<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 June 30, 1998
[ ] 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.)
2550 Eisenhower Avenue, Norristown, PA 19403
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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 30, 1998 was: 7,037,957
<PAGE>
CTI Group (Holdings) Inc.
Consolidated Balance Sheet
<TABLE>
<CAPTION>
June 30, March 31,
1998 1998
------------ -------------
ASSETS (Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents .................. $ 348,308 $ 628,329
Receivables:
Trade, less allowance for doubtful
accounts of $185,099 at June 30,
1998 and $281,399 at March 31, 1998 ........ 1,153,788 1,239,353
Inventories ................................ 48,721 48,674
Prepaid expenses ........................... 126,304 145,894
------------ -------------
Total current assets ....................... 1,677,121 2,062,250
------------ -------------
Furniture, fixtures, equipment and
leasehold improvements at cost, less
accumulated depreciation and amortization
of $375,971 at June 30, 1998 and
$314,540 at March 31, 1998 ................. 372,676 405,135
Computer software, net of accumulated
amortization of $1,955,688 at June 30,
1998 and $1,790,014 at March 31, 1998 ...... 2,045,349 2,080,811
Excess of cost over net assets of acquired
business, net of accumulated amortization of
$7,773 at June 30, 1998 and $6,660
at March 31, 1998 ........................ 36,792 37,905
Other assets ............................... 16,812 16,812
Deferred Tax Asset ......................... 76,500 76,500
------------ -------------
$ 4,225,250 $ 4,679,413
------------ -------------
------------ -------------
</TABLE>
<PAGE>
CTI Group (Holdings) Inc.
Consolidated Balance Sheet
<TABLE>
<CAPTION>
June 30, March 31,
1998 1998
------------- -------------
LIABILITIES and STOCKHOLDERS' EQUITY (Unaudited)
<S> <C> <C>
Current liabilities:
Current portion of long-term debt ....................................... $ 280,072 $ 293,820
Accounts payable ........................................................ 561,110 779,336
Accrued commissions and other compensation .............................. 248,880 25,323
Other accrued expenses .................................................. 1,071,013 1,232,645
Deferred revenue ........................................................ 1,134,252 1,072,016
------------- -------------
Total current liabilities ............................................... 3,295,327 3,403,140
------------- -------------
Long-term debt, less current portion .................................... 1,286,830 1,267,743
------------- -------------
Commitments and contingencies
Stockholders' equity:
Common stock, par value $.01; 10,000,000
shares authorized; 51,668 shares
issued at June 30, 1998 and March 31, 1998 .............................. 69,900 69,900
Capital in excess of par value .......................................... 8,028,230 8,028,230
Accumulated deficit ..................................................... (8,011,716) (7,670,841)
------------- -------------
86,414 427,289
Equity adjustment from foreign currency
translation ............................................................. (36,921) (12,359)
Less - Treasury stock, 140,250 shares at June 30, 1998 and March 31, 1998
at cost ................................................................. (406,400) (406,400)
------------- -------------
Total stockholders' equity .............................................. (356,907) 8,530
------------- -------------
$ 4,225,250 $ 4,679,413
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------------- -------------
</TABLE>
<PAGE>
CTI Group (Holdings) Inc.
Statement of Operations
<TABLE>
<CAPTION>
Three Months Ended
June 30,
----------------------------
(Unaudited)
Restated
1998 1997
------------ -----------
<S> <C> <C>
Net sales $ 1,626,510 $ 830,270
------------ -----------
Costs and expenses:
Cost of sales (exclusive of depreciation ........ 884,260 384,050
and amortization)
Selling, general and administrative expenses .... 823,470 474,710
Depreciation and amortization ................... 228,220 127,750
Interest expense, net of interest income of
$33,535 and $6,480 in 1998 and 1997, respectively 2,490
Imputed Interest ................................ 28,950 4,020
------------ -----------
1,967,390 990,530
------------ -----------
Income (loss) before income taxes ............... (340,880) (160,260)
Income tax provision ............................ --
------------ -----------
Net income (loss) ............................... $ (340,880) $ (160,260)
------------ -----------
------------ -----------
Other Comprehensive income, net of tax
Foreign currency translation adjustments ........ (36,921) --
------------ -----------
Comprehensive Income ............................ $ (377,801) (160,260)
------------ -----------
------------ -----------
Net income (loss) per common share .............. $ (0.05) $ (0.03)
------------ -----------
------------ -----------
Weighted average common shares outstanding ...... 6,526,000 6,390,314
------------ -----------
------------ -----------
</TABLE>
<PAGE>
CTI Group (Holdings) Inc.
Consolidated Statement of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
June 30,
------------------------
1998 Restated
1997
<S> <C> <C>
Cash Provided By (Used In):
Operating activities:
Net Income .................................................................. $(340,880) $(160,260)
----------- ----------
Adjustments to reconcile net income to cash provided by (used in) operations:
Depreciation and amortization ............................................... 228,220 127,750
Provision for doubtful accounts ............................................. (36,639)
Imputed Interest
Stock Grant
Changes in Operating Working Capital:
Decrease (increase) in receivables, trade .................................. 122,204 (44,770)
Increase in inventories ..................................................... (47) (5,500)
Decrease (increase) in prepaid expenses ..................................... 19,590 260
Decrease in accounts payable ................................................ (218,226) (62,880)
(Decrease) increase) in accrued commissions
and other compensation ...................................................... 223,557 28,690
(Decrease) increase in other accrued expenses ............................... (161,632) 14,730
Decrease in deferred revenue ................................................ 62,236 (25,180)
----------- ----------
Total adjustments ........................................................... 239,263 33,100
----------- ----------
Total operating activities .................................................. (101,617) (127,160)
----------- ----------
Investing Activities:
Increase in other assets .................................................... -- --
Additions to equipment and leasehold improvements ........................... (28,972) (7,330)
Additions to computer software .............................................. (130,212) (35,550)
----------- ----------
Total investing activities .................................................. (159,184) (42,880)
----------- ----------
Financing Activities:
Change in Debt .............................................................. 5,339 (11,610)
Proceeds from borrowings .................................................... -- 110,000
Stock issuance via exercise of stock option ................................. --
----------- ----------
Total financing activities .................................................. 5,339 98,390
----------- ----------
Decrease in cash and cash equivalents ....................................... (255,462) (71,650)
Effect of exchange rates on cash ............................................ (24,559) --
Cash and cash equivalents, at beginning of period ........................... 628,329 105,700
----------- ----------
Cash and cash equivalents, at end of period ................................. $ 348,308 $ 34,050
----------- ----------
----------- ----------
Supplemental disclosures:
Cash paid during the year for:
Interest .................................................................... 4,650 4,620
</TABLE>
<PAGE>
ITEM 2
- ------
Management's Discussion and Analysis
or Plan of Operation
Results of Operations
- ---------------------
Net sales for the three months ending June 30, 1998 increased by $796,240 over
the same period in 1997. This represented a 96% increase over the same quarter
last year and reflected the first full quarters results of $944,306 from the
acquistion of the Databit business from Siemens Plc in the UK. There was also an
increase in revenues for Neptune of $42,850 counterbalanced by a decline in the
Company's ITMS and Service Bureau revenues of $126,684. Sales for the Company's
Unity product and services also declined by $65,758 or 30%. This decline within
CTI Softcom was due to a change in company policy, compared to last year, to
bill maintenance on customer order and firm contract to alleviate an
overstatement of billed revenue and a subsequent bad debt expense write off.
The Cost of Sales in the Quarter increased by $500,210 over the same period in
1997. The increase was caused by the incorporation into the quarters results for
CTI Data Solutions Limited of the former Databit business of Siemens Plc. This
was counterbalanced by a decline in the combined Cost of Sales for the US based
business areas of $49,521. The decline in Sales for the US business over the
quarter was $149,952 or 18% of Sales. The Cost of Sales did not however decline
by the same percentage as there was a investment of resources into further
enhancement and development of the company's portfolio of new Windows based
products.
Selling, General, and Administration Expenses increased by $348,760 over the
same quarter in 1997. The Selling, General and Administration expenses in the US
declined by $141,251 or 30% over the same quarter in 1997. This was the result
of closing the New York offices of CTI Softcom and merging the Operations of CTI
Softcom into the CTI Data Solutions Offices at Valley Forge Pa. This reduction
was offset by the first full quarter of Selling, General, and Administration
expenses from CTI Data Solutions Limited of $490,011.
The Depreciation and amortization expenses increased by $100,470, an increase of
79%, which reflected the first full quarter of amortizing the Software products
acquired with the Databit business in the UK.
Liquidity and Capital Resources
- -------------------------------
Working Capital at June 30, 1998 showed a deficit of $1,541,706. This compared
to a deficit of $1,340,890 at March 31, 1998 and represents a decline of
$200,816. The Working Capital ratio declined from .061 to .053 over the quarter
CTI Data Solutions Inc. has a line of credit with its bank for the amount of
$200,000 which was fully utilized at June 30th 1998 and this line has been
extended until September 30, 1999. CTI Data Solutions limited does not have a
line of credit with any bank.
<PAGE>
CTI Group (Holdings) Inc.
Notes to Consolidated Financial Statements
(Unaudited)
NOTE 1 - The consolidated balance sheet as of June 30, 1998, the statement of
operations for the three months ended June 30, 1998 and 1997, and the
statement of cash flows for the three months ended June 30, 1998 and
1997 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, 1998 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, 1997 data to conform to the current years presentations.
<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 three months ended June 30, 1998
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 June 30, 1998
<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.
- ----------------------------------- --------------------------
Anthony P. Johns Date
President & Chief Executive Officer
- ----------------------------------- --------------------------
Geoffrey L. Powell Date
Acting Chief Financial Officer
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> MAR-31-1999 MAR-31-1998
<PERIOD-START> APR-01-1998 APR-01-1997
<PERIOD-END> JUN-30-1998 JUN-30-1997
<CASH> 348,308 628,329
<SECURITIES> 0 0
<RECEIVABLES> 1,465,191 1,666,646
<ALLOWANCES> 185,099 281,399
<INVENTORY> 48,721 48,674
<CURRENT-ASSETS> 1,677,121 2,062,250
<PP&E> 4,887,561 4,728,377
<DEPRECIATION> 2,339,432 2,111,214
<TOTAL-ASSETS> 4,225,250 4,679,413
<CURRENT-LIABILITIES> 4,582,157 4,670,883
<BONDS> 0 0
0 0
0 0
<COMMON> 69,900 69,900
<OTHER-SE> (426,807) (61,370)
<TOTAL-LIABILITY-AND-EQUITY> 4,225,250 4,679,413
<SALES> 1,626,510 830,270
<TOTAL-REVENUES> 1,626,510 830,270
<CGS> 884,260 384,050
<TOTAL-COSTS> 1,051,690 602,460
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 31,440 4,020
<INCOME-PRETAX> 0 0
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (340,880) (1,601,260)
<EPS-PRIMARY> (.05) (.03)
<EPS-DILUTED> 0 0
</TABLE>
