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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 June 30, 1997
[ ] 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
(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 No X
---- ------
The number of shares of common stock, par value $.01, outstanding as of
August 15, 1997 was: 6,390,314
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CTI Group (Holdings) Inc.
Consolidated Balance Sheet
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June 30, March 31,
1997 1997
ASSETS ----------- ----------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents....................... $ 34,050 $ 105,700
Receivables:
Trade, less allowance for doubtful
accounts of $65,000 at June 30,
1997 and March 31, 1997.................... 694,020 649,250
Inventories..................................... 47,860 42,360
Prepaid expenses................................ 76,170 76,430
---------- ----------
Total current assets..................... 852,100 873,740
---------- ----------
Furniture, fixtures, equipment and
leasehold improvements at cost, less
accumulated depreciation and amortization
of $447,010 at June 30, 1997 and
$431,830 at March 31, 1997...................... 202,680 210,530
Computer software, net of accumulated
amortization of $1,367,390 at June 30,
1997 and $1,328,930 at March 31, 1997........... 1,576,420 1,579,330
Excess of cost over net assets of acquired
business, net of accumulated amortization
of $3,310 at June 30, 1997 and $2,200
at March 31, 1997............................... 41,250 42,360
Other assets...................................... 49,810 49,810
---------- ----------
---------- ----------
$2,722,260 $2,755,770
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---------- ----------
</TABLE>
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CTI Group (Holdings) Inc.
Consolidated Balance Sheet
June 30, March 31,
1997 1997
LIABILITIES and STOCKHOLDERS' EQUITY ------------- -------------
(Unaudited)
Current liabilities:
Current portion of long-term debt $ 160,150 $ 57,360
Accounts payable 456,870 519,750
Accrued commissions and other compensation 53,680 24,990
Other accrued expenses 298,240 283,510
Deferred revenue 340,700 365,880
----------- -----------
Total current liabilities 1,309,640 1,251,490
----------- -----------
Long-term debt, less current portion 20,880 25,280
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Commitments and contingencies
Stockholders' equity:
Common stock, par value $.01; 10,000,000
shares authorized; 6,530,564 shares
issued at June 30, 1997 and March 31, 1997 65,310 65,310
Capital in excess of par value 7,769,180 7,769,180
Accumulated deficit (6,030,280) (5,943,020)
----------- -----------
1,804,210 1,891,470
Equity adjustment from foreign currency
translation (6,070) (6,070)
Less - Treasury stock, 140,250 shares at
June 30, 1997 and March 31, 1997
at cost (406,400) (406,400)
----------- -----------
Total stockholders' equity 1,391,740 1,479,000
----------- -----------
$ 2,722,260 $ 2,755,770
----------- -----------
----------- -----------
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CTI Group (Holdings) Inc.
Statement of Operations Three Months Ended
June 30,
(Unaudited) -----------------------------
1997 1996
---- ----
Net sales $ 830,270 $ 901,820
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Costs and expenses:
Cost of sales (exclusive of depreciation 384,050 386,590
and amortization)
Selling, general and administrative expenses 474,710 456,940
Depreciation and amortization 54,750 42,620
Interest expense, net of interest income of
$590 and $3,000 in 1997 and 1996,
respectively 4,020 (1,920)
----------- -----------
917,530 884,230
----------- -----------
Income (loss) before income taxes (87,260) 17,590
Income tax provision -- 2,110
----------- -----------
Net income (loss) $ (87,260) $ 15,480
=========== ===========
Net income (loss) per common share $ (0.01) $ 0.00
=========== ===========
Weighted average common shares outstanding 6,390,314 5,398,423
=========== ===========
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CTI Group (Holdings) Inc.
Consolidated Statement of Cash Flows
(Unaudited)
Three Months Ended
June 30,
----------------------
1997 1996
---- ----
Cash Provided By (Used In):
Operating activities:
Net Income $ (87,260) $ 15,480
---------- ---------
Adjustments to reconcile net income to cash
provided by (used in) operations:
Depreciation and amortization 54,750 42,620
Provision for doubtful accounts -- (8,700)
Issuance of stock option -- 24,000
Changes in Operating Working Capital:
Decrease (increase) in receivables, trade (44,770) 130,610
Increase in inventories (5,500) (9,190)
Decrease (increase) in prepaid expenses 260 (14,780)
Decrease in accounts payable (62,880) (116,970)
(Decrease) increase) in accrued commissions
and other compensation 28,690 (20,930)
(Decrease) increase in other accrued expenses 14,730 (21,710)
Decrease in deferred revenue (25,180) (31,880)
---------- ---------
Total adjustments (39,900) (26,930)
---------- ---------
Total operating activities (127,160) (11,450)
---------- ---------
Investing Activities:
Increase in other assets -- (10,070)
Additions to equipment and leasehold improvements (7,330) (20,810)
Additions to computer software (35,550) (134,160)
---------- ---------
Total investing activities (42,880) (165,040)
---------- ---------
Financing Activities:
Repayment of debt (11,610) (20,110)
Proceeds from borrowings 110,000 --
Stock issuance via exercise of stock option -- 10,000
---------- ---------
Total financing activities 98,390 (10,110)
--------- ---------
Decrease in cash and cash equivalents (71,650) (186,600)
Effect of exchange rates on cash -- 30
Cash and cash equivalents, at beginning of period 105,700 288,870
--------- ---------
Cash and cash equivalents, at end of period $ 34,050 $ 102,300
--------- ---------
--------- ---------
Supplemental disclosures:
Cash paid during the year for:
Interest 4,620 680
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CTI Group (Holdings) Inc.
Notes to Consolidated Financial Statements
(Unaudited)
NOTE 1 - The consolidated balance sheet as of June 30, 1997, the statement
of operations for the three months ended June 30, 1997 and 1996,
and the statement of cash flows for the three months ended June 30,
1997 and 1996 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 June 30, 1997 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 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
June 30, 1996 data to conform to the current years presentations.
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ITEM 2
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Management's Discussion and Analysis
or Plan of Operation
Results of Operations
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Net sales for the three months ended June 30, 1997 decreased $71,550 (8%)
from the same period in the prior year. Included in this reduction was a
decline in the Company's sales associated with its telemanagement service
bureau products of approximately $61,000 (16%) from the same period in the
prior year. Sales associated with the Company's billing products decreased
approximately $240,000 (59%) from the same period in the prior year. This
reduction was the result of a major customer cancellation in September 1996.
Sales associated with the Company's telemanagement licensed software products
increased approximately $229,000 (189%). This increase was primarily due to the
acquisition of Soft-Com Inc. in January 1997.
Cost of sales decreased $2,540 (1%) for the three months ended June 30, 1997
as compared to the prior year period. Cost of sales was 46% of sales for the
three months ended June 30, 1997 as compared to 43% of sales for the prior
year period. The Company reduced its ongoing cost of sales in the third
quarter of fiscal year ended March 31, 1997 as the result of the loss of a
major customer, however these costs were offset by the costs associated with
the Company's purchase of Soft-Com Inc in January 1997.
Selling, general and administrative expenses (S, G & A) increased $17,770
(4%) for the three months ended June 30, 1997. S, G & A was 57% of sales for
the three months ended June 30, 1997 as compared to 51% of sales for the
prior year period. The increase is due to the additional staff and marketing
costs associated with the purchase of Soft-Com Inc., in January 1997.
Depreciation and amortization expense decreased $12,130 (29%) from the same
period in the prior year. The increase is the result of the Company beginning
to amortize its new software products (i.e. Neptune & Unity).
The Company continues to market its new software products Neptune and Unity.
The Neptune billing software was completed as of the fiscal year ended March
31, 1997. The Company continues to install the smaller customers since March
1997 and has installed Neptune at a large customer site. Revenues will begin
to be generated from this larger customer site in the second quarter of this
fiscal year. Unity sales have been received and installed beginning in the
last quarter of the fiscal year ended March 31, 1997.
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Liquidity and Capital Resources
- ----------------------------------------------
Working capital at June 30, 1997 was a deficit of $457,540, a decrease
of $79,790 from the March 31, 1997 deficit of $79,790. The working capital
ratio was .65 to 1 as of June 30, 1997 and .70 to 1 as of March 31, 1997.
Working capital decreased as the result of the Company's operating activities
utilizing cash. The Company utilized the line of credit it has with the bank
to fund its operations for the quarter ending June 30, 1997. Subsequent to
June 30, 1997 the Company has reduced its cost structure so as to assist the
Company in generating cash for its operations. The Company's bank has
extended the maturity of the Company's $200,000 revolving line of credit to
September 30, 1997. The Company intends to discuss with the bank a further
extension of the line of credit as well as to seek additional funding.
<PAGE>
Part II - Other Information
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ITEM 1 - Legal Proceedings
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On August 11, 1997, John Perri, the former President of the Company's CTI
Soft-Com Inc. subsidiary, and Soft-Com, Inc. ("Soft-Com"), filed suit against
the Company, CTI Data Solutions (USA), Inc., Anthony P. Johns and Mark
Daugherty in connection with the Company's termination of Mr. Perri's
employment on July 28, 1997 and the Company's acquisition of Soft-Com in
January 1997. Mr. Perri is seeking a preliminary and permanent injunction
restricting the Company from enforcing the non-competition provisions of his
employment agreement and from selling or dissipating any of the assets of the
former Soft-Com. Mr. Perri is also seeking recission in the Merger Agreement
pursuant to which the Company acquired Soft-Com and certain monetary damages.
The Company filed a motion to dismiss the complaint for lack of subject
matter jurisdiction, a motion to partially dismiss the complaint for failure
to state a claim and a motion to stay discovery. The court has directed
discovery to proceed and will rule on the motion to dismiss in due course.
The Company intends to vigorously defend the action and believes it has
meritorious defenses to Mr. Perri's claims.
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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There were no matters submitted for a vote of security holders during the
three months ended June 30, 1997.
ITEM 5 - Other Information
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None
ITEM 6 - Exhibits and Reports on Form 8 - K
- -----------------------------------------------
(a) Exhibits - None
(b) Form 8 - K
None filed in the three months ended June 30, 1997.
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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.
/s/ Anthony P. Johns August 20, 1997
- ------------------------------------ ----------------
Anthony P. Johns Date
President & Chief Executive Officer
/s/ Mark H. Daugherty August 20, 1997
- ------------------------------------ ----------------
Mark H. Daugherty Date
Chief Financial Officer
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> APR-1-1997
<PERIOD-END> JUN-30-1997
<CASH> 34050
<SECURITIES> 0
<RECEIVABLES> 759020
<ALLOWANCES> 65000
<INVENTORY> 47860
<CURRENT-ASSETS> 852100
<PP&E> 649690
<DEPRECIATION> 447010
<TOTAL-ASSETS> 2722260
<CURRENT-LIABILITIES> 1309640
<BONDS> 0
0
0
<COMMON> 65310
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 2722260
<SALES> 830270
<TOTAL-REVENUES> 830270
<CGS> 384050
<TOTAL-COSTS> 917530
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4610
<INCOME-PRETAX> (87260)
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<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (87260)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> 0
</TABLE>
