<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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, 1996
/ / 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
CTI Group (Holdings) Inc.
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(Exact name of small business issuer as specified in its charter)
Delaware 51-0308583
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(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
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(Address of principal executive offices; zip code)
Issuer's telephone number, including area code (610) 666-1700
Not Applicable
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(Former name, address, and fiscal year)
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 8, 1996 was: 5,491,756
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CTI Group (Holdings) Inc.
Consolidated Balance Sheet
September 30, March 31,
1996 1996
ASSETS ------------- ----------
(Unaudited)
Current assets:
Cash and cash equivalents $ 297,810 $ 288,870
Receivables:
Trade, less allowance for doubtful
accounts of $50,000 at September 30,
1996 and $60,000 at March 31, 1996 411,470 802,410
Inventories 33,820 19,450
Prepaid expenses 40,620 26,590
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Total current assets 783,720 1,137,320
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Furniture, fixtures, equipment and
leasehold improvements at cost, less
accumulated depreciation and amortization
of $404,560 at September 30, 1996 and
$371,410 at March 31, 1996 234,180 246,300
Computer software, net of accumulated
amortization of $1,219,710 at September 30,
1996 and $1,149,790 at March 31, 1996 877,140 694,260
Other assets 39,480 29,380
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$1,934,520 $2,107,260
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2
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CTI Group (Holdings) Inc.
Consolidated Balance Sheet
September 30, March 31,
1996 1996
LIABILITIES and STOCKHOLDERS' EQUITY ------------- ------------
(Unaudited)
Current liabilities:
Current portion of long-term debt $ 10,840 $ 28,710
Accounts payable 323,960 450,820
Accrued commissions and other compensation 12,090 52,600
Other accrued expenses 186,090 217,830
Deferred revenue 198,630 209,390
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Total current liabilities 731,610 959,350
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Long-term debt, less current portion 29,690 34,720
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Commitments and contingencies
Stockholders' equity:
Common stock, par value $.01; 10,000,000
shares authorized; 5,572,006 shares
issued at September 30, 1996 and 5,522,006
shares issued at March 31, 1996 55,720 55,220
Capital in excess of par value 7,274,460 7,214,730
Accumulated deficit (5,744,990) (5,745,510)
Cumulative translation adjustment (5,570) (4,850)
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1,579,620 1,519,590
Less - Treasury stock, 140,250 shares at
September 30, 1996 and March 31, 1996
at cost (406,400) (406,400)
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Total stockholders' equity 1,173,220 1,113,190
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$ 1,934,520 $ 2,107,260
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3
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CTI Group (Holdings) Inc.
Statement of Operations
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
September 30,
-----------------------
1996 1995
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<S> <C> <C>
Net sales $1,783,830 $2,136,380
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Cost and expenses:
Cost of sales (exclusive of depreciation and amortization) 761,970 945,850
Selling, general and administrative expenses 907,910 897,840
Depreciation and amortization 102,930 123,550
Interest income, net of interest expense of
$1,990 and $800 in 1996 and 1995, respectively (3,110) (5,950)
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1,769,700 1,961,290
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Income before income taxes 14,130 175,090
Income tax provision 13,610 19,200
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Net income $ 520 $ 155,890
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---------- ----------
Net income per common share $ 0.00 $ 0.03
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---------- ----------
Weighted average common shares outstanding 5,415,089 5,131,756
---------- ----------
---------- ----------
</TABLE>
4
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CTI Group (Holdings) Inc.
Statement of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
-----------------------
1996 1995
---- ----
<S> <C> <C>
Net sales $ 882,010 $1,103,200
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Costs and expenses:
Cost of sales (exclusive of depreciation
and amortization) 375,380 485,070
Selling, general and administrative expenses 450,970 444,330
Depreciation and amortization 60,310 63,470
Interest income, net of interest expense of
$1,310 and $400 in 1996 and 1995, respectively (1,190) (4,530)
---------- ----------
885,470 988,340
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Income (loss) before income taxes (3,460) 114,860
Income tax provision 11,500 13,740
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Net income (loss) $ (14,960) $ 101,120
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---------- ----------
Net income (loss) per common share $ 0.00 $ 0.02
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---------- ----------
Weighted average common shares outstanding 5,431,756 5,131,756
---------- ----------
---------- ----------
</TABLE>
5
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CTI Group (Holdings) Inc.
Consolidated Statement of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
September 30,
---------------------
1996 1995
---- ----
<S> <C> <C>
Cash Provided By (Used in):
Operating activities:
Net income $ 520 $ 155,890
--------- ---------
Adjustments to reconcile net income to cash
provided by (used in) operations:
Depreciation and amortization 102,930 123,550
Provision for doubtful accounts (10,000) (18,000)
Issuance of stock options 50,230 --
Changes in Operating Working Capital:
Decrease (increase) in receivables, trade 400,940 (142,490)
Decrease (increase) in inventories (14,370) 13,540
Increase in prepaid expenses (14,030) (25,940)
(Decrease) increase in accounts payable (126,860) 128,940
(Decrease) increase in accrued commissions and
other compensation (40,510) 7,090
Decrease in other accrued expenses (31,740) (93,740)
Decrease in deferred revenue (10,760) (69,820)
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Total adjustments 305,830 (76,870)
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Total operating activities 306,350 79,020
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Investing Activities:
Decrease (increase) in other assets (10,100) 2,750
Additions to equipment and leasehold improvements (20,890) (63,620)
Additions to computer software (252,800) (166,410)
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Total investing activities (283,790) (227,280)
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Financing Activities:
Repayment of debt (22,900) (16,080)
Proceeds from bank borrowings -- 24,000
Stock issuance via exercise of stock option 10,000 --
--------- ---------
Total financing activities (12,900) 7,920
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Effect of exchange rate changes on cash (720) (3,200)
(Decrease) increase in cash and cash equivalents 9,660 (140,340)
Cash and cash equivalents, at beginning of period 288,870 570,310
--------- ---------
Cash and cash equivalents, at end of period $ 297,810 $ 426,770
--------- ---------
--------- ---------
Supplemental disclosures:
Cash paid during the year for:
Interest 3,270 800
Taxes -- 20,560
</TABLE>
6
<PAGE>
CTI Group (Holdings) Inc.
Notes to Consolidated Financial Statements
(Unaudited)
NOTE 1 - The consolidated balance sheet as of September 30,
1996, the statement of operations for the three and six months
ended September 30, 1996 and 1995, and the statement of cash
flows for the six months ended September 30, 1996 and 1995 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, 1996 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 - Income (loss) 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 4 - Certain reclassifications have been made to the comparative
September 30, 1995 data to conform to the current years
presentations.
NOTE 5 - The Company has issued 105,000 stock options to its employees
during the six months ended September 30, 1996. The option price
ranges from $.60 to $.61. Accordingly the Company recorded
compensation expense of $50,230. The options are exercisable upon
date of grant and are for the term of 10 years from the date of
grant.
NOTE 6 - In October, 1996 the Company granted 60,000 shares of common stock
to certain employees. The stock vests over the period ending
March 31, 1996, provided the employees remain in the continued
employment of the Company.
7
<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATION
RESULTS OF OPERATIONS
Net sales for the six months ended September 30, 1996 decreased $352,550
(17%) from the same period in the prior year. Service bureau revenue decreased
approximately $265,000 (14%) while licensed software sales decreased
approximately $87,000 (29%). The decrease in service bureau revenues was
primarily the result of fewer equipment sales of approximately $349,000 which
was partially offset by an increase in the Company's recurring service bureau
revenues of approximately $84,000. Until the Company is able to re-engineer its
telemanagement licensed software product, management expects to continue to have
declining revenues of its telemanagement licensed software products. The
revenues being generated by its current product are mainly the result of
recurring maintenance and license renewal fees.
Cost of sales decreased $183,880 (19%) for the six months ended September
30, 1996 as compared to the prior year period. Cost of sales was 43% of sales
for the six months ended September 30, 1996 as compared to 44% of sales for the
prior year period. The overall decrease in cost of sales was due to the
reduction in costs associated with the lower level of equipment sales.
Production costs have increased in direct relation to the rise in service bureau
reveneus.
Selling, general and administrative expenses (S, G & A) increased $10,070
(1%) for the six months ended September 30, 1996. S, G & A was 51% of sales for
the six months ended September 30, 1996 as compared to 42% of sales for the
prior year period. The percentage increase in S, G & A expenses in 1996 as
compared to 1995 is the direct result of the lower sales volumes during the
comparable periods. The Company's cost structure for its S, G & A expenses is
relatively fixed in nature. Therefore any change in the level of sales results
in a corresponding fluctuation in S, G & A expenses as a percentage of sales.
The Company has been marketing its Neptune billing software during the six
months ended September 30, 1996. Consequently, the Company has received its
first orders for its Neptune billing software during the quarter ended September
30, 1996. These orders will begin generating revenues during the quarter ending
December 31, 1996. Additionally, the Company has received new orders for its
Neptune billing software subsequent to the quarter ended September 30, 1996.
Depreciation and amortization expense decreased $20,620 (17%) from the same
period in the prior year. The reduction is primarily the result of the Company's
ITMS III Telemanagement Software being fully amortized as of March 31, 1996.
However during the quarter ended September 30, 1996, the Company has begun
amortizing the development costs associated with its Neptune billing software
product.
8
<PAGE>
During the quarter ended September 30, 1996 the Company announced the loss
of a major customer. This customer accounted for 32% of sales for the quarter
ended September 30, 1996. As the result of this loss the Company instituted a
financial model to assist in maintaining a neutral cash position until an
expected revenue recovery arrives early next year. The financial model, a six-
month plan, included a reduction in payroll of approximately 27% while
maintaining the full capacity of the Company's workforce affiliated with the
Neptune product. Based upon the present orders the Company has received combined
with the level of market interest, management believes the financial model will
be successful.
LIQUIDITY AND CAPITAL RESOURCES
Working capital at September 30, 1996 was $52,110, a decrease of $125,860
from the March 31, 1996 working capital of $177,970. The working capital ratio
was 1.07 to 1 as of September 30, 1996 and 1.19 to 1 as of March 31, 1996.
Working capital decreased as the result of the Company using some of its cash
reserves to continue to invest in modernizing its proprietary software products
and equipment needs. The Company's bank has extended the maturity of the
Company's $200,000 revolving line of credit to July 31, 1997. The bank has also
provided the Company with a $50,000 line of credit to be used as needed for
equipment purchases. As a result of the availability of these funds, the new
sales being generated and the Company's current operations position, management
believes its working capital is adequate to fund its operations for the
foreseeable future.
9
<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, 1996.
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, 1996.
10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
11/12/96 /s/ Anthony P. Johns
- ------------------- ------------------------
Date Anthony P. Johns
President & Chief Executive Officer
11/12/96 /s/ Mark H. Daugherty
- ------------------- ------------------------
Date Mark H. Daugherty
Chief Financial Officer
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> APR-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 297,810
<SECURITIES> 0
<RECEIVABLES> 461,470
<ALLOWANCES> 50,000
<INVENTORY> 33,820
<CURRENT-ASSETS> 783,720
<PP&E> 638,740
<DEPRECIATION> 404,560
<TOTAL-ASSETS> 1,934,520
<CURRENT-LIABILITIES> 731,610
<BONDS> 0
0
0
<COMMON> 55,720
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,934,520
<SALES> 1,783,830
<TOTAL-REVENUES> 1,783,830
<CGS> 761,970
<TOTAL-COSTS> 1,769,700
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,990
<INCOME-PRETAX> 14,130
<INCOME-TAX> 13,610
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 520
<EPS-PRIMARY> .00
<EPS-DILUTED> 0
</TABLE>
