Room 4561
September 27, 2005
John Birbeck
President and Chief Executive Officer
CTI Group (Holdings), Inc.
333 North Alabama Street, Suite 240
Indianapolis, IN 46204
Re: CTI Group (Holdings), Inc.
Form 10-KSB for Fiscal Year Ended December 31, 2004
Form 10-QSB for Fiscal Quarters Ended
March 31, 2005 and June 30, 2005
File No. 0-10560
Dear Mr. Birbeck:
We have reviewed the above referenced filings and have the
following comments. Please note that we have limited our review
to
the matters addressed in the comments below. We may ask you to
provide us with supplemental information so we may better
understand
your disclosure. Please be as detailed as necessary in your
explanation. After reviewing this information, we may raise
additional comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or any other aspect
of
our review. Feel free to call us at the telephone numbers listed
at
the end of this letter.
Form 10-K for the Fiscal Year Ended December 31, 2004
Consolidated Statements of Operations, page 31
1. Tell us why you have not classified the amortization expense of
capitalized software development costs and related impairment
charges
as cost of products and services. Tell us how you considered FASB
Staff Implementation Guide, Question 17 of Statement 86.
Note 1: Description of Business and Summary of Significant
Accounting Policies - Revenue Recognition, page 35
2. You indicate that "if the services are essential to the
functionality of the software, revenue from the software component
is
deferred until the essential service is complete." Tell us how
you
considered paragraphs 64 and 65 of SOP 97-2 and clarify if you
have
applied contract accounting to the entire arrangement. If so,
explain why you believe it is appropriate to apply the completed-
contract method of accounting. Refer to paragraphs 21-33 of SOP
81-
1.
Note 1: Description of Business and Summary of Significant
Accounting Policies - Basic & Diluted Income/(Loss) per Common
Shares, page 37
3. We note your net income per share presentation and earning per
share disclosure in Note 1. Tell us how your net income per share
calculation considers the guidance in paragraphs 60 and 61 of SFAS
128. Explain why you have not presented earnings per share for
all
classes of your common stock following paragraph 61(d) of SFAS
128.
4. We note that you issued 2,833,334 shares of Class B common
stock
and these shares are convertible to Class A common shares based on
the value of Tracking LLC, a wholly owned subsidiary. We further
note that you exclude the dilutive impact of these convertible
shares
in the computation of basic and diluted earnings per share "due to
inability of the Company to estimate the ultimate number of shares
to
be issued." Tell us why you are unable to estimate the number of
shares to be issued. In this regard, you indicate in Note 2 that
conversion can be determined by dividing the value of Tracking LLC
by
the fair value of Class A common stock, which appear to be
determinable amounts.
Note 2: Merger, Acquisition and Discontinued Operations -
Discontinued Operations, page 40
5. We note that you issued 1,140,564 shares of Class A common
stock
in connection with the sale of Xila`s assets. Tell us how you
accounted for these shares and how you determined that gain
recognition of $370,268 was appropriate. Provide the specific
guidance you are relying upon for your accounting treatment of
this
transaction.
Form 10-QSB for Fiscal Quarter Ended June 30, 2005
Item 3: Controls and Procedures, page 22
6. We note your disclosure that your Principal Officers "concluded
that the Company`s disclosure controls and procedures are
effective
in reaching a reasonable level of assurance that information
required
to be disclosed by the Company in the reports that it files or
submits under the Securities Exchange Act of 1934 is recorded,
processed, summarized and reported within the time periods
specified
by the Securities and Exchange Commission`s rules and forms."
Tell
us how your Officers considered Exchange Act Rule 13a-15(e)
concluding that your disclosure controls and procedures are also
effective to ensure that information required to be disclosed in
the
reports that you file or submit under the Exchange Act is
accumulated
and communicated to your management, including your chief
executive
officer and chief financial officer, to allow timely decisions
regarding required disclosure.
As appropriate, please amend your filing and respond to these
comments within 10 business days or tell us when you will provide
us
with a response. Please submit all correspondence and
supplemental
materials on EDGAR as required by Rule 101 of Regulation S-T. You
may wish to provide us with marked copies of any amendment to
expedite our review. Please furnish a cover letter with any
amendment that keys your responses to our comments and provides
any
requested information. Detailed cover letters greatly facilitate
our
review. Please understand that we may have additional comments
after
reviewing any amendment and your responses to our comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filing reviewed by the staff to
be
certain that they have provided all information investors require
for
an informed decision. Since the company and its management are in
possession of all facts relating to a company`s disclosure, they
are
responsible for the accuracy and adequacy of the disclosures they
have made.
In connection with responding to our comments, please
provide,
in writing, a statement from the company acknowledging that:
* the company is responsible for the adequacy and accuracy of the
disclosure in the filing;
* staff comments or changes to disclosure in response to staff
comments do not foreclose the Commission from taking any action
with
respect to the filing; and
* the company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in our review of your filing or in
response to our comments on your filing.
You may contact Kari Jin, Staff Accountant, at (202) 551-
3481,
Lisa Mitrovich, Assistant Chief Accountant at (202) 551-3453 or me
at
(202) 551-3499 if you have questions regarding these comments.
Sincerely,
Kathleen Collins
Accounting Branch Chief
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Mr. John Birbeck
CTI Group (Holdings), Inc.
September 26, 2005
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