SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended June 30, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ________________ to _________________.
Commission file number 0-9040
METRO-TEL CORP.
(Name of small business issuer in its charter)
Delaware 11-2014231
---------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
250 South Milpitas Boulevard, Milpitas, CA 95035
------------------------------------------ -----
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: 408-946-4600
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act: Common Stock,
$.025 par value
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[ ]
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]
State issuer's revenues for its most recent fiscal year: $3,893,077
The aggregate market value as at September 15, 1998 of the Common Stock
of the issuer, its only class of voting stock, held by non-affiliates was
approximately $1,739,000 calculated on the basis of the closing price of such
stock on the National Association of Securities Dealers Automated Quotation
System on that date. Such market value excludes shares owned by all executive
officers and directors (but includes shares owned by their spouses); this should
not be construed as indicating that all such persons are affiliates.
The number of shares outstanding of the issuer's Common Stock as at
September 15, 1998 was 2,054,046.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the issuer's Proxy Statement relating to its 1998 Annual Meeting of
Stockholders are incorporated by reference into Items 10, 11 and 12 in Part III
of this Report.
Transitional Small Business Disclosure Format Yes[ ] No[X]
<PAGE>
PART I
------
Item 1. Business.
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General
The Company was incorporated under the laws of the State of Delaware
on June 30, 1963. Its executive offices are located at 250 South Milpitas
Boulevard, Milpitas, California 95035, and its telephone number is 408-946-4600.
Since its inception, the Company has been engaged in the manufacture and sale of
telephone test and customer premise equipment utilized by telephone and
telephone interconnect companies in the installation and maintenance of
telephone equipment. Through internal research and development and through
acquisition, the Company has added various product lines to its telephone test
and customer premise product lines.
Proposed Merger
On July 6, 1998, the Company and Steiner-Atlantic Corp. ("Steiner")
signed a Merger Agreement pursuant to which a wholly owned subsidiary of the
Company would be merged with and into Steiner (the "Merger"). Steiner is a
privately held Florida corporation which is a supplier of dry cleaning
equipment, industrial laundry equipment and steam boilers.
If the Merger is consummated, each share of the Company's Common
Stock outstanding prior to the consummation of the Merger will remain
outstanding following the consummation of the merger. Each share of Steiner's
Common Stock outstanding prior to the consummation of the Merger will be
converted into 13.90561 shares of the Company's Common Stock. Steiner's
shareholders may also receive additional shares of the Company's Common Stock
depending on the number of shares of the Company's Common Stock to be subject to
options to be granted to key employees of Steiner on the date of consummation of
the Merger. Assuming no such additional shares are issued, upon consummation of
the Merger, the holders of the Company's Common Stock immediately prior to the
Merger would own 2,054,046, or approximately 30%, of the shares of the Company's
Common Stock to be outstanding immediately following the Merger and the holders
of Steiner's Common Stock immediately prior to the Merger would own 4,720,954,
or approximately 69%, of the shares of the Company's Common Stock to be
outstanding immediately following the Merger. The remaining 100,000 shares of
the Company's Common Stock to be outstanding immediately following the Merger
would be owned by the Compny's financial advisers in the transaction, which
would be receiving such shares as compensation for its services in connection
with the proposed Merger.
In addition, if the Merger is consummated, one of Steiner's two
shareholders will become Chairman of the Board of Directors of each of Steiner
and the Company, the other Steiner shareholder will become the President and
Chief Executive Officer of each of Steiner and the Company, and Steiner's
shareholders will designate four of the six members of the Boards of Directors
of each of the Company and Steiner.
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The Company's Board of Directors has approved the Merger Agreement
and recommended that it be approved and adopted by the Company's stockholders.
It is expected that the Merger will be voted upon by the Company's stockholders
at the Company's 1998 Annual Meeting of Stockholders, together with proposals to
increase the number of authorized shares of the Company's Common Stock and to
approve an amendment to the Company's stock option plan to increase the number
of shares of the Company's Common Stock subject thereto, the approval of each of
which proposals is a condition to the completion of the Merger.
Product Lines
The following table sets forth the approximate net sales of each of
the Company's two products lines and of its other products and services, as a
group, and the percentages which such sales bear to total net sales during each
of the three years ended June 30, 1998:
Year Ended June 30,
----------------------------------------------
1998 1997
---- ----
Amount % Amount %
------ -- ------ --
(dollars in thousands)
Telephone Test
Equipment $3,582 93% $3,602 93%
Customer Premise
Equipment 83 2% 121 3%
Other Products and
Services 174 5% 160 4%
------ --- ------ ---
$3,839 100% $3,883 100%
The downsizing of the Regional Bell Operating Companies ("RBOCs")
during the past several years has reduced the number of Telecom craft personnel
who are potential users of the Company's test equipment and, accordingly, the
Company's sales. To reduce the impact that has occurred as a result of the
downsizing of the RBOCs, through research and development, the Company has begun
introducing new products aimed at reducing its dependence on the RBOCs and is
entering into new markets, principally the public utility and data industry, for
its existing and new products.
Telephone Test Equipment. The Company manufactures and sells a line of
telephone test equipment which includes portable test sets that are designed for
use in locating high resistance faults resulting from moisture in exchange
cables and by cable splicers on exchange and toll cables for identification of
cable wires and other tone-testing purposes; linemen's rotary and/or touch-tone
testing handsets and portable line test sets for use by telephone installers,
repairmen and central office personnel; hand and pole exploring coils that are
used in cable fault finding; solid state conversion amplifier kits;
Volt-Ohmmeter test sets; and Cable Hound(R), a portable electronic unit
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<PAGE>
that locates and determines the depth of underground cable and metal pipes
primarily for the telephone, utility and construction industries.
In addition, the Company manufactures a line of transmission test
equipment used in telephone company central office installations by operating
companies, long distance telephone resellers and large companies who own their
own networks. Among these products are digital and analog rack-mounted test
systems, portable transmission test sets, remote test systems and fiber optic
test sets.
Customer Premise Equipment. The Company manufactures and markets a line
of telephone station and peripheral products, including telephone call
sequencers (which answer calls on up to 12 incoming unattended lines, provide
the caller with an appropriate message and place the calls in queue until
answered by an attendant) and a line of digital announcers (which provide a pre-
programmed message with the ability to ring through at the end of the message if
so desired by the caller). This product line also includes a series of specialty
telephone products, including call diverters (call forwarding devices used both
by end-users and in telephone company central offices), speed dialers, specialty
telephones and amplified handsets for the hearing impaired.
In addition, the Company has begun distributing a line of Channel
Service Units/Data Service Units (CSU/DSU) for the data industry. These devices
are used to terminate a digital channel on a customer's premises and enable
computer data to be transmitted and received at high speeds over the telephone
line without the use of a modem.
Other Products and Services. In addition, the Company sells a variety
of accessory products, primarily head sets and alligator clips. The Company also
sells spare parts for its product lines and provides repair services for its
products.
Methods of Distribution
The Company presently sells its products through its own regional sales
managers and sales representatives who assist the Company's national telephone
equipment distributors. Sales managers are presently based in Georgia and
Colorado. In addition, the Company maintains an in-house sales staff at its
facilities in Milpitas, California.
Competition
Competition is high with respect to each of the Company's product
lines. However, as the products contained in such lines are varied and similar
products contain varying features, neither the Company nor any of its
competitors is a dominant factor in any product line market, except for
linemen's test sets for which Dracon, a division of Harris Corporation, is
dominant.
The principal method of competition for each of the Company's products
is price and product features, with service and warranty having a relatively
less significant impact. The Company believes its product lines are
competitively priced. Many of the Company's competitors have greater
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financial resources and have more extensive research and development and
marketing staffs than the Company.
Raw Materials
The basic materials used in the manufacture of the Company's telephone
test equipment and telephone station and peripheral telephone equipment consist
of electronic components. The Company utilizes many suppliers and is not
dependent on any supplier. Its raw materials generally are readily available
from numerous suppliers.
Patents and Trademarks
The Company has obtained a number of patents and has a number of
trademarks which are used to identify its product lines. No patent or trademark
is considered to be material to the Company's overall operations. The Company
also pays royalties to third parties under arrangements permitting the Company
to manufacture various items in its product lines.
Principal Customers
The Company is not dependent upon any single customer. However, North
Supply Company, a national distributor of telephone products, accounted for
approximately 19% and 15% of the Company's net sales for the years ended June
30, 1997 and 1998, respectively. The Company believes that, should it for any
reason lose this distributor, the Company would not be adversely impacted since
these sales would be absorbed by other distributors.
Research and Development
The Company is regularly engaged in the design of new products and
improvement of existing products for all of its product lines. The amount
specifically allocated to research and development activities in fiscal 1997 and
1998, principally salaries, was $238,061 and $228,755, respectively. All
research and development is Company-sponsored, except for products designed for
the Company by unaffiliated third parties compensated by either a lump-sum
payment or on a royalty basis.
The Company intends to continue its policy of reviewing potential
acquisitions of new product lines, additional products for its existing product
lines and the enhancement of its production and distribution capabilities. Such
acquisitions could lead to the issuance of notes, use of the general working
capital of the Company and/or issuance of shares of the Company's capital stock.
Compliance with Environmental and Other Governmental Laws and Regulations
Certain of the Company's customer premise equipment products that
connect to public telephone networks need Federal Communications Commission (or,
in the case of foreign sales, the equivalent agency in the foreign country in
which they will be sold) approval prior to their sale. The Company does not
believe that compliance with Federal, state and local environmental and other
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<PAGE>
laws and regulations which have been adopted have had, or will have, a material
effect on its capital expenditures, earnings or competitive position.
Employees
As of August 31, 1998, the Company had in its employ 31 persons on a
full-time basis. Of these, 19 were engaged in production, 3 in engineering, 5 in
sales and 4 in administration.
Foreign and Government Sales
Export sales were approximately $252,000 and $189,000 in fiscal 1997
and 1998, respectively. Such export sales were made principally to Europe,
Canada and South America. Most export sales are made primarily through
distributors and agents. Foreign sales are affected by the strength of the
United States dollar. Revenues from sales to the United States government (none
of the contracts relating thereto being subject to renegotiation of profits or
termination at the election of the government) are immaterial.
Item 2. Properties.
- ------ ----------
The Company's manufacturing operations are conducted in
approximately 21,500 square feet of space in Milpitas, California (which
includes warehouse and administrative facilities and which, since September 1,
1996, has also housed the Company's executive offices ) under a lease expiring
on March 31, 1999. The Company believes its facilities, including machinery and
equipment, are suitable and adequate for its present operations. The Company
does not anticipate unusual capital expenditures due to aging, repair or
replacement of machinery and equipment.
Item 3. Legal Proceedings.
-----------------
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
- ------ ---------------------------------------------------
Not applicable.
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<PAGE>
PART II
Item 5. Market for the Common Equity and Related Stockholder Matters.
- ------ ------------------------------------------------------------
The Company's Common Stock is traded in the over-the-counter
market and is quoted on the Nasdaq Stock Market-Small Cap Market under the
symbol MTRO. The following table sets forth the high and low bid prices for the
Company's Common Stock for each quarterly period during fiscal 1998 and fiscal
1997, as reported by Nasdaq. The quotations are without retail markups,
markdowns or commissions and may not represent actual transactions.
High Low
---- ---
Fiscal 1997
-----------
First Quarter 1 1/4 1
Second Quarter 1 1/4 1
Third Quarter 1 1/4 1 1/16
Fourth Quarter 1 1/8 5/8
Fiscal 1998
-----------
First Quarter 1 3/8 11/16
Second Quarter 1 1/2 7/8
Third Quarter 1 3/8 5/8
Fourth Quarter 1 3/4 25/32
The Company has been advised by the Staff of Nasdaq that the
Staff considers the Merger to be a reverse acquisition and that, since the
combined entity is not expected to meet all of the criteria that would be
applicable to gain an initial listing on the Nasdaq SmallCap Market, the Company
will be delisted from the Nasdaq SmallCap Market effective on the date the
Merger is consummated. At that time the Company expects that price quotations
for its Common Stock will become available through Nasdaq's Electronic Bulletin
Board.
No dividends have been paid on the Company's Common Stock
during either of the last two fiscal years.
As of September 15, 1998 there were approximately 966 holders
of record of the Company's Common Stock.
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<PAGE>
Item 6. Management's Discussion and Analysis.
- ------ ------------------------------------
The following discussion and analysis should be read in
conjunction with the financial statements and notes thereto contained elsewhere
in this report.
Results of Operations
Net sales were $43,741 (1.1%) lower in fiscal year 1998 than
in fiscal 1997. Reference is made to the table for information concerning sales
by product lines of the Company during the two-year period ended June 30, 1998.
Sales of telephone test equipment decreased by $19,934 (.6%) in fiscal 1998 from
fiscal 1997, mostly due to a decrease of 42.6% in sales of transmission test
equipment, which offset increases of 6.2% in outside plant test sets and 10.3%
in installer's test sets. The increases in outside plant and installer's test
sets were mainly attributable to the introduction and sale of new products,
while the decrease in transmission test equipment sales was due to the effects
of a mature product line. Sales of customer premise equipment decreased by
$37,603 (31.1%) in fiscal 1998 over fiscal 1997, mainly due to a decrease in
dialer sales of 63.1% which offset an increase in call handling products of
87.5%. The increase in call handling products was due to newly introduced
products, while the decrease in dialer sales was attributable to the reduced
demand for dialers in the domestic market. Sales of miscellaneous products and
services increased by $13,796 (8.6%) in fiscal 1998 over fiscal 1997 due mainly
to increased sales of spare parts and repairs. The Company implemented selective
price increases during the third quarter of fiscal 1998; however, because of the
limited portion of the year in which the new prices were in effect, the price
increases had minimal impact on reported sales.
The Company's gross profit margin, expressed as a percentage of sales,
decreased to 33.0% in fiscal 1998 from 37.8% in fiscal 1997, mainly due to a one
time-write off of $105,917 for obsolete and discontinued inventory. In addition,
overhead expenses increased by 9.1% due to increases in salaries, payroll
expenses and depreciation which offset decreases in supplies, factory travel and
freight expenses.
Selling, general and administrative expenses increased in fiscal 1998
by $37,251 (3.1%) and as a percentage of sales to 32.5% in fiscal 1998 from
31.2% in fiscal 1997. This increase was mainly due to an increase in sales
expense (9.4%) which results from increases in commissions, royalties and
salaries which offset a reduction in travel and entertainment expenses.
Increased sales expenses also offset a reduction in general and administrative
expenses of 2.3%, which was due to reductions in most accounts except for
professional fees connected with the hiring of an investment banking firm.
A reserve of $300,000 was established in fiscal 1998 for estimated
professional fees in connection with the proposed merger pursuant to which
Steiner-Atlantic Corp. ("Steiner") would become a wholly-owned subsidiary of the
Company, with approximately 69% of the Company's
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<PAGE>
shares of Common Stock to be outstanding immediately following the merger, to be
owned by the two shareholders of Steiner (the "Merger").
Research and development expenses were $9,306 (3.9%) lower in fiscal
1998 than in fiscal 1997, mainly due to lower salary expenses, payroll costs and
supplies.
Royalties, interest and other income increased by $3,927 (62.8%) in
fiscal 1998 from fiscal 1997, mostly due to increased cash balances invested for
most of fiscal 1998.
The provision for income taxes was a credit of $150,000 or 30% of the
pre-tax loss in fiscal 1998 compared to a charge of $13,000 or 51.7% of the
pre-tax profit in fiscal 1997. The credit in fiscal 1998 was below the Federal
statutory rate of 34% primarily as a result of the net operating loss carryback
created in fiscal 1998 and good will amortization, offset by State income taxes
incurred despite the Company's loss. The provision in fiscal 1997 was higher
than Federal statutory rate of 34% due to State income taxes, non-deductible
charges to earnings, principally goodwill, and other rate adjustments.
Financial Condition
During the year ended June 30, 1998, cash and cash equivalents
decreased by $23,107 to $475,508. Cash provided by operating activities was
$56,986 despite a loss for financial reporting purposes of $349,670. Such loss
included non-cash charges of $74,012 for depreciation and amortization, $105,917
for a one time write-off of obsolete and discontinued inventory, as well as a
$300,000 provision for accrued expenses related to the pending Merger, offset by
a $108,000 credit for deferred income tax benefits ($99,000 of which related to
such accrued expenses). Cash of $80,093 was used in investing activities for
capital expenditures. The Company believes that its present cash and cash it
expects to generate from operations will be sufficient to meet its operational
needs in fiscal 1999. Steiner proposes to obtain a revolving credit facility
subsequent to the Merger to support the activities of Steiner.
Year 2000 Compliance
The Company believes that its internal management information systems,
billing, payroll and other information services are Year 2000 compliant. The
Company has already upgraded its software programs at cost of less than $2,000
and has carried out certain tests of its accounts payable and accounts
receivable files which are date sensitive and found all systems to operate
properly.
The Company believes that one of its transmission products is not Year
2000 compliant. The Company is reviewing certain engineering changes for this
product. The product tests transmission qualities of telephone circuits which
are not date sensitive and will not obsolete units in the field. Liability
exposure, if any, associated with this product, which sells for approximately
$5,000 per unit, is believed by the Company to be minimal. The Company has sold
approximately 12 of these units in the past five years.
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<PAGE>
The Company is not linked by computer with any of its customers or
vendors. Orders are received and purchase orders are sent by telecopy, telephone
or mail. None of these methods are date sensitive.
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<PAGE>
Item 7. Financial Statements.
- ------ --------------------
The following financial statements of the Company are
contained on the pages indicated:.
Page
----
Report of Independent Certified Public Accountants 12
Financial Statements:
Balance Sheets - June 30, 1997 and 1998 13
Statements of Operations - years ended 15
June 30, 1997 and 1998
Statement of Changes in Stockholders' Equity - 16
years ended June 30, 1997 and 1998
Statements of Cash Flows - years ended 17
June 30, 1997 and 1998
Notes to Financial Statements 18
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Report of Independent Certified Public Accountants
- --------------------------------------------------
Board of Directors and Stockholders
Metro Tel Corp.
We have audited the accompanying balance sheets of Metro Tel Corp. as of June
30, 1997 and 1998, and the related statements of operations, changes in
stockholders' equity and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Metro Tel Corp. as of June 30,
1997 and 1998, and the results of its operations and its cash flows for the
years then ended in conformity with generally accepted accounting principles.
/S/ Grant Thornton, LLP
San Jose, California
August 10, 1998
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<PAGE>
<TABLE>
<CAPTION>
Metro Tel Corp.
BALANCE SHEETS
June 30,
ASSETS
1997 1998
------ ----
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 498,615 $ 475,508
Trade receivables, net of allowance for doubtful accounts of
$10,000 in 1997 and 1998 550,457 486,144
Inventories 1,516,339 1,434,147
Prepaid expenses and other 43,696 78,766
-------------- ----------
Total current assets 2,609,107 2,474,565
DEFERRED INCOME TAXES 27,000 133,000
PROPERTY AND EQUIPMENT - AT COST
Machinery and equipment 486,683 566,732
Furniture and fixtures 76,883 76,927
Leasehold improvements 8,765 8,765
------------- ----------
572,331 652,424
Less accumulated depreciation and amortization 457,671 501,078
------------- ----------
114,660 151,346
OTHER ASSETS
Goodwill, net of accumulated amortization of $399,255 in 1997
and $429,071 in 1998 793,444 763,628
Other, net 10,465 9,676
-------------- ----------
803,909 773,304
-------------- ----------
$3,554,676 $3,532,215
============= ==========
</TABLE>
The accompanying notes are an integral part of these statements.
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<PAGE>
Metro Tel Corp.
BALANCE SHEETS (continued)
June 30,
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
1997 1998
---- ----
<S>
CURRENT LIABILITIES <C> <C>
Accounts payable $ 212,171 $ 196,694
Accrued liabilities 171,880 216,566
Accrued expenses related to pending acquisition - 300,000
------------- ------------
Total current liabilities 384,051 713,260
DEFERRED INCOME TAXES 7,000 5,000
COMMITMENTS AND CONTINGENCIES - -
STOCKHOLDERS' EQUITY
Common stock, 6,000,000 shares authorized,
2,080,296 shares issued and 2,054,046 shares
outstanding in 1997 and 1998 52,007 52,007
Additional paid-in capital 2,152,423 2,152,423
Retained earnings 1,027,945 678,275
------------- -----------
3,232,375 2,882,705
Less 26,250 shares of treasury stock - at cost (68,750) (68,750)
------------- -----------
3,163,625 2,813,955
$ 3,554,676 $ 3,532,215
============ ===========
</TABLE>
The accompanying notes are an integral part of these statements.
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<PAGE>
Metro Tel Corp.
STATEMENTS OF OPERATIONS
Years ended June 30,
<TABLE>
<CAPTION>
1997 1998
---- ----
<S> <C> <C>
Net sales $ 3,882,818 $ 3,839,077
Cost of goods sold 2,413,529 2,570,561
-------------- ------------
Gross profit 1,469,289 1,268,516
Selling, general and administrative expenses 1,212,361 1,249,612
Expenses related to pending acquisition - 300,000
Research and development 238,061 228,755
Interest and other income (6,254) (10,181)
-------------- ------------
1,444,168 1,768,186
-------------- ------------
Earnings (loss) before provision for income taxes 25,121 (499,670)
Provision for income taxes 13,000 (150,000)
-------------- ------------
NET EARNINGS (LOSS) $ 12,121 $ (349,670)
============== ============
Earnings (loss) per common share - Basic and diluted $.01 $(.17)
Weighted average number of common shares outstanding -
Basic and diluted 2,025,711 2,054,046
</TABLE>
The accompanying notes are an integral part of these statements.
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<PAGE>
Metro Tel Corp.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
Years ended June 30, 1997 and 1998
<TABLE>
<CAPTION>
Common Stock Additional
$.025 Par Value Paid-in Retained Treasury
Shares Amount Capital Earnings Stock Total
------ ------ ---------- -------- -------- -----
<S> <C> <C> <C> <C> <C> <C>
Balance at July 1, 1996 2,030,296 $50,757 $2,107,173 $1,015,824 $(68,750) $3,105,004
Net earnings - - - 12,121 - 12,121
Stock options exercised 50,000 1,250 45,250 - - 46,500
----------- ------- ---------- ---------- --------- ----------
Balance at June 30, 1997 2,080,296 52,007 2,152,423 1,027,945 (68,750) 3,163,625
Net loss - - - (349,670) - (349,670)
----------- ------- ---------- ---------- --------- ----------
Balance at June 30, 1998 2,080,296 $52,007 $2,152,423 $ 678,275 $(68,750) $2,813,955
=========== ======= ========== =========== ========= ==========
</TABLE>
The accompanying notes are an integral part of this statement.
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<PAGE>
<TABLE>
<CAPTION>
Metro Tel Corp.
STATEMENTS OF CASH FLOWS
Years ended June 30,
1997 1998
------ ----
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ 12,121 $(349,670)
Adjustments to reconcile net earnings (loss) to net cash provided
by operating activities
Depreciation and amortization 66,558 74,012
Deferred income taxes (3,000) (108,000)
(Increase) decrease in operating assets:
Trade receivables 165,646 64,313
Inventories (102,960) 82,192
Prepaid expenses and other assets (18,345) (35,070)
Increase (decrease) in operating liabilities:
Accounts payable 2,203 (15,477)
Accrued liabilities (2,324) 44,686
Accrued expenses related to pending acquisition - 300,000
Income taxes payable (18,866) -
---------- ----------
Net cash provided by operating activities 101,033 56,986
Cash flows from investing activities:
Capital expenditures (60,842) (80,093)
Cash flows from financing activities:
Issuance of common stock 46,500 -
---------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH 86,691 (23,107)
EQUIVALENTS
Cash and cash equivalents at beginning of year 411,924 498,615
----------- ----------
Cash and cash equivalents at end of year $498,615 $ 475,508
=========== ==========
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Income taxes $ 60,127 $ 1,989
</TABLE>
The accompanying notes are an integral part of these statements.
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Metro Tel Corp.
NOTES TO FINANCIAL STATEMENTS
June 30, 1997 and 1998
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Metro Tel Corp. (the "Company") is a Delaware corporation engaged
principally in the manufacture and sale of telephone test equipment and
customer premise equipment, as well as related accessories. The
principal market for the Company's products is the United States. A
summary of the significant accounting policies applied in the
preparation of the accompanying financial statements follows:
1. Revenue Recognition
Sales are recorded as products are shipped.
2. Inventories
Inventories are stated at the lower of cost or market. Cost is
principally determined by the weighted average method, which
approximates the first-in, first-out ("FIFO") method.
3. Property and Equipment
Property and equipment are stated at cost, less accumulated
depreciation and amortization. Depreciation and amortization
are provided for in amounts sufficient to relate the cost of
depreciable assets to operations over their estimated useful
lives (generally 5 to 10 years), on a straight-line basis.
Depreciation and amortization of property and equipment was
$36,740 and $43,407 in fiscal 1997 and 1998, respectively.
4. Goodwill
Goodwill, representing cost in excess of the book value of net
assets acquired, is being amortized on a straight-line basis
over a period of 40 years. On an ongoing basis, management
reviews the valuation and amortization of goodwill to
determine possible impairment by comparing the carrying value
to the undiscounted future cash flows of the related assets.
5. Income Taxes
Deferred income taxes are recognized for temporary differences
between the financial statement and income tax bases of assets
and liabilities and loss carryforwards and tax credit
carryforwards for which income tax benefits are expected to be
realized in future years. A valuation allowance is established
to reduce deferred tax assets if it is more likely than not
-18-
<PAGE>
Metro Tel Corp.
NOTES TO FINANCIAL STATEMENTS (continued)
June 30, 1997 and 1998
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
that all, or some portion, of such deferred tax assets will
not be realized. The effect on deferred taxes of a change in
tax rates is recognized in the statement of operations in the
period that includes the enactment date.
6. Earnings (Loss) Per Common Share
The Company has adopted the provisions of Statement of
Financial Accounting Standards ("SFAS") No. 128, Earnings Per
Share, for all periods presented. SFAS No. 128 requires a dual
presentation of basic and diluted earnings per share.
Basic earnings (loss) per common share is based upon the
weighted average number of shares of common stock outstanding
during the year. Common stock equivalents are included in the
weighted average number of common shares outstanding, for
purposes of calculating diluted earnings per share, when their
effect is dilutive. The effect of common stock equivalents on
earnings (loss) per share is anti-dilutive in 1997 and 1998.
The adoption of SFAS No. 128 for fiscal 1997 had no impact on
previously reported earnings per share.
7. Cash and Cash Equivalents
The Company considers all highly liquid investments with
original maturities of three months or less to be cash
equivalents for purposes of the statement of cash flows.
8. Principal Customers
The Company sells its products principally to companies in the
telecommunications industry and to distributors, with its
credit risk being dependent on the economic conditions of the
industry and generally prevailing economic conditions. The
Company performs ongoing credit evaluations of its customers
and does not generally require collateral. Sales to two
customers accounted for 19% and 10% of total sales for fiscal
1997 and 15% and 11% of total sales for fiscal 1998. Two
customers accounted for 18% and 16% of trade receivables at
June 30, 1997 and 15% and 13% of trade receivables at June 30,
1998.
-19-
<PAGE>
Metro Tel Corp.
NOTES TO FINANCIAL STATEMENTS (continued)
June 30, 1997 and 1998
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
9. Use of Estimates
In preparing financial statements in conformity with generally
accepted accounting principles, management is required to make
estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements, as well
as the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those
estimates.
NOTE B - INVENTORIES
The components of inventories are summarized as follows:
June 30,
-------
1997 1998
---- ----
Raw materials $692,368 $640,414
Work-in-process 232,818 289,498
Finished goods 591,153 504,235
$1,516,339 $1,434,147
========== ==========
NOTE C - STOCK OPTIONS
The Company has in effect a 1991 Stock Option Plan and a 1994
Non-Employee Director Stock Option Plan that authorize the grant of
options to purchase 250,000 and 100,000 shares, respectively, of the
Company's common stock to key management employees of the Company and
members of the Company's Board of Directors, respectively. The plans
provide that option prices will not be less than the fair market value
per share on the date the option is granted. Accordingly, no
compensation cost has been recognized for options granted under the
plans. Had compensation cost for the plans been determined based on the
fair value of the options at the grant dates consistent with the method
prescribed in SFAS No. 123, Accounting for Stock-Based Compensation,
the Company's net earnings and earnings per share would have been
reduced to the pro forma amounts indicated below. Pro forma amounts for
1997 and 1998 may not be indicative of pro forma results in future
periods because the pro forma amounts below do not include pro forma
compensation cost for options granted prior to fiscal 1996.
-20-
<PAGE>
Metro Tel Corp.
NOTES TO FINANCIAL STATEMENTS (continued)
June 30, 1997 and 1998
NOTE C - STOCK OPTIONS (continued)
1997 1998
---------- -------
Net earnings (loss)
As reported $12,121 $(349,670)
Pro forma 2,087 (357,311)
Per share
As reported $0.01 $(.17)
Pro forma 0.00 (.17)
The fair value of each option grant is estimated on the date of grant
using the Black-Scholes options pricing model with the following
weighted-average assumptions used for grants in 1997 (there were no
grants in 1998): no dividend yield; expected volatility of 90%;
risk-free interest rate of 5.9%; and expected lives of 4 years.
In addition, in each of June 1991 and May 1993, the Company granted
stock options to purchase 30,000 shares of its common stock to
nonemployee directors at an exercise price of $1.19 and $1.00 per
share, respectively, the fair market values on the dates of grant.
These options were not granted pursuant to the Company's stock option
plans. Options for 20,000 shares expired in May 1996. The remaining
options to purchase 40,000 shares are exercisable over a ten-year
period.
A summary of the status of options granted under the Company's stock
options plans, including options granted to non-employee directors
prior to the 1994 Plan, as of June 30, 1997 and 1998, and changes
during the years ended on those dates, is presented below.
<TABLE>
<CAPTION>
1997 1998
---- ----
Weighted Weighted
Average Average
Exercise Exercise
Shares Price Shares Price
----- -------- ------ ---------
<S> <C> <C> <C> <C>
Outstanding at beginning of year 231,000 $0.98 225,000 $0.98
Granted 90,000 0.90 - -
Exercised (50,000) 0.93 - -
Canceled or expired (46,000) 0.85 - -
-------- -------------
Outstanding at end of year 225,000 $0.98 225,000 $0.98
Weighted average grant-date fair value
of options granted during the year $0.65 -
</TABLE>
-21-
<PAGE>
NOTE C - STOCK OPTIONS (continued)
The following information relates to stock options outstanding at June
30, 1998:
Range of exercise prices $0.81-$1.19
Options outstanding 225,000
Weighted average exercise price of options outstanding $0.98
Weighted average remaining contractual life (years) 8
Options exercisable 209,000
Weighted average exercise price of options exercisable $0.98
NOTE D - INCOME TAXES
The provision (benefit) for income taxes is summarized as follows:
June 30,
-------
1997 1998
---- ----
Current
Federal $11,000 $(40,000)
State 5,000 (2,000)
Deferred (3,000) (108,000)
--------- ----------
$13,000 $(150,000)
========= ==========
The tax effects of temporary differences which give rise to deferred
tax assets (liabilities) are summarized as follows:
June 30,
-------
1997 1998
---- ----
Deferred tax assets (liabilities)
Acquisition costs $ - $99,000
Operating loss carryforward - 7,000
Inventory capitalization 15,500 14,000
Vacation accrual 8,500 10,000
Trade receivables 3,000 3,000
Depreciation (7,000) (5,000)
------ -------
20,000 128,000
Valuation allowance - -
------ -------
Net deferred tax asset $20,000 $128,000
======= ========
-22-
<PAGE>
Metro Tel Corp.
NOTES TO FINANCIAL STATEMENTS (continued)
June 30, 1997 and 1998
The following is a reconciliation of the provision for income taxes to
the Federal statutory income tax rate:
June 30,
-------
1997 1998
---- ----
Federal statutory rate 34.0% (34.0)%
State taxes, net of Federal benefit 6.5 (4.2)
Amortization of goodwill 13.2 2.0
Effect of operating loss carryback - 5.5
Effect of graduated Federal tax rates (11.9) -
Other, net 9.9 .7
------ --------
51.7% (30.0)%
====== ======
NOTE E - ACCRUED LIABILITIES
Accrued liabilities are summarized as follows:
June 30,
-------
1997 1998
---- ----
Payroll and employee benefits $80,934 $108,387
Profit-sharing contributions 49,589 54,528
Accrued professional fees 36,000 36,000
Other 5,357 17,651
----------- ----------
$171,880 $216,566
=========== ==========
NOTE F - EMPLOYEE BENEFIT PLANS
The Company maintains a profit-sharing plan which covers substantially
all employees. Annual contributions, determined at the discretion of
the Board of Directors, were $49,589 in fiscal 1997 and $54,527 in
fiscal 1998.
The Company also maintains a 401(k) retirement plan which covers
substantially all employees and provides for voluntary employee
contributions with employer matching contributions of up to 2% of the
employee's compensation. The Company's matching contribution for this
401(k) retirement plan was $19,000 for both fiscal 1997 and 1998.
-23-
<PAGE>
Metro Tel Corp.
NOTES TO FINANCIAL STATEMENTS (continued)
June 30, 1997 and 1998
NOTE G - COMMITMENTS AND CONTINGENCIES
Leases
The Company occupies a manufacturing and warehouse facility in
California pursuant to a noncancelable operating lease expiring in
March 1999. This lease does not contain a renewal option. The minimum
rental commitment under this lease, at June 30, 1998, is $87,000.
Rent expense charged to operations (including rent under a
noncancelable lease for an office facility in New York which expired in
February 1997) was $147,000 and $116,000 for fiscal 1997 and 1998,
respectively.
Employment Agreements
The Company is obligated under an employment agreement, expiring June
30, 2001, with an officer to pay $173,000 per annum. The Company is
also a party to an employment arrangement with another executive
officer pursuant to which he has been receiving a salary of $150,000
per annum since July 1, 1997.
Royalty Agreement
The Company is presently obligated pursuant to a royalty agreement to
pay the greater of 10% of sales of certain products or $75,000 per
year. Payments were $79,800 and $113,000 for fiscal 1997 and 1998,
respectively. The Company is also obligated pursuant to a second
royalty agreement to pay 10% of annual sales of certain other products.
Payments under the second royalty agreement were $27,000 and $10,000
for fiscal 1997 and 1998, respectively.
NOTE H - EXPORT SALES
Export sales were approximately $252,000 and $189,000 in fiscal 1997
and 1998, respectively.
NOTE I - FINANCIAL INSTRUMENTS
The carrying amounts of financial instruments including cash and cash
equivalents, accounts receivable and accounts payable approximated fair
value as of June 30, 1997 and 1998.
-24-
<PAGE>
Metro Tel Corp.
NOTES TO FINANCIAL STATEMENTS (continued)
June 30, 1997 and 1998
NOTE J - SUBSEQUENT EVENTS
On July 1, 1998, the Company and Steiner-Atlantic Corporation
("Steiner") entered into an agreement which provides for the merger of
a newly-formed Subsidiary of the Company with and into Steiner. Upon
completion of the merger, Steiner will become a wholly-owned subsidiary
of the Company and the Company would issue 4,720,954 shares of common
stock to the present shareholders of Steiner, which would represent
approximately 69% of the shares to be outstanding immediately following
the completion of the merger. In addition, the Company will grant
options at 100% of fair market value for the purchase of up to 500,000
shares of its common stock to employees of Steiner other than Steiner
shareholders.
For financial accounting purposes, this transaction will be accounted
for as a reverse acquisition of the Company by Steiner.
-25-
<PAGE>
Item 8. Changes in and Disagreements With
- ------ Accountants on Accounting and Financial Disclosure.
--------------------------------------------------
Not applicable.
PART III
--------
Item 9. Directors, Executive Officers, Promoters and Control Persons;
- ------ Compliance with Section 16(a) of the Exchange Act.
------------------------------------------------------------
The following information is presented with respect to the
background of each of the directors and executive officers of the Company:
Venerando J. Indelicato, 65, has been President and Treasurer
of the Company for more than the past five years. Mr. Indelicato has been a
director of the Company since 1966.
Richard A. Wildman, 44, has been Executive Vice President of
the Company since September 1996. For more than five years prior to joining the
Company, Mr. Wildman served in various sales and marketing capacities with AT&T
Corp., most recently directing its western phone store operations.
Lloyd Frank, 73, has been a member of the law firm of Parker
Chapin Flattau & Klimpl for more than the past five years. Mr. Frank has been a
director of the Company since 1977. The Company retained Parker Chapin Flattau &
Klimpl during the Company's last fiscal year and is retaining that firm during
the Company's current fiscal year. Mr. Frank is also a director of Park
Electrochemical Corp.
Michael Michaelson, 75, has been an independent publishing and
marketing consultant for more than the past five years. Mr. Michaelson has been
a director of the Company since 1978.
Michael Epstein, 60, has been an independent investor since
December 1993. For more than five years prior thereto Mr. Epstein was an
investment banker with the investment banking firm of Allen & Company
Incorporated.
There are no family relationships among any of the directors
and executive officers of the Company. All directors serve until the next annual
meeting of stockholders (scheduled to be held on or about October 29, 1998) and
until the election and qualification of their respective successors. All
officers serve at the pleasure of the Board of Directors.
The following information is presented with respect to the
background of each person who is not an executive officer but who is expected to
make a significant contribution to the Company:
-26-
<PAGE>
Howard Perera, 46, has served as the Company's Director of
Engineering, engaged in the design and development of new products since joining
the Company in September 1993. For approximately five years prior to joining the
Company, Mr. Perera served as a product manager for DCM Corp.
Jon D. Robinette, 41, has, since July 1995, served as General
Manager of the Company, responsible for managing and coordinating operations in
the Company's Milpitas, California facility. Prior thereto, Mr. Robinette served
as Operations Manager for the Company from October 1984.
Item 10. Executive Compensation.
- ------- ----------------------
The information called for by this Item will be contained in
the Company's definitive Proxy Statement with respect to the Company's 1998
Annual Meeting of Stockholders to be filed pursuant to Regulation l4A under the
Securities Exchange Act of 1934, and is incorporated herein by reference to such
information.
Item 11. Security Ownership of Certain Beneficial Owners and Management.
- ------- --------------------------------------------------------------
The information called for by this Item will be contained in
the Company's definitive Proxy Statement with respect to the Company's 1998
Annual Meeting of Stockholders to be filed pursuant to Regulation l4A under the
Securities Exchange Act of 1934, and is incorporated herein by reference to such
information.
Item 12. Certain Relationships and Related Transactions.
- ------- ----------------------------------------------
The information called for by this Item will be contained in
the Company's definitive Proxy Statement with respect to the Company's 1998
Annual Meeting of Stockholders to be filed pursuant to Regulation l4A under the
Securities Exchange Act of 1934, and is incorporated herein by reference to such
information.
Item 13. Exhibits and Reports on Form 8-K.
- ------- --------------------------------
(a) Exhibits
2(a)(1) Agreement of Merger dated as of July 1, 1998 between the
Company and Steiner- Atlantic Corp. (Exhibit 2.01 to the
Company's Current Report on Form 8-K dated July 6, 1998).
3(a)(1) Copy of Certificate of Incorporation of the Company, as filed
with the Secretary of State of the State of Delaware on June
30, 1963. (Exhibit 1.1 to the Company's Registration Statement
on Form 10, File No. 0-9040).
-27-
<PAGE>
3(a)(2) Copy of Certificate of Amendment to the Certificate of
Incorporation of the Company, as filed with the Secretary of
State of the State of Delaware on March 27, 1968. (Exhibit 1.2
to the Company's Registration Statement on Form 10, File No.
0-9040).
3(a)(3) Copy of Certificate of Amendment to the Certificate of
Incorporation of the Company, as filed with the Secretary of
State of the State of Delaware on November 4, 1983 (Exhibit
3(a)(3) to the Company's Annual Report on Form 10- KSB for the
year ended June 30, 1995, File No. 0-9040).
3(a)(4) Copy of Certificate of Amendment to the Certificate of
Incorporation of the Company, as filed with the Secretary of
State of the State of Delaware on November 5, 1986 (Exhibit
3(a)(4) to the Company's Annual Report on Form 10- KSB for the
year ended June 30, 1995, File No. 0-9040).
3(a)(5) Copy of Certificate of Change of Location of Registered Office
and of Agent, as filed with the Secretary of State of the
State of Delaware on December 31, 1986 (Exhibit 3(a)(5) to the
Company's Annual Report on Form 10-KSB for the year ended June
30, 1995, File No. 0-9040).
3(b)(1) Copy of By-Laws of the Company (Exhibit 3(b)(1) to the
Company's Annual Report on Form 10-KSB for the year ended June
30, 1996, File No. 0-9040).
10(a)(1) Lease dated April 1, 1991 between the Company and CB
Institutional Fund VII with respect to the Company's
facilities at 240 South Milpitas Boulevard, Milpitas,
California. (Exhibit 10(a)(2) to the Company's Annual Report
on Form 10-K for the year ended June 30, 1991, File No.
0-9040).
10(b)(1)(i)+ Employment Agreement dated July 1, 1981 between the Company
and Venerando J. Indelicato. (Exhibit 10(b)(1)(i) to the
Company's Annual Report on Form 10- KSB for the year ended
June 30, 1995, File No. 0-9040).
10(b)(1)(ii)+ Amendment No. 1 dated July 1, 1983 to the Employment Agreement
dated July 1, 1981 between the Company and Venerando J.
Indelicato. (Exhibit 10(b)(1)(ii) to the Company's Annual
Report on Form 10-KSB for the year ended June 30, 1995, File
No. 0-9040).
10(b)(2)+ Letter agreement dated August 29, 1996 between the Company and
Richard A. Wildman. (Exhibit 10(b)(2) to the Company's Annual
Report on Form 10-KSB for the year ended June 30, 1997, File
No. 0-9040).
10(c)(1)+ The Company's 1991 Stock Option Plan (Exhibit 10(c)(1) to the
Company's Annual Report on Form 10-KSB for the year ended June
30, 1996, File No. 0- 9040).
-28-
<PAGE>
10(c)(2)(a)+ The Company's 1984 Non-Employee Director Stock Option Plan, as
amended. (Exhibit 10(d)(2) to the Company's Annual Report on
Form 10-K for the year ended June 30, 1987, File No. 0-9040).
10(c)(2)(b)+ The Company's 1994 Non-Employee Director Stock Option Plan.
(Exhibit A to the Company's Proxy Statement dated October 14,
1994 used in connection with the Company's 1994 Annual Meeting
of Stockholders, File No. 0-9040).
10(c)(3)+ Form of Stock Option Agreement dated June 25, 1991 entered
into between the Company and each of Sheppard Beidler (option
has since expired), Lloyd Frank and Michael Michaelson,
together with a schedule identifying the details in which the
actual agreements differ from the exhibit filed herewith.
(Exhibit 10(c)(4) to the Company's Annual Report on Form 10-K
for the year ended June 30, 1991, File No. 0-9040).
10(c)(4)+ Form of Stock Option Agreement dated May 4, 1993 entered into
between the Company and each of Sheppard Beidler, Lloyd Frank
and Michael Michaelson, together with a schedule identifying
the details in which the actual agreements differ from the
exhibit filed herewith. (Exhibit 10(c)(4) to the Company's
Annual Report on Form 10-KSB for the year ended June 30, 1993,
File No. 0-9040).
*27 Financial Data Schedule.
- --------------------
* Filed herewith. All other exhibits are incorporated herein by
reference to the filing indicated in the parenthetical
reference following the exhibit description.
+ Management contract or compensatory plan or arrangement.
(b) Reports on Form 8-K
No Reports on Form 8-K were filed by the Company during the
last fiscal quarter of the Company's fiscal year ended June 30, 1998. Following
the close of the fiscal year, the Company filed a Current Report on Form 8-K
dated (Date of earliest event reported) July 6, 1998 reporting under Item 5 and
Item 7. No financial statements were filed with that Report.
-29-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Company has duly caused this Report to be
signed on its behalf by the undersigned, thereunto duly authorized.
METRO-TEL CORP.
Dated: September 28, 1998
By: /s/ VENERANDO J. INDELICATO
-----------------------------
Venerando J. Indelicato,
President
Pursuant to the requirements of the Securities Exchange Act
of 1934, this Report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Capacity Date
--------- --------- ----
<S> <C> <C>
VENERANDO J. INDELICATO President, Treasurer September 28, 1998
- ----------------------- (Principal Executive,
Venerando J. Indelicato Financial and
Accounting Officer)
and Director
MICHAEL EPSTEIN Director September 28, 1998
- -----------------------
Michael Epstein
LLOYD FRANK Director September 28, 1998
- -----------------------
Lloyd Frank
MICHAEL MICHAELSON Director September 28, 1998
- -----------------------
Michael Michaelson
</TABLE>
-30-
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
- ------- -----------
2(a)(1) Agreement of Merger dated as of July 1, 1998 between the
Company and Steiner-Atlantic Corp. (Exhibit 2.01 to the
Company's Current Report on Form 8-K dated July 6, 1998).
3(a)(1) Copy of Certificate of Incorporation of the Company, as filed
with the Secretary of State of the State of Delaware on June
30, 1963. (Exhibit 1.1 to the Company's Registration Statement
on Form 10, File No. 0-9040).
3(a)(2) Copy of Certificate of Amendment to the Certificate of
Incorporation of the Company, as filed with the Secretary of
State of the State of Delaware on March 27, 1968. (Exhibit 1.2
to the Company's Registration Statement on Form 10, File No.
0-9040).
3(a)(3) Copy of Certificate of Amendment to the Certificate of
Incorporation of the Company, as filed with the Secretary of
State of the State of Delaware on November 4, 1983. (Exhibit
3(a)(3) to the Company's Annual Report on Form 10-KSB for the
year ended June 30, 1995, File No. 0-9040).
3(a)(4) Copy of Certificate of Amendment to the Certificate of
Incorporation of the Company, as filed with the Secretary of
State of the State of Delaware on November 5, 1986. (Exhibit
3(a)(4) to the Company's Annual Report on Form 10-KSB for the
year ended June 30, 1995, File No. 0-9040).
3(a)(5) Copy of Certificate of Change of Location of Registered Office
and Agent, as filed with the Secretary of State of the State
of Delaware on December 31, 1986. (Exhibit 3(a)(5) to the
Company's Annual Report on Form 10-KSB for the year ended June
30, 1995, File No. 0-9040).
3(b)(1) Copy of By-Laws of the Company. (Exhibit 3(b)(1) to the
Company's Annual Report on Form 10-KSB for the year ended June
30, 1996, File No. 0-9040).
10(a)(1) Lease dated April 1, 1991 between the Company and CB
Institutional Fund VII with respect to the Company's
facilities at 240 South Milpitas Boulevard, Milpitas,
California. (Exhibit 10(a)(2) to the Company's Annual Report
on Form 10-K for the year ended June 30, 1991, File No.
0-9040).
10(b)(1)(i)+ Employment Agreement dated July 1, 1981 between the Company
and Venerando J. Indelicato. (Exhibit 10(b)(1)(i) to the
Company's Annual Report on Form 10-KSB for the year ended June
30, 1995, File No. 0-9040).
-31-
<PAGE>
10(b)(1)(ii)+ Amendment No. 1 dated July 1, 1983 to the Employment Agreement
dated July 1, 1981 between the Company and Venerando J.
Indelicato. (Exhibit 10(b)(1)(ii) to the Company's Annual
Report on Form 10-KSB for the year ended June 30, 1995, File
No. 0-9040).
10(b)(2)+ Letter agreement dated August 29, 1996 between the Company and
Richard A. Wildman. (Exhibit 10(b)(2) to the Company's Annual
Report on Form 10- KSB for the year ended June 30, 1997, File
No. 0-9040).
10(c)(1)+ The Company's 1991 Stock Option Plan. (Exhibit 10(c)(1) to the
Company's Annual Report on Form 10-KSB for the year ended June
30, 1996, File No. 0- 9040).
10(c)(2)(a)+ The Company's 1984 Non-Employee Director Stock Option Plan, as
amended. (Exhibit 10(d)(2) to the Company's Annual Report on
Form 10-K for the year ended June 30, 1987, File No. 0-9040).
10(c)(2)(b)+ The Company's 1994 Non-Employee Director Stock Option Plan.
(Exhibit A to the Company's Proxy Statement dated October 14,
1994 used in connection with the Company's 1994 Annual Meeting
of Stockholders, File No. 0-9040).
10(c)(3)+ Form of Stock Option Agreement dated June 25, 1991 entered
into between the Company and each of Sheppard Beidler (option
has since expired), Lloyd Frank and Michael Michaelson,
together with a schedule identifying the details in which the
actual agreements differ from the exhibit filed herewith.
(Exhibit 10(c)(4) to the Company's Annual Report on Form 10-K
for the year ended June 30, 1991, File No. 0-9040).
10(c)(4)+ Form of Stock Option Agreement dated May 4, 1993 entered into
between the Company and each of Sheppard Beidler, Lloyd Frank
and Michael Michaelson, together with a schedule identifying
the details in which the actual agreements differ from the
exhibit filed herewith. (Exhibit 10(c)(4) to the Company's
Annual Report on Form 10-KSB for the year ended June 30, 1993,
File No. 0- 9040).
*27 Financial Data Schedule.
- --------------------
* Filed herewith. All other exhibits are incorporated herein by
reference to the filing indicated in the parenthetical
reference following the exhibit description.
+ Management contract or compensatory plan or arrangement.
-32-
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000065312
<NAME> METRO-TEL-CORP
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-30-1997
<PERIOD-END> JUN-30-1998
<CASH> 275,508
<SECURITIES> 200,000
<RECEIVABLES> 496,144
<ALLOWANCES> 10,000
<INVENTORY> 1,434,147
<CURRENT-ASSETS> 2,607,565
<PP&E> 652,424
<DEPRECIATION> 501,078
<TOTAL-ASSETS> 3,532,215
<CURRENT-LIABILITIES> 713,260
<BONDS> 0
0
0
<COMMON> 52,007
<OTHER-SE> 2,766,948
<TOTAL-LIABILITY-AND-EQUITY> 3,532,215
<SALES> 3,839,077
<TOTAL-REVENUES> 3,839,077
<CGS> 2,570,561
<TOTAL-COSTS> 1,768,186
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 10,000
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (499,670)
<INCOME-TAX> (150,000)
<INCOME-CONTINUING> (349,670)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (349,670)
<EPS-PRIMARY> (.17)
<EPS-DILUTED> (.17)
</TABLE>