SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-9040
METRO TEL CORP.
___________________________________________________________________________
(Exact name of small business issuer as specified in its charter)
DELAWARE 11-2014231
____________________________________________________________________________
(State of other jurisdiction of (I.R.S.Employer
incorporation or organization) Identification No.)
250 South Milpitas Blvd., Milpitas, California 95035
___________________________________________________________________________
(Adress of principal executive offices)
(408) 946-4600
- ---------------------------------------------------------------------------
(Issuer's telephone number)
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 .
State the number of shares outstanding of each of the issuer's
classes of common equity as of the latest practicable date:
Common Stock, $.025 par value per share - 2,054,046 shares
outstanding as of May 5, 1997
===========================================================================
Metro Tel Corp.
Statement of Operations
(Unaudited, Note A)
For the nine months For the three months
ended March 31, ended March 31,
1997 1996 1997 1996
____________________________________________________________________________
Net sales $2,821,220 $3,022,791 $1,068,290 $1,072,171
Cost of goods sold 1,761,387 1,880,233 629,397 662,801
____________________________________________________________________________
Gross profit 1,059,833 1,142,558 438,893 409,370
____________________________________________________________________________
Selling, general, and
administrative expenses 899,713 858,137 309,800 280,969
Research and development 184,075 210,106 51,980 68,433
Interest and other income (4,362) (9,209) (1,692) (2,177)
____________________________________________________________________________
1,079,426 1,059,034 360,088 347,225
____________________________________________________________________________
Earnings (loss) before
provision (credit) for
income taxes (19,593) 83,524 78,805 62,145
Provision (credit) for
income taxes (7,800) 33,400 31,600 24,900
____________________________________________________________________________
Net earnings (loss) $ (11,793) $ 50,124 $ 47,205 $ 37,245
============================================================================
Earnings (loss) per
common share (Note B) $ (.01) $ .03 $ .02 $ .02
==========================================================================
Weighted average number
of shares outstanding
(Note B) 2,015,157 2,004,046 2,037,379 2,004,046
============================================================================
Metro Tel Corp.
Balance Sheets
(Unaudited, Note A)
ASSETS
____________________________________________________________________________
March 31, June 30,
1997 1996
____________________________________________________________________________
Current Assets
Cash and cash equivalents $ 477,587 $ 411,924
Accounts receivable, net 474,002 716,103
Inventories 1,449,008 1,413,379
Prepaid expenses and other 78,526 14,254
Deferred income taxes 31,000 31,000
____________________________________________________________________________
Total current assets 2,510,123 2,586,660
Property and Equipment - at cost
Machinery and equipment 510,727 470,433
Furniture and fixtures 89,647 88,414
Leasehold improvements 8,765 8,765
____________________________________________________________________________
609,139 567,612
Less accumulated depreciation 502,146 477,054
____________________________________________________________________________
106,993 90,558
Other Assets
Goodwill, net of accumulated
amortization of $391,801
on March 31, 1997 and
$369,438 on June 30, 1996 800,899 823,262
Other, net 10,791 21,562
____________________________________________________________________________
811,690 844,824
- ---------------------------------------------------------------------------
$3,428,806 $3,522,042
==========================================================================
Metro Tel Corp.
Balance Sheets
(Unaudited, Note A)
LIABILITIES AND
STOCKHOLDERS' EQUITY
____________________________________________________________________________
March 31, June 30,
1997 1996
____________________________________________________________________________
Current Liabilities
Accounts payable $ 101,300 $ 209,968
Accrued liabilities 173,795 174,204
Income taxes payable 18,866
_____________________________________________________________________________
Total current liabilities 275,095 403,038
Defrred Income Taxes 14,000 14,000
Stockholders' Equity
Preferred stock, $1 par value,
200,000 shares authorized,
none issued or outstanding
Common stock, $.025 par value,
6,000,000 shares authorized,
2,080,296 shares issued,
2,054,046 shares outstanding 52,007 50,757
Additional paid-in capital 2,152,423 2,107,173
Retained earnings 1,004,031 1,015,824
_____________________________________________________________________________
3,208,461 3,173,754
Less 26,250 shares of treasury
stock - at cost (68,750) (68,750)
_____________________________________________________________________________
3,139,711 3,105,004
_____________________________________________________________________________
$3,428,806 $3,522,042
=============================================================================
Metro Tel Corp.
Statements of Cash Flows
(Unaudited, Note A)
____________________________________________________________________________
For the nine months ended
March 31,
1997 1996
____________________________________________________________________________
Cash flows from operating activities
Net earnings (loss) $ (11,793) $ 50,124
Adjustments to reconcile net earnings
to cash provided by operating
activities
Depreciation and amortization 48,441 54,066
(Increase) decrease in operating assets
Accounts receivable 242,101 (20,950)
Inventories (35,629) 2,077
Prepaid expenses and other (54,487) (18,312)
Increase (decrease) in operating
liabilities
Accounts payable (108,668) (22,452)
Accrued liabilities (409) 20,851
Income taxes payable (18,866) (13,542)
____________________________________________________________________________
Net cash provided
by operating activities 60,690 51,862
____________________________________________________________________________
Cash flows from investing activities
Capital expenditures (41,527) (15,990)
____________________________________________________________________________
Net cash used in
investing activities (41,527) (15,990)
____________________________________________________________________________
Cash flows from financing activities
Proceeds from sale of stock 46,500 -
- ---------------------------------------------------------------------------
Net cash provided by
financing activities 46,500 -
- --------------------------------------------------------------------------
Net increase in cash
and cash equivalents 65,663 35,872
Cash and cash equivalents at beginning
of year 411,924 297,157
____________________________________________________________________________
Cash and cash equivalents at end of
period $ 477,587 $ 333,029
============================================================================
Supplement disclosures of cash flow
information
Cash paid during the period for
Income taxes $ 60,627 $ 46,942
[FN]
METRO TEL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note A - General: The accompanying unaudited financial statements have
been prepared in accordance with generally accepted accounting principles
for interim financial statements and the instructions to Form 10-QSB
related to interim period financial statements. Accordingly, these
financial statements do not include certain information and footnotes
required by generally accepted accounting principles for complete
financial statements. However, the accompanying unaudited financial
statements contain all adjustments (consisting only of normal recurring
accruals) which, in the opinion of management, are necessary in order to
make the financial statements not misleading. The results of operations
for interim periods are not necessarily indicative of the results to be
expected for the full year. For further information, refer to the
Company's financial statements and footnotes thereto included in the
Company's Annual Report on Form 10-KSB for the year ended June 30, 1996.
Note B - Earnings Per Common Share: Earnings per common share is based upon
the weighted average number of shares of common stock outstanding during the
year. Stock options have not been included in the calculation since their
inclusion would not be materially dilutive.
Management's Discussion and Analysis of
Financial Condition and Results of Operation
Liquidity and Capital Resources
During the nine month period ended March 31, 1997, cash increased
by $65,663. Of the cash generated by operating activities ($60,690),
$48,441 was derived from non-cash expense for depreciation and amortization
and $242,101 was generated by the collection of accounts receivable. These
sources were used principally to fund the loss of $11,793, increases
in inventories ($35,629) and prepaid expenses ($54,487) and decreases in
current liabilities ($127,943) and income taxes payable ($18,866). Investing
activities used $41,527 to purchase capital assets, while financing activities
provided $46,500 from the exercise of a stock option to purchase 50,000
shares of common stock. The Company believes that the cash it expects
to generate from operations will be sufficient to meet operational needs.
Results of Operations
Net sales for the nine and three month period ended March 31, 1997
decreased by $201,571 (6.7%) and $3,881 (.4%) respectively, from the
comparable periods of fiscal 1996 mainly due to the shipment of a substantial
contract for CSU/DSU data devices. Due principally to the shipment of the
CSU/DSU contract during fiscal 1996, sales of customer premise equipment
decreased by $324,340 (76.7%) and $89,980 (73.5%) for the nine and three
month periods, respectively, from the comparable periods of fiscal 1996. Sales
of telephone test equipment increased by $190,419 (7.9%) for the nine month
period and $103,730 (11.6%) for the three month period of fiscal 1997 when
compared to the same periods of fiscal 1996. The increase in test equipment
sales for both periods was due to the marketing of the Company's newer products
to a wider telecommunications market. Sales of spare parts, repairs and
miscellaneous products decreased by $63,883 (36.1%) and $15,991 (31.0%) for
the nine and three month periods, respectively. Prices remained mostly constant
though all reporting periods.
The Company's gross profit margin, expressed as a percentage of sales,
decreased to 37.6% for the nine month period of fiscal 1997 from 37.8% for the
same period of fiscal 1996. However, for the third quarter of fiscal 1997,
gross profit margin improved to 41.1% from 38.2% in fiscal 1996. The change
during the nine the period related primarily to the reduction in sales for
the period which affected the ability of the Company to absorb its fixed
expenses. The improvement in the third quarter was principally due to a
decrease of 11.0% in overhead expenses, primarily a reduction in indirect
labor and related payroll costs and taxes.
Selling, general and administrative expenses increased by $41,576 (4.8%)
and $28,831 (10.3%) for the nine and three month periods, respectively, in
fiscal 1997 from fiscal 1996. The increase in both periods was mainly due to
increases in selling expense 23.4% for the nine month period and 51.7% for
the three month period which offset decreases in general and administrative
expenses of 5.8% and 11.7% for the nine and three month periods. These
increases were mainly attributed to increases in advertising and staff in the
sales group offsetting decreases in rent and salaries in administrative
expenses as a result of closing the New York office in January, 1997.
Research and development expenses decreased by $26,031 (12.4%) and
$16,453 (24.0%) for the nine and three month periods, respectively, in fiscal
1997 from the comparable fiscal 1996 periods due to decreases in staff.
Interest and other income decreased by $4,847 (52.6%) and $485 (22.3%)
for the nine and three month periods in fiscal 1997 from the same periods in
fiscal 1996.
The effective tax rate for each reported period was approximately 40%.
PART 11 - OTHER INFORMATION
Item 2. Changes in Securities
On January 22, 1997, Venerando J. Indelicato, President and
Chief Executive Officer of the Company, exercised an option to
purchase 50,000 shares of the Company's Common Stock at an
exercise price of $.93, 110% of the market value of the Company's
Common Stock on January 24, 1992, the date of grant. The option
had been granted under the Company's 1991 Employee Stock Option
Plan. No underwriters were involved in the issuance. Mr.Indelicato
agreed to aquire the above for investment and not for distribution.
The Company believes that the exemption from the registration
requirements of the Securities Act of 1933, as amended, afforded
by Section 4(2) of that Act is applicable to such issuance.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27. Financial Data Schedule
(b) Reports on Form 8-K
No Reports on Form 8-K were filed during the
quarter ended March 31, 1997.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
METRO-TEL CORP.
Date: May 5, 1997 By: Venerando J. Indelicato
President, Treasurer and
Principal Financial and
Chief Accounting Officer
EXHIBIT INDEX
Exhibit Number Description
27 Financial Data Schedule
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> MAR-31-1997
<CASH> 377,587
<SECURITIES> 100,000
<RECEIVABLES> 474,002
<ALLOWANCES> 10,000
<INVENTORY> 1,449,008
<CURRENT-ASSETS> 2,510,123
<PP&E> 609,139
<DEPRECIATION> 502,146
<TOTAL-ASSETS> 3,428,806
<CURRENT-LIABILITIES> 275,095
<BONDS> 0
<COMMON> 52,007
0
0
<OTHER-SE> 3,101,704
<TOTAL-LIABILITY-AND-EQUITY> 3,428,806
<SALES> 2,821,220
<TOTAL-REVENUES> 2,821,220
<CGS> 1,761,387
<TOTAL-COSTS> 1,079,426
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 10,000
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (19,593)
<INCOME-TAX> (7,800)
<INCOME-CONTINUING> (11,793)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (11,793)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
</TABLE>
