SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
_____________________
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
____________________
For the Fiscal Year Ended June 30, 1996
Commission File No. 0-24448
____________________
CINTECH TELE-MANAGEMENT SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
Ohio
(State of Incorporation)
2100 Sherman Avenue
Cincinnati, Ohio
(Address of principal executive offices)
31-1200684
(I.R.S. Employer Identification No.)
45212
(Zip Code)
Registrant's telephone number, including area code:
513-731-6000
____________________
Securities registered pursuant to Section 12(b) of the
Act:
None
Securities registered pursuant to Section 12(g) of the
Act:
Common Stock, without par value
____________________
Check whether the registrant (1) 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 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 _____
Check if there is no disclosure of
delinquent filers in response to Item 405 of
Regulation S-B (228.405 of this Chapter) is not
contained herein, and no disclosure will be contained,
to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by
reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB [ X ].
All amounts specified in this Annual Report are in
U.S. Dollars, unless otherwise specified herein.
The registrant's revenues as of June 30, 1996 were
$8,161,700.
The aggregate market value of the voting stock of the
registrant held by non-affiliates of the registrant as
of June 30, 1996 was $1,833,091.
The outstanding voting securities of the registrant at
the close of business on June 30, 1996 were
12,281,371 shares of Common Stock without par value.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents are hereby incorporated by
reference herein and the parts of this Form 10-KSB
into which the document is incorporated are shown
beside the respective documents:
Document Part
A. Registration Statement on Parts I, II and III
Form 10-SB (Release No.
34-32231), as amended, filed
June 27, 1994
B. Proxy Statement Parts II and III
Filed on September 11, 1996
PART I
Item 1. Description of Business
Organization
Cintech Tele-Management Systems, Inc. ("Company") was
incorporated by means of Articles of Incorporation
filed under the laws of the State of Ohio on March 20,
1987. The Company has operated continuously since that
time and grown through internal development of an
array of computer software products. The Company has
not experienced any bankruptcy or similar proceedings,
nor has it been involved in any merger, consolidation,
or purchase or sale of a significant amount of assets
not in the ordinary course of business. The Company
did effect a stock split, effective January 21, 1994,
under which each outstanding share of its common stock
was changed into 83,757 shares of such stock. On
January 31, 1994, the Company completed a public
offering of its common stock without par value in
Canada, realizing net proceeds therefrom of $7.7
million. The Company's shares sold in the offering
are registered on the Toronto Stock Exchange, and are
traded under the symbol CTM.
Business Overview/Market
The Company operates in the emerging computer and
telephone integration industry. Also known as
computer telephony, the industry integrates computers
with telephone systems using software to produce
business applications. The combined power of a
computer and telephone systems opens numerous
possibilities for the market, many of which have not
been fully developed. The Company believes that the
ability to merge voice, database, call routing,
messaging, reporting, real-time statistics and other
technologies, has significant market potential, most
notably for small businesses and for departments and
branch offices within larger decentralized
organizations.
As a competitor in the computer and telephone
integration industry, the Company is a developer and
distributor of computer software that integrates
computers and telephone switching systems to produce
applications that assist in business management and
operations. These applications are designed to
increase productivity and service levels of small and
mid-size businesses and departments or branches of
larger businesses and to provide relevant additional
information for managers. To date, the Company has
focused on the development of applications for the
modular digital key telephone switching systems
("Norstar") sold worldwide by Northern Telecom Ltd. of
Missassauga, Ontario, Canada ("Nortel"). The Norstar
was the first key telephone system to offer open
application interface targeted for small and mid-size
business units. The Company was the first developer
to write a successful open application interface-based
application for Norstar and is now the leader in
developing business applications for Norstar. The
Company's software enables small and mid-size
businesses to use applications such as ACD (Automatic
Call Distribution) previously generally available only
to larger users. The Company began shipping its first
ACD product, CINPHONY, in April, 1991 and in October,
1993, introduced a second product, PRELUDE.
In June, 1994, the Company announced plans to jointly
market and sell the Company's software applications
with Nippon Electric Company ("NEC"). Accordingly,
Cintech has developed a new ACD product, JAZZ2000, a
PC-based solution for NEC s NEAX2000 IVS (Integrated
Voice Server) PBX. The application performs similar
functions as the CINPHONY product on the Norstar, but
on a larger PBX phone switch platform. The JAZZ2000
is scheduled for general release in the Fall 1996 and
will be jointly marketed by Cintech and NEC America.
Under terms of the joint arrangement, the Company's
product JAZZ2000 will be sold under the Cintech name
by NEC America's direct sales force and distribution
network in North America. The Company believes that
NEC's direct sales force and distribution network will
significantly expand its market for applications.
Principal Products
(a) Automatic Call Distribution Products (ACD
Products)
An ACD is a specialized software and/or hardware call
management system which answers, queues and routes
incoming telephone calls. It plays announcements to
callers, encouraging them to hold until an agent (a
person qualified to take the call) is available,
provides statistics about the status of agents and
callers waiting, and provides specialized management
information reports. ACDs are typically employed in
order to increase employee productivity and revenues,
and to reduce costs.
ACDs were originally designed for environments such as
airline reservation services and mail order firms
which have high call volumes and generate high
revenues per call. As more companies have focused on
productivity and customer service, the ACD market has
expanded to include other types of businesses. Using
open application interface technology, the Company
made it feasible and cost effective for Norstar users
to bring ACD into departments, branch offices and
small companies.
The Company has developed two ACD systems for Nortel's
Norstar, CINPHONY and PRELUDE and JAZZ2000 for NEC s
NEAX2000 PBX. CINPHONY AND PRELUDE are generally
targeted towards organizations that have less than 50
telephone agents ("small call centers") and can be
effectively utilized by small businesses and
departments or branch offices in larger organizations.
JAZZ2000 is targeted toward the small to mid-size call
center market and provides more capacity than the
CINPHONY product. More detailed information on these
products is as follows:
CINPHONY
CINPHONY, introduced in April 1991, is targeted
to a sophisticated small call center with advanced ACD
needs. CINPHONY was designed for use with a larger
model of the Norstar system. Typically, the CINPHONY
user has experience with ACD in a large call center
within the organization and wants that same level of
capability in smaller areas. Reporting often becomes
the critical sales element.
CINPHONY users range from small businesses with
as few as 15 employees to Fortune 500 companies. In
1993, the Company began to focus on major accounts
that would typically have the potential for multiple
installations. In 1994, over 50% of CINPHONY
installations were in large corporations, government
agencies and institutions, many of them with multiple
installations. CINPHONY is available in two levels.
Level I is designed for small call centers staffed
with up to 30 agents and 4 groups. Level II supports
up to 80 agents and a maximum of 24 groups.
PRELUDE
PRELUDE is an entry level product offering basic
ACD functionality and was introduced in October 1993.
PRELUDE also offers real-time status, voice
capabilities and reports. The Company believes that
PRELUDE is broadening the market for ACDs because of
its straightforward feature set and affordability for
even the smallest center. Many departments, branch
offices and small businesses do not believe they are
candidates for ACD because of its reputation as a
product for large users only, its historically high
cost, and a perceived overabundance of features.
PRELUDE also replaces older technology, such as call
sequencers. Cintech's plan is to introduce less
sophisticated users to ACD with PRELUDE and then
upgrade them to CINPHONY as their needs expand.
JAZZ2000
The JAZZ2000 application performs similar
functions as the CINPHONY product on the Norstar, but
on a larger PBX phone switch platform designed by NEC,
the NEAX2000 IVS. JAZZ2000 provides Cintech with an
advanced ACD solution targeted at sophisticated small
to mid-size call centers, while complementing the
power and versatility of a PBX. The JAZZ2000 s
capacity exceeds that of CINPHONY as it can handle a
maximum of 80 active agents, and 24 groups of agents.
The first generation of the JAZZ2000 is targeted for
shipment in the Fall of 1996.
(b) Call Accounting Products
Call accounting products provide management with
various reports that show how a company's telephone
systems are being used. These products typically
generate a variety of reports which detail, on a call
by call basis, the origination and destination of the
call, the cost of the call, and the duration of each
call. Call accounting packages assist managers and
employees in understanding how time is being spent on
the telephone and the related costs and can also help
protect against the potential abuse of outsiders
gaining access to the telephone system.
The Company entered the call accounting market in
1987 with its personal computer-based TELE-SERIES call
accounting product. The technology of using a
personal computer as the call accounting platform was
relatively new at the time and allowed the Company to
offer a full-featured package at low cost. This
matched the Company's strategy of bringing
high-productivity software to small and mid-sized
businesses.
The Company's initial call accounting product,
TELE-SERIES, continues to be sold today through
various US and Canadian dealers. It works with a
large number of telephone switches including those of
NEC, Nortel, AT&T and Mitel. TELE-SERIES consists of
a number of products and feature modules and is
designed to allow the user to build its own systems.
In 1992, Nortel entered into an agreement with
the Company to replace the existing Norstar call
accounting product with a rewritten version of
TELE-SERIES that would take advantage of Norstar's
unique technology. In February 1993, the Company
introduced TELE-SERIES for Norstar. It replaced the
previous Norstar call accounting product and is
endorsed by Nortel as the official replacement product
in the United States. As part of its agreement with
Nortel, Cintech provides technical product support for
Nortel's installed base of the previous call
accounting product.
Tele-Series for Norstar, in addition to basic
call accounting functions, takes advantage of features
unique to Norstar. These advantages include the
ability to: (i) display the incoming caller's
telephone number on the user's telephone set; (ii)
prompt users to enter account codes at the telephone
set; (iii) monitor for possible toll fraud
(unauthorized individuals gaining access to and
misusing the Norstar); and (iv) track intercom calls.
Marketing and Distribution
In 1994, Cintech announced plans for joint
marketing and distribution arrangements with both
Nortel and NEC America. The Nortel arrangement was
implemented during April 1996 with the release of new
versions of CINPHONY and PRELUDE that were designed to
perform on Nortel s newly released Norstar Application
Module platform. Under the arrangement, Cintech s
CINPHONY and PRELUDE are now included in the Nortel
product catalog and sold directly by the Nortel direct
sales force and distributors.
Cintech s products for Norstar are distributed by
Nortel to all of the Regional Bell Operating
Companies, Canadian provincial telephone companies,
the three largest US independent operating companies:
GTE, Sprint and Wiltel and approximately 500 smaller
dealers. In the Company's opinion this distribution
stronghold represents one of its major competitive
advantages.
The Company also has a joint marketing and
distribution arrangement with NEC America for its
JAZZ2000 ACD solution. The JAZZ2000 is scheduled for
general release in the Fall 1996 and will be jointly
marketed by Cintech and NEC America s direct sales
force and NEC distributors. The Company believes that
NEC's direct sales force and distribution network will
significantly expand its market for applications as
well as provide a vehicle for further international
expansion.
In addition to the US and Canada, the Company's
products are installed in Central and South America as
well as in the Middle East. The Company intends to
expand its sales internationally to fill the needs of
global accounts. This objective complements the
Company's joint marketing and distribution strategy.
Retail Distribution
On March 8, 1995, the Company announced an
agreement with OCTuS Inc. giving Cintech exclusive
distribution of OCTuS' retail computer-telephony
products in North America. The product line covered
by the agreement includes OCTuS PTA, OCTuS' powerful
PC-based telephone management software; OCTuLINK, a
portable PC-telephone hardware interface; and the
OCTuS PTA Personal Fax and Personal Voice Mail
software add-ons. During 1996, the Company moved
forward with its retail expansion by negotiating
distribution agreements with Graybar, Gates/Arrow and
Tech Data. Computer City is the leading retailer of
the OCTuS PTA product at this early stage of the
Company's expansion into the computer retail market.
Competitive Position
The Company is still in a relatively early stage
of development and, accordingly, its business
operations are subject to all the risks inherent in
the establishment and maintenance of a young business
enterprise and the competitive environment in which it
operates. While the Company has been in operation for
approximately nine years, its relationship with its
major distributors began in 1990, the commercial
release of CINPHONY only began in April 1991, and
substantial working capital resources became available
only in 1994. The Company's long term future
expansion will depend upon the continued availability
of working capital, the ability of management to
implement and successfully develop the distribution of
products, and the continued and increased demand in
the market place for the products and services
provided by the Company.
The market for the Company's products is
characterized by rapid technological change and
evolving industry standards. The Company's
competitiveness depends on its ability to enhance its
existing products and to offer new products on a
timely basis. The long term success of the Company's
products is based primarily on product features,
performance, ease-of-use, reliability, compatibility,
brand name recognition, product reputation, levels of
advertising, pricing, merchandising and training,
quality customer support, excellence and timeliness of
product upgrades, and the capability of the Company to
introduce complementary new products. Presently, the
Company is not aware of any existing or upcoming
technologies which would render obsolete or
significantly displace its products in the near
future.
Dependence on Customers/Distribution
The Company derives a significant portion of its
revenue from products which are integrated with the
Norstar system. Because of this product
concentration, the Company would be materially
adversely affected if users of the Norstar system
determined to use another system or similar device or
if the Norstar system ceased to be competitive in the
marketplace. Also, the Company has entered into
various marketing, selling and similar arrangements
with a number of regional providers of telephone
systems and service. Under these arrangements, the
Company's products are generally sold in conjunction
with sales of goods and services by such distributors.
Approximately 10% of the Company's sales in the year
ended June 30, 1996 were made to one such distributor.
Consequently, the Company's business is in part
dependent upon the degree of marketing support and
effort provided by these distributors.
Sources and Availability of Raw Materials/Principal
Suppliers
The Company, as a supplier primarily of software
products, is not dependent upon availability of raw
materials. Hardware components used primarily for
bundling with the Company's JAZZ2000 product are
readily available for open market purchase and the
Company can acquire such components from any number of
available primary and secondary sources. The Company
is dependent upon both Nortel and NEC for the supply
of Norstar and NEAX2000, respectively, components
required for testing and development of Company
products.
Proprietary Rights
CINPHONY and Tele-Series have been copyrighted by
the Company with the United States Copyright Office.
The Company has applied for trademarks in respect to
CINPHONY, PRELUDE, JAZZ2000, Tele-Series and StarDome
in the United States. In addition, the Company is a
licensee of certain of Nortel's development toolkits,
under which the Company has developed and will
continue to develop products for use with Nortel's own
product offerings. This license, under which the
Company makes periodic royalty payments, extends from
year to year under an automatic renewal arrangement,
subject to termination upon proper notice.
Government Impact
The Company knows of no material governmental
approvals required for the development, marketing or
sale of the Company's principal products or services.
Likewise, the Company knows of no existing or probable
governmental regulations which have or would have a
material adverse effect on the operation of the
Company's business. Finally, the Company knows of no
material costs or effects of compliance with
environmental laws (federal, state or local) in the
operation of its business.
Research and Development
The Company spent on research and development
during each of the last two fiscal years the following
sums: $326,000 for the fiscal year ending June 30,
1996, and $373,000 for fiscal year ending June 30,
1995. The cost of such activities are considered
overhead items which are reflected only indirectly in
the pricing of the company's products sold into the
market.
Employees
The Company presently has 60 employees, 58 of
which are full time. Of these employees, 21 are
involved primarily in sales and marketing, 17 work on
systems support, 13 are involved in product
development and the remaining nine are responsible
for all management and administrative functions.
Item 2. Properties
The Company's plant and its executive
offices comprising approximately 20,000 square feet
are located at 2100 Sherman Avenue, Cincinnati, Ohio
45212. The Company leases this facility. The lease
extends until February 28, 2002 and calls for
escalating lease payments. The Company had maintained
its executive offices at 3006 Vernon Place,
Cincinnati, Ohio 45219 until early March 1995, at
which time it relocated to 2100 Sherman Avenue. The
offices at 3006 Vernon Place were leased from a
partnership in which two of the Company's shareholders
(one of whom is also a director) are partners. In
May, 1996, the Company negotiated a buyout of the
lease. The transaction was funded by execution of a
Term Note Payable with The Fifth Third Bank and a
second Term Note Payable with the partnership
previously serving as lessor. Lease payments for the
year ending June 30, 1996 amounted to approximately
$277,000.
The Company owns minimum amounts of tangible
personal property in the form of equipment, furniture
and fixtures, and inventory (comprised of computer
hardware and literature and other documentation). The
value of these items is modest in comparison to the
value of the Company's overall assets, inclusive of
cash and cash equivalents.
All of the Company's leased premises and
tangible personal property are in good condition.
Executive Officers of the Company. The names, ages
and positions of the executive officers of the Company
as of June 30,1996 are as follows:
NAME AGE POSITION
Diane M. Kamionka 49 President and Chief
Executive Officer
Bryant A. Downey 33 Chief Technology Officer
David J. Thibodeau 46 Vice President - Customer
Support Services
Each of the directors and officers has been
engaged in their principal occupation indicated above
for the previous five years, except for Mr. Thibodeau
who became an Executive Officer of the Company during
1996.
Item 3. Legal Proceedings
The Company is not a party to any pending
legal proceedings which would have a material adverse
impact on the Company's financial condition or results
of operations.
Item 4. Submission of Matters to a Vote of Security
Holders.
The Company has nothing to report under this
Item.
PART II
Item 5. Market for the Company's Common
Equity and Related Stockholder Matters
The Company's common stock is held by
approximately 700 shareholders of record as of June
30, 1996, and is traded on The Toronto Stock Exchange.
The range of price quotations in each quarter of the
two years ended June 30, 1996 are shown below. These
prices represent actual transactions and do not
reflect retail markup, markdowns or commissions.
FOR THE QUARTER ENDED
HIGH(1) LOW(1)
June 30, 1995 $2.50 1.40
September 30, 1995 2.80 1.55
December 31, 1995 2.20 1.11
March 31, 1996 1.70 1.10
June 30, 1996 1.98 1.40
(1) Based on quotations obtained from the Toronto
Stock Exchange. All amounts are in Canadian dollars.
No dividends were declared or paid during
the two years ended June 30, 1996 and June 30, 1995,
and the Company does not anticipate paying dividends
in the foreseeable future.
Item 6. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Liquidity and Capital Resources
In January 1994, the Company completed its
initial public offering ("IPO") of 2,181,820 shares of
common stock (see Note 1 of Notes to the Financial
Statements). The net proceeds of this offering, after
deducting applicable issuance costs and expenses, were
$7.7 million. The proceeds of the offering have been
used to retire the debt of the Company incurred prior
to the offering. In addition, the proceeds are being
used to implement sales and marketing programs, as
well as for product development.
Working Capital decreased to $1.9 million in
1996 from $2.2 million in 1995. The decrease of
$300,000 was primarily due to a corresponding decrease
in cash and marketable securities investments of
$892,000 offset by increases in inventory and accounts by
increases in inventory and accounts required for testing
and development of Company
by increases in inventory and accounts
receivable of $510,000 and $279,000 respectively.
The remainder of the decrease in Working Capital was
attributable to a $186,000 increase in current
liabilities.
During 1996, the Company used cash of
$725,000 for operating activities and invested another
$193,000 and $115,000 in software development and
fixed assets, respectively. The ending cash balance
increased by $85,000. These activities were funded primarily
through sales of marketable securities of $975,000 and the execution
of a $140,000 note payable (see Note 5 of the Financial Statements).
At the end of 1996, the Company had $130,000
in outstanding debt in the form of a note payable and
held cash and marketable securities totaling $974,000.
Results of Operations
The following selected financial information
set forth below has been derived from the financial
statements of the Company. This discussion and
analysis should be read in conjunction with the
financial statements and notes thereto which follow.
Results of Operations 1996 versus 1995
Sales for fiscal 1996 increased by
$3,076,000 or 60% compared with fiscal 1995. This
increase by product is broken down as follows (in
thousands):
PRODUCT CATEGORY 1996 1995 INCREASE
Automatic Call
Distribution (ACD) $5,184 $3,885 $1,299
Call Accounting 697 541 156
Other 660 1,621
______ _______ ______
Total $8,162 $5,086 $3,076
The increase in the sales of the Automatic
Call Distribution products and Tele-Series, the
Company's Call Accounting product, was due to
achieving a greater level of penetration through the
Company's distribution channels for the product.
Other sales increased due to the effectiveness of
programs designed to increase revenues from
maintenance contracts, training and installation,
sales demo systems, and product literature.
Cost of products sold increased $705,000 or
45% due to the related increase in sales volume. In
contrast, as a percentage of sales, cost of products
sold for 1996 actually decreased to 28% from 31%
experienced in 1995, due to the combination of a
reduction of lower margin hardware sales attributable
to the Company's joint marketing arrangement with
Nortel effective in March, 1996 and continued efforts
to decrease component costs while maintaining product
quality. License fees increased $227,000 or 52% due
to the related increase in sales volume. Gross Profit
increased $2,135,000 or 72% due to the increased sales
volume combined with the reduction in the cost of
sales margin.
Research and development costs of $326,000
were $47,000 or 13% lower than 1995. This decrease is
largely due to more effective allocation of resources
as the Company continues to develop new products. In
addition, the Company capitalized software development
costs of $193,000 during the year.
Selling, general, and administrative
expenses increased $1,275,000 or 35% over 1995. This
was due to the Company's investment in its customer
support services and product management due to the
continued growth in sales. However, selling, general
and administrative expenses have decreased as a
percentage of sales from 61% for 1996 compared to 72%
in 1995, reflecting the continued implementation of
the Company s distribution strategy. A schedule of
the selling, general, and administrative expense
categories appears below (in thousands):
CATEGORY 1996 1995 INCREASE
Payroll $2,584 $1,986 $ 598
Professional Services 480 280 200
Sales and Marketing 1,189 857 332
Occupancy 306 223 83
Other 396 334 62
------ ------ ------
Total $4,955 $3,680 $1,275
====== ====== ======
The increase in payroll costs reflects an
18% increase in staff levels and related salary and
expense increases. Professional services rose as a
result of increased subcontracted installations due to
increased installation sales. The increase in sales
and marketing expenses is primarily due to expenses
associated with the increase in the Company s sales
such as commissions, travel, and marketing programs.
The increase in other expenses is due to increases in
office costs and depreciation related to the increased
size of the Company s staff.
Lease termination costs of $55,000 decreased
$251,000 or 82% from 1995 due to the favorable impact
of negotiating a buy-out of the lease obligation on
the former corporate offices (see notes 4 and 5 of the
financial statements).
The Company s loss from operations decreased
$1,158,000 or 84%, due to increased sales volume and
gross profit margins combined with lower levels of
selling, general and administrative expenses and
research and development costs when compared to sales.
Other income of $67,000 decreased by
$110,000 or 63% compared to 1995 due to a reduction in
the amount of funds invested in marketable securities.
The net loss of $160,000 represents a
decrease of $1,048,000 compared to the loss reported
in 1995. The corresponding loss per share was $0.01
in 1996 compared to $0.10 in 1995.
The Company's operating plans are to
continue distributing its products through the current
channels. While operating expenses did increase in
1996, the Company believes that increases in sales
and/or the liquidation of marketable securities will
provide sufficient cash flow to meet these expenses in
1997. The Company has no material commitments for
capital expenditures, nor is the Company subject to
seasonal aspects that could be expected to have a
material effect on the Company's financial condition
or its results of operations. The Company believes
that there are no significant elements of income or
loss that do not arise from the Company's continuing
operations.
Item 7. Financial Statements and Supplementary Data
The response to Item 7 is included Exhibit
13 to this report.
Item 8. Changes and Disagreements with
Accountants on Accounting and Financial Disclosure
The Company has nothing to report under this
Item.
PART III
Item 9. Directors, Executive Officers, Promoters and
Control Persons of the Registrant; Compliance with
Section 16(a) of the Exchange Act
The information required by this Item is
incorporated herein by reference to the Company s 1996
definitive proxy statement filed on September 11, 1996
with the Securities and Exchange Commission as set
forth under the captions "Voting Shares and Security
Ownership of Certain Beneficial Owners and Management"
and Compensation of Directors and Officers".
Item 10. Executive Compensation
The information required by this Item is
incorporated herein by reference to the Company s 1996
definitive proxy statement filed on September 11, 1996
with the Securities and Exchange Commission as set
forth under the caption "Compensation of Directors and
Officers".
Item 11. Security Ownership of Certain Beneficial
Owners and Management
The information required by this Item is
incorporated herein by reference to the Company s 1996
definitive proxy statement filed on September 11, 1996
with the Securities and Exchange Commission as set
forth under the caption "Voting Shares and Security
Ownership of Certain Beneficial Owners and
Management".
Item 12. Certain Relationships and Related
Transactions
During the last two years, the Company was a
party directly or indirectly to the following
transactions with its directors, executive officers,
and principal shareholders (including any of their
associates or affiliates):
1. During 1996, the Company was a
party to a lease dated July 13, 1990 with Renaissance
Partners, a partnership in which S. William Miller and
Frank W. Terrizzi are partners. Messrs. Miller and
Terrizzi are principal shareholders of the Company,
and Mr. Terrizzi is also a director. The lease
relates to the Company's former headquarters at 3006
Vernon Place, Cincinnati, Ohio, with expiration on
December 31, 1997. On May 13, 1996, the Company
negotiated a buyout of the lease. A portion of the
buyout proceeds consisted of a Term Note Payable to
the lessor partnership. The Term Note Payable bears
interest at 6% and matures on May 13, 1997 with
principal and interest due in full.
With respect to the above transactions, the
consideration was determined by means of negotiation
conducted between the Company and the other party.
Management believes that no better terms could have
been obtained from any third parties, and that such
transactions represented "fair market value"
transactions at the time they were entered into.
Item 13. Exhibits, Financial Statements and Reports
on Form 8-K
(a)(1) and (2). Financial Statements
The financial statements attached to the end of
this annual report are filed as part of this annual
report.
(a)(3). Exhibits
Exhibit No. Description Where Provided
3. Charter and Bylaws *
-----
4. Instruments Defining Rights of Security Holders
*
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4.1 Agency Agreement by and among Cintech
Tele-Management Systems, Inc., Loewen, Ondaatje,
McCutcheon Limited, and Toronto Dominion Securities,
Inc. dated January 20, 1994 *
-----
4.2 Cintech Tele-Management Systems, Inc.
1993 Stock Option Plan *
-----
9. Voting Trust Agreements *
-----
10. Material Contracts *
-----
10.1 Agency Agreement by and among Cintech
Tele-Management Systems, Inc., Loewen, Ondaatje,
McCutcheon Limited, and Toronto Dominion Securities,
Inc. dated January 20, 1994 *
-----
10.2 Escrow Agreement described in Part II,
Item 1 *
-----
10.3 Lease between Renaissance Partners and
Cintech Tele-Management Systems, Inc. dated July 13,
1990 *
-----
10.4 Cintech Tele-Management Systems, Inc.
Stock Option Plan *
-----
10.5 Lease between Cintech Tele-Management
Systems, Inc. and Norwood Real Estate Partners dated
October 25, 1994 ***
-----
13. Portions of the Annual Report to Shareholders
14. Material Foreign Patents N/A
27. Financial Data Schedule
99. Additional Exhibits **
---
99.1 Marketing Communique **
---
99.2 StarDome Distribution Agreement (Form) **
---
99.3 Press Release dated June 8, 1994 **
---
99.4 Letter of Understanding between Cintech
Tele-Management Systems, Inc. and NEC America, Inc.
dated May 5, 1994 **
---
99.5 October 10, 1991 Letter ***
-----
99.6 Amendment to License Agreement dated
October 10, 1991 ***
-----
99.7 Status and Disposition Agreement ***
-----
99.8 Loan Agreement ***
-----
99.9 Agreement for Purchase of Preferred Stock
***
-----
99.10 Debt Exchange Agreement ***
-----
99.11 Agreement to Finance ***
-----
99.12 Supplementary Agreement to Finance ***
-----
99.13 Second Supplementary Agreement to Finance
***
-----
99.14 Third Supplementary Agreement to Finance
***
-----
99.15 Term Note Payable dated May 13, 1996 to
Related Parties
* Previously provided in original filing of Form
10-SB.
** Previously provided in Amendment No. 1 to Form
10-SB
*** Previously provided in Amendment No. 2 to Form
10-SB
(a)(4). Reports on Form 8-K
The Company has not made any reports on Form
8-K during the last quarter of the period covered by
this report.
SIGNATURES
Pursuant to the requirements of Section 13 or
15(d) of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly
authorized.
CINTECH TELE-MANAGEMENT
SYSTEMS, INC.
/s/ Diane M. Kamionka
------------------------
By: Diane M. Kamionka,
President and Chief Executive Officer
September 23, 1996
Pursuant to the requirements of the Securities
and 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.
PRINCIPAL EXECUTIVE OFFICER:
/s/ Diane M. Kamionka September 23, 1996
___________________________ _____________________
Diane M. Kamionka, Date
President, Chief Executive Officer and Director
PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER:
/s/James K. Keller September 23, 1996
___________________________ _____________________
James K. Keller, Date
Chief Financial Officer
DIRECTORS:
/s/ Diane M. Kamionka September 23, 1996
___________________________ _____________________
Diane M. Kamionka, Date
President, Chief Executive Officer and Director
/s/ Bryant A. Downey September 23, 1996
___________________________ _____________________
Bryant A. Downey, Date
Chief Technology Officer and Director
/s/ Robert I. Westheimer September 23, 1996
___________________________ _____________________
Robert I. Westheimer, Date
Director
/s/ Frank W. Terrizzi September 23, 1996
___________________________ _____________________
Frank W. Terrizzi, Date
Director
/s/ Christopher S.L. Hoffmann September 23, 1996
___________________________ _____________________
Christopher S.L. Hoffmann, Date
Director
EXHIBIT 13
CINTECH TELE-MANAGEMENT SYSTEMS, INC.
Financial Statements for the Years Ended
June 30, 1996 and 1995 and Independent Auditors' Report
INDEPENDENT AUDITORS' REPORT
To the Stockholders of
Cintech Tele-Management Systems, Inc.
We have audited the accompanying balance sheets of Cintech
Tele-Management Systems, Inc. (the "Company") as of June 30, 1996
and 1995 and the related statements of operations, stockholders'
equity and cash flows for the years then ended (all expressed in
U.S. dollars). These financial statements are the responsibility
of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards
generally accepted in the United States of America. Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, such financial statements present fairly, in all
material respects, the financial position of the Company as of
June 30, 1996 and 1995 and the results of its operations and its
cash flows for the years then ended in conformity with accounting
principles generally accepted in the United States of America.
/s/ Deloitte & Touche LLP
August 23, 1996
CINTECH TELE-MANAGEMENT SYSTEMS, INC.
<TABLE>
<CAPTION>
BALANCE SHEETS
JUNE 30, 1996 AND 1995
LIABILITIES AND
ASSETS 1996 1995 STOCKHOLDERS' EQUITY 1996 1995
<S> <C> <C> <C> <C>
CURRENT ASSETS: CURRENT LIABILITIES:
Cash and cash
equivalents $ 203,441 $ 118,713 Accounts payable $ 715,258 $ 599,950
Marketable securities
(Notes 3,5) 770,391 1,745,663 Accrued liabilities:
Accounts receivable, trade
- (Net of Accrued salaries 82,228 34,827
allowance of $53,726 and
$57,073 in 1996 and Accrued payroll taxes 13,568 12,660
1995 respectively)
(Note 2) 1,151,471 872,363 Accrued vacation 60,945 50,649
Inventory (Note 2) 1,009,960 499,496 Accrued lease
termination costs
(Notes 4, 5) 164,702
Prepaid expenses 18,224 Other 62,555 38,573
--------- ---------
Total current assets 3,153,487 3,236,235 Current portion
--------- --------- of notes payable
(Note 5) 100,000
Deferred maintenance
revenue (Note 2) 140,667 88,008
--------- -------
FIXED ASSETS (Note 2): Total current liabilities 1,175,221 989,369
Equipment 574,551 475,068
Furniture and fixtures 123,906 110,113 ACCRUED LEASE TERMINATION
--------- ---------
Total 698,457 585,181 COSTS (Note 4, 5) 84,298
Less accumulated --------- --------
depreciation 394,184 286,767
--------- ---------
Total fixed assets - net 304,273 298,414 NOTES PAYABLE 30,000
--------- --------- (Note 5) --------- --------
OTHER ASSETS: STOCKHOLDERS' EQUITY
(Notes 1, 6, 7):
Deposits 5,062 Common stock 8,982,580 8,965,690
Deferred software
development Contributed capital 675,757 675,757
costs - net (Note 2) 303,205 232,357 Treasury stock (2,290) (2,290)
-------- --------
Total other assets 303,205 237,419 Accumulated
deficit (7,100,303) (6,940,756)
Total stockholders'---------- ---------
equity 2,555,744 2,698,401
-------- --------- ---------- ---------
TOTAL $3,760,965 $3,772,068 TOTAL $3,760,965 $3,772,068
========= ========= ========= =========
</TABLE>
See notes to financial statements.
CINTECH TELE-MANAGEMENT SYSTEMS, INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED JUNE 30, 1996 AND 1995
1996 1995
NET SALES (Note 2) $8,161,700 $5,085,572
COST OF PRODUCTS SOLD 2,263,491 1,558,950
AMORTIZATION OF DEFERRED
SOFTWARE DEVELOPMENT
COSTS (Note 2) 122,494 113,247
LICENSING FEES 665,773 438,720
--------- ----------
GROSS PROFIT 5,109,942 2,974,655
RESEARCH AND DEVELOPMENT 326,141 372,844
SELLING, GENERAL AND ADMINISTRATIVE
(Notes 2, 4) 4,955,329 3,679,698
LEASE TERMINATION COSTS (Note 4, 5) 54,675 305,834
--------- ----------
LOSS FROM OPERATIONS (226,203) (1,383,721)
OTHER INCOME - Interest income 66,656 176,605
--------- ----------
NET LOSS $ (159,547) $(1,207,116)
========= ==========
NET LOSS PER SHARE (Note 6) $ (0.01) $ (0.10)
========= ==========
See notes to financial statements.
CINTECH TELE-MANAGEMENT SYSTEMS, INC.
<TABLE>
<CAPTION>
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED JUNE 30, 1996 AND 1995
Common Total
Stock Contributed Treasury Accumulated Stockholders'
No Par Value Capital Stock Deficit Equity
<S> <C> <C> <C> <C> <C>
BALANCE AT JUNE 30, 1994 $8,958,211 $675,757 $(5,733,640) $3,900,328
PURCHASE OF TREASURY SHARES $(2,290) (2,290)
SALE OF COMMON STOCK 7,479 7,479
NET LOSS (1,207,116) (1,207,116)
--------- ---------- --------- ---------- ---------
BALANCE AT JUNE 30, 1995 8,965,690 675,757 (2,290) (6,940,756) 2,698,401
SALE OF COMMON STOCK 16,890 16,890
NET LOSS (159,547) (159,547)
--------- ---------- --------- --------- ---------
BALANCE AT JUNE 30, 1996 $8,982,580 $675,757 $(2,290) $(7,100,303) $2,555,744
========== ======== ======= =========== ==========
</TABLE>
See notes to financial statements.
CINTECH TELE-MANAGEMENT SYSTEMS, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 1996 AND 1995
1996 1995
CASH FLOWS FOR OPERATING ACTIVITIES:
Net loss $(159,547) $(1,207,116)
Adjustments to reconcile net loss to net -------- ----------
cash used in operating activities:
Depreciation 108,338 69,811
Accrued rent 15,427 1,202
Amortization of software development costs 122,494 113,247
Provision for doubtful accounts (3,347) 37,225
Loss on disposal of fixed assets 613 3,422
Changes in assets and liabilities:
Increase in accounts receivable (275,761) (278,931)
Increase in inventory (510,464) (347,132)
(Increase) decrease in prepaid expenses (18,224) 10,840
Decrease in deposits 5,062
Increase in accounts payable 115,308 150,141
Increase (decrease) in accrued expenses 71,421 (61,278)
Increase (decrease) in accrued lease termination
costs (Note 4, 5) (249,000) 249,000
Increase in deferred maintenance revenue 52,659 21,613
-------- -------
Total adjustments (565,474) (30,840)
-------- ---------
Net cash used in operating activities (725,021) (1,237,956)
-------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from marketable securities 975,272 1,651,459
Purchase of fixed assets (114,810) (219,019)
Expenditures for software development costs (193,342) (92,500)
-------- ---------
Net cash provided by investing activities 667,120 1,339,940
-------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of common stock 12,629 5,223
Proceeds from notes payable 140,000
Payment on notes payable (10,000)
Purchase of treasury shares (2,290)
--------- ----------
Net cash provided by financing activities 142,629 2,933
---------- ----------
NET INCREASE IN CASH AND CASH
EQUIVALENTS 84,728 104,917
CASH AND CASH EQUIVALENTS:
Beginning of period 118,713 13,796
---------- ----------
End of period $203,441 $118,713
========== ==========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
FINANCING ACTIVITIES - Upon exercise of common stock options
for the years ended June 30, 1996 and 1995, $4,261 and $2,256 was
charged to previously accrued compensation expense, respectively.
See notes to financial statements.
CINTECH TELE-MANAGEMENT SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1996 AND 1995
1. INITIAL PUBLIC OFFERING
In January 1994, Cintech Tele-Management Systems, Inc. (the
"Company") completed its initial public offering of 2,181,820
shares of common stock (the "Offering"). The Company's shares are
traded on the Toronto Stock Exchange (TSE) under the symbol "CTM".
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business - The Company develops and markets computer
software in the emerging Computer-to-Telephone Integration (CTI)
industry which integrates the voice functions of the telephone
with the data functions of the computer to provide various
business applications. This provides the means for small to
mid-sized offices to take advantage of the rapid advances and
emerging capabilities of CTI. Cintech has key strategic product
partnerships with Nortel and NEC America, and extensive
distribution capabilities with product sold through Nortel and
NEC's direct sales organizations as well as their authorized
distributors throughout North America.
Use of Estimates - The preparation of the financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from
those estimates.
Financial Statement Presentation - These financial statements have
been prepared in accordance with accounting principles generally
accepted in the United States of America and are expressed in
United States dollars. The differences in accounting principles
generally accepted in the United States of America and Canada are
described in Note 9.
Revenue - Generally, the Company records revenue from product
sales when the product is shipped. Contracts with certain
distributors may have terms which cause the Company to record
revenue when the product is sold to third parties. Also, the
Company records an estimate of potential future returns of product
sold during the year.
The Company sells product maintenance agreements which provide for
repair of hardware and no-cost upgrade of software. These
agreements normally cover a one-year period with revenue being
recognized on a straight-line basis over the maintenance period.
Depreciation - Fixed assets are carried at cost. Depreciation is
based on the estimated useful lives of the assets and is computed
using an accelerated method. Depreciation is computed using the
following useful lives:
Equipment 5 years
Furniture and Fixtures 7 years
Inventory - Inventories are valued at the lower of cost or market,
with cost being computed using the first-in, first-out method.
Inventories consist of:
1996 1995
Literature and other documentation $ 70,935 $ 51,980
Computer hardware 973,166 447,516
Allowance for obsolete inventory (34,141)
________ _______
Total inventory $1,009,960 $499,496
========== ========
Significant Customers - Most of the Company's sales are to
distributors in the telephony industry.
The Company had sales to one major distributor, as follows:
Sales for the Years Ended June 30,
1996 1995
--------------- ---------------
Amount % Amount %
Distributor $813,346 10% $604,427 12%
The Company had gross accounts receivable from major distributors,
each of which was in excess of 10% of the Company's total accounts
receivable, as follows:
Distributors Percent of
Gross
Accounts
Receivable
June 30, 1996 2 58%
June 30, 1995 2 20%
International Sales - The Company had international sales as
follows:
Sales for the Years Ended June 30,
1996 1995
Amount % Amount %
Canada $925,333 11% $756,163 15%
Other 14,255 0% 31,928 1%
________ ___ ________ ___
Total $939,588 11% $788,091 16%
======== === ======== ===
Software Development Costs - Costs incurred internally for
creation of the computer software product are charged to research
and development expense when incurred until technological
feasibility has been established for the product. Thereafter,
until general release, all software production costs are
capitalized and subsequently reported at the lower of amortized
cost or net realizable value. As the Company's products are in
their early product life cycle, the capitalized costs are
amortized on a straight-line basis over the estimated economic
life of the product.
Costs capitalized were $193,342 and $92,500 and related
amortization was $122,494 and $113,247 for 1996 and 1995,
respectively.
Fair Value of Financial Instruments - The carrying value of
certain of the Company's financial instruments, such as cash,
trade accounts receivable and trade accounts payable, approximate
their fair values. The Company's notes payable also approximate
fair value based on the borrowing rates currently available to the
Company for notes with similar terms and average maturities.
Cash and Cash Equivalents - For purposes of reporting cash flows,
the Company considers all money market instruments to be cash
equivalents.
3. MARKETABLE SECURITIES
The Company maintains various investments in treasury bills which
are classified as held to maturity and are reported at amortized
cost in accordance with FASB Statement No. 115 "Accounting for
Certain Investments in Debt and Equity Securities". All items
mature within one year. At June 30, 1996 and 1995 the cost and
market value of the investments is summarized below:
Net
Amortized Unrealized
Description Cost Market Gain
June 30, 1996 - United States $ 770,391 $ 778,146 $7,755
Treasury Bills ========== ========== =======
June 30, 1995 - United States $1,745,663 $1,748,549 $2,886
Treasury Bills ========== ========== =======
4. OPERATING LEASES
Operating Leases - The Company leases its office facility in
Norwood, Ohio. This operating lease, which began in March 1995
and expires in March 2002, calls for escalating lease payments
over the term of the lease. The Company records lease expense on
a straight-line basis over the life of the lease.
The annual minimum rent to be paid under the operating lease
agreement for the facility in Norwood, Ohio is as follows:
Years Ending June 30: $165,750
1997 184,500
1998 205,000
1999 210,000
2000 220,000
2002 and thereafter 183,330
Rent expense for the leased office space was $276,927 and $199,286
in 1996 and 1995, respectively.
During 1996 and 1995, the Company remained obligated for the lease
on its former office facility in Cincinnati, Ohio leased from a
partnership in which two of the Company's stockholders, one of
whom is also a director, are partners. As a result of the
duplicate office facility the Company accrued as lease termination
cost the remaining lease payments on the Cincinnati facility, less
projected sublease income and expenses. In May 1996, this
obligation was removed through a buyout of the lease as discussed
in Note 5.
5. NOTES PAYABLE
Notes Payable consist of the following at June 30, 1996:
Term Note Payable - Bank $ 90,000
Term Note Payable - Third Party 40,000
_______
Total $130,000
========
The Term Note Payable - Bank bears interest at the prime lending
rate (8.25% at June 30, 1996). The remaining term is 18 months.
The note is secured by various securities on deposit with the
bank.
The Term Note Payable - Third Party bears interest at 6%. The
term of the note is for 12 months with principal and interest due
in full on May 13, 1997. The note is with a partnership in which
two of the company's stockholders, one of whom is also a director,
are partners.
The notes are a result of the buyout of the lease on the Company's
former office facility in Cincinnati, Ohio. As a result of the
lease buyout, the Company has eliminated the liability for accrued
lease termination costs.
6. CAPITAL STOCK AND LOSS PER SHARE
The following schedule is a summary of the Company's shares of
capital stock.
Common In
Authorized Issued Outstanding Treasury
Balance at
June 30, 1995 15,000,000 12,266,422 12,264,422 2,000
========== ========== ========== =====
Balance at 15,000,000 12,281,371 12,279,371 2,000
June 30, 1996 ========== ========== ========== =====
Loss per common share was based on the weighted average number of
common shares outstanding during each period. Exercise of stock
options is not assumed as the effect is antidilutive. The
weighted average number of common shares outstanding was
12,269,699 and 12,261,454 in 1996 and 1995, respectively.
7. STOCK OPTION PLAN
During 1994, the Board of Directors approved a plan providing for
the granting, to employees, options for the purchase of a maximum
of 1,500,000 shares of common stock. In February 1994 the Company
granted 141,500 stock options to its employees to purchase common
stock at prices which reflect a discount from the market value at
the date of grant. The related compensation expense is recognized
over the period earned. Options granted become exercisable over a
two-year period and expire at the end of ten years from the date
of grant. In November 1994, the Company adjusted the exercise
price on the options to $.88. In March 1995, the Company granted
an additional 118,000 stock options to its employees. These
options were granted at prices equal to the market value at the
date of grant and become exercisable over a four-year period and
expire at the end of ten years from the date of grant. In
January, March and June of 1996, the Company granted additional
stock options to its employees of 35,000, 10,000 and 174,015,
respectively. These options were all granted at prices equal to
market value at the date of the grant and become exercisable over
a four year period and expire at the end of ten years from the
date of grant. As of June 30, 1996, the Company had granted
options to purchase 478,515 shares of which 20,885 have been
exercised; 90,447 are currently exercisable; 72,405 will become
exercisable during 1997, 1998, and 1999; and 54,754 will become
exercisable during 2000. The remaining 95,213 options have been
forfeited.
8. INCOME TAXES
Deferred income tax assets and liabilities are computed for
differences between the financial statement and tax basis of
assets and liabilities that will result in taxable or deductible
amounts in the future based on enacted tax laws and rates
applicable to the periods in which the differences are expected to
affect taxable income. Valuation allowances are established when
necessary to reduce deferred tax assets to the amount expected to
be realized. Income tax expense is the tax payable or refundable
for the period plus or minus the change during the period in
deferred tax assets and liabilities.
Deferred taxes at June 30, 1996 and 1995 consist of the following:
1996 1995
Current deferred tax asset:
Deferred revenue $47,827 $ 29,923
Accrued compensation 9,411 6,297
Reserves not currently deductible 18,267 19,405
Accured lease termination costs 55,999
Accrued rent 14,328 9,082
_______ _______
Total 89,833 120,706
Less valuation allowance (89,833) (120,706)
_______ _______
Net $ $
======= ========
1996 1995
Non-current deferred tax asset:
Accrued lease termination costs $ 28,661
Net operating loss carryforward $2,173,836 2,046,318
Research and development credits 134,525 112,325
---------- ----------
Total 2,308,361 2,187,304
Non-current deferred tax liability:
Deferred software development costs (103,007) (79,001)
--------- ----------
Net non-current deferred tax asset 2,205,354 2,108,803
Less valuation allowance (2,205,354) (2,108,303)
---------- ----------
Net $ $
========= =========
The provision for income taxes for the years ended June 30, 1996
and 1995 consists of the following:
1996 1996
Current provision $ $
Deferred credit 66,178 151,983
_______ ________
Total 66,178 151,983
Less increase in the valuation allowance (66,178) (151,983)
Income tax expense $ $
======== ========
At June 30, 1996, the Company has net operating loss carry
forwards of $6,393,636 for U.S. Federal tax purposes. Such loss
carryforwards, if unused as offsets to future taxable income, will
expire beginning in 2002 and continuing through 2010. Also at
June 30, 1996, for U.S. Federal tax purposes, the Company has
research and development credit carryforwards available to offset
future income taxes of $134,525 which will begin to expire in
2002.
9. RECONCILIATION OF CANADIAN AND UNITED STATES GENERALLY
ACCEPTED ACCOUNTING PRINCIPLES ("CANADIAN GAAP AND U.S. GAAP")
These financial statements have been prepared in accordance with
accounting principles generally accepted in the United States.
During the years ended June 30, 1996 and 1995, differences between
Canadian GAAP and U.S. GAAP arose as a result of depreciation.
For U.S. GAAP purposes, furniture and fixtures and equipment are
depreciated over useful lives of seven and five years,
respectively, using an accelerated method. For Canadian GAAP
purposes, furniture and fixtures and equipment are to be
depreciated over useful lives of five and three years,
respectively, using a straight-line method. The difference does
not have a material effect on income nor on the earnings per share
calculation.
* * * * * *
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> JUN-30-1996
<CASH> 203441
<SECURITIES> 770391
<RECEIVABLES> 1205197
<ALLOWANCES> 53726
<INVENTORY> 1009960
<CURRENT-ASSETS> 3153487
<PP&E> 698457
<DEPRECIATION> 394184
<TOTAL-ASSETS> 3760965
<CURRENT-LIABILITIES> 1175221
<BONDS> 30000
0
0
<COMMON> 8982580
<OTHER-SE> (6426836)
<TOTAL-LIABILITY-AND-EQUITY> 3760965
<SALES> 8161700
<TOTAL-REVENUES> 8161700
<CGS> 2263491
<TOTAL-COSTS> 3051758
<OTHER-EXPENSES> 5336145
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (159547)
<INCOME-TAX> 0
<INCOME-CONTINUING> (159547)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (159547)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
</TABLE>
EXHIBIT 99.15
NOTE
$40,000.00 Cincinnati, Ohio
May 13, 1996
On or before May 13, 1997, for value received, the
undesigned Borrower promises to pay to the order of
Renaissance Partners ("Lender") the principal sum of
Forty Thousand and No/100 Dollars ($40,000.00)
together with interest at Six and No/100 percent
(6.00%) per annum payable in full on May 13, 1997.
This note may be paid at any time prior to maturity
without penalty.
The Lender, at its option, may accelerate this note
and declare the principal and interest on this note
immediately due and payable if any of the following
conditions of default occur: (1) failure of Borrower
to pay interest or principal when due; (2) failure of
Borrower to perform under any of the terms contained
in this note or other writings related to this note;
(3) insolvency of Borrower or the filing of a Chapter
proceeding under the Bankruptcy Code with respect to
Borrower; (4) appointment of a receiver, or any
marshaling of any assets of Borrower for the benefit
of creditors.
Borrower waives notice of default, notice of
acceleration of maturity, presentment and notice of
dishonor. In the event of an actual default or in the
event the principal and interest on this note could be
declared immediately due and payable, then Borrower
agrees to pay all costs (including the fees of
attorneys and other professional persons) incurred by
Lender in collecting this note or in working with
Borrower to eliminate the conditions for which the
principal and interest could be declared immediately
due and payable.
This note shall be governed by and construed in
accordance with Ohio law.
The rights granted to Lender are not exclusive but are
in addition to all other rights accruing to Lender in
law or equity.
Any failure of Lender to exercise these rights shall
not operate as a waiver of such right or any other
right under this note.
BORROWER:
Cintech Tele-Management Systems,
Inc., an Ohio corporation
By: /s/ James K. Keller
Title: Chief Financial Officer
