<PAGE>
U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
-----------------------
Form 10 - QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
Commission file number 0-10560
COMMUNICATIONS GROUP INC.
- --------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Delaware 51-0308583
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
901 S. Trooper Road, P.O. Box 80360, Valley Forge, PA 19484
- --------------------------------------------------------------------------------
(Address of principal executive offices; zip code)
Issuer's telephone number, including area code (610) 666-1700
Not Applicable
---------------
(Former name, former address, and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or
for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the
past 90 days. Yes X No
----- -----
The number of shares of common stock, par value $.01, outstanding as of
November 1, 1995 was: 5,131,756
<PAGE>
COMMUNICATIONS GROUP INC.
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
September 30, March 31,
1995 1995
------------- ----------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 426,770 $ 570,310
Receivables:
Trade, less allowance for doubtful
accounts of $52,000 at September 30,
1995 and $70,000 at March 31, 1995 841,520 681,030
Inventories 15,020 28,560
Prepaid expenses 66,580 40,640
---------- ----------
Total current assets 1,349,890 1,320,540
---------- ----------
Furniture, fixtures, equipment and
leasehold improvements at cost, less
accumulated depreciation and amortization
of $378,750 at September 30, 1995 and
$348,620 at March 31, 1995 225,020 191,530
Computer software, net of accumulated
amortization of $1,065,790 at September 30,
1995 and $972,370 at March 31, 1995 467,800 394,810
Other assets 42,590 45,340
---------- ----------
$2,085,300 $1,952,220
---------- ----------
---------- ----------
</TABLE>
<PAGE>
COMMUNICATIONS GROUP INC.
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
September 30, March 31,
1995 1995
------------- ----------
(Unaudited)
<S> <C> <C>
LIABILITIES and STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 22,590 $ 16,080
Accounts payable 374,500 245,560
Accrued commissions and other compensation 42,000 34,910
Other accrued expenses 413,640 507,380
Deferred revenue 210,670 280,490
---------- ----------
Total current liabilities 1,063,400 1,084,420
---------- ----------
Long-term debt, less current portion 18,770 17,360
---------- ----------
Commitments and contingencies
Stockholders' equity:
Common stock, par value $.01; 10,000,000
shares authorized; 5,272,006 shares
issued at September 30, 1995 and
March 31, 1995 52,720 52,720
Capital in excess of par value 7,173,480 7,173,480
Accumulated deficit (5,813,470) (5,969,360)
Cumulative translation adjustment (3,200) ----
---------- ----------
1,409,530 1,256,840
Less - Treasury stock, 140,250 shares at
September 30, 1995 and March 31, 1995;
at cost (406,400) (406,400)
---------- ----------
Total stockholders' equity 1,003,130 850,440
---------- ----------
$2,085,300 $1,952,220
---------- ----------
---------- ----------
</TABLE>
<PAGE>
COMMUNICATIONS GROUP INC
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
(Unaudited)
Six Months Ended
September 30,
-------------------------
1995 1994
---- ----
<S> <C> <C>
Net sales $2,136,380 $1,628,040
---------- ----------
Costs and expenses:
Cost of sales (exclusive of depreciation 945,850 619,740
and amortization)
Selling, general and administrative expenses 897,840 812,720
Depreciation and amortization 123,550 217,560
Interest income, net of interest expense of
$800 and $360 in 1995 and 1994,
respectively (5,950) (4,000)
---------- ----------
1,961,290 1,646,020
---------- ----------
Income (loss) before income taxes 175,090 (17,980)
Income tax provision 19,200 ----
---------- ----------
Net income (loss) $ 155,890 $ (17,980)
---------- ----------
---------- ----------
Net income (loss) per common share $ 0.03 $ 0.00
---------- ----------
---------- ----------
Weighted average common shares outstanding 5,131,756 5,121,756
---------- ----------
---------- ----------
</TABLE>
<PAGE>
COMMUNICATIONS GROUP INC
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
(Unaudited)
Three Months Ended
September 30,
-------------------------
1995 1994
---- ----
<S> <C> <C>
Net sales $1,103,200 $ 826,870
---------- ----------
Costs and expenses:
Cost of sales (exclusive of depreciation 485,070 292,430
and amortization)
Selling, general and administrative expenses 444,330 399,070
Depreciation and amortization 63,470 108,060
Interest income, net of interest expense of
$400 and $170 in 1995 and 1994,
respectively (4,530) (2,130)
---------- ----------
988,340 797,430
---------- ----------
Income before income taxes 114,860 29,440
Income tax provision 13,740 ----
---------- ----------
Net income $ 101,120 $ 29,440
---------- ----------
---------- ----------
Net income per common share $ 0.02 $ 0.01
---------- ----------
---------- ----------
Weighted average common shares outstanding 5,131,756 5,121,756
---------- ----------
---------- ----------
</TABLE>
<PAGE>
COMMUNICATIONS GROUP INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
(Unaudited)
Six Months Ended
September 30,
-------------------------
1995 1994
---- ----
<S> <C> <C>
Cash Provided By (Used In):
Operating activities:
Net Income (Loss) $ 155,890 $ (17,980)
---------- ----------
Adjustments to reconcile net income
(loss) to cash provided by (used in)
operations:
Depreciation and amortization 123,550 217,560
Provision for doubtful accounts (18,000) (5,000)
Changes in Operating Working Capital:
Increase in receivables, trade (142,490) (33,420)
Decrease (increase) in inventories 13,540 (14,980)
Increase in prepaid expenses (25,940) (24,870)
Increase in accounts payable 128,940 17,130
(Decrease) increase in accrued
commissions and other compensation 7,090 (44,820)
Decrease in other accrued expenses (93,740) (80,450)
Decrease in deferred revenue (69,820) (41,570)
---------- ----------
Total adjustments (76,870) (10,420)
---------- ----------
Total operating activities 79,020 (28,400)
---------- ----------
Investing Activities:
Decrease (increase) in other assets 2,750 (460)
Additions to equipment and leasehold
improvements (63,620) (25,270)
Additions to computer software (166,410) (35,350)
---------- ----------
Total investing activities (227,280) (61,080)
---------- ----------
Financing Activities:
Repayment of debt (16,080) (2,190)
Proceeds from bank borrowings 24,000 ----
---------- ----------
Total financing activities 7,920 (2,190)
---------- ----------
Decrease in cash and cash equivalents (140,340) (91,670)
Effect of exchange rates on cash (3,200) ----
Cash and cash equivalents, at beginning
of period 570,310 345,500
---------- ----------
Cash and cash equivalents, at end of period $ 426,770 $ 253,830
---------- ----------
---------- ----------
Supplemental disclosures:
Cash paid during the year for:
Interest 800 360
Taxes 20,560 4,180
</TABLE>
<PAGE>
COMMUNICATIONS GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - The consolidated balance sheet as of September 30, 1995, the statement
of operations for the three and six months ended September 30, 1995
and 1994, and the statement of cash flows for the six months ended
September 30, 1995 and 1994 have been prepared by the Company without
audit. In the opinion of management all adjustments necessary to
present fairly the financial position, results of operations, and
statement of cash flows at September 30, 1995 have been made. The
results of operations for interim periods are not necessarily
indicative of the results for the full year.
NOTE 2 - Inventories are stated at the lower of cost or market determined
principally by the first-in, first-out (FIFO) method. Substantially
all inventory consists of equipment purchased for resale and repair
parts.
NOTE 3 - The financial statements of CTI Data Solutions (International)
Limited, a UK based wholly owned subsidiary, have been included in the
consolidated financial statements and have been translated to U.S.
dollars in accordance with the Statement of Financial Accounting
Standards (SFAS) No.52, Foreign Currency Translation. Assets and
liabilities are translated at current exchange rates in effect at the
balance sheet date and stockholders' investment is translated at
historical exchange rates. Revenues and expenses are translated at the
average exchange rate for the applicable period. Any resulting
translation adjustments are made directly to a separate component of
stockholders' equity.
NOTE 4 - Income per common share is computed on the basis of the weighted
average number of common shares outstanding during the period. Per
share computations do not assume the exercise of stock options
outstanding because such exercises would not be dilutive.
NOTE 5 - Certain reclassifications have been made to the comparative September
30, 1994 data to conform to the current years presentations.
<PAGE>
ITEM 2
Management's Discussion and Analysis
or Plan of Operation
RESULTS OF OPERATIONS
Net sales for the six months ended September 30, 1995 increased $508,340
(31%) from the same period in the prior year. Service bureau revenue increased
$600,950 (49%) while licensed software sales decreased $92,610 (23%). The
Company's recurring service bureau revenues increased by approximately $263,000
while equipment sales, associated with its service bureau operations, increased
by approximately $338,000 for the quarter ended September 30, 1995 as compared
to the same period in the prior year. These increases are the result of the
Company's marketing effort targeted towards the telemanagement billing services
market during the last year. The Company has completed its new generation
billing software and expects to be BETA testing this software both
internationally and domestically during the quarter ending December 31, 1995.
This new product offering should enable the Company to further penetrate the
billing services market. Until the Company is able to modernize its licensed
software product management does not expect much change in its licensed software
revenues. The revenues being generated by its current product are mainly the
result of recurring maintenance and renewal fees. The Company plans to modernize
its licensed software product upon successful testing of its billing software by
utilizing the billing software as the foundation. This should shorten the
development time required to finalize a new licensed software product. The
Company anticapates completing its new licensed software product by the end of
its current fiscal year.
Cost of sales increased $326,110 (53%) for the six months ended September
30, 1995 as compared to the prior year period. Costs of sales was 44% percent of
sales for the six months ended September 30, 1995 as compared to 38% percent of
sales for the prior year period. Overall equipment sales increased approximately
$310,000 and thereby substantially increasing material costs as compared to the
prior year period. Production costs have increased in direct relation to the
rise in service bureau revenues. However due to the lower profit margin on
equipment sales versus the Companys' service bureau and licensed software
revenues the overall profit margin has decreased.
Selling, general and administrative expenses (S, G & A) increased $85,120
(11%) for the six months ended September 30, 1995. S, G & A was 42% of sales for
the six months ended September 30, 1995 as compared to 50% of sales for the
prior year period. The Company has been aggressively marketing its
telemanagement billing software in both the international and domestic
marketplace resulting in an increase in costs of approximately $70,000 when
compared to the prior year period. As a result of this effort the Company has
been able to sign new customers and expects to start generating revenue from its
international division during the quarter ending March 31, 1996. Due to the
Company generating additional revenues its' commission expense has increased
approximately $40,000 as compared to the prior year period. The Company has been
able to partially offset these increases with a reduction in legal fees of
approximately $35,000 as a result of concluding certain litigation during its'
last fiscal year.
<PAGE>
Depreciation and amortization expense decreased $94,010 (43%) from the same
period in the prior year. The reduction is primarily the result of some of the
Company's computer software and all of the Company's excess of cost over net
tangible assets of acquired business being fully amortized as of March 31, 1995.
LIQUIDITY AND CAPITAL RESOURCES
Working capital at September 30, 1995 was $286,490, an increase of $50,370
from the March 31, 1995 working capital of $236,120. The working capital ratio
was 1.27 to 1 as of September 30, 1995 and 1.22 to 1 as of March 31, 1995.
Working capital increased as a direct result of the cash that was provided from
current operations. As a result of the growing strength of the Companys'
operations, the Company has continued to invest in modernizing its proprietary
software products and equipment needs. The Company has used $24,000 of the
available $100,000 term loan which was established to permit equipment
purchases. As a result of the availability of these funds and the Company's
operations providing funds, management believes its working capital is adequate
to fund its operations for the foreseeable future.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
None
ITEM 2 - CHANGES IN SECURITIES
None
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
Not Applicable
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted for a vote of security holders during
the six months ended September 30, 1995.
ITEM 5 - OTHER INFORMATION
None
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8 - K
(a) Exhibits - None
(b) Form 8 - K
None filed in the six months ended September 30, 1995.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-30-1996
<PERIOD-START> APR-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 426,770
<SECURITIES> 0
<RECEIVABLES> 893,520
<ALLOWANCES> 52,000
<INVENTORY> 15,020
<CURRENT-ASSETS> 1,349,890
<PP&E> 603,770
<DEPRECIATION> 378,750
<TOTAL-ASSETS> 2,085,300
<CURRENT-LIABILITIES> 1,063,400
<BONDS> 0
<COMMON> 52,720
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 2,085,300
<SALES> 2,136,380
<TOTAL-REVENUES> 2,136,380
<CGS> 945,850
<TOTAL-COSTS> 1,961,290
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 800
<INCOME-PRETAX> 175,090
<INCOME-TAX> 19,200
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 155,890
<EPS-PRIMARY> .03
<EPS-DILUTED> 0
</TABLE>
