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 DECEMBER 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 January 26,
2000, was 4,461,121 shares.
<PAGE>
SAZTEC INTERNATIONAL, INC.
FORM 10-QSB/A
FOR THE
QUARTER ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
PAGE
----
PART I - FINANCIAL INFORMATION
<S> <C>
Item 1. Financial Statements:
Consolidated Statements of Operations --
Three months ended December 31, 1999 and 1998 3
Consolidated Statements of Operations -- 4
Six months ended December 31, 1999 and 1998
Consolidated Balance Sheets -- December 31, 1999 and June 30, 1999 5
Consolidated Statement of Changes in Stockholders' Equity -- 6
December 31, 1999
Consolidated Statements of Cash Flows -- 7 - 8
Six months ended December 31, 1999 and 1998
Notes to Consolidated Financial Statements - December 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
2
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<PAGE>
<TABLE>
<CAPTION>
SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED DECEMBER 31, 1999 AND 1998
(Unaudited)
1999 1998
---- ----
<S> <C> <C>
REVENUES $2,049,174 $1,835,031
Cost of services 1,670,133 1,519,303
---------------------------------------------------
GROSS PROFIT 379,041 315,728
Selling, general & administrative expense 649,413 543,493
---------------------------------------------------
LOSS FROM OPERATIONS (270,372) (227,765)
Interest expense (income) 10,793 (4,258)
---------------------------------------------------
LOSS BEFORE PROVISION FOR INCOME TAXES (281,165) (223,507)
Provision for income taxes 3,867 403
---------------------------------------------------
NET LOSS APPLICABLE TO COMMON STOCKHOLDERS $(285,032) $ (223,910)
===================================================
LOSS PER SHARE OF COMMON STOCK:
Basic and diluted net loss applicable to common $(.06) $(.05)
stockholders
===================================================
Weighted average number of shares 4,461,121 4,461,121
===================================================
See accompanying notes.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1999 AND 1998
(Unaudited)
1999 1998
---- ----
<S> <C> <C>
REVENUES $4,230,956 $3,601,715
Cost of services 3,305,815 3,022,512
-------------------- -------------------
GROSS PROFIT 925,141 579,203
Selling and administrative expense 1,228,920 1,076,356
-------------------- -------------------
LOSS FROM OPERATIONS (303,779) (497,153)
Interest expense (income) 21,659 (19,764)
LOSS BEFORE PROVISION FOR INCOME TAXES (325,438) (477,389)
Provision for income taxes 3,867 (76,198)
-------------------- -------------------
NET LOSS APPLICABLE TO COMMON STOCKHOLDERS $(329,305) $(401,191)
==================== ===================
LOSS PER SHARE OF COMMON STOCK:
Basic and diluted net loss applicable to common $(.07) $(.09)
stockholders
==================== ===================
Weighted average number of shares 4,461,121 4,461,121
==================== ===================
See accompanying notes.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 AND JUNE 30, 1999
ASSETS
DEC. 31, JUNE 30,
1999 1999
---- ----
(Unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $246,346 $338,088
Restricted cash 26,210 26,210
Accounts receivable, less allowance for doubtful accounts of $28,155 1,113,754 1,612,573
Costs and estimated earnings in excess of billings 43,392
Work in process 445,755 118,720
Prepaid expenses and other current assets 174,948 112,601
-----------------------------------
TOTAL CURRENT ASSETS 2,050,405 2,208,192
PROPERTY AND EQUIPMENT, NET 344,907 422,076
OTHER ASSETS
Goodwill and other intangible assets, less accumulated amortization of 131,460 137,520
$87,842 in 1999 and $75,722 in 1998
Deposits and other assets 57,383 63,626
-----------------------------------
TOTAL ASSETS $2,584,155 $2,831,414
===================================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Line of Credit $81,736 $0
Current portion long-term debt and capital lease obligations 153,183 172,375
Accounts payable 994,769 620,366
Accrued liabilities 527,769 728,230
Income Taxes Payable 2,469 0
Customer deposits 261,960 385,461
-----------------------------------
TOTAL CURRENT LIABILITIES 2,021,886 1,906,432
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS LESS CURRENT PORTION 70,836 104,039
ACCRUED EXPENSE 1,076 7,355
STOCKHOLDER'S 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 shares
issued at both December 31, 1999
and June 30, 1999 12,430,811 12,430,811
Contributed capital 14,498 14,498
Accumulated deficit (11,839,107) (11,509,802)
Cumulative translation adjustment (115,845) (121,919)
-----------------------------------
TOTAL STOCKHOLDERS' EQUITY 490,357 813,588
-----------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $2,584,155 $2,831,414
===================================
See accompanying notes.
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
DECEMBER 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, 1999 4,461,129 $ 12,430,811 $ 14,498 $(11,509,802) $ (121,919)
Net loss (329,305)
Translation 6,074
adjustment
------------ ------------ ------------ ------ ------------ ------------ ------------
4,461,129 $ 12,430,811 $ 14,498 $(11,839,107) $ (115,845)
See accompanying notes.
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1999 AND 1998
(Unaudited)
1999 1998
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (329,305) $ (401,191)
Adjustments to reconcile net loss to net cash (used
in) provided by operating activities:
Depreciation and amortization 114,007 110,260
Provision for (recovery of) bad debts (21,791)
Changes in assets and liabilities:
Accounts receivable 498,819 (235,115)
Cost in excess of billings (43,392)
Work in process (327,035) (59,810)
Prepaid expenses and other current assets (62,347) (22,229)
Deposits and other assets 6,243 (16,539)
Accounts payable 374,403 (110,503)
Accrued liabilities (200,461) (137,023)
Customer deposits and non-current accrued expenses (129,780) 337,734
----------- -----------
NET CASH FROM (USED IN) OPERATING ACTIVITIES (98,848) 33,643
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (30,042) (38,978)
Payments received on notes receivable 35,540
Decrease in restricted cash 112,685
----------- -----------
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES (30,042) 109,247
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on notes payable 3,712,629 1,421,462
Payments on notes payable (3,630,894) (1,338,496)
Principal payments on debt and capital lease (52,395) (52,889)
obligations
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 29,340 30,077
----------- -----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 7,807 (3,725)
----------- -----------
NET INCREASE (DECREASE) IN CASH (91,743) 169,242
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD 338,089 513,194
----------- -----------
CASH AND EQUIVALENTS AT END OF PERIOD $ 246,346 $ 682,436
=========== ===========
See accompanying notes.
</TABLE>
7
<PAGE>
SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1999 AND 1998
(Unaudited)
1999 1998
---- ----
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND
FINANCING ACTIVITIES:
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $31,788 $12,210
======== =========
Income taxes $3,867 $5,283
======== =========
See accompanying notes.
8
<PAGE>
SAZTEC INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 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, 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>
6 MONTHS ENDED DECEMBER 31,
1999 1998
---- ----
<S> <C> <C>
Revenue
United States $3,252,351 $2,412,924
United Kingdom/Western Europe 978,605 1,188,791
--------------------------------------------------
$4,230,956 $3,601,715
==================================================
Loss before income taxes
United States $(84.640) $(26,525)
United Kingdom/Western Europe (240,798) (450,864)
--------------------------------------------------
$(325,438) $(477,389)
==================================================
Depreciation
United States $73,392 $47,989
United Kingdom/Western Europe 40,615 56,211
Amortization-U.S. only 6,060 6,060
--------------------------------------------------
$120,067 $110,260
==================================================
Identifiable Assets DECEMBER 31 1999 JUNE 30, 1999
---------------- -------------
United States $2,578,443 $1,746,463
United Kingdom 1,136,547 1,084,951
--------------------------------------------------
$3,714,990 $2,831,414
==================================================
</TABLE>
9
<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 year which totaled 4,461,121 for the quarters ended
December 31, 1999, and 1998.
10
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Revenue for the six months ended December 31, 1999, increased to $4,230,956 from
$3,601,715 for the six months ended December 31, 1998, an increase of $629,241
or (17.5%). Revenue for the Quarter ended December 31, 1999 at $2,049,174 was up
$214,143 from the $1,835,031 earned for the quarter ended December 31, 1998.
U.S. revenue for the six months ended December 31, 1999 of $3,252,351, increased
$839,427 compared with the six-month period the prior year of $2,412,924. U.S.
revenue for the second quarter of the current year $1,547,835 was $342,822
higher compared to $1,205,013 for the quarter ended December 31, 1998. European
revenue for the six months ended December 31, 1999 of $978,605 decreased
$210,186 compared with the six-month period in the prior year of $1,188,791.
European revenue for the second quarter of the current year at $501,457 was
$128,562 less compared to $630,019 for the quarter ended December 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. Management
expects this positive trend to continue in the U.S. during the second half of
the year. European revenue is down compared to last year as a result in the
decline in library retrospective conversion project revenue.
Gross profit for the six months ended December 31, 1999 increased $345,938 from
the prior year period to 21.9% of sales, compared to 16.1% of sales for the same
period. Gross profit for the quarter ended December 31, 1998 was 18.5% of sales
compared to 17.2% in the same period of 1998. Gross profit for U.S. operations
increased $346,150 for the six months ended December 31, 1999 to 26.2% of sales
compared to 21% for the same period last year. European gross profit decreased
$212 for the 6-month period ended December 31, 1999 and was 7.4% of sales
compared to 6.2% for the same period last year.
Selling, and administrative expenses (S&A) for the six month period increased
$152,564 to $1,228,920 (29% of sales) from $1,076,356 (30% of sales) for the
same period in the prior year. For the quarter ended December 31, 1999 S&A
increased to $649,413 (31.7% of sales) from $543,493 (29.6% of sales) in the
prior year quarter. During the three-month period ending December 31, 1999, the
company invested $78,871 in new technology development compared to $0 for the
same period last year. This investment is the beginning of a plan to upgrade
Saztec's offering to higher value added services, dedicated to building and
managing content.
Loss from operations was $303,779 for the six months ended December 31, 1999
compared to $497,153 for the six months ended December 31, 1998. Loss form
operations for the three months ended December 31, 1999 was $270,372 compared to
$227,765 for the same period the prior year.
Cash Flow decreased $91,743 for the six months ended December 31, 1999 compared
to an increase of $169,242 for the same period the prior year. Net cash from
operating activities decreased $98,848, and net cash from investing activities
decreased $30,042. Cash flow from financing activities of $29,304 and effect of
exchange rate changes of $7,807 make up the balance of the change.
11
<PAGE>
CAPITAL RESOURCES AND LIQUIDITY
The Company renegotiated its revolving credit agreement with a U.S. finance
company, which is secured by substantially all the assets of the Company,
effective December 10, 1999. The agreement bears interest at the lender's prime
rate plus 2.5% (11% at December 31, 1999). Available borrowings are 80% of
domestic trade accounts receivable less than 90 days old and are subject to a
maximum borrowing ceiling of $800,000. The line of credit is repaid directly
from a collateral account established by the lender, through a lockbox at the
Company's bank. At December 31, 1999 the Company had total available borrowings
of $800,000 and had borrowed $81,736. At December 31, 1998 the Company had total
available borrowings of $120,000 against a previous line of credit, and had
borrowed $0. The Company was in compliance with the covenants contained in each
of the credit agreements at December 31, 1999 and 1998. The existing 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.
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.
DECEMBER 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 16
(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: FEBRUARY 10, 2000
SAZTEC INTERNATIONAL, INC.
(Registrant)
By: /s/ PAUL F. PARSHLEY
------------------------------------------
Paul F. Parshley
Vice President, Finance and Administration
14
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
- ------- -----------
27 Financial Data Schedule
15
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
SAZTEC INTERNATIONAL, INC.
FORM 10-QSB/A FOR DECEMBER 31, 1999 - EXHIBIT 27
FINANCIAL DATA SCHEDULE
under
Article 5 of Regulation S-X
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-END> DEC-31-1999
<CASH> 272,556
<SECURITIES> 0
<RECEIVABLES> 1,141,909
<ALLOWANCES> 28,155
<INVENTORY> 445,755
<CURRENT-ASSETS> 2,050,405
<PP&E> 3,714,990
<DEPRECIATION> 3,370,083
<TOTAL-ASSETS> 2,584,155
<CURRENT-LIABILITIES> 2,021,886
<BONDS> 0
0
0
<COMMON> 12,430,811
<OTHER-SE> (11,839,107)
<TOTAL-LIABILITY-AND-EQUITY> 2,584,155
<SALES> 0
<TOTAL-REVENUES> 4,230,956
<CGS> 0
<TOTAL-COSTS> 3,305,815
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 21,659
<INCOME-PRETAX> (325,438)
<INCOME-TAX> 3,867
<INCOME-CONTINUING> (329,305)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (329,305)
<EPS-BASIC> (.07)
<EPS-DILUTED> (.07)
<FN>
16
</FN>
</TABLE>
