<PAGE>
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 December 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 February 11, 1998
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Metro Tel Corp.
Statement of Operations
(Unaudited, Note A)
For the six months For the three months
ended December 31, ended December 31,
1997 1996 1997 1996
____________________________________________________________________________
Net sales $2,019,042 $1,752,930 $ 972,414 $ 736,680
Cost of goods sold 1,249,778 1,131,990 616,372 505,376
____________________________________________________________________________
Gross profit 769,264 620,940 356,042 231,304
____________________________________________________________________________
Selling, general, and
administrative expenses 630,137 589,913 318,814 309,528
Research and development 112,189 132,095 56,060 63,492
Interest and other income (5,355) (2,670) (2,570) (1,298)
____________________________________________________________________________
736,971 719,338 372,304 371,722
____________________________________________________________________________
Earnings (loss) before
provision (credit) for
income taxes 32,293 (98,398) (16,262) (140,418)
Provision (credit) for
income taxes 12,900 (39,400) (6,500) (56,200)
____________________________________________________________________________
Net earnings (loss) $ 19,393 $ (58,998) $ (9,762) $ (84,218)
============================================================================
Earnings (loss) per
common share (Note B) $ .01 $ (.03) $ - $ (.04)
==========================================================================
Weighted average number
of shares outstanding
(Note B) 2,054,046 2,004,046 2,054,046 2,004,046
============================================================================
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Metro Tel Corp.
Balance Sheets
(Unaudited, Note A)
ASSETS
____________________________________________________________________________
December 31, June 30,
1997 1997
____________________________________________________________________________
Current Assets
Cash and cash equivalents $ 410,840 $ 498,615
Accounts receivable, net 484,614 550,457
Inventories 1,615,356 1,516,339
Prepaid expenses and other 40,960 43,696
Deferred income taxes 27,000 27,000
____________________________________________________________________________
Total current assets 2,578,770 2,636,107
Property and equipment - at cost
Machinery and equipment 510,737 486,683
Furniture and fixtures 76,927 76,883
Leasehold improvements 8,765 8,765
____________________________________________________________________________
596,429 572,331
Less accumulated depreciation 477,563 457,671
____________________________________________________________________________
118,866 114,660
Other assets
Goodwill, net of accumulated
amortization of $414,164
on December 31, 1997 and
$399,256 on June 30, 1997 778,536 793,444
Other, net 9,805 10,465
____________________________________________________________________________
788,341 803,909
- ---------------------------------------------------------------------------
$3,485,977 $3,554,676
==========================================================================
Metro Tel Corp.
Balance Sheets
(Unaudited, Note A)
LIABILITIES AND
STOCKHOLDERS' EQUITY
____________________________________________________________________________
December 31, June 30,
1997 1997
____________________________________________________________________________
Current Liabilities
Accounts payable $ 121,986 $ 212,171
Accrued liabilities 173,973 171,880
_____________________________________________________________________________
Total current liabilities 295,959 384,051
Defrred Income Taxes 7,000 7,000
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 52,007
Additional paid-in capital 2,152,423 2,152,423
Retained earnings 1,047,338 1,027,945
_____________________________________________________________________________
3,251,768 3,232,375
Less 26,250 shares of treasury
stock - at cost (68,750) (68,750)
_____________________________________________________________________________
3,183,018 3,163,625
_____________________________________________________________________________
$3,485,977 $3,554,676
=============================================================================
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Metro Tel Corp.
Statements of Cash Flows
(Unaudited, Note A)
____________________________________________________________________________
For the six months ended
December 31,
1997 1996
____________________________________________________________________________
Cash flows from operating activities
Net earnings (loss) $ 19,393 $ (58,998)
Adjustments to reconcile net earnings
to cash provided by operating
activities
Depreciation and amortization 35,460 32,292
(Increase) decrease in operating assets
Accounts receivable 65,843 240,204
Inventories (99,017) (120,048)
Prepaid expenses and other 2,736 (103,426)
Increase (decrease) in operating
liabilities
Accounts payable (90,185) (88,580)
Accrued liabilities 2,093 (40,365)
Income taxes payable - (18,866)
____________________________________________________________________________
Net cash (used)
by operating activities (63,677) (157,787)
____________________________________________________________________________
Cash flows from investing activities
Capital expenditures (24,098) (34,339)
____________________________________________________________________________
Net (decrease) in cash
and cash equivalents (87,775) (192,126)
Cash and cash equivalents at beginning
of year 498,615 411,924
____________________________________________________________________________
Cash and cash equivalents at end of
period $ 410,840 $ 219,787
============================================================================
Supplement disclosures of cash flow
information
Cash paid during the period for
Income taxes $ - $ 60,627
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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, 1997.
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.
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<PAGE>
Management's Discussion and Analysis of
Financial Condition and Results of Operation
Liquidity and Capital Resources
During the three month period ended December 31, 1997, cash decreased
by $87,775. The decrease resulted from $63,677 used by operating activities
and $24,098 used in investing activities to purchase capital assets. Cash
generated for operations by profits ($19,393), depreciation ($35,460) and
reductions in accounts receivables ($65,843) and prepaid expenses ($2,736)
were used to support increases in inventory ($99,017), accrued liabilities
($2,093) and reduce accounts payable ($90,185). The Company believes that the
cash it expects to generate from operations will be sufficient to meet
operational needs in the forseeable future.
Results of Operations
Net sales for the three and six month periods ended December 31, 1997
increased by $235,734 (32.0%) and $266,112 (13.2%), respectively, from the
comparable periods of a year ago. The increase in sales for both fiscal 1998
reported periods was mainly due to increases in foreign sales of telephone
test equipment and an increase in new test equipment sales to Regional Bell
Operating Companies. Prices remained constant, however the Company intends
to implement selected price increases in the third quarter of fiscal 1998.
Sales of telephone test equipment increased by $239,398 (35.7%) for the three
month period and $283,808 (17.6%) for the six month period ended December 31,
1997 over to the same periods of a year ago. Sales of customer premise
equipment for the second quarter and the first half of fiscal 1998 decreased
by $12,425 (42.8%) and $29,447 (44.7%), respectively, from the same perods of
fiscal 1997. The reduction in both periods was mainly due to a reduction in
sales of dialers. Sales of spare parts and repairs increased for, the three
month and six month periods by $8,761 (23.8%) and $11,751 (15.3%),
respectively, from the three and six month periods of fiscal 1997.
The Company's gross profit margin, expressed as a percentage of sales,
improved to 38.1% for the six month period of fiscal 1998 from 35.4% for the
same period of fiscal 1997. Gross profit margin for the second quarter of
fiscal 1998 increased to 36.6% from 31.3% for the same period of fiscal 1997.
The improvement for both periods was mainly due to the increase in sales
which enabled the Company to better absorb its fixed expenses.
Selling, general and administrative expenses increased by $40,224 (6.8%)
and $9,286 (3.0%) for the three and six month periods, respectively, in fiscal
1998 over the comparable fiscal 1997 periods. The increases were mainly
due to increased selling expenses which offset reductions in administrative
costs. For the six month period selling expenses increased by 29.0% mainly
due to increases in advertising, commissions, royalties and salaries. These
expenses were partially offset by a reduction in administrative expenses
(8.3)%. For the three month period sales expenses increased by 8.7% due to
increases in commissions, royalties and salaries, partially offset by a
reduction in administrative expenses (1.8%).
Research and development expenses decreased by $19,906 (15.1%) and $7,432
(11.7%) for the six and three month periods, respectively, in fiscal 1998 from
the comparable fiscal 1997 periods due to decreases in payroll and payroll
expenses associated with staff changes.
Interest and other income increased by $2,685 (100.6%) and $1,272 (98.0%)
for the six and three month periods in fiscal 1998 from the same periods
in fiscal 1997 due to increased cash balances.
The effective tax rate for each reported period was approximately 40%.
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PART 11 - OTHER INFORMATION
Item 7. 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
December 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: February 11, 1998 By: Venerando J. Indelicato
President, Treasurer and
Principal Financial and
Chief Accounting Officer
</PAGE>
EXHIBIT INDEX
Exhibit Number Description
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> DEC-31-1997
<CASH> 210,840
<SECURITIES> 200,000
<RECEIVABLES> 494,614
<ALLOWANCES> 10,000
<INVENTORY> 1,615,356
<CURRENT-ASSETS> 2,578,770
<PP&E> 596,429
<DEPRECIATION> 477,563
<TOTAL-ASSETS> 3,485,977
<CURRENT-LIABILITIES> 295,959
<BONDS> 0
<COMMON> 52,007
0
0
<OTHER-SE> 3,131,011
<TOTAL-LIABILITY-AND-EQUITY> 3,485,977
<SALES> 2,019,042
<TOTAL-REVENUES> 2,019,042
<CGS> 1,249,778
<TOTAL-COSTS> 736,971
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 10,000
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 32,293
<INCOME-TAX> 12,900
<INCOME-CONTINUING> 19,393
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 19,393
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
