<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington DC 20549
FORM 10-QSB
/X/ QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTER ENDED JUNE 30, 2000
OR
/ / TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
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 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 X No __ .
The number of shares of common stock par value $.01, outstanding as of August
11, 2000 was 7,621,505.
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CTI GROUP (HOLDINGS) INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, March 31,
2000 2000
---------- ----------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 74,139 $ 171,761
Trade, accounts receivable less allowance
for doubtful accounts of $95,423 and
$97,717 at June 30, 2000 and
March 31, 2000, respectively 954,643 857,390
Inventories 7,827 4,367
Prepaid expenses 58,445 97,949
---------- ----------
Total current assets 1,095,054 1,131,467
Furniture, fixtures, equipment and leasehold
improvements at cost, less accumulated
depreciation and amortization of $426,424
and $402,441 at June 30, 2000
and March 31, 2000, respectively 168,599 182,923
Computer software, net of accumulated
amortization of $2,862,830 and $2,745,842
at June 30, 2000 and March 31, 2000,
respectively 282,841 397,389
Other assets 9,623 9,623
---------- ----------
$1,556,117 $1,721,402
========== ==========
</TABLE>
2
<PAGE>
CTI GROUP (HOLDINGS) INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
<TABLE>
<CAPTION>
June 30, March 31,
2000 2000
----------- -----------
(Unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 65,115 $ 50,398
Accounts payable 237,191 135,570
Other accrued expenses 664,835 981,082
Accrued merger costs 374,979 243,981
Accrued taxes payable 143,114 143,114
Deferred revenue 649,378 521,957
---------- ----------
Total current liabilities 2,134,612 2,076,102
---------- ----------
Commitments and contingencies
Stockholders' equity:
Common stock, par value $.01; 50,000,000 shares
authorized; 7,576,505 issued at June 30, 2000
and 7,566,505 shares issued at March 31, 1999 75,765 75,665
Capital in excess of par value 8,660,946 8,524,057
Accumulated deficit (9,004,546) (8,606,975)
Other comprehensive income - Foreign
currency translation 95,740 58,953
Less - Treasury stock, 140,250 shares at
June 30, 2000 and March 31, 2000, at cost (406,400) (406,400)
---------- ----------
Total stockholders' equity (578,495) (354,700)
---------- ----------
$1,556,117 $1,721,402
========== ==========
</TABLE>
3
<PAGE>
CTI GROUP (HOLDINGS) INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
June 30,
--------------------------
2000 1999
----------- ----------
<S> <C> <C>
Sales $ 1,265,142 $2,003,117
Cost of sales (exclusive of depreciation and
amortization) 760,524 942,895
----------- ----------
Gross Profit 504,618 1,060,222
----------- ----------
Costs and expenses:
Merger Costs 268,575 -0-
Selling, general and administrative expenses 494,006 780,235
Depreciation and amortization 140,971 142,806
----------- ----------
$903,552 $923,041
----------- ----------
Income (loss) from operations (398,934) 137,181
Other expenses (income)
Interest expense net of interest income (1,363) 1,724
----------- ----------
Net income (loss) $ (397,571) $ 135,457
=========== ==========
Other Comprehensive Income (loss)
Foreign Currency Translation Adjustment 36,787 17,737
----------- ----------
Comprehensive Income (loss) $ (360,784) $ 153,194
=========== ==========
Basic and Diluted Net income (loss) per common share $ (0.05) $ 0.02
=========== ==========
Basic weighted average common shares outstanding 7,429,588 6,944,135
=========== ==========
Diluted weighted average common shares outstanding 7,429,588 7,105,258
=========== ==========
</TABLE>
4
<PAGE>
CTI GROUP (HOLDINGS) INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
June 30,
--------------------------
2000 1999
----------- ----------
<S> <C> <C>
Cash Provided By (Used In):
Operating activities:
Net Income $ (397,571) $ 135,457
Adjustments to reconcile net income to cash
provided by (used in) operations:
Depreciation and amortization 140,971 142,806
Provision for doubtful accounts 8,524 20,461
Compensation expense related to issuance of stock options 134,492 3,876
Changes in operating working capital:
Increase in receivables, trade (138,456) (348,363)
Increase in inventories (3,460) (5,071)
Decrease (increase) in prepaid expenses 35,724 (38,869)
Increase (decrease) in accounts payable 100,593 (78,841)
Increase (decrease) in other accrued expenses (146,543) 53,777
Increase (decrease) in deferred revenue 156,675 (175,755)
----------- ----------
Cash utilized in operating activities (109,051) (290,522)
----------- ----------
Investing Activities:
Additions to equipment and leasehold improvements (12,100) (23,357)
Additions to computer software -0- (4,000)
----------- ----------
Cash utilized in investing activities (12,100) (27,357)
----------- ----------
Financing Activities:
Repayment of Debt (25,283) (35,704)
Exercised Options 2,500 -0-
Addition to Debt 40,000 -0-
----------- ----------
Cash provided by (utilizing in) financing activities 17,217 (35,704)
Effect of exchange rates on cash 6,312 (9,896)
----------- ----------
Decrease in cash and cash equivalents (103,934) (353,583)
Cash and cash equivalents, at beginning of period 171,761 776,146
----------- ----------
Cash and cash equivalents, at end of period $ 74,139 $ 412,667
=========== ==========
Supplemental disclosures:
Cash paid during the year for interest $ 476 $ 4,414
</TABLE>
5
<PAGE>
CTI GROUP (HOLDINGS) INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1: Business and Basis of Presentation
CTI Group (Holdings) Inc. and Subsidiaries (the "Company") designs, develops,
markets and supports data processing software and services for managing
telecommunications systems.
The accompanying consolidated financial statements have been prepared by CTI
Group (Holdings) Inc. without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission ("SEC"), and reflect all adjustments
which, in the opinion of management, are necessary for a fair statement of the
results for the interim periods presented. All such adjustments are of a normal
recurring nature. Certain previously reported amounts have been reclassified to
conform with the current period presentation.
Certain information in footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
has been condensed or omitted pursuant to the rules and regulations of the SEC,
although the Company believes the disclosures are adequate to make the
information presented not misleading. These financial statements should be read
in conjunction with the financial statements and the notes thereto included in
the Company's Annual Report on Form 10-KSB for the fiscal year ended March 31,
2000.
Certain reclassifications have been made to the comparative June 30, 1999 data
to conform to the current year's presentations.
ACCOUNTING PRONOUNCEMENTS: In June 1998, the FASB issued SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities. This statement
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts
collectively referred to as derivatives, and for hedging activities. It requires
that an entity recognize all derivatives as either assets or liabilities in the
consolidated balance sheet and measure those statements at fair value. This
statement, as amended, is effective for fiscal years beginning after June 15,
2000, although early adoption is encouraged. The Company has not yet determined
the impact SFAS No. 133 will have on its consolidated financial position or
results of operations.
In December 1999, the Securities and Exchange Commission (the "SEC") issued
Staff Accounting Bulletin No. 101, Revenue Recognition in Financial Statements
("SAB No. 101"). SAB No. 101 provides guidance on the recognition, presentation,
and disclosure of revenue in financial statements filed with the SEC, and is
required to be adopted in the fourth quarter of fiscal years beginning after
December 15, 1999. The Company has not yet determined the impact SAB No. 101
will have on its consolidated financial position or results of operations.
NOTE 2: Going Concern and Management's Plan for Continuing Operations
The consolidated financial statements of the Company have been prepared on a
going concern basis, which contemplates the continuation of operations,
realization of assets and liquidation of liabilities in the ordinary course of
business. The Company had a deficiency in working capital of $1,039,558 at June
30, 2000 compared to a deficit of $944,635 at March 31, 2000 and has incurred a
6
<PAGE>
net loss of $397,571 for the three months ended June 30, 2000 compared to a net
income of $135,457 for the three months ended June 30, 1999. In addition, the
Company's line of credit, which was fully utilized as of March 31, 1999 was
restructured to a term loan due in September 2000. In April 2000, the Company
established an overdraft line of credit for use by CTI Data Solutions Ltd. for
approximately $143,000. The overdraft line of credit bears interest at the
bank's prime rate plus 2.87%, with interest payable quarterly. The overdraft
line of credit which is available for a twelve month period is collateralized by
CTI Data Solutions Ltd.'s trade receivables. CTI Data Solutions Ltd. net trade
receivables amount to $471,672 as of June 30, 2000. As of June 30, 2000 the
company has 100% available under the overdraft line of credit. On June 29, 2000
a director of the company issued a non interest bearing note in the amount of
$40,000 with no maturity date.
These factors indicate that there is substantial doubt about the Company's
ability to continue as a going concern. The accompanying financial statements do
not include any adjustments that might be necessary should the Company be unable
to continue as a going concern. The Company plans to focus on improving revenue
levels through increased marketing efforts and the identification of new
distribution arrangements. The company anticipates that the pending mergers with
Centillion and Celltech (see Note 3 to the consolidated financial statements)
will significantly strengthen its financial position and its ability to continue
as a going concern by providing increased revenues and cash resources. If the
Company is not successful in its pending mergers, future actions could include
further cost containment measures, consolidation of the product line, potential
for additional private placement financing, and the pursuit of joint venture
partnerships/source code transactions. The Company's ability to operate beyond
the immediate future is dependent upon its ability to achieve levels of revenues
to support the Company's cost structure, maintain adequate financing and
generate sufficient cash flows from operations to meet its operating needs.
However, no assurance can be given that the Company will be successful in its
efforts to implement its plans and achieve a level of profitability. The
disruption in management time associated with the pending merger and acquisition
and the lack of capital resources has hampered the Company's ability to grow
revenue.
NOTE 3: Pending Transactions
On February 3, 2000 the Company entered into an Agreement and Plan of Merger
with Centillion Data Systems, Inc. ("Centillion") pursuant to which Centillion's
telecommunications billing business will be merged into the Company. Centillion
is a telecommunication company with annual billing revenues of approximately
$10.9 million dollars.
Centillion will divest itself of all businesses other than its billing business,
and Centillion's shareholders will initially receive 9,747,404 shares of the
Company's Common Stock. Centillion shareholders will be able to receive up to
3,215,100 additional shares of the Company's common stock depending upon the
attainment of a revenue target by the combined company of $12 million over a
three year period from Centillion's largest current customer and from any
business that the combined company may derive from third parties to certain
patent infringement claims made by Centillion. Centillion shareholders will be
entitled to all or a portion of additional shares based upon the formula of
3,215,100 shares multiplied by the ratio of (a) revenues derived by the combined
company from those sources to (b) 12 million. Centillion's shareholders will be
entitled to purchase the difference, if any, between 3,215,100 and the
additional shares so issued at $1.50 per share.
The Centillion businesses that are not related to the billing business are being
transferred to a limited liability company (that will be owned by current
Centillion shareholders) in exchange for a Promissory Note that will be
approximately $10,000,000, which the Company will acquire in the merger.
Principal and interest will be paid as those businesses are sold. The Company
will issue additional shares of Common Stock to the Centillion shareholders for
principal payments, at a per share value of 88% of the average market value of
the Common Stock at the time. If the Promissory Note is not fully paid in five
years it is to be appraised, and shares of the Company's Common Stock are to be
issued for the appraised value at the average market price at the time.
7
<PAGE>
Centillion's right to enforce its patents, and its current and future patent
infringement litigation and claims, are being transferred to a limited liability
company that will be wholly owned by the Company (the "Tracking LLC"). As part
of the merger consolidation, in connection with the transfer to the Tracking
LLC, 2,833,334 newly authorized shares of the Company Class B common stock will
be issued to the Centillion stockholders (the current Company common stock will
be re-designated as Class A). The Company and the holders of Class B common
stock have certain rights to convert the Class B common stock into Class A
common stock at various times after the merger based on the value of the
Tracking LLC at a Class A common stock value of $2.25 per share, for a maximum
of 333,334 additional shares if issued within one year of closing, and
thereafter at either 88% of the average market value at the time or 100% of the
average market value at the time, depending upon the type and amount of the
conversion. Affiliates of Centillion's current stockholders have committed to
loan, on a non-recourse basis, up to $2,000,000 to the Tracking LLC to pursue
its patent infringement litigation.
The Centillion merger will be accounted for as a reverse acquisition due to the
fact that former Centillion shareholders will own a majority of the outstanding
shares of common stock and will control the combined company upon consummation
of the transaction. As such, upon closing the transaction, the Company's assets
will be revalued and the purchase price will be allocated to those assets and
liabilities assumed by Centillion. The allocation of the purchase price will be
dependent on the final appraisal yet to be received.
The Company has incurred costs related to the Centillion merger of $268,575 for
the three months ended June 30, 2000 and $482,153 in the fiscal year ended March
31, 2000. Such cost are made up of legal, accounting, and consulting costs of
$141,212 in the three months ending June 30, 2000 and $269,881 in the fiscal
year ended March 31, 2000 and compensation expense of $127,363 in the three
months ending June 30, 2000 and $212,272 in the fiscal year ended March 31, 2000
related to options granted to the Company's President and Chief Executive
Officer ("CEO") which were contingent upon the Company entering into a merger
agreement with Centillion (see Note 3). Such costs have been expensed as
incurred due to the Company being the accounting acquiree in the transaction.
On April 6, 2000 the Company entered into an Agreement and Plan of Merger with
Celltech Information Systems, Inc. which is contingent on the consummation of
the Centillion merger. Celltech provides custom software development, customer
management systems, billing and other services to the media of multi-service
telecommunications providers, and had net annual billing revenues of
approximately $6.4 million dollars.
The Company will acquire Celltech with a combination of cash and stock for total
consideration valued at $5,251,977. The purchase will include $262,599 in cash,
and the balance of $4,989,378 will be satisfied by the issuance of 1,633,126
newly registered shares of common stock at an assumed value of $3.00 per share
(subject to change based upon the fair market value on the closing date). The
shares, to be issued at closing, may be adjusted based upon the average stock
price during the twenty-day trading period prior to the closing to a maximum
average price of $3.75 per share and a minimum of $2.25 per share.
The Company will account for the Celltech acquisition under the purchase method
of accounting. The allocation of the purchase price will be dependent on the
final appraisal yet to be received.
Consummation of the mergers are subject to certain customary conditions
including regulatory and other approvals. The Company currently anticipates
these transactions to be consummated in the second fiscal quarter of 2001.
However there can be no assurance that either transaction will be consummated.
NOTE 4: Basic and Diluted Income (Loss) Per Common Share
Net income (or loss) per common share is computed in accordance with the
provision of SFAS No. 128, "Earnings Per Share". Basic earnings per share is
computed by dividing reported earnings available to common stockholders by the
8
<PAGE>
weighted average shares outstanding for the period. Diluted earnings per share
is computed by dividing reported earnings available to common stockholders by
weighted average shares outstanding for the period giving effect to securities
considered to be dilutive potential common shares such as stock options. The
effect of all dilutive potential common shares would have been to increase
dilutive weighted average shares by 176,977 shares for the quarter ended June
30, 2000 resulting in dilutive weighted average shares of 7,606,585. Basic and
diluted earnings per share were ($0.05) per share for the quarter ended June 30,
2000. Because the Company incurred losses for the quarter ended June 30, 2000,
the effect of all dilutive potential common shares was antidilutive.
Consequently, the Company's basic and diluted earnings per share were the same
for the quarter ended June 30, 2000.
NOTE 5: Income Taxes
The Company utilized the benefit of available net operating loss carry-forwards
with an equivalent tax benefit to offset any tax liability as a result of income
which arose in three months period ended June 30, 2000.
NOTE 6: Debt
A director of the company issued a non interest-bearing loan of $40,000 on June
29, 2000 to the Company. This loan has no maturity date.
NOTE 7: Segment Information
The Company designs, develops, markets and supports data processing software
and services for managing telecommunication systems. These business operations
fall into two major classifications: telemanagement and billing and customer
care. The Company's telemanagement products and services are used by
organizations to optimize the usage of their telecommunication services and
equipment and to control telephone expenses and uses. The Company's billing and
customer care software products are used by small to mid-range telephone and
wireless network operators to manage customer accounts, generate bills, track
payments and customer service operations. The Company conducts business in the
United Kingdom and United States. Activities in the United Kingdom are primarily
telemanagement activities. The Company has not provided product and service
information for each segment presented because it is impractical to do so. A
summary of the Company's operations by geographic area for the three months
ended June 30, 2000 and 1999 is as follows:
<TABLE>
<CAPTION>
UK USA Consolidated
-------------------------------------------------
<S> <C> <C> <C>
2000
----
Sales $ 723,128 $ 542,014 $1,265,142
========== ========== ==========
Income (loss) from operations $ (282,355) $ (116,579) $ (398,934)
========== ========== ==========
Net income (loss) $ (280,821) $ (116,750) $ (397,571)
========== ========== ==========
Long-lived assets $ 253,738 $ 207,325 $ 461,063
========== ========== ==========
1999
----
Sales $1,362,366 $ 640,751 $2,003,117
========== ========== ==========
Loss from operations $ 78,286 $ 58,895 $ 137,181
========== ========== ==========
Net income $ 80,976 $ 54,481 $ 135,457
========== ========== ==========
</TABLE>
9
<PAGE>
The following table summarizes the Company's financial information by industry
segment.
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Revenues:
Telemanagement $1,084,390 $1,860,781
Billing and customer care 180,752 142,336
---------- ----------
Total Sales $1,265,142 $2,003,117
Net Income (loss):
Telemanagement $ (158,093) $ 102,467
Billing and customer care 29,097 32,990
Merger costs (268,575) - 0 -
---------- ----------
Net Income (loss) $ (397,571) $ 135,457
Depreciation and Amortization Expense:
Telemanagement $ 72,899 $ 74,734
Billing and customer care 68,072 68,072
---------- ----------
Total depreciation and amortization $ 140,971 $ 142,806
Total Assets:
Telemanagement $1,104,843
Billing and customer care 451,274
----------
Total assets $1,556,117
</TABLE>
10
<PAGE>
ITEM 2
Management's Discussion and Analysis or Plan of Operation
Results of Operations
Revenues from operations decreased $737,975 to $1,265,142 for the three month
period ended June 30, 2000, as compared to the corresponding period in the prior
year. Revenues generated from CTI Data Solutions Ltd. amounted to $723,128 for
the three month period ended June 30, 2000 as compared to $1,362,366 for the
corresponding period in the prior year. Revenues generated for CTI Data
Solutions Inc. amounted to $542,014 for three month period ended June 30, 2000
as compared to $640,751 for the corresponding period in the prior year. During
calendar year 1999, customers purchased and replaced systems at an accelerated
rate in anticipation of real or perceived Year 2000 software problems. This has
resulted in soft market conditions and a depleted pipeline particularly in the
Company's UK business. The revenue decrease was primarily associated with a
decrease in telemanagement revenues to $1,084,390 for the three month period
ended June 30, 2000 as compared to $1,860,781 in the corresponding period in the
prior year offset by an increase in billing revenue of $180,752 for the three
month period ended June 30, 2000 as compared to $142,336 in the corresponding
period in the prior year. As demand from end users softened, the Company has
redirected its marketing strategy to forming strategic alliances with major
telecommunication providers. Management anticipates that our efforts in forming
strategic alliances, focusing on our direct sales force and product enhancements
should add incrementally to future business growth; however, there can be no
assurance that we will be successful in such efforts.
Cost of Sales were 60% of revenues for three months ended June 30, 2000 as
compared to 39% in the prior year period. The overall increase in cost of sales
and corresponding decrease in gross margins was due primarily to a decline in
telemanagement sales for the three months ended June 30, 2000, coupled with
fixed costs that did not decline at the same rate as sales. Gross margins
decreased to 40% for the three month period ended June 30, 2000 as compared to
61% the corresponding period in the prior year. Telemanagement gross margins
decreased to 36% from 61% in the prior year offset by an increase in billing
gross margins to 63% compared to 62% in the prior year.
Selling, general and administrative expenses decreased by $286,229 to maintain a
39% ratio to revenues for three months ended June 30, 2000 when compared to the
same period in 1999. The decrease is the result of cost containment measures of
the reduction in non-essential staff.
The Company incurred expenses totaling $268,575 for the three month period ended
June 30, 2000 related to the pending merger with Centillion.
Depreciation and amortization expenses decreased by $1,835, a decrease of 1%
over the same period last year .
Liquidity and Capital Resources
Cash and cash equivalents amounted to $74,139 as of June 30, 2000 compared to
$171,761 as of March 31, 2000. The decrease in cash is the result of cash
utilized in operations of approximately $109,051 which was related primarily to
the net loss; cash utilized in investing activities related to the acquisition
of fixed assets of approximately $12,100; and cash provided in financing
activities of $17,217 which was primarily related to a $40,000 loan received
from a director offset by repayment of debt of approximately $25,283.
The consolidated financial statements of the Company have been prepared on a
going concern basis, which contemplates the continuation of operations,
realization of assets and liquidation of liabilities in the ordinary course of
business. The Company had a deficiency in working capital of $1,039,558 at June
11
<PAGE>
30, 2000 compared to a deficit of $944,635 at March 31, 2000 and has incurred a
net loss of $397,571 for the three months ended June 30, 2000 compared to a net
income of $135,457 for the three months ended June 30, 1999. In addition, the
Company's line of credit, which was fully utilized as of March 31, 1999 was
restructured to a term loan due in September 2000. In April 2000, the Company
established an overdraft line of credit for use by CTI Data Solutions Ltd. for
approximately $143,000. The overdraft line of credit bears interest at the
bank's prime rate plus 2.87%, with interest payable quarterly. The overdraft
line of credit which is available for a twelve month period is collateralized by
CTI Data Solutions Ltd.'s trade receivables. CTI Data Solutions Ltd. net trade
receivables amount to $471,672 as of June 30, 2000. As of June 30, 2000 the
company has 100% available under the overdraft line of credit. On June 29, 2000
a director of the company issued a non interest-bearing loan in the amount of
$40,000 with no maturity date.
These factors indicate that there is substantial doubt about the Company's
ability to continue as a going concern. The accompanying financial statements do
not include any adjustments that might be necessary should the Company be unable
to continue as a going concern. The Company plans to focus on improving revenue
levels through increased marketing efforts and the identification of new
distribution arrangements. The company anticipates that the pending mergers with
Centillion and Celltech (see Note 3 to the consolidated financial statements)
will significantly strengthen its financial position and its ability to continue
as a going concern by providing increased revenues and cash resources. If the
Company is not successful in its pending mergers, future actions could include
further cost containment measures, consolidation of the product line, potential
for additional private placement financing, and the pursuit of joint venture
partnerships/source code transactions. The Company's ability to operate beyond
the immediate future is dependent upon its ability to achieve levels of revenues
to support the Company's cost structure, maintain adequate financing and
generate sufficient cash flows from operations to meet its operating needs.
However, no assurance can be given that the Company will be successful in its
efforts to implement its plans and achieve a level of profitability. The
disruption in management time associated with the pending merger and acquisition
and the lack of capital resources has hampered the Company's ability to grow
revenue.
12
<PAGE>
PART II - OTHER INFORMATION
ITEM 1 - Legal Proceedings:
None
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 three months ended June 30, 2000.
ITEM 5 - Other Information:
None
ITEM 6 - Exhibits and Reports on Form 8 - K:
(a) Exhibits - Amendment to the Company's Certificate of Incorporation
for the increase in the authorized capital of the Company to
50,000,000 shares, $.01 par value incorporated by reference from
the Proxy Statement filed with the Securities and Exchange
Commission on September 17, 1999.
(b) Form 8 K - Agreement and Plan of Merger, dated as of April 5,
2000, by and between CTI Group (Holdings) Inc. and Centillion Data
Systems, Inc., incorporated by reference from Exhibit B to Form
8-K filed with the Securities and Exchange Commission on February
22, 2000.
13
<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 August 14, 2000
-------------------- ---------------
Anthony P. Johns Date
Chairman & Chief Executive Officer
14
