<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 December 31, 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
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
Communications Group Inc.
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(Former name)
Not Applicable
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(Former address, and former 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
February 5, 1996 was: 5,381,756
<PAGE>
CTI Group (Holdings) Inc.
Consolidated Balance Sheet
<TABLE>
<CAPTION>
December 31, March 31,
1995 1995
ASSETS ------------- -------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 368,070 $ 570,310
Receivables:
Trade, less allowance for doubtful
accounts of $52,000 at December 31,
1995 and $70,000 at March 31, 1995 953,630 681,030
Inventories 8,890 28,560
Prepaid expenses 38,890 40,640
------------ ------------
Total current assets 1,369,480 1,320,540
------------ ------------
Furniture, fixtures, equipment and
leasehold improvements at cost, less
accumulated depreciation and amortization
of $393,670 at December 31, 1995 and
$348,620 at March 31, 1995 224,460 191,530
Computer software, net of accumulated
amortization of $1,112,000 at December 31,
1995 and $972,370 at March 31, 1995 545,270 394,810
Other assets 28,440 45,340
------------ ------------
$ 2,167,650 $ 1,952,220
------------ ------------
------------ ------------
</TABLE>
<PAGE>
CTI Group (Holdings) Inc.
Consolidated Balance Sheet
<TABLE>
<CAPTION>
December 31, March 31,
1995 1995
LIABILITIES and STOCKHOLDERS' EQUITY ------------ -------------
(Unaudited)
<S> <C> <C>
Current liabilities:
Current portion of long-term debt $ 27,960 $ 16,080
Accounts payable 421,050 245,560
Accrued commissions and other compensation 40,070 34,910
Other accrued expenses 316,340 507,380
Deferred revenue 210,670 280,490
------------ ------------
Total current liabilities 1,016,090 1,084,420
------------ ------------
Long-term debt, less current portion 38,130 17,360
------------ ------------
Commitments and contingencies
Stockholders' equity:
Common stock, par value $.01; 10,000,000
shares authorized; 5,522,006 shares
issued at December 31, 1995 and 5,272,006
shares issued at March 31, 1995 55,220 52,720
Capital in excess of par value 7,199,230 7,173,480
Accumulated deficit (5,730,130) (5,969,360)
Cumulative translation adjustment (4,490) ----
------------ ------------
1,519,830 1,256,840
Less - Treasury stock, 140,250 shares at
December 31, 1995 and March 31, 1995;
at cost (406,400) (406,400)
------------ ------------
Total stockholders' equity 1,113,430 850,440
------------ ------------
$ 2,167,650 $ 1,952,220
------------ ------------
------------ ------------
</TABLE>
<PAGE>
CTI Group (Holdings) Inc.
Statement of Operations
<TABLE>
<CAPTION>
Nine Months Ended
December 31,
(Unaudited) ----------------------------
1995 1994
---- ----
<S> <C> <C>
Net sales $ 3,266,390 $ 2,440,790
------------ ------------
Costs and expenses:
Cost of sales (exclusive of depreciation 1,435,900 949,950
and amortization)
Selling, general and administrative expenses 1,385,830 1,242,310
Depreciation and amortization 184,990 325,630
Interest income, net of interest expense of
$1,720 and $530 in 1995 and 1994,
respectively (9,660) (6,440)
------------ ------------
2,997,060 2,511,450
------------ ------------
Income (loss) before income taxes 269,330 (70,660)
Income tax provision 30,100 ----
------------ ------------
Net income (loss) $ 239,230 $ (70,660)
------------ ------------
------------ ------------
Net income (loss) per common share $ 0.04 $ (0.01)
------------ ------------
------------ ------------
Weighted average common shares outstanding 5,326,200 5,121,756
------------ ------------
------------ ------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CTI Group (Holdings) Inc.
Statement of Operations Three Months Ended
December 31,
(Unaudited) -----------------------------
1995 1994
---- ----
<S> <C> <C>
Net sales $ 1,130,010 $ 812,750
------------ ------------
Costs and expenses:
Cost of sales (exclusive of depreciation 490,050 330,210
and amortization)
Selling, general and administrative expenses 487,990 429,590
Depreciation and amortization 61,440 108,070
Interest income, net of interest expense of
$920 and $170 in 1995 and 1994,
respectively (3,710) (2,440)
------------ ------------
1,035,770 865,430
------------ ------------
Income (loss) before income taxes 94,240 (52,680)
Income tax provision 10,900 ----
------------ ------------
Net income (loss) $ 83,340 $ (52,680)
------------ ------------
------------ ------------
Net income (loss) per common share $ 0.02 $ (0.01)
------------ ------------
------------ ------------
Weighted average common shares outstanding 5,381,756 5,121,756
------------ ------------
------------ ------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CTI Group (Holdings) Inc. Nine Months Ended
Consolidated Statement of Cash Flows December 31,
(Unaudited) ---------------------------
1995 1994
---- ----
<S> <C> <C>
Cash Provided By (Used In):
Operating activities:
Net Income (Loss) $ 239,230 $ (70,660)
------------ ------------
Adjustments to reconcile net income (loss) to cash
provided by (used in) operations:
Depreciation and amortization 184,990 325,630
Provision for doubtful accounts (18,000) (20,000)
Changes in Operating Working Capital:
Increase in receivables, trade (254,600) (13,860)
Decrease (increase) in inventories 19,670 (35,300)
Decrease (increase) in prepaid expenses 1,750 (25,560)
Increase in accounts payable 175,490 45,710
(Decrease) increase in accrued commissions and
other compensation 5,160 (47,770)
Decrease in other accrued expenses (191,040) (48,270)
Decrease in deferred revenue (69,820) (41,570)
------------ ------------
Total adjustments (146,400) 139,010
------------ ------------
Total operating activities 92,830 68,350
------------ ------------
Investing Activities:
Decrease (increase) in other assets 16,900 (19,920)
Additions to equipment and leasehold improvements (78,290) (34,450)
Additions to computer software (290,090) (83,670)
------------ ------------
Total investing activities (351,480) (138,040)
------------ ------------
Financing Activities:
Repayment of debt (17,350) (2,190)
Proceeds from bank borrowings 50,000 ----
Stock Issuance 28,250 ----
------------ ------------
Total financing activities 60,900 (2,190)
------------ ------------
Decrease in cash and cash equivalents (197,750) (71,880)
Effect of exchange rates on cash (4,490) ----
Cash and cash equivalents, at beginning of period 570,310 345,500
------------ ------------
Cash and cash equivalents, at end of period $ 368,070 $ 273,620
============ ============
Supplemental disclosures:
Cash paid during the year for:
Interest 1,720 530
Taxes 34,470 7,460
</TABLE>
<PAGE>
CTI Group (Holdings) Inc.
Notes to Consolidated Financial Statements
(Unaudited)
NOTE 1 - The consolidated balance sheet as of December 31, 1995, the
statement of operations for the three and nine months ended
December 31, 1995 and 1994, and the statement of cash flows for the
nine months ended December 31, 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 December 31,
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
December 31, 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 nine months ended December 31, 1995 increased $825,600
(34%) from the same period in the prior year. Service bureau revenue increased
$915,250 (48%) while licensed software sales decreased $89,630 (17%). The
Company's recurring service bureau revenues increased by approximately $421,000
while equipment sales, associated with its service bureau operations, increased
by approximately $494,000 for the quarter ended December 31, 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 domestic billing services market
during the last year. The Company has completed its new generation billing
software and is currently BETA testing this software domestically and expects to
be BETA testing the software internationally during the quarter ending March 31,
1996. This new product offering should enable the Company to further penetrate
the billing services market. Until the Company is able to re-engineer its
telemanagement licensed software product, management does not expect much change
in its telemanagement 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 re-engineer its telemanagement 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 telemanagement licensed software product. The Company
anticipates completing its new licensed software product during the first
quarter of its next fiscal year.
Cost of sales increased $485,950 (51%) for the nine months ended December 31,
1995 as compared to the prior year period. Cost of sales was 44% of sales for
the nine months ended December 31, 1995 as compared to 39% of sales for the
prior year period. Total equipment sales increased approximately $456,000 and
thereby substantially increased 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 Company's service bureau and licensed software revenues, the
overall profit margin has decreased.
<PAGE>
Selling, general and administrative expenses (S, G & A) increased $143,520
(12%) for the nine months ended December 31, 1995. S, G & A was 42% of sales for
the nine months ended December 31, 1995 as compared to 51% of sales for the
prior year period. The Company has been marketing its legacy billing software in
the domestic marketplace. When compared to the prior year period the result has
been an increase in domestic marketing costs of approximately $90,000, inclusive
of an increase in commission expense associated with the growth in domestic
sales. Additionally the Company has invested approximately $185,000 during the
current fiscal year in its International Subsidiary based in the U.K., which
represents an increase of approximately $150,000 when compared to the same
period in the prior year. The investment has been twofold; (1) to provide market
research for development of the Company's billing software for the international
marketplace, and (2) to lay the groundwork for maximum market pentration upon
completion of the Company's international version of its billing software. As a
result of the Company investing these funds, it has positioned itself to begin
receiving revenues from the international market during its next fiscal year.
The Company has been able to partially offset these increases with a reduction
in legal fees of approximately $76,000 as a result of concluding certain
litigation during its last fiscal year. The Company has also been able to reduce
certain other S, G & A expenses to help offset the marketing effort it embarked
upon during this fiscal year. This has allowed the Company to allocate more of
its resources to this effort than it would have been able to otherwise.
Depreciation and amortization expense decreased $140,640 (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 December 31, 1995 was $353,390, an increase of $117,270
from the March 31, 1995 working capital of $236,120. The working capital ratio
was 1.35 to 1 as of December 31, 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 Company's
operations, the Company has continued to invest in modernizing its proprietary
software products and equipment needs. The Company has used $50,000 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
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ITEM 1 - Legal Proceedings
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None
ITEM 2 - Changes in Securities
-------------------------------------
None
ITEM 3 - Defaults Upon Senior Securities
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Not Applicable
ITEM 4 - Submission of Matters to a Vote of Security Holders
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The Annual Meeting of Shareholders was held on November 16, 1995, at
which time the following matters were voted on by the Shareholders: (1)
the Shareholders elected Messrs. Anthony P. Johns, John D. Mazzuto,
Francis O. Hunnewell, Rupert D. Armitage and Mark H. Daugherty to serve
as Directors of the Company until the next Annual Meeting of
Shareholders and until their successors would be elected and would
qualify; (2) the Shareholders approved and adopted an amendment to the
Company's Certificate of Incorporation to change the Company's name to
CTI Group (Holdings) Inc. and contribute all the Company's tangible
assets and liabilities to CTI Data Solutions (USA) Inc., a Delaware
corporation and a wholly-owned subsidiary of the Company; (3) the
Shareholders approved and adopted the Company's Stock Option and
Restricted Stock Plan; and (4) the Shareholders ratified the selection
of Zelenkofske, Axelrod & Co., Ltd. as the Company's independent
certified public accountants.
ITEM 5 - Other Information
----------------------------------
None
ITEM 6 - Exhibits and Reports on Form 8 - K
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(a) Exhibits - None
(b) Form 8 - K
None filed in the nine months ended December 31, 1995.
<PAGE>
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:
2/7/96 /s/ Anthony P. Johns
- ----------- ----------------------------------
Anthony P. Johns
President & Chief Executive Officer
2/7/96 /s/ Mark H. Daugherty
- ----------- ----------------------------------
Mark H. Daugherty
Chief Financial Officer
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-START> APR-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 368,070
<SECURITIES> 0
<RECEIVABLES> 1,005,630
<ALLOWANCES> 52,000
<INVENTORY> 8,890
<CURRENT-ASSETS> 1,369,480
<PP&E> 618,130
<DEPRECIATION> 393,670
<TOTAL-ASSETS> 2,167,650
<CURRENT-LIABILITIES> 1,016,090
<BONDS> 0
0
0
<COMMON> 55,220
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 2,167,650
<SALES> 3,266,390
<TOTAL-REVENUES> 3,266,390
<CGS> 1,435,900
<TOTAL-COSTS> 2,997,060
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,720
<INCOME-PRETAX> 269,330
<INCOME-TAX> 30,100
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 239,230
<EPS-PRIMARY> .04
<EPS-DILUTED> 0
</TABLE>
