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 September 30, 1996
[ ] Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from ______________ to ______________
Commission file number 0-20887
TELIDENT, INC.
(Name of Small Business Issuer in Its Charter)
Minnesota 41-1533060
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Main Street S.E., Suite 85
Minneapolis, Minnesota 55414
(Address of principal executive offices) (Zip Code)
(612) 623-0911
(Issuer's Telephone Number, Including Area Code)
- --------------------------------------------------------------------------------
(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
Number of shares outstanding as of October 31, 1996: 6,154,293 shares of
Common Stock, par value $.02 per share.
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
TELIDENT, INC.
BALANCE SHEETS
(UNAUDITED)
September 30, June 30,
ASSETS 1996 1996
Current assets : ------------ -----------
<S> <C> <C>
Cash $ 1,475,723 $ 448,654
Trade accounts receivable, net of allowance for doubtful
accounts of $40,000 :
Billed 1,030,253 825,358
Unbilled 15,234 15,196
Inventories, net of reserve for obsolescence of $15,000 699,187 573,086
Other 33,473 37,947
------------ -----------
Total current assets 3,253,870 1,900,241
Furniture and office equipment, less accumulated
depreciation of $138,433 and $121,933, respectively 261,095 253,242
Intangible assets, less accumulated amortization of $262,739
and $225,008, respectively 484,600 443,247
Other assets 148,456 175,070
------------ -----------
$ 4,148,021 $ 2,771,800
============ ===========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Trade accounts payable $ 421,019 $ 258,506
Accrued expenses 201,995 133,457
Deferred revenue -- 11,000
Notes payable - bank 12,538 130,628
Notes payable - others 16,208 1,351,258
Debentures and interest payable - related parties 5,625 11,250
Debentures and interest payable - others 19,200 38,400
------------ -----------
Total current liabilities 676,585 1,934,499
Debentures payable - related parties 225,000 225,000
Debentures payable - others 768,000 768,000
------------ -----------
Total liabilities 1,669,585 2,927,499
------------ -----------
Commitments
Shareholders' equity (deficit):
Preferred stock, $.02 par value, convertible into common stock at the
rate of one common share for each preferred share, 2,500,000 shares
authorized, 175,000 and 187,500 shares outstanding , respectively 3,500 3,750
Common stock, $.02 par value, 10,000,000 shares authorized, 6,151,592 and
4,903,110 shares outstanding, respectively 123,032 98,062
Additional paid-in capital 12,077,432 9,025,640
Accumulated deficit (9,725,528) (9,283,151)
------------ -----------
2,478,436 (155,699)
------------ -----------
$ 4,148,021 $ 2,771,800
============ ===========
See accompanying notes to interim financial statements.
</TABLE>
<TABLE>
<CAPTION>
TELIDENT, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
Three months ended
September 30,
-------------
1996 1995
---- ----
<S> <C> <C>
Net Sales $ 826,369 $ 1,001,274
Cost of Sales 257,316 286,574
----------- -----------
Gross profit 569,053 714,700
----------- -----------
Operating expenses:
Sales and marketing 336,074 174,662
Research and development 288,380 177,375
General and administrative 289,254 252,268
----------- -----------
Total operating expenses 913,708 604,305
----------- -----------
Income (loss) from operations (344,655) 110,395
Interest income 14,793 --
Interest expense - others (106,865) (95,455)
Interest expense - related parties (5,650) (8,741)
----------- -----------
Net income (loss) $ (442,377) $ 6,199
=========== ===========
Income (loss) per share, primary and fully
diluted $ (.08) $ --
=========== ===========
Weighted average number of
shares and common equivalent
shares outstanding 5,541,034 5,141,830
=========== ===========
See accompanying notes to interim financial statements.
</TABLE>
<TABLE>
<CAPTION>
TELIDENT, INC.
STATEMENT OF SHAREHOLDERS' DEFICIT
UNAUDITED
Number Amount of Amount of Additional
of shares Preferred Common paid-in Accumulated
issued Stock Stock capital deficit
------ ----- ----- ------- -------
<S> <C> <C> <C> <C> <C>
BALANCE, June 30, 1996 5,090,610 $ 3,750 $98,062 $ 9,025,640 $ (9,283,151)
Common stock issued to directors 2,926 -- 59 10,441 --
for services
Common stock issued in public offering net 1,150,000 -- 23,000 2,875,620 --
of offering expenses of $551,000
offering expenses of $551,000
Common stock issued from 95,556 -- 1,911 227,429 --
conversion of debt
Peferred stock redemptions (12,500) (250) -- (49,750) --
Preferred stock dividends -- -- -- (11,948) --
Net loss -- -- -- -- (442,377)
--------- --------- ----------- ------------ -----------
BALANCE, September 30, 1996 6,326,592 $ 3,500 $ 123,032 $12,077,432 $(9,725,528)
========= ========= =========== ============ ===========
See accompanying notes to interim financial statements.
</TABLE>
<TABLE>
<CAPTION>
TELIDENT, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three months ended
September 30,
-------------------
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (442,377) $ 6,199
Adjustments to reconcile net income (loss) to
net cash provided by (used in)
operating activities:
Depreciation expense 16,500 11,166
Amortization expense 37,731 28,131
Common stock issued for services 10,500 7,000
Common stock issued in connection with notes payable 229,340 146,500
Changes in assets and liabilities:
(Increase) decrease in receivables (204,933) 167,286
Increase in inventory (126,101) (45,336)
(Increase) decrease in other assets 31,089 (30,889)
Increase (decrease) in trade accounts payable 162,513 (96,653)
Decrease in accrued expenses 32,713 (103,868)
----------- ---------
Net cash provided by (used in) operating activities (253,025) 89,536
----------- ---------
Cash flows from investing activities:
Payments for intangible asset (79,084) (213)
Purchase of furniture and office equipment (24,353) (15,840)
----------- ---------
Net cash used in investing activities (103,437) (16,053)
----------- ---------
Cash flows from financing activities:
Payments on related party borrowing -- (27,421)
Payments on borrowings from others (1,335,050) (82,003)
Borrowings from notes payable-bank 325,000 59,645
Payments on notes payable-bank (443,090) (190,674)
Proceeds from issuance of common stock 2,898,619 104,795
Preferred stock redemption (50,000) (50,000)
Preferred stock dividends (11,948) (15,998)
----------- ---------
Net cash provided by (used in) financing activities 1,383,531 (201,656)
----------- ---------
Net increase (decrease) in cash for the period 1,027,069 (128,173)
Cash, beginning of period 448,654 181,744
----------- ---------
Cash, end of period $ 1,475,723 $ 53,571
=========== =========
Supplemental schedule of non-cash financing activities:
Common stock issued for services $ 10,500 $ 7,000
=========== =========
Conversion of notes payable to common stock $ 229,340 $ 124,000
=========== =========
Conversion of notes payable to common stock through options $ -- $ 22,500
=========== =========
See accompanying notes to interim financial statements.
</TABLE>
TELIDENT, INC.
NOTES TO INTERIM FINANCIAL STATEMENTS
(UNAUDITED)
September 30, 1996
INTERIM REPORTING
The interim financial statements included in this Form 10-QSB are
unaudited. However, in the opinion of the Company, the interim statements
include all adjustments, consisting of normal recurring adjustments, necessary
for the fair statement of the results and balances for the interim periods.
The results of operations for the three-month period ended September 30,
1996, do not necessarily indicate the results to be expected from the full year.
These statements should be read in conjunction with the Company's financial
statements and notes thereto, contained in the Company's Annual Report on Form
10-KSB for the year ended June 30, 1996.
INVENTORIES
Inventories are stated at the lower of cost or market using the first in,
first out method, and consisted of the following:
September 30, June 30,
-------------- -------------
1996 1996
---- ----
Raw materials $ 433,423 $ 360,465
Work in progress 196,180 156,762
Finished goods 84,584 70,859
Inventory reserve (15,000) (15,000)
-------------- -------------
$ 699,187 $ 573,086
============= ============
EARNINGS (LOSS) PER SHARE
For the three-month period ended September 30, 1996, the loss per common
share was computed by dividing the net loss (less the preferred stock dividend)
by the weighted average number of shares of common stock outstanding reported
during the year. Because the Company recorded net income for the period ended
September 30, 1995, common stock equivalents, such as options, warrants and
convertible securities were included in the calculation.
MAJOR CUSTOMERS
Sales in the first quarter of fiscal 1997 to Fujitsu Business Communication
Systems (FBCS) amounted to 13.3% of total product sales and accounted for 11.0%
of accounts receivable as of September 30, 1996. Sales in the first quarter of
fiscal 1996 to FBCS amounted to 29.8% of total product sales and accounted for
17.1% of accounts receivable as of September 30, 1995.
PUBLIC OFFERING
In August 1996, the Company completed a public offering of 1.15 million
shares of its common stock at $3.00 per share, resulting in net proceeds to the
Company of $2,899,000 after deducting offering expenses. The Company's
underwriter received 115,000 common stock warrants as part of its compensation.
The warrants are exercisable at $3.60 per share, are fully exercisable, and
expire on August 15, 2001.
PART I - FINANCIAL INFORMATION
ITEM 2 - MD & A
TELIDENT, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
This discussion and analysis contains foward-looking terminology such
as "believes", "anticipates", "expects" and "intends" or comparable terminology.
Such statements are subject to certain risks and uncertainties that could cause
actual results to differ materially from those projected. Potential purchasers
of the Company's securities are cautioned not to place undue reliance on such
foward-looking statements which are qualified in their entirety by the cautions
and risks described herein.
Telident designs, manufactures and markets proprietary hardware and
software systems which provide the exact location of a 911 telephone call to the
emergency dispatcher who receives the call. The Company's systems provide
information which can shorten the response time to a 911 call, reduce the costs
associated with responses to incorrect locations and improve the safety of
individuals within a private branch exchange ("PBX") telephone system. In
addition, the Company manufactures and markets network hardware that provides
switching, selective routing and data interfacing capabilities to public and
private telephone networks and city, county and state government agencies.
Telident also provides these customers with a variety of emergency information
processing and management software systems.
RESULTS OF OPERATIONS
FIRST QUARTER 1997 COMPARED TO FIRST QUARTER 1996
The Company had revenues in the first quarter of fiscal 1997 of $826,369
compared with $1,001,274 during the first quarter of fiscal 1996, a decrease of
17.5%. Station Translation System (STS) product sales accounted for 91.3% of the
sales in the first quarter of fiscal 1997 and 77.1% in the comparable fiscal
1996 period. The decrease in revenues for the first quarter of fiscal 1997 is
attributable to the decrease in unit sales of the Company's public safety
products. Public safety product sales have declined as a result of the Company's
strategic decision to focus on the STS market.
Cost of sales decreased 10.2% from $286,574 in the first quarter of fiscal
1996 to $257,316 during the corresponding 1997 period. Gross margin decreased to
68.9% in the first quarter of fiscal 1997 compared to 71.4% for the comparable
fiscal 1996 period. The decrease in gross margin was due to an increase in
warranty reserves.
Total operating expenses increased $309,403 or 51.2% in the first quarter
of fiscal 1997 compared to the same period of fiscal 1996. Sales and marketing
expenses increased $161,412 or 92.4% in the first quarter of fiscal 1997, as a
result of the increase in the Company's sales and marketing staff, as well as
the addition of sales offices in Atlanta, Chicago, San Francisco and Los
Angeles. The Company also hired a director of sales in the first quarter of
fiscal 1997.
Research and development expenses increased $111,005, or 62.6%, in the
first quarter of fiscal 1997, due to the addition of a Director of Operations in
September 1995, the addition of two software programmers, two hardware engineers
and the increased use of consultants for product development which were added
subsequent to the fiscal 1996 period.
General and administrative expenses increased $36,986 in the 1997 period, a
14.7% increase, primarily due to the additional travel expense incurred and
expenses associated with the Company's public offering in August 1996.
Interest expense, net of interest income, decreased $6,474 in the first
quarter of fiscal 1997 compared to the similar 1996 period. The Company
anticipates a decrease in interest expense for fiscal 1997 as a result of the
public offering of 1,150,000 shares of the Company's common stock in August of
1996 which generated net proceeds of $2.89 million, and the conversion of debt
into the Company's common stock during fiscal 1996.
VARIABILITY OF QUARTERLY RESULTS
Historically, the Company has experienced variability in its net sales and
operating margins on a quarterly basis and expects these patterns to continue in
the future. Management believes that the factors influencing quarterly
variability include, but are not limited to, the following: (i) the Company
participates in a highly dynamic industry; (ii) the Company sells products with
a lengthy sales cycle; and (iii) the Company or its competitors may introduce
new products at different times. Due to the factors noted above, as well as due
to general economic conditions, the Company's revenues and earnings may be
subject to significant variability, particularly on a quarterly basis.
INFLATION
Inflation has not had a material impact on the Company's net sales or
results of operations.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1996 the Company had cash of $1,475,723 and accounts
receivable of approximately $1,045,000. In the first quarter of fiscal 1997, net
cash used in the Company's operating activities was approximately $253,000,
consisting primarily of the Company's loss from operations. During the first
quarter of fiscal 1997, $229,340 of bridge notes were converted into common
stock at $2.40 per share. The Company invested $79,000 in capitalized software
development and $24,000 in additional office equipment during the first quarter
of fiscal 1997. Funds required to finance the Company's operations and
investments during fiscal 1997 were provided by the August 1996 public offering
of common stock, resulting in net proceeds of approximately $2.9 million. Upon
completion of this stock offering, the Company repaid $1,020,000 of bridge
notes. The Company has relied on debt and equity capital to fund its operating
losses during fiscal 1997 and prior periods.
Based on projected revenues and expenses, the Company believes that the net
proceeds of the recently completed public offering together with cash from
operations will be adequate to fund the Company's working capital requirements
through June 30, 1997. However, current working capital levels are not adequate
to enable the Company to retire the $993,000 of convertible debentures that
become due on July 15, 1997. While the Company is exploring certain funding
possibilities, it has no agreements which would provide the Company with
additional debt or equity capital and there can be no assurance that if
additional funds are required, that they will be available, or if available,
available on terms acceptable to the Company. If the Company is unable to obtain
additional capital and the debenture holders are unwilling or unable to convert
or extend the debentures, the Company would be in default on the debentures. In
this event, the Company may be required to reduce its level of operations. At
September 30, 1996, the Company had an accumulated deficit of $9,725,528 and
shareholders' equity of $2,478,436. The Company has no material commitments for
capital expenditures for fiscal 1997.
PART II - OTHER INFORMATION
ITEM 1-5.
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 27 Financial Data Schedule
(b) The Company did not file any reports on Form 8-K during
the quarter ended September 30, 1996.
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.
TELIDENT, INC.
-----------------------------------------------
(Registrant)
November 13, 1996 /s/ Michael J. Miller
- --------------------------- -----------------------------------------------
Date Michael J. Miller, President and CEO
(Principal Executive Officer)
November 13, 1996 /s/ John F. Kromer
- --------------------------- -----------------------------------------------
Date John F. Kromer, Chief Financial Officer
(Principal Financial and Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> SEP-30-1996
<CASH> 1,475,723
<SECURITIES> 0
<RECEIVABLES> 1,085,487
<ALLOWANCES> (40,000)
<INVENTORY> 699,187
<CURRENT-ASSETS> 3,253,870
<PP&E> 399,528
<DEPRECIATION> (138,433)
<TOTAL-ASSETS> 4,148,021
<CURRENT-LIABILITIES> 676,585
<BONDS> 993,000
0
3,500
<COMMON> 123,032
<OTHER-SE> 12,077,432
<TOTAL-LIABILITY-AND-EQUITY> 4,148,021
<SALES> 826,369
<TOTAL-REVENUES> 826,369
<CGS> 257,316
<TOTAL-COSTS> 257,316
<OTHER-EXPENSES> 913,708
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 97,722
<INCOME-PRETAX> (442,377)
<INCOME-TAX> 0
<INCOME-CONTINUING> (442,377)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (442,377)
<EPS-PRIMARY> (.08)
<EPS-DILUTED> (.08)
</TABLE>
