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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 December 31, 1996
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE EXCHANGE ACT
For the transition period from _______________ to __________________
CINTECH TELE-MANAGEMENT SYSTEMS, INC.
(Exact name of small business issuer as specified in its charter)
OHIO 31-1200684
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
2100 Sherman Avenue, Cincinnati, Ohio 45212
(Address of principal executive offices)
(513) 731-6000
(Issuer's telephone number)
N/A
(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 December 31, 1996.
Transitional Small Business Disclosure Format (check one): Yes No X
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
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.
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
For the six months ended December 31, 1996 compared to the six months ended
December 31, 1995
Sales for the six months ended December 31, 1996 were $3,128,000
compared to $3,605,000 for the corresponding period of the prior year. The
$477,000 or 13% decrease in sales reflects the initial impact of the transition
to the Nortel sales and distribution strategy announced in March 1996. Under the
terms of the joint marketing arrangement with Nortel, the Company's CINPHONY and
PRELUDE ACD software products are listed in Nortel's catalog and are sold
directly by Nortel sales representatives. In addition, the Company no longer
sells the PC-hardware platforms required to run its ACD software products as
such hardware is now supplied by Nortel. Included in the comparative prior
period sales figure is approximately $1,146,000 of PC-hardware revenue.
ACD unit volume for the current period increased by approximately 15%
over the same period last year. Unit volume is expected to continue growing to a
level which more than offsets the loss of revenues previously realized from
PC-hardware. Revenues from ACD software training, installation and maintenance
increased by approximately 41% over the same prior year period and sales of the
Tele-Series call accounting product increased by 17% over the same period. In
addition, the Company continued its efforts in repositioning the OCTuS PTA
retail product.
Gross Margin as a percentage of sales, increased to 67% compared to 58%
for the comparable prior year period. This increase in Gross Margin percentage
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. During the first six months
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of fiscal 1997 the Company generated Gross Profit of $2,085,000 a decrease of
$17,000 or 1% compared to the prior year.
Research and Development costs increased to $208,000 or 7% over the
same prior year period. This reflects the Company's ongoing efforts to produce
new products and new releases of existing products. Selling, General and
Administrative (S,G&A) expenses of $2,330,000 were approximately 11% higher than
the comparable prior year period due to the Company's continued implementation
of its business plan. The greatest portion of the increase in S,G&A over the
first six months of last year was due to higher payroll costs of $229,000
reflecting higher staffing levels which grew primarily during fiscal 1996.
The Company incurred a Net Loss of $437,000 for the first six months of
fiscal 1997 compared to the $194,000 Net Loss reported for the same period last
year. The $0.04 Loss per Share was $0.02 higher than that realized for the
corresponding period of 1996. As the transition of the Company's joint marketing
strategy with Nortel nears completion, it is anticipated that the sales growth
rate will exceed levels experienced in prior years and yield improved
profitability.
Liquidity and Capital Resources
Working Capital decreased to $1.5 million for the period ended December
31, 1996 compared to $2.0 million for the corresponding prior year period. This
$500,000 decrease was attributable to decreases in cash and marketable
securities ($267,000), accounts receivable ($317,000), and current liabilities
($21,000) offset by increases in inventory and prepaid expenses of $14,000 and
$19,000 respectively.
The Company's operations provided cash of $30,000 for the six months
ended December 31, 1996. As of December 31, 1996, Cintech had outstanding debt
obligations of $100,000 due to the buyout of the lease on the Company's former
office facilities in May, 1996 and held cash and marketable securities totaling
$863,000.
The Company's plan of operation is to continue distributing its
ACD-related products via joint marketing agreements with Northern Telecom and
NEC America. 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 or loss that do not arise from the Company's continuing operations,
other than interest income realized from investment in marketable securities.
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PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) The following Exhibits are required by Item 601 of Regulation
S-B:
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Exhibit No. 2 - Plan of Acquisition, Reorganization, Arrangement, Liquidation,
or Succession..................................................................... N/A
Exhibit No. 3 - (I) Articles of Incorporation, (ii) By-laws ...................................... *
Exhibit No. 4 - Instruments Defining
Rights of Security Holders........................................................ N/A
Exhibit No. 10 - Material Contracts................................................................ *,**
Exhibit No. 11 - Statement re: Computation of Per Share Earnings .................................. N/A
Exhibit No. 15 - Letter on Unaudited Interim Financial Information................................. N/A
Exhibit No. 18 - Letter on Change in Accounting Principles......................................... N/A
Exhibit No. 19 - Reports Furnished to Security-Holders............................................. N/A
Exhibit No. 22 - Published Report Regarding Matters Submitted to Vote.............................. N/A
Exhibit No. 23 - Consent of Experts and Counsel.................................................... N/A
Exhibit No. 24 - Power of Attorney................................................................. N/A
Exhibit No. 99 - Additional Exhibits............................................................... N/A
(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: /s/ Diane M. Kamionka Date: February 14, 1997
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Diane M. Kamionka, President and
Chief Executive Officer
By: /s/ James K. Keller Date: February 14, 1997
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James K. Keller, Chief Financial Officer
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