Zanett Inc. is an information technology holding company that delivers IT solutions to corporate and government clients throughout the United States through its operating subsidiaries collectively called the IT Commonwealth. The IT Commonwealth consists of four IT solutions companies:Back Bay Technologies Inc. Brandywine Computer Group Inc. Delta Communications Group Inc. and Paragon Dynamics Inc. Zanett Inc. has a market cap of $3.9 million; its shares were traded at around $0.45 with and P/S ratio of 0.1.
Highlight of Business Operations:Our revenues were $21,892,585 for the six months ended June 30, 2009 versus revenues of $24,237,826 for the six months ended June 30, 2008, a decrease of 10%. This decrease in revenue can be attributed primarily to the weakening of the economy and decreased demand in the IT industry, coupled with increased competition for customers. As a result, primarily, of this decrease in revenues, costs of revenues also decreased by 10%. Selling and marketing expenses increased 5%, from $2,806,783 in the six months ended June 30, 2008 to $3,055,711 for the first six months of 2009. This increase can be attributed to the increase in bad debt expense which has been partially offset by the decline in commission and marketing expenses.
General and administrative expenses for the first six months of 2009 were $3,807,902 as compared to $4,184,249 in the first six months of 2008, representing a decrease of $376,347, or 9%. This decrease is a result of one-time expenses incurred in 2008 at the corporate level, related to the sale of PDI, offset in part by the increase in headcount in the second quarter.
At June 30, 2009 we had cash and cash equivalents of $499,145, representing an increase of $48,841 from the December 31, 2008 year-end balance of $450,304.
Cash provided by investing activities was $366,170 for the six months ended June 30, 2009 compared to $7,239,991 of cash provided for the corresponding period in 2008. The 2009 inflow primarily reflected net proceeds of $720,833 for the PDI acquisition (compared to $7,946,297 in the 2008 period), offset by additions to property and equipment of $132,680 as well as $221,983 of contingent consideration paid in 2009.
Cash provided by financing activities for the six months ended June 30, 2009 was $788,423 versus $8,224,164 of cash used for the same period in 2008. This activity in 2009 included approximately $780,000 of draws on our line of credit with Bank of America for working capital and capital expenditures. In 2008, we repaid approximately $8.5 million of bank and related party indebtedness with a portion of the proceeds of the PDI transaction.
With a portion of the proceeds from the sale of PDI, the Company repaid $5,700,000 of the outstanding borrowings under the Bank of America credit facility. In addition, the Company also used a portion of the proceeds to repay promissory notes owing to Bruno Guazzoni. The notes repaid consisted of two notes issued by the Company each in aggregate principal amount of $500,000 and bearing interest at 15% per annum and a note issued by ZCS in an aggregate principal amount of $500,000 and bearing interest at 15% per annum. The proceeds were also used to repay a promissory note owing by PDI to Emral Holdings Limited in the amount of $1.5 million.
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