1 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, 1997 [ ] 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 Number) incorporation or organization) 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___ APPLICABLE ONLY TO CORPORATE ISSUERS 2 State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: 12,279,751 shares of common stock as of September 30, 1997. Transitional Small Business Disclosure Format (check one): Yes No X 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 three months ended September 30, 1997 compared to the three months ended September 30, 1996 Sales for the three months ended September 30, 1997 were $2,057,000 compared to $1,521,000 for the same period last year. The $536,000 or 35%, increase in sales is primarily attributable to the combined effects of a 50% increase in ACD unit volume and a 108% increase in training, installation and maintenance revenue which were slightly offset by a 19% decrease in sales realized from the Tele-Series call accounting product. Gross Margin of $1,375,000 was $350,000 or 34%, greater than the corresponding period of last year. The increase in Gross Margin is a direct result of the increase in sales volume. Gross Margin as a percentage of sales was 67% or unchanged from that experienced during the same period of the prior year. Research and Development costs increased to $132,000 or 39%, over the same prior year period. This reflects the Company's continued efforts to produce new products such as the MINUET ACD for Nortel which was released at the end of September. Selling, General and Administrative (S,G&A) expenses of $1,145,000 were approximately $40,000 or 3.4%, lower than the comparable prior year period. The Company realized Net Income of $106,000 for the three months ended September 30,1997 compared to a $247,000 Net Loss reported for the same period last year. Earnings Per Share were $0.01 versus a $0.02 Loss Per Share reported for the prior year quarter. 2 3 Liquidity and Capital Resources Working Capital decreased by approximately $761,000 or 45%, to $927,000 when compared to the corresponding period of last year. The decrease is primarily due to the approximate $800,000 retail inventory product write-off reported for the third fiscal quarter of last year. The Company's operations provided cash of $235,000 for the three months ended September 30, 1997. As of September 30, 1997, Cintech held cash and marketable securities totaling approximately $974,000 and had no outstanding long-term debt obligations. 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 these 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. PART II - OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders (a) The Annual Meeting of Shareholders of the Company was held on October 30, 1997 (the "Annual Meeting"). The vote of holders of record of 12,281,751 shares (inclusive of 2,000 shares held as treasury stock) of the Company's common stock outstanding at the close of business on September 10, 1997 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 FOR AGAINST ABSTAIN Diane M. Kamionka 10,348,950 0 6,900 Bryant A. Downey 10,348,950 0 6,900 Frank W. Terrizzi 10,348,950 0 6,900 John G. Slater 10,348,950 0 6,900 Carter F. Randolph 10,348,950 0 6,900 3 4 (c) At the Annual Meeting, stockholders approved the following matter by the vote indicated: VOTE FOR AGAINST ABSTAIN Ratification of Selection 9,209,593 3,300 1,142,957 of Deloitte Touche as Independent Auditors Item 6. Exhibits and Reports on Form 8-K (a) The following Exhibits are required by Item 601 of Regulation S-B: Page Page ---- 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 4 5 (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. 5 6 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: November 14, 1997 --------------------------------- Diane M. Kamionka, President and Chief Executive Officer By: /s/ James K. Keller Date: November 14, 1997 --------------------------------- James K. Keller, Chief Financial Officer 6