Zanett Inc. (ZANE) filed Quarterly Report for the period ended 2009-09-30.
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 $4.78 million; its shares were traded at around $0.548 with and P/S ratio of 0.1.
Highlight of Business Operations:Our revenues were $31,795,705 for the nine months ended September 30, 2009 versus revenues of $36,860,354 for the nine months ended September 30, 2008, a decrease of 14%. 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. These trends in our industry have been present throughout 2009. As a result, primarily, of this decrease in revenues, costs of revenues also decreased by 11%. Selling and marketing expenses decreased 2%, from $4,353,487 in the nine months ended September 30, 2008 to $4,269,631 for the nine months of 2009. This decrease can be attributed to the decline in commission and marketing expenses.
General and administrative expenses for the first nine months of 2009 were $5,620,186 as compared to $6,121,530 in the first nine months of 2008, representing a decrease of $501,344, or 8%. This decrease is a result of one-time expenses incurred in 2008 at the corporate level, related to the sale of PDI and a reduction in office and professional fees, certain employee benefits and certain administrative costs which were offset in part by the increase in stock incentive compensation related to awards made in November 2008.
At September 30, 2009 we had cash and cash equivalents of $87,602, representing a decrease of $362,703 from the December 31, 2008 year-end balance of $450,304.
Cash provided by investing activities was $160,347 for the nine months ended September 30, 2009 compared to $6,661,643 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 $7,848,964 in the 2008 period), offset by additions to property and equipment of $242,829 as well as $317,657 of contingent consideration paid in 2009.
Cash provided by financing activities for the nine months ended September 30, 2009 was $51,773 versus $8,271,013 of cash used for the same period in 2008. This activity in 2009 included approximately $300,000 of draws on our line of credit with a related party 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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