<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, 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
November 10, 1997 was: 6,390,314
Transitional Small Business Disclosure Format (check one):
Yes No X
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CTI Group (Holdings) Inc.
Consolidated Balance Sheet
<TABLE>
<CAPTION>
SEPTEMBER 30, MARCH 31,
1997 1997
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<S> <C> <C>
ASSETS
(Unaudited)
Current assets:
Cash and cash equivalents............................ $ 66,270 $ 105,700
Receivables:
Trade, less allowance for doubtful
accounts of $45,000 at September 30,
1997 and $65,000 March 31, 1997..................... 761,550 649,250
Inventories.......................................... 48,750 42,360
Prepaid expenses..................................... 100,990 76,430
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Total current assets............................... 977,560 873,740
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Furniture, fixtures, equipment and
leasehold improvements at cost, less
accumulated depreciation and amortization
of $462,170 at September 30, 1997 and
$431,830 at March 31, 1997.......................... 187,540 210,530
Computer software, net of accumulated
amortization of $1,395,150 at September 30,
1997 and $1,328,930 at March 31, 1997............... 1,559,900 1,579,330
Excess of cost over net assets of acquired
business, net of accumulated amortization
of $4,320 at September 30, 1997 and $2,200
at March 31, 1997................................... 40,240 42,360
Other assets.......................................... 49,810 49,810
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$2,815,050 $ 2,755,770
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</TABLE>
2
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CTI Group (Holdings) Inc.
Consolidated Balance Sheet
<TABLE>
<CAPTION>
SEPTEMBER 30, MARCH 31,
1997 1997
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<S> <C> <C>
LIABILITIES and STOCKHOLDERS' EQUITY
(UNAUDITED)
Current liabilities:
Current portion of long-term debt................................. $ 224,790 $ 57,360
Accounts payable.................................................. 591,250 519,750
Accrued commissions and other compensation........................ 95,750 24,990
Other accrued expenses............................................ 329,580 283,510
Deferred revenue.................................................. 339,180 365,880
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Total current liabilities....................................... 1,580,550 1,251,490
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Long-term debt, less current portion.............................. 22,360 25,280
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Commitments and contingencies
Stockholders' equity:
Common stock, par value $.01; 10,000,000
shares authorized; 6,530,564 shares
issued at September 30, 1997 and March 31, 1997................... 65,310 65,310
Capital in excess of par value.................................... 7,769,180 7,769,180
Accumulated deficit............................................... (6,209,880) (5,943,020)
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1,624,610 1,891,470
Equity adjustment from foreign currency
translation....................................................... (6,070) (6,070)
Less--Treasury stock, 140,250 shares at
September 30, 1997 and March 31, 1997
at cost........................................................... (406,400) (406,400)
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Total stockholders' equity...................................... 1,212,140 1,479,000
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$ 2,815,050 $ 2,755,770
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</TABLE>
3
<PAGE>
CTI Group (Holdings) Inc.
Statement of Operations
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
SEPTEMBER 30,
----------------
1997 1996
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<S> <C> <C>
Net sales............................................... $ 1,584,630 $ 1,783,830
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Costs and expenses:
Cost of sales (exclusive of depreciation................ 810,580 761,970
and amortization)
Selling, general and administrative expenses............ 927,580 907,910
Depreciation and amortization........................... 101,700 102,930
Interest expense, net of interest (income) of
$1,220 and $5,100 in 1997 and 1996,
respectively............................................ 11,630 (3,110)
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1,851,490 1,769,700
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Income (loss) before income taxes....................... (266,860) 14,130
Income tax provision.................................... -- 13,610
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Net income (loss)..................................... $ (266,860) $ 520
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------------ ------------
Net income (loss) per common share...................... $ (0.04) $ 0.00
------------ ------------
------------ ------------
Weighted average common shares outstanding.............. 6,390,314 5,415,089
------------ ------------
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</TABLE>
4
<PAGE>
CTI Group (Holdings) Inc.
Statement of Operations
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
------------------
1997 1996
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<S> <C> <C>
Net sales................................................ $ 754,360 $ 882,010
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Costs and expenses:
Cost of sales (exclusive of depreciation
and amortization)....................................... 426,530 375,380
Selling, general and administrative expenses............. 452,870 450,970
Depreciation and amortization............................ 46,950 60,310
Interest expense, net of interest (income) of
$630 and $2,500 in 1997 and 1996,
respectively............................................ 7,610 (1,190)
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933,960 885,470
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Loss before income taxes................................. (179,600) (3,460)
Income tax provision..................................... -- 11,500
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Net loss.............................................. $ (179,600) $ (14,960)
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Net loss per common share................................ $ (0.03) $ 0.00
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Weighted average common shares outstanding............... 6,390,314 5,431,756
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</TABLE>
5
<PAGE>
CTI Group (Holdings) Inc.
Consolidated Statement of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
SEPTEMBER 30,
----------------
1997 1996
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<S> <C> <C>
Cash Provided By (Used In):
Operating activities:
Net Income............................................. $ (266,860) $ 520
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Adjustments to reconcile net income to cash
provided by (used in) operations:
Depreciation and amortization.......................... 101,700 102,930
Provision for doubtful accounts........................ (20,000) (10,000)
Issuance of stock option............................... -- 50,230
Changes in Operating Working Capital:
Decrease (increase) in receivables, trade.............. (92,300) 400,940
Increase in inventories................................ (6,390) (14,370)
Increase in prepaid expenses........................... (24,560) (14,030)
(Decrease) increase in accounts payable................ 71,500 (126,860)
(Decrease) increase in accrued commissions
and other compensation................................ 70,760 (40,510)
(Decrease) increase in other accrued expenses.......... 46,070 (31,740)
Decrease in deferred revenue........................... (26,700) (10,760)
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Total adjustments........................................ 120,080 305,830
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Total operating activities............................ (146,780) 306,350
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Investing Activities:
Increase in other assets............................... -- (10,100)
Additions to equipment and leasehold
improvements........................................... (7,330) (20,890)
Additions to computer software......................... (49,830) (252,800)
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Total investing activities............................ (57,160) (283,790)
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Financing Activities:
Repayment of debt...................................... (10,490) (22,900)
Proceeds from borrowings............................... 175,000 --
Stock issuance via exercise of stock option............ -- 10,000
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Total financing activities............................ 164,510 (12,900)
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(Decrease) increase in cash and cash equivalents......... (39,430) 9,660
Effect of exchange rates on cash......................... -- (720)
Cash and cash equivalents, at beginning of period........ 105,700 288,870
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Cash and cash equivalents, at end of period.............. $ 66,270 $ 297,810
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Supplemental disclosures:
Cash paid during the year for:
Interest.............................................. 10,800 3,270
</TABLE>
6
<PAGE>
CTI Group (Holdings) Inc.
Notes to Consolidated Financial Statements
(Unaudited)
NOTE 1 - The consolidated balance sheet as of September 30, 1997,
the statement of operations for the six and three months
ended September 30, 1997 and 1996, and the statement of
cash flows for the six months ended September 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 September 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
September 30, 1996 data to conform to the current years
presentations.
NOTE 5 - On August 11, 1997, John Perri ("Perri"), the former President of the
Company's CTI Soft-Com Inc. subsidiary and Soft-Com Inc., filed suit
in the United States District Court for the Eastern District of
Pennsylvania 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 Inc. in January 1997. On November 11,
1997, the parties to this litigation entered into a settlement
agreement, pursuant to which, among other things; (i) no party admitted
liability to another party; (ii) the Company agreed to pay an
aggregate of $100,000 payable in monthly installments of $5,000 and
issue options to purchase 100,000 shares of common stock of the
Company to Perri to resolve the litigation and buy out the remainder
of Perri's employment contract; (iii) Perri filed a stipulation
terminating the litigation with prejudice; and, (iv) the parties
released each other from any further liability.
7
<PAGE>
ITEM 2
Management's Discussion and Analysis
Results of Operations
Net sales for the six months ended September 30, 1997 decreased $199,200
(11%) 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 $146,000 (19%) from the same period in the
prior year. Sales associated with the Company's billing products decreased
approximately $436,000 (53%) 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 $383,000 (189%). This increase was
primarily due to the acquisition of Soft-Com Inc. in January 1997.
Cost of sales increased $48,610 (6%) for the six months ended September 30,
1997 as compared to the prior year period. Cost of sales was 51% of sales for
the six months ended September 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 $19,670(2%)
for the six months ended September 30, 1997. S, G & A was 59% of sales for the
six months ended September 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.
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 Neptune at smaller customers
and has installed Neptune at one large customer site. This larger customer
site began generating revenues for the Company in the second quarter of this
fiscal year. The Company expects this larger customer to grow in size and
therefore increase revenues to the Company during the coming months. Unity
sales and installations commenced in the last quarter of the fiscal year
ended March 31, 1997.
Liquidity and Capital Resources
Working capital at September 30, 1997 was a deficit of $602,990, a decrease
of $225,240 from the March 31, 1997 deficit of $377,750. The working capital
ratio was .62 to 1 as of September 30, 1997 and .70 to 1 as of March 31,
1997. Working capital decreased as 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 six months ending September 30,
1997. The Company's bank has extended the maturity of the Company's $200,000
revolving line of credit to March 31, 1998. During the quarter ended
September 30,1997, the Company reduced its cost structure by way of a
reduction in its workforce. As discussed in Part II item 1, on November 11,
1997, the Company settled an outstanding lawsuit with the former President of
its CTI Soft-Com Inc. subsidiary. As part of the settlement the Company
eliminated the restriction that was part of the acquisition agreement with
Soft-Com Inc., which prevented the Company from closing its New York office.
As a result of this settlement, the Company is in the process of
consolidating its New York operations into its Valley Forge operations to
further reduce its cost structure and thus assist the Company in generating
cash from operations.
8
<PAGE>
Part II - Other Information
ITEM 1 - Legal Proceedings
On August 11, 1997, John Perri ("Perri"), the former President of the
Company's CTI Soft-Corn Inc. subsidiary and Soft-Corn Inc, filed suit in the
United States District Court for the Eastern District of Pennsylvania 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-Corn Inc.
in January 1997. On November 11, 1997, the parties to this litigation entered
into a settlement agreement, pursuant to which, among other things; (i) no
party admitted liability to another party: (ii) the Company agreed to pay an
aggregate of $100,000 payable in monthly installments of $5,000 and issue
options to purchase 100,000 shares of common stock of the Company to Perri to
resolve the litigation and buy out the remainder of Perri's employment
contract; (iii) Perri filed a stipulation terminating the litigation with
prejudice; and, (iv) the parties released each other from any further
liability.
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, 1997.
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 three months ended September 30, 1997.
9
<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.
/s/ Anthony P. Johns 11/19/97
___________________________________ ___________________
Anthony P. Johns Date
President & Chief Executive Officer
/s/ Mark H. Daugherty 11/19/97
___________________________________ ___________________
Mark H. Daugherty Date
Chief Financial Officer
10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 66,270
<SECURITIES> 0
<RECEIVABLES> 806,550
<ALLOWANCES> 45,000
<INVENTORY> 48750
<CURRENT-ASSETS> 977560
<PP&E> 649710
<DEPRECIATION> 462170
<TOTAL-ASSETS> 2815050
<CURRENT-LIABILITIES> 1580550
<BONDS> 0
0
0
<COMMON> 65310
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 2815050
<SALES> 1584630
<TOTAL-REVENUES> 1584630
<CGS> 810580
<TOTAL-COSTS> 1851490
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12850
<INCOME-PRETAX> (266860)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (266860)
<EPS-PRIMARY> (.04)
<EPS-DILUTED> 0
</TABLE>
