> <C> <C>
Revenue
United States $1,704,516 $1,207,910
United Kingdom/Western Europe 477,265 558,775
---------------------------------------------------
$2,181,781 $1,766,685
===================================================
Income (loss) before income taxes
United States $57,204 $16,441
United Kingdom/Western Europe (101,478) (270,324)
---------------------------------------------------
$ (44,274) $ (253,883)
===================================================
Depreciation
United States $36,415 $30,274
United Kingdom/Western Europe 19,672 20,094
Amortization-U.S. only 3,030 3,030
---------------------------------------------------
$59,117 $53,398
===================================================
Identifiable Assets SEPTEMBER 30, 1999 SEPTEMBER 30, 1998
------------------ ------------------
United States $1,959,653 $1,627,744
United Kingdom 906,900 1,211,934
---------------------------------------------------
$2,866,553 $2,839,678
===================================================
</TABLE>
8
<PAGE>
NOTE 3. LOSS PER SHARE
Loss per common share is computed by dividing net loss applicable to common
stockholders by the weighted average number of shares of common stock
outstanding during each period which totaled 4,461,121 for the quarters ended
September 30, 1999, and 1998, respectively. The inclusion of common stock
equivalents would have been antidilutive and were not included for the quarter
ended September 30, 1998.
Effective for periods ending after December 15, 1997, the Financial Accounting
Standards Board has issued Statement of Financial Accounting Standards No. 128,
EARNINGS PER SHARE. The standard amends the computation of earnings per share to
provide for two measures, Basic Earnings Per Share and Dilutive Earnings Per
Share. Under this standard, the Company would have reported the following for
the quarters ended December 31:
BASIC EPS DILUTIVE EPS
1999 $(.01) $(.009)
1998 $(.04) $ (.04)
9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Revenue for the three months ended September 30, 1999 increased 23.5% to
$2,181,781 from $1,766,685 for the quarter ended September 30, 1998. U.S.
revenue for the quarter increased 41.1% and European revenue decreased 14.6%
compared to the prior year first quarter. The sales mix in the United States
continues to grow with the traditional data conversion projects and scanning
projects increasing consistently; revenue from Europe was down due to poor
delivery performance of a major subcontractor. Revenue from foreign sources
comprised 21.9% of consolidated revenues for the first three months of the
current year as compared with 31.6% in the prior year.
Loss before taxes of $(44,274) was reduced $209,609 as compared with $(253,883)
in the prior year. U.S. Income before taxes increased $40,763 to $57,204, while
Europe's loss before taxes was $168,846 lower than the previous year. Gross
profit for the quarter of $546,098 was $282,262 higher and gross margin of 25%
was 10% higher than results from the first quarter of the prior year, with the
company continuing to lower it's cost in Europe and move the overall business
into higher value added services.
Selling and administrative (S&A) expenses for the current year quarter increased
$70,305 to $579,508 from $509,203 for the same period in the prior year. As a
percentage of sales, S&A decreased to 26.6% from the 28.8% ratio of the prior
year period.
Cash for the period decreased $123,103, and borrowing on the line of credit
increased by $382,292. This is a result of increased sales revenue which
increased accounts receivables by $115,394, the pay down of accrued liabilities
of $203,181 and an increase in work in process inventory of $84,131, as a result
of the work being performed in Europe that is ahead of schedule. All work in
process inventory is for existing contracts and should be delivered in the next
3 months.
The Company has analyzed its exposure to potential data processing "Year 2000"
problems and formulated a plan to ensure its systems were in compliance by
December 31, 1999. This has been 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 cost is under $100,000, and is a subset
of ongoing systems upgrades to increase production.
CAPITAL RESOURCES AND LIQUIDITY
At September 30, 1999 the Company had borrowed $383,292 under its revolving
credit agreement which allows for borrowings of $500,000. The revolving credit
agreement provides for interest at the lender's prime rate plus 2.5% (10.75 % at
September 30, 1999). The credit agreement is secured by substantially all
domestic assets of the Company, including the stock of subsidiaries. The
revolving credit agreement is intended to be a continuing agreement and shall
remain in full effect for an initial term of one year and for any renewal term
of one year unless terminated by either party within 30 days prior to the end of
any such period. The initial term of the revolving credit agreement is from June
22, 1999 to June 21, 2000. Maximum borrowing under the agreement is limited to
80% of outstanding domestic accounts receivable less than ninety days old, up to
$500,000. The Company is in compliance with covenants contained in the current
agreement and was in compliance at all times with the covenants contained in the
agreement during the period ending September 30, 1999.
10
<PAGE>
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
<PAGE>
SAZTEC INTERNATIONAL, INC.
SEPTEMBER 30, 1999 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
- ------- ----------------------
27 Financial Data Schedule
(B) REPORTS ON FORM 8-K:
None.
12
<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.
Dated: November 15, 1999
SAZTEC INTERNATIONAL, INC.
(Registrant)
By: /S/ PAUL F. PARSHLEY
--------------------
Paul F. Parshley
CFO
13
<PAGE>
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-1-1999
<PERIOD-END> SEP-30-1999
<CASH> 214,985
<SECURITIES> 0
<RECEIVABLES> 1,756,122
<ALLOWANCES> 39,904
<INVENTORY> 202,851
<CURRENT-ASSETS> 2,282,343
<PP&E> 3,721,991
<DEPRECIATION> 3,333,427
<TOTAL-ASSETS> 2,866,553
<CURRENT-LIABILITIES> 1,998,255
<BONDS> 85,346
0
0
<COMMON> 12,430,811
<OTHER-SE> (98,088)
<TOTAL-LIABILITY-AND-EQUITY> 2,866,553
<SALES> 0
<TOTAL-REVENUES> 2,181,781
<CGS> 0
<TOTAL-COSTS> 1,635,683
<OTHER-EXPENSES> 579,508
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,864
<INCOME-PRETAX> (44,274)
<INCOME-TAX> 0
<INCOME-CONTINUING> (44,274)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (44,274)
<EPS-BASIC> (.01)
<EPS-DILUTED> (.009)
</TABLE>
