<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON DC 20549
FORM 10-QSB
(Mark One)
/X/ QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the quarter ended December 31, 1998
OR
/ / TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from _____________ to __________ Commission
file number 0-10560.
CTI GROUP (HOLDINGS) INC.
-------------------------
(Exact name of Small Business Issuer in its charter)
DELAWARE 51-0308583
-------- -----------
(State or other jurisdiction of (IRS Employer
incorporation of organization) Identification Number)
2550 EISENHOWER AVENUE, NORRISTOWN, PA 19403
---------------------------------------------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code (610) 666-1700
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
December 31, 1998 was 7,037,957.
<PAGE>
CTI GROUP (HOLDINGS) INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, March 31,
1998 1998
---------- ----------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 298,005 $ 628,329
Receivables:
Trade, less allowance for doubtful
accounts of $137,305 and $281,399 at
December 31, 1998 and
March 31, 1998 respectively 1,220,184 1,239,353
Inventories 51,971 48,674
Prepaid expenses 79,981 145,894
---------- ----------
Total current assets 1,650,441 2,062,250
Furniture, fixtures, equipment and leasehold
improvements at cost, less accumulated
depreciation and amortization of $481,536
and $314,540 at December 31, 1998 and March 31, 1998
respectively 275,653 405,135
Computer software, net of accumulated
amortization of $2,384,175 and $1,885,961
at December 31, 1998 and March 31, 1998
respectively 1,770,789 2,080,811
Excess of cost over net assets of acquired
business, net of accumulated amortization
of $9,999 and $6,660 at December 31, 1998
and March 31, 1998 respectively 34,566 37,905
Other assets 21,862 16,812
Deferred Tax Assets 76,500 76,500
---------- ----------
$3,829,511 $4,679,413
---------- ----------
---------- ----------
</TABLE>
2
<PAGE>
CTI GROUP (HOLDINGS) INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
<TABLE>
<CAPTION>
December 31, March 31,
1998 1998
----------- -----------
(Unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 232,364 $ 293,820
Accounts payable 792,109 779,336
Accrued commissions and other compensation 28,841 25,323
Other accrued expenses 1,150,709 1,232,645
Deferred revenue 1,140,966 1,072,016
----------- -----------
Total current liabilities 3,344,989 3,403,140
----------- -----------
Long-term debt, less current portion 1,229,862 1,267,743
----------- -----------
Commitments and contingencies
Stockholders' equity:
Common stock, par value $.01; 10,000,000 shares
authorized; 7,037,957 issued at December 31, 1998
and 6,989,681 shares issued at March 31, 1998 70,380 69,900
Capital in excess of par value 8,043,901 8,028,230
Accumulated deficit (8,486,881) (7,670,841)
----------- -----------
(372,600) 427,289
Equity adjustment from foreign currency
translation 33,660 (12,359)
Less - Treasury stock, 140,250 shares at
December 31, 1998 and March 31, 1998, at cost (406,400) (406,400)
----------- -----------
Total stockholders' equity (745,340) 8,530
----------- -----------
$ 3,829,511 $ 4,679,413
----------- -----------
----------- -----------
</TABLE>
3
<PAGE>
CTI GROUP (HOLDINGS) INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
December 31
(Restated)
--------------------------
1998 1997
----------- -----------
<S> <C> <C>
Net sales $ 5,133,040 $ 2,185,870
Costs and expenses:
Cost of sales (exclusive of depreciation and
amortization) 2,725,320 1,148,780
Selling, general and administrative expenses 2,468,432 1,301,850
Bad debt expense (27,953) --
Depreciation and amortization 668,550 383,330
----------- -----------
5,834,349 2,833,960
----------- -----------
Loss from operations (701,309) (648,090)
Other expenses (income)
Interest expense net of interest income 12,400 16,320
Loan note imputed interest 86,180 --
Other expense net 16,151 66,580
----------- -----------
Loss before provision for income taxes (benefit) $ (816,040) $ (730,990)
Provision for income taxes (benefits -- --
----------- -----------
Net loss $ (816,040) $ (730,990)
----------- -----------
----------- -----------
Other Comprehensive Income before taxes:
Foreign Currency translation adjustment $ 33,660 --
----------- -----------
Comprehensive Income $ (782,380) $ (730,990)
----------- -----------
Net loss per common share $ (0.11) $ (0.11)
----------- -----------
----------- -----------
Weighted average common shares outstanding 7,037,957 6,398,647
----------- -----------
----------- -----------
</TABLE>
4
<PAGE>
CTI GROUP (HOLDINGS) INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
December 31
(Restated)
--------------------------
1998 1997
----------- -----------
<S> <C> <C>
Net sales $ 1,677,050 $ 601,240
Costs and expenses:
Cost of sales (exclusive of depreciation and
amortization) 892,760 338,200
Selling, general and administrative expenses 763,757 374,270
Bad debt expense (69,218) --
Depreciation and amortization 218,170 127,790
----------- -----------
1,805,469 840,260
----------- -----------
Loss from operations (128,419) (239,020)
Other expenses (income)
Interest expense net of interest income 4,070 4,690
Loan note imputed interest 28,950 --
Other expense net 16,151 66,580
----------- -----------
Loss before provision for income taxes (benefit) $ (177,590) $ (310,290)
Provision for income taxes (benefits -- --
----------- -----------
Net loss $ (177,590) $ (310,290)
----------- -----------
v
Other Comprehensive Income before taxes:
Foreign Currency translation adjustment $ 55,949 --
----------- -----------
Comprehensive Income $ (121,641) $ (310,290)
Net loss per common share $ (0.02) $ (0.05)
----------- -----------
----------- -----------
Weighted average common shares outstanding 7,037,957 6,406,981
----------- -----------
----------- -----------
</TABLE>
5
<PAGE>
CTI GROUP (HOLDINGS) INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months ended,
December 31,
Restated
----------------------
1998 1997
--------- ---------
<S> <C> <C>
Cash Provided By:
Operating Activities:
Net Loss $(816,040) $(730,990)
Adjustments to reconcile net loss to cash provided by
(used in) operations:
Depreciation and amortization 668,550 383,330
Gain on sale of assets -- --
Provision for doubtful accounts (144,094) --
Employee stock award 16,151 54,650
Deferred taxes -- --
Changes in operating assets and liabilities:
Decrease in receivable, trade 163,263 13,420
Increase in inventories (3,297) 22,220
Increase in prepaid expenses 65,913 (21,050)
Increase (decrease) in accounts payable 12,772 (47,680)
Increase (decrease) in accrued commissions and other
compensation 3,518 73,820
Increase in other accrued expenses (81,936) 161,580
Increase (decrease) in deferred revenue 68,950 (61,180)
--------- ---------
Total operating activities (46,250) (151,880)
--------- ---------
Investing Activities:
Decrease (increase) in other assets (5,050) --
Additions to equipment and leasehold improvements (37,514) (11,530)
Additions to computer software (188,192) (50,950)
Sale of fixed asset -- --
Acquisition of businesses -- --
--------- ---------
Total investing activities (230,756) (62,480)
</TABLE>
6
<PAGE>
CTI GROUP (HOLDINGS) INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months ended,
December 31,
Restated
1998 1997
--------- ---------
<S> <C> <C>
Financing Activities:
Repayment of debt (99,337) (29,970)
Proceeds from borrowings -- 175,000
--------- ---------
Total financing activities (99,337) 145,030
--------- ---------
Effect of exchange rate changes on cash 46,019 --
--------- ---------
Increase (decrease) in cash and cash equivalents (376,343) (69,330)
Cash and cash equivalents, at beginning of year 628,329 105,700
--------- ---------
Cash and cash equivalents, at end of year $ 298,005 $ 36,370
--------- ---------
--------- ---------
Supplemental disclosures:
Cash paid during the year for:
Interest $ 22,315 $ 12,700
--------- ---------
--------- ---------
</TABLE>
7
<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Results of Operations
- ------------------
Net Sales for the nine months ending on December 31, 1998 increased by
$2,947,170 over the same period in 1997. This represented a 235% increase which
reflected the first nine months sales of $3,097,317 from the acquisition of the
Databit business from Siemens plc in the UK. The revenues for the Company's
Billing Services increased by $103,404 (19%) on the same period last year. This
was offset by a decline in the Company's ITMS and Service Bureau operations of
$177,294 (16%). Sales for the Company's UNITY product and services declined by
$79,558 (15%) 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 nine month period increased by $1,576,540 over the same
period in 1997. The increase was caused by the first nine months results from
CTI Data Solutions Ltd. which incorporates the former Databit business of
Siemens plc and amounted to $1,730,359, counterbalanced by a decline in the Cost
of Sales for the US business of $153,819. There was a 7% decline in sales for
the US business over the nine month period which was matched by a 13% decline in
the Cost of Sales for this business.
Selling, General and Administration ("SG&A") expenses increased by $1,166,582 or
90% over the same period in 1997. The SG&A expenses in the US business declined
by $483,924 or 37% over the same period in 1997. This was the result of closing
the New York offices of CTI Softcom, merging the Operations of CTI Softcom into
the CTI Data Solutions Offices at Valley Forge, Pennsylvania and reducing total
staff by 25% in September, 1998. This reduction was offset by the first nine
months SG&A expenses from CTI Data Solutions Ltd. of $1,623,049.
The depreciation and amortization expenses increased by $285,220, an increase of
74% over the same nine months last year which reflected the amortization of the
Software products acquired in February, 1998, and subsequently developed (and
capitalized) with the Databit business in the UK.
Liquidity and Capital Resources
- -------------------------------
Working capital at December 31, 1998 showed a deficit of $1,694,835. This
compared to a deficit of $1,340,890 at March 31, 1998 and represents a decline
of $353,945. The working capital ratio declined from 0.61 to 0.49 over the nine
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 Ltd. has an unused
invoice finance facility which is capable of providing approximately $300,000 of
additional credit if required.
8
<PAGE>
CTI GROUP (HOLDINGS) INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1:
The consolidated balance sheet as of December 31, 1998, the statement of
operations for the nine months ended December 31, 1998 and 1997, and the
statement of cash flows for the nine months ended December 31, 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 statements of cash flows at December 31, 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 December 31, 1998
data to conform to the current years presentations.
9
<PAGE>
PART II - OTHER INFORMATION
- ---------------------------
ITEM 1 - Legal Proceedings:
None of materiality
ITEM 2 - Changes in Securities:
None
ITEM 3 - Details 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 nine months ended December 31, 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 nine months ended December 31,
1998.
10
<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 1/22/99
- -------------------- -------
Anthony P. Johns
President & Chief Executive Officer
/s/ Geoffrey L. Powell 1/22/99
- ---------------------- -------
Geoffrey L. Powell
Acting Chief Financial Officer
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 9-MOS
<FISCAL-YEAR-END> MAR-31-1999 MAR-31-1998
<PERIOD-START> OCT-01-1998 OCT-01-1997
<PERIOD-END> DEC-31-1998 DEC-31-1997
<CASH> 298,005 628,329
<SECURITIES> 0 0
<RECEIVABLES> 1,357,489 1,666,646
<ALLOWANCES> (137,305) (281,399)
<INVENTORY> 51,971 48,674
<CURRENT-ASSETS> 1,650,441 2,062,250
<PP&E> 5,055,080 4,728,377
<DEPRECIATION> (2,875,710) (2,111,214)
<TOTAL-ASSETS> 3,829,511 4,679,413
<CURRENT-LIABILITIES> 3,344,989 4,670,883
<BONDS> 0 0
0 0
0 0
<COMMON> 70,380 69,900
<OTHER-SE> (442,980) (61,370)
<TOTAL-LIABILITY-AND-EQUITY> 3,829,511 4,679,413
<SALES> 5,133,040 2,185,870
<TOTAL-REVENUES> 5,133,040 2,185,870
<CGS> 2,725,320 1,148,780
<TOTAL-COSTS> 5,834,349 2,833,960
<OTHER-EXPENSES> 16,151 66,580
<LOSS-PROVISION> (27,953) 0
<INTEREST-EXPENSE> 98,580 16,320
<INCOME-PRETAX> (816,040) (730,990)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (816,040) (730,990)
<EPS-PRIMARY> (.11) (.11)
<EPS-DILUTED> 0 0
</TABLE>
