<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, 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.
- --------------------------------------------------------------------------------
(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
- --------------------------------------------------------------------------------
(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>
September 30 March 31,
1998 1998
ASSETS ------------ ---------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 132,965 $ 628,329
Receivables:
Trade, less allowance for doubtful
accounts of $211,754 at September 30,
1998 and $281,399 at March 31, 1998 1,251,026 1,239,353
Inventories 47,660 48,674
Prepaid expenses 69,271 145,894
---------- ----------
Total current assets 1,500,922 2,062,250
---------- ----------
Furniture, fixtures, equipment and
leasehold improvements at cost, less
accumulated depreciation and amortization
of $431,368 at September 30, 1998 and
$314,540 at March 31, 1998 320,723 405,135
Computer software, net of accumulated
amortization of $2,121,342 at September 30,
1998 and $1,790,014 at March 31, 1998 1,939,027 2,080,811
Excess of cost over net assets of acquired
business, net of accumulated amortization of
$8,882 at September 30, 1998 and $6,660
at March 31, 1998 35,679 37,905
Other assets 21,862 16,812
Deferred Tax Assets 76,500 76,500
---------- ----------
$3,894,713 $4,679,413
---------- ----------
---------- ----------
</TABLE>
<PAGE>
CTI Group (Holdings) Inc.
Consolidated Balance Sheet
<TABLE>
<CAPTION>
September 30 March 31,
1998 1998
LIABILITIES and STOCKHOLDERS' EQUITY ------------ ---------
(Unaudited)
<S> <C> <C>
Current liabilities:
Current portion of long-term debt $ 261,894 $ 293,820
Accounts payable 550,053 779,336
Accrued commissions and other compensation 261,225 25,323
Other accrued expenses 1,127,733 1,232,645
Deferred revenue 1,130,916 1,072,016
----------- -----------
Total current liabilities 3,331,821 3,403,140
----------- -----------
Long-term debt, less current portion 1,202,731 1,267,743
----------- -----------
Commitments and contingencies
Stockholders' equity:
Common stock, par value $.01; 10,000,000
shares authorized; 51,668 shares
issued at September 30, 1998 and March 31, 1998 69,900 69,900
Capital in excess of par value 8,028,230 8,028,230
Accumulated deficit (8,309,280) (7,670,841)
----------- -----------
(211,150) 427,289
Equity adjustment from foreign currency
translation (22,289) (12,359)
Less - Treasury stock, 140,250 shares at
September 30, 1998 and March 31, 1998
at cost (406,400) (406,400)
----------- -----------
Total stockholders' equity (639,839) 8,530
----------- -----------
$ 3,894,713 $ 4,679,413
----------- -----------
----------- -----------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CTI Group (Holdings) Inc.
Statement of Operations Six Months Ended
September 30
(Unaudited) --------------------------------
Restated
1998 1997
------------ ------------
<S> <C> <C>
Net sales $ 3,455,990 $ 1,584,630
------------ ------------
Costs and expenses:
Cost of sales (exclusive of depreciation 1,832,560 810,580
and amortization)
Selling, general and administrative expenses 1,745,940 927,580
Depreciation and amortization 450,380 255,540
Interest expense, net of interest income of
$9,749 and $1,220 in 1998 and 1997, respectively 8,330 11,630
Imputed Interest 57,230
------------ ------------
4,094,440 2,005,330
------------ ------------
Income (loss) before income taxes (638,450) (420,700)
Income tax provision -- --
------------ ------------
Net income (loss) $ (638,450) $ (420,700)
------------ ------------
------------ ------------
Other Comprehensive income before tax:
Foreign currency translation adjustment (22,289) --
------------ ------------
Comprehensive Income (660,739) (420,700)
------------ ------------
------------ ------------
Net income (loss) per common share $ (0.09) $ (0.07)
------------ ------------
------------ ------------
Weighted average common shares outstanding 7,037,957 6,390,314
------------ ------------
------------ ------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CTI Group (Holdings) Inc.
Statement of Operations Three Months Ended
September 30,
(Unaudited) ----------------------------------------
Restated
1998 1997
---- ----
<S> <C> <C>
Net sales $ 1,829,480 $ 754,360
-------------- ---------------
Costs and expenses:
Cost of sales (exclusive of depreciation 948,300 426,530
and amortization)
Selling, general and administrative expenses 922,470 452,870
Depreciation and amortization 213,910 127,790
Interest income, net of interest expense of
$3,218 and $630 in 1998 and 1997,respectively 5,840 7,610
Imputed Interest 28,280
-------------- ---------------
2,118,800 1,014,800
-------------- ---------------
-------------- ---------------
Income before income taxes (289,320) (260,440)
Income tax provision 0 0
-------------- ---------------
Net income $ (289,320) $ (260,440)
-------------- ---------------
-------------- ---------------
Other Comprehensive income before tax:
Foreign currency translation adjustment 14,632 0
-------------- ---------------
Comprehensive Income (274,688) (260,440)
-------------- ---------------
-------------- ---------------
Net income (loss) per common share $ (0.04) $ (0.04)
-------------- ---------------
-------------- ---------------
Weighted average common shares outstanding 7,037,957 6,390,314
-------------- ---------------
-------------- ---------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CTI Group (Holdings) Inc. Six Months
Consolidated Statement of Cash Flows September 30
(Unaudited) ---------------------
Restated
1998 1997
--------- ---------
<S> <C> <C>
Cash Provided By (Used In):
Operating activities:
Net Income $(638,450) $(420,700)
---------- ----------
Adjustments to reconcile net income to cash
provided by (used in) operations:
Depreciation and amortization 450,380 255,540
Provision for doubtful accounts 41,263 (20,000)
Issuance of stock option --
Changes in Operating Working Capital:
Decrease (increase) in receivables, trade (52,936) (92,300)
Increase in inventories 1,014 (6,390)
Decrease (increase) in prepaid expenses 76,623 (24,560)
Decrease in accounts payable (229,283) 71,500
(Decrease) increase) in accrued commissions
and other compensation 235,915 70,760
(Decrease) increase in other accrued expenses (104,912) 46,070
Decrease in deferred revenue 58,900 (26,700)
---------- ----------
Total adjustments 476,964 273,920
---------- ----------
Total operating activities (161,486) (146,780)
---------- ----------
Investing Activities:
Increase in other assets (5,050) --
Additions to equipment and leasehold improvements (32,416) (7,330)
Additions to computer software (189,544) (49,830)
---------- ----------
Total investing activities (227,010) (57,160)
---------- ----------
Financing Activities:
Repayment of debt (96,938) (10,490)
Proceeds from borrowings -- 175,000
Stock issuance via exercise of stock option --
---------- ----------
Total financing activities (96,938) 164,510
---------- ----------
Decrease in cash and cash equivalents (485,434) (39,430)
Effect of exchange rates on cash (9,930) --
Cash and cash equivalents, at beginning of period 628,329 105,700
---------- ----------
Cash and cash equivalents, at end of period $ 132,965 $ 66,270
---------- ----------
---------- ----------
Supplemental disclosures:
Cash paid during the year for:
Interest 9,300 10,800
</TABLE>
<PAGE>
ITEM 2
- ------
Management's Discussion and Analysis
or Plan of Operation
Results of Operations
- ---------------------
Net Sales for the six months ending on September 30, 1998 increased by
$1,871,360 over the same period in 1997. This represented a 118% increase over
the same period last year and reflects the first six months sales of $2,120,435
from the acquistion of the Databit business from Siemens Plc in the UK. The
revenues for the Company's Neptune product increased by $80,449 (30%) on the
same period last year. This was offset by a decline in the Company's ITMS
Service Bureau operations of $201,840 (22%). Sales for the Company's UNITY
product and services declined by $127,737 (32%) when compared to the same period
in 1997. 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 six month period increased by $1,021,980 over the same
period in 1997. The increase was caused by the first six months results from CTI
Data Solutions Limited which now incorporates the former Databit business of
Siemens Plc, counterbalanced by a decline in the Cost of Sales for the US
business of $132,793. There was a 16% decline in Sales for the US business over
the six month period which was matched by a 16% decline in the Cost of Sales for
these business.
Selling, General and Administration expenses increased by $818,790 over the same
period in 1997. The Selling, General, and Administration expenses in the US
business declined by $343,903 or 29% over the same period 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 six months Selling, General and Administration
expenses from CTI Data Solutions Limited of $1,162,693.
The depreciation and amortization expenses increased by $197,810 an increase of
77% over the same six months last year which reflected the first six months
amortization of the Software products acquired with the Databit business in the
UK.
Liquidity and Capital Resources
- -------------------------------
Working Capital at September 30, 1998 showed a deficit of $1,830,899. This
compared to a deficit of $1,340,890 at March 31, 1998 and represents a decline
of $490,009. The working Capital ratio declined from 0.61 to 0.45 over the six
months. CTI Data Solutions Inc has a line of credit with its bank for the amount
of $200,000 which was fully utilized at September 30, 1998, and this line has
been renewed to September 30, 1999. CTI Data Solutions Limited does not have a
line of credit with any bank and is currently seeking an invoice finance
facility.
<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> 6-MOS 6-MOS
<FISCAL-YEAR-END> MAR-31-1999 MAR-31-1998
<PERIOD-START> JUL-01-1998 JUL-01-1997
<PERIOD-END> SEP-30-1998 SEP-30-1997
<CASH> 132,965 628,329
<SECURITIES> 0 0
<RECEIVABLES> 1,532,051 1,666,646
<ALLOWANCES> 211,754 281,399
<INVENTORY> 47,660 48,674
<CURRENT-ASSETS> 1,500,922 2,062,250
<PP&E> 4,955,383 4,728,377
<DEPRECIATION> 2,561,592 2,111,214
<TOTAL-ASSETS> 3,894,713 4,679,413
<CURRENT-LIABILITIES> 4,534,552 4,670,883
<BONDS> 0 0
0 0
0 0
<COMMON> 69,900 69,900
<OTHER-SE> (709,739) (61,370)
<TOTAL-LIABILITY-AND-EQUITY> 3,894,713 4,679,413
<SALES> 3,455,990 1,584,630
<TOTAL-REVENUES> 3,455,990 1,584,630
<CGS> 1,832,560 810,580
<TOTAL-COSTS> 2,196,320 1,183,120
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 65,560 11,630
<INCOME-PRETAX> 0 0
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (638,450) (420,700)
<EPS-PRIMARY> (.09) (.07)
<EPS-DILUTED> 0 0
</TABLE>
