Form 10-C
Securities and Exchange Commission
Washington, DC 20549
Report by issuer of securities quoted on The Nasdaq Stock Market, filed pursuant
to section 13 or 15(d) of the Securities Exchange Act of 1934 and Rule 13a-17 or
15d-17 thereunder.
EXACT NAME OF ISSUER AS SPECIFIED IN CHARTER: Computer Telephone Corp.
ADDRESS OF PRINCIPAL EXECUTIVE OFFICES: 360 Second Ave., Waltham MA 02171
ISSUER'S TELEPHONE NUMBER (INCLUDING AREA CODE:) (617) 466-8080
I. Change in Number of Shares Outstanding
Indicate any change (increase or decrease of five percent or more in the number
of shares outstanding:
1. Title of Security Class I Common Stock
2. Number of shares outstanding before the change 3,119,483
3. Number of shares outstanding after the change 5,377,092 (includes
465,245 shares attributable to unexercised stock options.
4. Effective Date of change July 25, 1995
5. Method of change
Specify method (such as merger, acquisition exchange distribution, stock split,
reverse split, acquisition of stock for treasury, etc.) Stock split Give brief
description of transaction Three for two common stock split in which one share
of Class I Common Stock will be issued for every two shares owned on the record
date July 25, 1995)
II. Change in Name of Issuer
1. Name prior to change
2. Name after change
3. Effective date of charter amendment changing name
4. Date of shareholder approval of change, if required
July 14, 1995 /s/ John D. Pittenger, Treasurer
- - --------------------------------------------------------------------------------
DATE OFFICER'S SIGNATURE AND TITLE
Return to: The NASDAQ Stock Market
Attn: 10C Form
80 Merritt Boulevard
Trumbull, CT 06611
(203) 375-9609
(C) October 1993, The Nasdaq Stock Market, Inc. All rights reserved. NASD and
Nasdaq are registered service marks of the National Association of Securities
Dealers, Inc. (NASD). The Nasdaq Stock Market is a service mark of NASD.
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
For Quarter ended June 30, 1995.
Commission File Number 0-13627.
COMPUTER TELEPHONE CORP.
(Exact name of registrant as specified in its charter)
Massachusetts 04-2731202
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
360 Second Avenue, Waltham, Massachusetts 02154
(Address of principal executive offices) (Zip Code)
(617) 466-8080
(Registrant's telephone number including area code)
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 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
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the Issuer's classes of
Common Stock, as of the latest practicable date:
As of July 26, 1995, 4,681,662 shares of Class I, $.01 par value, Common Stock
were outstanding.
<PAGE>
COMPUTER TELEPHONE CORP.
FORM 10-Q
INDEX
Part I FINANCIAL STATEMENTS PAGE NO.
Item 1. Financial Statements
Condensed Balance Sheets
as of June 30 and March 31, 1995 3
Condensed Statements of Income
Three Months Ended June 30, 1995 and 1994 4
Condensed Statements of Cash Flows
Three Months Ended June 30, 1995 and 1994 5
Notes to Condensed Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7-8
Part II OTHER INFORMATION
Item 1. Legal Proceedings Inapplicable
Item 2. Changes in Securities Inapplicable
Item 3. Default Upon Senior Securities Inapplicable
Item 4. Submission of Matters to a
Vote of Security Holders Inapplicable
Item 5. Other Information Inapplicable
Item 6. Exhibits and Reports on Form 8-K
The following exhibit is included herein:
(11) Statements Regarding Computation
of Per Share Earnings
Three Months ended June 30, 1995 and 1994 9
The Company did not file any reports on Form 8-K during the three months ended
June 30, 1995.
2
<PAGE>
COMPUTER TELEPHONE CORP
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, March 31,
1995 1995
-------- ---------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 2,336,243 $ 2,390,546
Accounts receivable, net 4,610,698 3,639,220
Inventories 32,087 36,512
Prepaid expenses and other current assets 411,115 353,381
------------- --------------
Total Current Assets 7,390,143 6,419,659
Furniture, Fixtures and Equipment 5,386,903 5,287,289
Less accumulated depreciation (4,300,417) (4,162,417)
------------- --------------
Total Equipment 1,086,486 1,124,872
Deferred tax asset 153,000 153,000
Other Assets 27,085 28,285
------------- --------------
Total Assets $ 8,656,714 $ 7,725,816
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued expenses $ 390,481 $ 456,094
Accrued salaries and related taxes 1,773,457 1,445,937
Accrued income taxes 265,519 281,569
Deferred revenue 0 4,209
Customer deposits 12,412 12,412
------------- --------------
Total Current Liabilities 2,441,869 2,200,221
Stockholders' Equity
Common stock 31,244 31,244
Additional paid in capital 4,871,302 4,871,302
Retained-earnings 1,485,984 796,734
------------- --------------
6,388,530 5,699,280
Amounts due from stockholders (159,825) (159,825)
Less treasury stock, at cost (13,860) (13,860)
------------- --------------
Total Stockholders' Equity 6,214,845 5,525,595
------------- --------------
Total Liabilities and
Stockholders' Equity $ 8,656,714 $ 7,725,816
============= ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
COMPUTER TELEPHONE CORP
CONDENSED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended
June 30, June 30,
1995 1994
-------- -------
<S> <C> <C>
Revenue
Network service commission income $ 5,667,426 $ 3,872,239
Long distance usage income 1,048,576 546,466
------------- --------------
6,716,002 4,418,705
Costs and expenses
Cost of long distance network 827,844 449,300
Selling, general and administrative expenses 4,767,574 3,774,387
------------- --------------
5,595,418 4,223,687
------------- --------------
Income from operations 1,120,584 195,018
Other
Interest income 32,024 19,496
Interest expense 0 (2,035)
Other (8) 2,621
------------- --------------
32,016 20,082
------------- --------------
Income before income taxes 1,152,600 215,100
Provision for income taxes 463,350 78,500
------------- --------------
Net income $ 689,250 $ 136,600
============= ==============
Net income per common share
Primary $ 0.20 $ 0.05
============= =============
Fully diluted $ 0.20 $ 0.05
============= ==============
Weighted average number of common shares
Primary 3,423,320 2,742,591
============= ==============
Fully diluted 3,448,213 2,761,025
============= ==============
</TABLE>
4
<PAGE>
COMPUTER TELEPHONE CORP
CONDENSED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
June 30, June 30,
1995 1994
-------- -------
<S> <C> <C>
OPERATING ACTIVITIES
Net Income $ 689,250 $ 136,600
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 138,000 150,000
Changes in noncash working capital items:
Accounts receivable (971,478) (198,471)
Inventories 4,425 957
Other current assets (57,734) (7,966)
Income tax receivable 0 50,000
Other assets 1,200 0
Accounts payable (65,613) (98,787)
Accrued liabilities 327,520 91,250
Deferred revenue (4,209) (6,744)
Accrued taxes (16,050) (17,260)
------------- --------------
Net cash provided by operating activities 45,311 99,579
INVESTING ACTIVITIES
Additions to equipment (99,614) (360,769)
------------- --------------
Net cash used in investing activities (99,614) (360,769)
FINANCING ACTIVITIES
Repayment of capital lease obligations 0 (3,570)
------------- --------------
Net cash used by financing activities 0 (3,570)
Decrease in cash (54,303) (264,760)
Cash at beginning of year 2,390,546 1,238,811
------------- --------------
Cash and cash equivalents
at end of period $ 32,336,243 $ 974,051
============= =============
</TABLE>
5
<PAGE>
COMPUTER TELEPHONE CORP.
NOTES TO FINANCIAL STATEMENTS
NOTE 1: BASIS OF PRESENTATION
The accompanying condensed financial statements have been prepared in accordance
with the instructions to form 10-Q and do not include all the information and
footnote disclosures required by generally accepted accounting principles for
complete financial statements. In the opinion of management all adjustments
(consisting of normal recurring accruals) necessary for a fair presentation have
been included. Operating results for the three months ended June 30, 1995 are
not necessarily indicative of the results that may be expected for the year
ending March 31, 1996. These statements should be read in conjunction with the
financial statements and related notes included in the Company's Annual Report
to Shareholders on Form 10-K for the year ended March 31, 1995.
NOTE 2: CASH DIVIDENDS
The Company has not paid cash dividends during the period presented.
NOTE 3: COMMITMENTS AND CONTINGENCIES
The Company is party to suits arising in the normal course of business which
either individually or in the aggregate are not material.
NOTE 4. COMMON STOCK TRANSACTIONS SUBSEQUENT TO
MARCH 31, 1995
On July 5, 1995, the Computer Telephone Corp. Employee Stock Purchase Plan
purchased 2,337 shares of Class 1 Common Stock from the Company at $9.775 for
the purchase period ended June 30, 1995.
On July 13,1995, the Board of Directors approved a 3-for-2 Stock Split payable
to shareholders of Record on July 25, 1995. A total of 1,560,554 shares of
common stock were issued in connection with the split.
Through July 25, 1995, 2,534 shares of Class 1 Common Stock were issued as a
result of employees exercising outstanding stock options.
NOTE 5. NET INCOME (LOSS) PER SHARE
Net income per share is computed based on the weighted average number of common
stock and, if dilutive, common stock equivalent shares outstanding during the
period. Common stock shares result from the assumed exercise of common stock
options using the treasury stock method. Net loss per share is computed based on
the weighted average number of common stock shares outstanding.
6
<PAGE>
Part I
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
The following discussion should be read in conjunction with the Financial
Statements and Notes set forth elsewhere in this Report.
Results of Operations - Three months ended June 30, 1995 as compared to the
three months ended June 30, 1994.
Total revenues for the first quarter of Fiscal 1996 increased 52% to
approximately $6,716,000 as compared to approximately $4,418,000 for the same
period of the preceding year (Fiscal 1995). Network service commission income,
which represents fees earned by the Company in its capacity as an agent for
various local and long distance telephone companies, increased 46% to
approximately $5,667,000 as compared to approximately $3,872,000 for the first
quarter of Fiscal 1995. Long distance usage income, which represents the gross
billings to mid-sized commercial accounts on the Company's long distance
network, increased 92% to approximately $1,049,000 as compared to approximately
$546,000 for the same period of the preceding year.
The increase in revenues is primarily attributable to a growing base of business
in the Northeast, where the Company is paid a residual fee to actively manage a
substantial group of customers on behalf of NYNEX- New England, NYNEX- New York,
and Southern New England Telephone. The Company added account executives to
secure additional customers under these programs, and continued to leverage
these relationships by adding collateral products, such as prepaid debit cards,
conference calling, and broadcast faxing, in addition to our long distance
products.
Selling, general, and administrative expenses increased approximately 26% to
$4,768,000 for the first quarter of Fiscal 1996 as compared to $3,774,000 for
the first quarter of Fiscal 1995. This increase is attributable to the increase
in variable sales commission and bonus expenses incurred in connection with the
substantial increase in revenues. As a percentage of revenues, these expenses
were approximately 71% for Fiscal 1996, as compared to approximately 85% for
Fiscal 1995, reflecting continuing efforts by the Company to control operating
expenses.
Operating income for the first quarter of Fiscal 1996 increased to approximately
$1,121,000, as compared to approximately $195,000 for the same period of Fiscal
1995. Net income for the quarter increased to approximately $689,000, as
compared to approximately $137,000. The Company will utilize an effective tax
rate of approximately 40% for Fiscal 1996.
The period ended June 30, 1995 marks the eighth consecutive quarter of profits
for the Company. Management believes that its strategy of building long term
relationships and leveraging customer opportunities, combined with continuing
efforts to control costs, should result in a continuation of this trend
throughout Fiscal 1996.
7
<PAGE>
Liquidity and Capital Resources
Working capital at June 30, 1995 amounted to approximately $4,948,000, as
compared to $4,219,000 at March 31, 1995, an increase of 17%. Cash balances at
June 30, 1995 totaled approximately $2,336,000.
On April 28, 1995, the Company amended its revolving line of credit agreement
with Fleet Bank, which is available under certain conditions, to provide for an
increase in the credit line to $3,000,000 from $1,000,000 and to reduce the
interest rate to the prime rate from prime plus one-half percent.
In addition, the Company entered into an agreement with Fleet Bank which
provides up to $500,000 of term financing for capital expenditures at the prime
rate of interest plus one percent.
The Company presently has no bank debt and expects that the revolving credit
line, together with cash flows from operations, will be sufficient to meet the
cash requirements of the Company for the foreseeable future.
8
Exhibit 11
COMPUTER TELEPHONE CORP
STATEMENTS REGARDING COMPUTATION OF PER SHARE EARNINGS
(IN THOUSANDS EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
June 30, June 30,
1995 1994
-------- --------
<S> <C> <C>
PRIMARY
Average shares outstanding 3,116 2,499
Net effect of stock options, if dilutive,
based on the treasury stock method
using the average market price 307 244
------------- -------------
Total 3,423 2,743
Net income $ 689 $ 137
------------- -------------
Net income p $ 0.20 $ 0.05
------------- -------------
FULLY DILUTED
Average shares outstanding 3,116 2,499
Net effect of stock options, if dilutive,
based on the treasury stock method
using the period-end market price 332 263
------------ ------------
Total 3,448 2,762
Net income $ 689 $ 137
------------- -------------
Net income per share $ 0.20 $ 0.05
------------- -------------
</TABLE>
9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on behalf by the undersigned
thereunto duly authorized.
COMPUTER TELEPHONE CORP.
Date: July 28, 1995 /S/ ROBERT FABBRICATORE
-------------------------- ---------------------------
Robert Fabbricatore
Chairman and President
Date: July 28, 1995 /S/ JOHN D. PITTENGER
-------------------------- ---------------------------
John D. Pittenger
Treasurer
10
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5 Financial Data Schedule for 1st Quarter 10-Q
<CIK> 0000764841
<NAME> COMPUTER TELEPHONE CORP.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> Mar-31-1996
<PERIOD-END> Jun-30-1995
<CASH> 2,336
<SECURITIES> 0
<RECEIVABLES> 4,739
<ALLOWANCES> 128
<INVENTORY> 32
<CURRENT-ASSETS> 7,390
<PP&E> 5,387
<DEPRECIATION> 4,300
<TOTAL-ASSETS> 8,657
<CURRENT-LIABILITIES> 2,442
<BONDS> 0
0
0
<OTHER-SE> 6,184
<TOTAL-LIABILITY-AND-EQUITY> 8,657
<SALES> 6,716
<TOTAL-REVENUES> 6,748
<CGS> 828
<TOTAL-COSTS> 5,595
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,152
<INCOME-TAX> 463
<INCOME-CONTINUING> 689
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 689
<EPS-PRIMARY> 0.13
<EPS-DILUTED> 0.13
</TABLE>
