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, 2000
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)
900 Middlesex Tpk., 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 10,
2000, was 5,549,928 shares.
<PAGE>
SAZTEC INTERNATIONAL, INC.
FORM 10-QSB
QUARTER ENDED SEPTEMBER 30, 2000
CONTENTS
Page
----
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Statements of Operations -
Three months ended September 30, 2000 and 1999 3
Consolidated Balance Sheets - September 30, 2000
and June 30, 2000 4
Consolidated Statement of Changes in Stockholders'
Equity - September 30, 2000 5
Consolidated Statements of Cash Flows -
Three months ended September 30, 2000 and 1999 6 - 7
Notes to Consolidated Financial Statements -
September 30, 2000 and 1999 8 - 9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10 - 11
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 2. Changes in Securities 12
Item 3. Defaults Upon Senior Securities 12
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
2
<PAGE>
SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(Unaudited)
2000 1999
----------- -----------
Revenues $ 1,851,132 $ 2,181,781
Cost of services 1,574,106 1,635,683
----------- -----------
Gross profit 277,026 546,098
Selling and administrative expense 451,997 579,508
----------- -----------
Loss from operations (174,971) (33,410)
Interest expense 36,571 10,864
Loss before provision for income taxes (211,542) (44,274)
Income taxes -- --
----------- -----------
Net loss applicable to common stockholders $ (211,542) $ (44,274)
=========== ===========
(Loss) per share of common stock:
Basic and diluted net loss applicable to common
stockholders $ (.047) $ (.01)
=========== ===========
Weighted average number of shares 4,515,747 4,461,121
=========== ===========
See accompanying notes.
3
<PAGE>
SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2000 AND JUNE 30, 2000
<TABLE>
<CAPTION>
ASSETS
September 30, June 30,
2000 2000
------------ ------------
Unaudited Audited
------------ ------------
<S> <C> <C>
Current assets
Cash and cash equivalents $ 213,963 $ 484,294
Restricted cash 27,230 27,230
Accounts receivable, less allowance for doubtful
accounts of $42,014 at September 30, 2000
and $42,911 at June 30, 2000 1,298,644 1,442,136
Work in process 40,206 6,909
Prepaid expenses and other current assets 158,597 119,765
-----------------------------
Total current assets 1,738,640 2,080,334
Property and equipment, net 220,278 306,440
Other assets
Goodwill and other intangible assets, less
accumulated amortization of $102,992 at
September 30, 2000 and $99,962 at June 30, 2000 122,370 125,400
Deposits and other assets 89,738 46,515
-----------------------------
Total assets $ 2,171,026 $ 2,558,689
=============================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Line of Credit $ 541,728 $ 545,998
Convertible note payable 500,000 500,000
Current portion of long-term debt and capital lease
obligations 50,572 89,102
Accounts payable 1,096,596 1,065,817
Accrued liabilities 363,761 517,990
Customer deposits 65,122 75,653
-----------------------------
Total current liabilities 2,617,779 2,794,560
Long-term debt and capital lease obligations less
current portion 42,134 57,186
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; 4,469,371 and 4,515,747 shares
issued and outstanding at June 30, 2000
and September 30, 2000 12,450,675 12,435,975
Contributed capital 14,498 14,498
Accumulated deficit (12,850,829) (12,639,287)
Other comprehensive income (103,231) (104,243)
-----------------------------
Total stockholders' equity (488,887) (293,057)
-----------------------------
Total liabilities and stockholders' equity $ 2,171,026 $ 2,558,689
=============================
</TABLE>
See accompanying notes.
4
<PAGE>
SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
SEPTEMBER 30, 2000
<TABLE>
<CAPTION>
Common Stock
----------------------------- Cumulative
Number of Contributed Accumulated Translation
Shares Amount Capital Deficit Adjustment
------------ ------------ ------------ ------------- ------------
<S> <C> <C> <C> <C> <C>
Balance at June 30, 2000 4,469,371 $ 12,435,975 $ 14,498 $(12,639,287) $ (104,243)
Stock issued pursuant to
Employee options and grants 46,376 $ 14,700
Net loss (211,542)
Translation adjustment 1,012
------------------------------------------------------------------------------
Balance at September 30, 2000 4,515,747 $ 12,450,675 $ 14,498 $(12,850,829) $ (103,231)
==============================================================================
</TABLE>
See accompanying notes.
5
<PAGE>
SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(Unaudited)
<TABLE>
<CAPTION>
Increase (decrease) in cash 2000 1999
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (211,542) $ (44,274)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization 3,071 59,117
Provision for (recovery of) bad debts (897) 11,749
Changes in assets and liabilities:
Accounts receivable 144,388 (115,394)
Work in process (33,297) (84,131)
Prepaid expenses and other current assets (43,123) (9,478)
Deposits and other assets (43,223) 332
Accounts payable 30,779 53,924
Accrued liabilities (154,230) (203,181)
Customer deposits and non-current accrued expenses (10,531) (86,832)
---------------------------
Net cash used in operating activities (318,606) (418,168)
---------------------------
Cash flows from investing activities:
Disposals (additions) to property and equipment net 86,121 (22,575)
Payments received on notes receivable 4,291 2,138
---------------------------
Net cash provided by (used by) investing activities 90,412 (20,437)
---------------------------
Cash flows from financing activities:
Principal payments on debt and capital lease
Obligations (53,581) (22,038)
Borrowings on revolving credit line 1,576,450 1,751,487
Payments on revolving credit line (1,580,720) (1,423,195)
Issuance of common stock issue 14,700
---------------------------
Net cash (used in) provided by financing activities (43,151) 306,254
---------------------------
Effect of exchange rate changes on cash 1,014 9,248
---------------------------
Net increase (decrease) in cash and cash equivalents (270,331) (123,103)
Cash and cash equivalents at beginning of period 484,294 338,088
---------------------------
Cash and cash equivalents at end of period $ 213,963 $ 214,985
===========================
</TABLE>
See accompanying notes.
6
<PAGE>
SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(Unaudited)
<TABLE>
<CAPTION>
2000 1999
------- -------
<S> <C> <C>
Supplemental schedule of non-cash investing and financing activities:
Financed purchases of property and equipment through notes payable $ 0 $ 0
==================
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $22,196 $14,957
==================
Income taxes $ 0 $ 0
==================
</TABLE>
See accompanying notes.
7
<PAGE>
SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000 AND 1999
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 1. COMMON STOCK
Per a resolution adopted by the Board of Directors, the Company issued on July
19, 2000, 46,376 shares of common stock in lieu of compensation in the amount of
$14,700 to certain key employees. The price used for calculation of the shares
was based on the average of close price for the 30 day period prior to June 14,
2000, which calculated to $.317/share
NOTE 3. FOREIGN OPERATIONS AND MAJOR CUSTOMERS-SEGMENTS
Revenue, loss before taxes, and identifiable assets by geographic area are shown
below. United Kingdom amounts relate solely to Saztec Europe, Ltd. and its
subsidiaries, whose customers are located in England, Scotland, Germany, and
Italy. Identifiable assets of Saztec Europe Ltd. located outside of Ardrossan,
Scotland are immaterial.
Quarter Ended September 30,
2000 1999
----------- -----------
Revenue
United States $ 1,488,873 $ 1,704,516
United Kingdom/Western Europe* 362,259 477,265
----------- -----------
$ 1,851,132 $ 2,181,781
=========== ===========
Income (loss) before income taxes
United States $ (286,492) $ 57,204
United Kingdom/Western Europe 74,950 (101,478)
----------- -----------
$ (211,542) $ (44,274)
=========== ===========
Depreciation
United States $ 36,268 $ 36,415
United Kingdom/Western Europe (36,227) 19,672
Amortization-U.S. only 3,030 3,030
----------- -----------
$ 3,071 $ 59,117
=========== ===========
Identifiable Assets September 30, 2000 September 30, 1999
------------------ ------------------
United States $ 1,631,164 $ 1,959,653
United Kingdom 539,862 906,900
----------- -----------
$ 2,171,026 $ 2,866,553
=========== ===========
* Adjusted for intercompany revenue
8
<PAGE>
NOTE 4. 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 4,515,747 and 4,461,121 for the
quarters ended September 30, 2000, and 1999, respectively.
NOTE 5. SUBSEQUENT EVENTS:
In October, 2000, the Company entered into a one-year note payable with a
related party for $350,000 due October, 2001. Interest accrues at Prime plus 2%
and is due upon maturity.
In October, 2000, the Company also entered into a one-year convertible note
payable with a second related party (Datamatics Technology Ltd.) for $550,000
due October, 2001. Interest accrues at Prime plus 2% and is due upon maturity.
The note may be converted into common stock at the conversion price of
$0.36/share.
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, 2000 decreased 15.2% to
$1,851,132 from $2,181,781 for the quarter ended September 30, 1999. U.S.
revenue for the quarter decreased 12.6% and European revenue decreased 3.5%
compared to the prior year first quarter. The decrease in the US revenue was
mainly in the general data conversion service area of the business. Resume
processing remained steady. The company reorganized its business in the US and
Europe to move to an `outsource' business model to overcome capacity limitations
which limited growth and hampered the introduction of more effective workflow
methods. Saztec recently announced that Datamatics Technologies Limited, a
premier information technology and knowledge management provider, based in
Mumbai, India, has increased its investment in Saztec. This recent event will
enable a tighter coupling of the Saztec and Datamatics capabilities to provide
end-to-end knowledge management solutions.
Loss before taxes of $(211,542) increased $167,268 as compared with $(44,274) in
the prior year. U.S. Income before taxes decreased $343,696 to $(286,492), while
Europe Income improved to $74,950 as compared to a loss of $(101,478) for the
period the previous year. Gross profit for the quarter of $277,026 was $269,072
lower and gross margin percentage of 15% was 40% lower than results from the
first quarter of the prior year. Although the headcount was reduced, both in
Europe and the US, other costs were incurred in technology development to aid
the transition process.
Selling and administrative (S&A) expenses for the current year quarter decreased
$127,511 to $451,997 from $579,508 for the same period in the prior year. As a
percentage of revenues, S&A decreased to 24.4% from the 26.6% ratio of the prior
year period.
Capital Resources and Liquidity
At September 30, 2000 the Company had borrowed $541,728 under its revolving
credit agreement which allows for borrowings of $800,000. The revolving credit
agreement provides for interest at the lender's prime rate plus 2.5% (12.00 % at
September 30, 2000). The credit agreement is collateralized 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 was from
June 22, 1999 to June 21, 2000, and was renewed for a one-year period until June
21, 2001. Maximum borrowing under the agreement is limited to 80% of outstanding
domestic accounts receivable less than ninety days old, up to $800,000. The
Company is in compliance with covenants contained in the renewed agreement.
10
<PAGE>
On June 30, 2000 the Company executed a convertible promissory note agreement
with Maida Vale Ltd, a subsidiary owned indirectly by Domain Foundation, a major
shareholder, in the amount of $500,000 payable with interest due on June 29,
2001. The note agreement provides for simple interest at the prime lending rate
plus 2.0%. The note may be converted to shares of Saztec common stock at the
holders request at any time during the term of the note at an exchange rate
calculated at $.50 per share for the outstanding principle and interest at the
time of the conversion. This note along with accumulated interest was converted
into common stock on October 18, 2000. The total amount due and converted was
$517,090.50 or 1,034,181 shares.
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, 2000 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
On October 19, 2000 at a regular meeting of the board of directors of the
company, the following individuals were elected to fill vacant board seats until
the next annual meeting of shareholders and until their successors are duly
elected and qualified:
Dr. Lalit S. Kanodia
Vidur Bhogilal
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 14, 2000
SAZTEC INTERNATIONAL, INC.
--------------------------
(Registrant)
By: /S/ Christopher Parker
--------------------------------
Christopher Parker
President and CEO
13
<PAGE>
EXHIBIT INDEX
EXHIBIT NUMBER EXHIBIT DESCRIPTION
-------------- -------------------
27 Financial Data Schedule
