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 MARCH 31, 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 May 13, 1999,
was 4,461,121 shares.
<PAGE>
<TABLE>
<CAPTION>
SAZTEC INTERNATIONAL, INC.
FORM 10-QSB/A
FOR THE
QUARTER ENDED MARCH 31, 1999
PAGE
----
<S> <C> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Statements of Operations --
Three months ended March 31, 1999 and 1998 3
Consolidated Statements of Operations -- 4
Nine months ended March 31, 1999 and 1998
Consolidated Balance Sheets -- March 31, 1999 and June 30, 1998 5
Consolidated Statement of Changes in Stockholders' Equity -- 6
March 31, 1999
Consolidated Statements of Cash Flows -- 7 - 8
Nine months ended March 31, 1999 and 1998
Notes to Consolidated Financial Statements -- March 31, 1999 9 - 10
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 11 - 12
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 2. Changes in Securities 13
Item 3. Defaults Upon Senior Securities Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders Not Applicable
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
</TABLE>
2
<PAGE>
SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(Unaudited)
1999 1998
----------- -----------
REVENUES $ 2,511,398 $ 2,271,910
Cost of services 1,870,788 1,716,596
----------- -----------
GROSS PROFIT 640,610 555,314
Selling, general & administrative expense 605,977 477,079
----------- -----------
INCOME FROM OPERATIONS 34,633 78,235
Interest expense 18,326 11,281
----------- -----------
INCOME BEFORE PROVISION FOR INCOME TAXES 16,307 66,954
Provision (benefit) for income taxes (27) 14,368
----------- -----------
NET INCOME $ 16,334 $ 52,586
=========== ===========
INCOME PER SHARE OF COMMON STOCK:
Basic and diluted net income applicable to
common stockholders $ .004 $ .01
=========== ===========
Weighted average number of shares 4,461,121 4,461,129
=========== ===========
See accompanying notes.
3
<PAGE>
SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED MARCH 31, 1999 AND 1998
(Unaudited)
1999 1998
----------- -----------
REVENUES $ 6,113,113 $ 5,850,130
Cost of services 4,893,300 4,616,629
----------- -----------
GROSS PROFIT 1,219,813 1,233,501
Selling and administrative expense 1,682,332 1,483,552
----------- -----------
LOSS FROM OPERATIONS (462,519) (250,051)
Interest expense (income) (1,437) 35,541
----------- -----------
LOSS BEFORE PROVISION FOR INCOME TAXES (461,082) (285,592)
Provision (benefit) for income taxes (76,225) 14,368
----------- -----------
NET LOSS APPLICABLE TO COMMON STOCKHOLDERS $ (384,857) $ (299,960)
=========== ===========
LOSS PER SHARE OF COMMON STOCK:
Basic and diluted net loss applicable to common $ (.09) $ (.07)
stockholders
=========== ===========
Weighted average number of shares 4,461,121 4,089,022
=========== ===========
See accompanying notes.
4
<PAGE>
<TABLE>
<CAPTION>
SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1999 AND JUNE 30, 1998
ASSETS
MARCH 31, JUNE 30,
1999 1998
------------ ------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 409,858 $ 513,192
Restricted cash 26,374 172,452
Accounts receivable, less allowance for doubtful accounts of $11,691 at 1,570,365 1,658,274
March 31 and $40,494 at June 30, 1998
Costs and estimated earnings in excess of billings 107,108
Work in process 128,161 176,539
Prepaid expenses and other current assets 107,114 92,833
Note receivable 23,902
------------ ------------
TOTAL CURRENT ASSETS 2,372,882 2,613,290
PROPERTY AND EQUIPMENT, NET 403,054 443,083
OTHER ASSETS
Goodwill and other intangible assets, less accumulated amortization of 140,550 149,640
$84,812 at March 31 and $75,722 at June 30, 1998
Deposits and other assets 74,711 111,856
------------ ------------
TOTAL ASSETS $ 2,991,197 $ 3,317,869
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $ 37,380 $ 29,682
Current portion long-term debt and capital lease obligations 202,672 182,599
Accounts payable 631,577 472,132
Accrued liabilities 617,399 699,455
Customer deposits 641,752 646,544
------------ ------------
TOTAL CURRENT LIABILITIES 2,130,780 2,030,412
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS LESS CURRENT PORTION 121,601 146,675
ACCRUED EXPENSE 10,737 22,362
STOCKHOLDERS' EQUITY
Preferred stock-no par value; 1,000,000 shares authorized; no shares
issued
Common stock-no par value; 10,000,000 shares authorized; 4,461,121 12,430,811 12,430,811
shares issued at March 31,1999 and 4,461,121 shares issued at
June 30, 1998
Contributed capital 14,498 14,498
Accumulated deficit (11,598,067) (11,213,217)
Cumulative translation adjustment (119,163) (113,672)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 728,079 1,118,420
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,991,197 $ 3,317,869
============ ============
</TABLE>
See accompanying notes.
5
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<TABLE>
<CAPTION>
SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
MARCH 31, 1999
Common Stock Common Stock
Subscribed
CUMULATIVE
NUMBER OF NUMBER OF CONTRIBUTED ACCUMULATED TRANSLATION
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT ADJUSTMENT
------------- ---------- ----------- ------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
June 30, 1998 4,461,129 $12,430,811 $14,498 $(11,213,217) $(113,672)
Net loss (384,850)
Translation
adjustment (5,491)
------------- ---------- ----------- ------- --------- ----------- -----------
4,461,129 $12,430,811 $14,498 $(11,598,067) $(119,163)
</TABLE>
See accompanying notes.
6
<PAGE>
<TABLE>
<CAPTION>
SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED MARCH 31, 1999 AND 1998
(Unaudited)
1999 1998
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (384,857) $ (299,960)
Adjustments to reconcile net loss to net cash (used
in) provided by operating activities:
Depreciation and amortization 136,660 179,366
Provision for bad debts (28,803) 12,062
Other 17
Changes in assets and liabilities:
Accounts receivable 9,604 (681,434)
Work in process 48,378 (165,389)
Prepaid expenses and other current assets (38,183) (17,657)
Deposits and other assets 37,145 59,316
Accounts payable 159,445 (116,871)
Accrued liabilities (82,056) 268,829
Customer deposits and non-current accrued expenses (16,410) 327,067
----------- -----------
NET CASH USED IN OPERATING ACTIVITIES (159,077) (434,654)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (87,541) (226,714)
Payments received on notes receivable 219 11,937
Decrease in restricted cash 146,078 142,305
----------- -----------
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES 58,756 (72,470)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on notes payable 2,046,332 2,098,554
Payments on notes payable (2,038,634) (2,193,958)
Principal payments on debt and capital lease (5,001) (101,410)
obligations
Proceeds from issuance of common stock, net of
issuance costs 860,000
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 2,697 663,186
----------- -----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (5,491) 7,887
----------- -----------
NET INCREASE (DECREASE) IN CASH (103,334) 163,949
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD 513,194 386,785
----------- -----------
CASH AND EQUIVALENTS AT END OF PERIOD $ 409,858 $ 550,734
=========== ===========
</TABLE>
See accompanying notes.
7
<PAGE>
SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED MARCH 31, 1999 AND 1998
(Unaudited)
1999 1998
-------- -------
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND
FINANCING ACTIVITIES:
Purchase of equipment through issuance of notes
payable and capital lease obligations $13,624
=======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 23,134 $24,221
======== =======
Income taxes $ 5,283 $14,368
======== =======
See accompanying notes.
8
<PAGE>
SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 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
Revenues, income (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.
9 MONTHS ENDED MARCH 31,
1999 1998
----------- -----------
Revenue
United States $ 4,055,439 $ 2,969,056
United Kingdom/Western Europe 2,057,674 2,881,074
----------- -----------
$ 6,113,113 $ 5,850,130
=========== ===========
Income (loss) before income taxes
United States $ 34,766 $ (112,933)
United Kingdom/Western Europe (495,841) (172,659)
----------- -----------
$ (461,075) $ (285,592)
=========== ===========
Depreciation
United States $ 96,152 $ 71,869
United Kingdom/Western Europe 64,403 98,407
Amortization-U.S. only 9,090 9,090
----------- -----------
$ 169,645 $ 179,366
=========== ===========
MARCH 31 1999 JUNE 30, 1998
------------- -------------
Identifiable Assets
United States $ 1,682,954 $ 1,851,102
United Kingdom 1,308,243 1,466,767
----------- -----------
$ 2,991,197 $ 3,317,869
=========== ===========
9
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NOTE 3. EARNINGS (LOSS) PER SHARE
Earnings (loss) per common share is computed by dividing net income (loss)
applicable to common stockholders by the weighted average number of shares of
common stock outstanding during each year which totaled 4,461,121 for the
quarters ended March 31, 1999, and 1998. The inclusion of common stock
equivalents would have been antidilutive and were not included for the quarter
ended March 31, 1999.
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 March 31:
BASIC EARNINGS PER SHARE DILUTIVE EARNINGS PER SHARE
1999 $.004 $.004
1998 $.01 $.01
10
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Revenue for the nine months ended March 31, 1999, increased to $6,113,113 from
$5,850,130 for the nine months ended March 31, 1998, an increase of $262,983 or
(4.5%). Revenue for the Quarter ended March 31, 1999 at $2,511,398 was up
$239,488 from the $2,271,910 earned for the quarter ended March 31, 1998.
U.S. revenue for the nine months ended March 31, 1999 of $4,055,439 increased
$1,086,383 compared with the nine-month period the prior year of $2,969,056.
U.S. revenue for the third quarter of the current year $1,642,515 was $474,247
higher compared to $1,168,268 for the quarter ended March 31, 1998. European
revenue for the nine months ended March 31, 1999 of $2,057,694 decreased
$823,400 compared with the nine-month period in the prior year of $2,881,074.
European revenue for the third quarter of the current year at $868,883 was
$234,759 less compared to $1,103,642 for the quarter ended March 31, 1998.
U.S. revenue continues to increase as a result of growth in scanning services
revenue and the improved growth in data entry conversion revenue. European
revenue is down compared to last year as a result in the decline in library
retrospective conversion project revenue. As a result of a new contract with the
University Cattolica del Sacro Cuore of Milan received in November 1998, and
increased activity with existing customers, third quarter revenue was up 46%
over the average of the previous two quarters.
Gross profit for the nine months ended March 31, 1999 decreased $13,688 from the
prior year period to 20% of sales, compared to 21% of sales for the same period
of 1998. Gross profit for the quarter ended March 31, 1999 was 25.5% of sales
compared to 24.4% in the same period of 1998. Gross profit for U.S. operations
increased $339,121 for the nine months ended March 31, 1999 to 23.7% of sales
compared to 21% for the same period last year. European gross profit decreased
$352,809 for the nine month period ended March 31, 1999 to 12.5% of sales
compared to 21.2% for the same period last year. The operation in Europe
increased its volume to cover previous under utilization, achieving a gross
margin in the three months ending March 31, 1999, of 21.3%.
Selling and administrative expenses (S&A) for the nine month period increased
$198,780 to $1,682,332 (27.5% of sales) from $1,483,552 (25.4% of sales) for the
same period in the prior year. For the quarter ended March 31, 1999 S&A
increased to $605,977 (24.1% of sales) from $477,079 (21% of sales) in the prior
year quarter.
Loss from operations was $462,519 for the nine months ended March 31, 1999
compared to $250,051 for the nine months ended March 31, 1998. Profit from
operations for the three months ended March 31, 1999 was $34,633 compared to
$78,235 for the same period the prior year.
Cash Flow decreased $103,345 for the nine months ended March 31, 1999 compared
to an increase of $163,949 for the same period the prior year. Net cash from
operating activities decreased $151,740; net cash from investing activities
increased $111,191 mainly as a result in a decrease in restricted cash of
$146,078. Cash flow from financing activities of ($49,198) and effect of
exchange rate changes of ($13,598) make up the balance of the change.
The Company continues to analyze its exposure to potential data processing "Year
2000" problems and has formulated a plan to ensure its accounting systems are in
compliance by June 30, 1999, and all other systems are in compliance by December
31, 1999. This will be effected through replacement of PC-level hardware and an
upgrade to a third-party software package which has been certified Year 2000
compliant. Total planned cost through the balance of the current year is
expected to be less than $50,000 beyond continuing systems upgrades to increase
production performance. The Company is also in the process of compiling
certifications of Y2K compliance from its vendors. No external consulting
resource requirements are expected. The company believes that all actions and
implementation of new software should mitigate the effect of the Year 2000
issue. However, if
11
<PAGE>
such modifications are not made or completed timely the Year 2000 issue could
have an effect on operations and financial condition of the company.
The Company's operations could be affected by the Euro. A material amount of
revenue generated by the sales and production facilities in the United Kingdom
is derived from customers located in countries adopting the common currency. The
Company will continue to be subject to exchange rate risk as a result of the
pound sterling's fluctuations against the new currency and may encounter pricing
pressure from competitors located in countries participating in its adoption.
CAPITAL RESOURCES AND LIQUIDITY
The Company has signed an extension to its revolving credit agreement with UMB
Bank, Kansas City, Missouri. The agreement is secured by accounts receivable,
work in process, property and equipment and other assets, bearing interest at
the lender's prime rate plus 4.0% (12.0% and 12.5% at March 31, 1999 and 1998,
respectively). Available borrowings are 70% of domestic trade receivables less
than 90 days old with an aggregate maximum borrowing level that declines $15,000
per month from $90,000 at March 1, 1999 until maturity on October 1, 1999.
Aggregate borrowings were $37,380 on March 31, 1999 and $179,108 on March 31,
1998. The company was in compliance with the covenants contained in the
agreement throughout the nine-month period ended March 31, 1999.
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.
12
<PAGE>
SAZTEC INTERNATIONAL, INC.
MARCH 31, 1999 FORM 10-QSB/A
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS OF FORM 8-K
(a) EXHIBITS
The following Exhibit is filed by attachment to this Form 10-QSB/A:
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT PAGE
- ------ ---------------------- ----
27 Financial Data Schedule 13
(b) REPORTS ON FORM 8-K:
None.
13
<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: May 13, 1999
SAZTEC INTERNATIONAL, INC.
--------------------------
(Registrant)
By: /s/ CHRISTOPHER PARKER
----------------------
Christopher Parker
CEO
14
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
- ------- -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-END> MAR-31-1999
<CASH> 409,858
<SECURITIES> 0
<RECEIVABLES> 1,570,365
<ALLOWANCES> 11,691
<INVENTORY> 128,161
<CURRENT-ASSETS> 2,372,882
<PP&E> 403,054
<DEPRECIATION> 169,645
<TOTAL-ASSETS> 2,991,197
<CURRENT-LIABILITIES> 2,130,780
<BONDS> 121,601
0
0
<COMMON> 12,430,811
<OTHER-SE> (11,702,732)
<TOTAL-LIABILITY-AND-EQUITY> 2,991,197
<SALES> 0
<TOTAL-REVENUES> 6,113,113
<CGS> 0
<TOTAL-COSTS> 4,893,300
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (1,444)
<INCOME-PRETAX> (461,082)
<INCOME-TAX> (76,225)
<INCOME-CONTINUING> (384,857)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (384,850)
<EPS-PRIMARY> (.09)
<EPS-DILUTED> (.09)
</TABLE>
