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FORM 10-QSB
[As last amended in Release No. 34-32231, April 28, 1993, 58 F.R. 26509]
U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE EXCHANGE ACT
For the transition period from __________________ to
_____________________
CINTECH TELE-MANAGEMENT SYSTEMS, INC.
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(Exact name of small business issuer as specified in its charter)
OHIO 31-1200684
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(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
2100 Sherman Avenue, Cincinnati, Ohio 45212
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(Address of principal executive offices)
(513) 731-6000
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(Issuer's telephone number)
N/A
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(Former name, former address and former fiscal year,
if changed since last report)
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
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APPLICABLE ONLY TO CORPORATE ISSUERS
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State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: 12,279,371 SHARES OF COMMON
STOCK AS OF SEPTEMBER 30, 1996.
Transitional Small Business Disclosure Format (check one): Yes No X
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
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The financial statements attached to the end of this quarterly report
are filed as part of this quarterly report. The financial statements include all
adjustments which in the opinion of management are necessary in order to make
the financial statements not misleading.
Item 2. Management's Discussions and Analysis or Plan of Operation.
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The following selected financial information set forth below has been
derived from the unaudited financial statements of the Company. This discussion
and analysis should be read in conjunction with such financial statements. All
amounts are in US dollars.
Results of Operations
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For the three months ended September 30, 1996 compared to the three months ended
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September 30, 1995
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Sales for the three months ended September 30, 1996 were $1,521,000
compared to $1,547,000 for the corresponding period of the prior year. ACD unit
volume for the current period increased by approximately 15% over the same
period last year. Revenues from ACD software training, installation and
maintenance increased by approximately 42% over the prior year quarter and sales
of the Tele-Series call accounting product increased by 24% over the same
period. Sales of the Company's retail product, OCTus PTA, were negatively
impacted due to higher than expected returns of inventory overstock by one of
its distributors. Cintech is currently repositioning this product to generate
higher unit sales.
Gross Margin as a percentage of sales, increased to 67% compared to 56%
for the comparable prior year period. This increase in Gross Margin is
attributable to the Company's strategy of concentrating on higher margin ACD
software unit sales while de-emphasizing distribution of the lower margin
PC-hardware products. This change in strategy, combined with sales of high
margin, non-ACD products such as Tele-Series, Dial-by-Name, maintenance,
installation, etc., allowed the Company to generate Gross Profit of $1,026,000,
an increase of $153,000 or 18% compared to the same period of last year.
The first quarter represents the first full quarter whereby Cintech's
ACD products were promoted and sold under the joint marketing agreement entered
into with Nortel in March 1996. Under this partnership arrangement, Cintech's
PRELUDE and CINPHONY ACD are listed in the Nortel catalog and are sold by Nortel
through Authorized Norstar Distributors. Cintech receives revenue on software
only instead of software and hardware as in the past. Nortel now is
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responsible for supplying the PC hardware components. On a per unit basis then,
Cintech realizes less revenue, countered by a higher gross margin. Unit volume
is expected to continue to increase, brought about by the marketing and sales
leverage of Nortel. (Nortel has approximately 120 salespeople versus Cintech's
10.) For comparative purposes, had Cintech continued to provide PC-hardware
components during the current quarter, sales would have increased approximately
34% over the prior year's first quarter to about $2,075,000.
Research and Development costs increased to $90,000 or 7% over the same
prior year period. This reflects the Company's ongoing efforts in product
development including the most recent software solution - JAZZ2000 ACD for NEC's
NEAX 2000 IVS. Selling, General and Administrative (S,G&A) expenses of
$1,190,000 were approximately 16% higher than the comparable quarter due to the
implementation of the Company's joint marketing strategy. The greatest portion
of the increase in S,G&A over the first quarter of last year was due to higher
payroll costs of $139,000 reflecting higher staffing levels. The organizational
growth occurred mainly in fiscal 1996 with staffing levels maintained from the
fourth quarter of fiscal 1996 to the first quarter of 1997.
Other Income decreased to $8,000 for the first three months of fiscal
1997 compared with $24,000 for the prior year quarter due to lower levels of
interest income generated from corresponding lower levels of funds invested in
marketable securities.
The Company incurred a Net Loss of $247,000 for the first three months
of fiscal 1997 compared to the $241,000 Net Loss reported for the same period
last year. The $0.02 Loss per Share was equal to that realized for the first
quarter of 1996.
Liquidity and Capital Resources
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Working Capital decreased to $1.7 million for the current quarter
compared to $2.0 million for the corresponding prior year. This $300,000
decrease was attributable to decreases in cash and marketable securities
($538,000), accounts receivable ($83,000), and current liabilities ($26,000)
offset by increases in inventory and prepaid expenses of $277,000 and $18,000
respectively.
The Company's operations provided cash of $175,000 during the first
fiscal quarter ended September 30, 1996. The cash provided was partially offset
by net cash used by investing activities of $67,000.
As of September 30, 1996, Cintech had outstanding debt obligations of
$115,000 due to the buyout of the lease on the Company's former office
facilities in May, 1996 and held cash and marketable securities totaling $1.07
million.
The Company is continuing to execute its joint marketing strategy with
Nortel and NEC America that provides higher margin unit sales and a much larger
sales and marketing effort from the partnering companies. While operating
expenses did increase during the periods covered, the Company believes that
increases in sales and/or the liquidation of marketable securities will provide
sufficient cash flow to meet expenses in future periods. 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 feels
that there are no significant elements of income
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or loss that do not arise from the Company's continuing operations, other than
interest income realized from investment in marketable securities.
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
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(a) The Annual Meeting of Shareholders of the Company was held on
October 8, 1996 (the "Annual Meeting"). The vote of holders of
record of 12,281,371 shares of the Company's common stock
outstanding at the close of business on September 2, 1996 was
solicited by proxy pursuant to Regulation 14A under the
Securities Exchange Act of 1934.
(b) All of the Board of Directors nominees submitted for approval
by shareholders were elected. The results of the shareholder
voting were as follows:
VOTE
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FOR AGAINST ABSTAIN
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Diane M. Kamionka 10,374,714 0 1,000
Bryant A. Downey 10,375,714 0 0
Frank W. Terrizzi 10,375,714 0 0
Robert I. Westheimer 10,375,714 0 0
John G. Slater 10,375,714 0 0
Carter F. Randolph 10,375,714 0 0
(c) At the Annual Meeting, stockholders approved the following
matters by the vote indicated:
VOTE
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FOR AGAINST ABSTAIN
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Ratification of Selection 10,371,214 4,000 500
of Deloitte Touche as
Independent Auditors
VOTE
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FOR AGAINST ABSTAIN
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Amendment of Stock 10,366,714 7,000 2,000
Option Plan to Provide
for Nonemployee Eligibility
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Item 6. Exhibits and Reports on Form 8-K
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(a) The following Exhibits are required by Item 601 of Regulation
S-B:
Page
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Exhibit No. 2 - Plan of Acquisition, Reorganization, Arrangement, Liquidation,
- ------------- or Succession..................................................................... N/A
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Exhibit No. 3 - (I) Articles of Incorporation, (ii) By-laws ...................................... *
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Exhibit No. 4 - Instruments Defining
- ------------- Rights of Security Holders........................................................ N/A
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Exhibit No. 10 - Material Contracts................................................................*, **
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Exhibit No. 11 - Statement re: Computation of Per Share Earnings .................................. N/A
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Exhibit No. 15 - Letter on Unaudited Interim Financial Information................................ N/A
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Exhibit No. 18 - Letter on Change in Accounting Principles......................................... N/A
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Exhibit No. 19 - Reports Furnished to Security-Holders............................................. N/A
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Exhibit No. 22 - Published Report Regarding Matters Submitted to Vote.............................. N/A
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Exhibit No. 23 - Consent of Experts and Counsel.................................................... N/A
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Exhibit No. 24 - Power of Attorney................................................................. N/A
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Exhibit No. 99 - Additional Exhibits............................................................... N/A
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(b) On September 15, 1995, the Company changed its fiscal year end to
June 30 commencing June 30, 1995. The Company filed a Form 8-K regarding this
change in fiscal year on September 26, 1995. This form is incorporated in this
report by reference.
* Previously provided in original filing on Form 10-SB.
** Previously provided in Amendment No. 2 to Form 10-SB.
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SIGNATURES
In accordance with the requirements of the Securities Exchange Act of
1934, Cintech Tele-Management Systems, Inc., as Registrant, has caused this
Report on Form 10-QSB to be signed on its behalf by the undersigned, thereunto
duly authorized.
CINTECH TELE-MANAGEMENT SYSTEMS, INC.
By: _________________________________ Date: November 14, 1996
Diane M. Kamionka, President and
Chief Executive Officer
By: _________________________________ Date: November 14, 1996
James K. Keller, Chief Financial Officer
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