U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[x] Quarterly report under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended March 31, 2000
[ ] 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.
(Exact Name of Small Business Issuer as Specified in Its Charter)
MINNESOTA 41-1533060
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
10 SECOND STREET N.E., SUITE 212
MINNEAPOLIS, MINNESOTA 55413
(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 of each of the issuer's classes of equity
securities, as of April 30, 2000: i) 3,037,657 shares of Common Stock, par value
$.08 per share and ii) 400,000 shares of Series III Convertible Preferred Stock,
par value $.08 per share.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
PART I FINANCIAL INFORMATION ...................................................................................3
ITEM 1. Financial Statements ................................................................................3
Condensed Balance Sheets (unaudited) as of March 31, 2000 and June 30, 1999..............................3
Condensed Statements of Operations (unaudited) for the three months and nine months
ended March 31, 2000 and 1999 ...........................................................................4
Statement of Shareholders' Equity (unaudited) for the nine months ended
March 31, 2000 ..........................................................................................5
Condensed Statements of Cash Flows (unaudited) for the nine months ended
March 31, 2000 and 1999 ................................................................................6
Notes to Condensed Financial Statements .................................................................7
ITEM 2. Management's Discussion and Analysis or Plan of Operation ..........................................8
PART II OTHER INFORMATION ......................................................................................11
ITEM 6. Exhibits and Reports on Form 8-K ..................................................................11
</TABLE>
2
<PAGE>
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
TELIDENT, INC.
CONDENSED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
March 31, June 30,
2000 1999
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 967,346 $ 925,785
Restricted cash 318,938 306,734
Trade accounts receivable, net of allowance for doubtful
accounts of $25,000 at both dates 650,351 633,760
Inventories 258,242 261,758
Other 47,474 79,569
------------ ------------
Total current assets 2,242,351 2,207,606
FURNITURE AND EQUIPMENT:
Furniture and equipment 467,831 447,932
Accumulated depreciation (354,560) (288,775)
------------ ------------
Net furniture and equipment 113,271 159,157
INTANGIBLE ASSETS, less accumulated amortization of $161,903
and $97,958, respectively 163,472 198,047
OTHER ASSETS -- 16,855
------------ ------------
$ 2,519,094 $ 2,581,665
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable $ 106,737 $ 48,051
Trade accounts payable 181,736 138,150
Accrued expenses 93,280 127,123
Deferred revenue 22,975 19,835
Current portion of long-term debt 3,975 28,330
------------ ------------
Total current liabilities 408,703 361,489
LONG-TERM DEBT, less current portion -- 2,494
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Preferred stock, $.08 par value, 2,500,000 shares authorized
Series III, convertible into common stock equal to
the quotient of $2.50 divided by the lesser of $2.50
or 80% of the average of the closing bid price for
the shares of common stock on the ten trading days
prior to notice of conversion, except for 200,000
shares for which 80% of the average price shall not
be more than $.785 until the closing bid price is
greater than $1.75 on any ten consecutive trading
days, 400,000 shares outstanding 32,000 32,000
Common stock, $.08 par value, 10,000,000 shares authorized,
3,037,657 shares outstanding 243,013 243,013
Additional paid-in capital 15,490,517 15,490,517
Accumulated deficit (13,655,139) (13,547,848)
------------ ------------
Total shareholders' equity 2,110,391 2,217,682
------------ ------------
$ 2,519,094 $ 2,581,665
============ ============
</TABLE>
See accompanying notes to condensed financial statements.
3
<PAGE>
TELIDENT, INC.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended Nine months ended
March 31, March 31,
------------------------------- -------------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
NET SALES $ 561,098 $ 461,449 $ 1,778,214 $ 1,909,345
COST OF SALES 144,769 138,364 452,745 540,638
----------- ----------- ----------- -----------
GROSS PROFIT 416,329 323,085 1,325,469 1,368,707
OPERATING EXPENSES:
Sales and marketing 104,796 113,479 325,432 367,434
Product development and operations 159,518 118,697 441,182 328,185
General and administrative 191,763 187,073 588,523 664,355
----------- ----------- ----------- -----------
Total operating expenses 456,077 419,249 1,355,137 1,359,974
----------- ----------- ----------- -----------
(Loss) income from operations (39,748) (96,164) (29,668) 8,733
TRANSACTION COSTS RELATED TO
SALE OF ASSETS (111,975) -- (111,975) --
INTEREST INCOME AND OTHER, NET 18,916 14,428 46,670 40,630
INTEREST EXPENSE (4,844) (7,367) (12,318) (29,668)
----------- ----------- ----------- -----------
NET (LOSS) INCOME (137,651) (89,103) (107,291) 19,695
PREFERRED STOCK DIVIDENDS -- -- -- (275,442)
----------- ----------- ----------- -----------
NET (LOSS) INCOME APPLICABLE TO
APPLICABLE TO COMMON STOCK $ (137,651) $ (89,103) $ (107,291) $ (255,747)
=========== =========== =========== ===========
NET(LOSS) INCOME PER
COMMON SHARE:
Basic $ (.05) $ (.03) $ (.04) $ (.09)
=========== =========== =========== ===========
Diluted $ (.05) $ (.03) $ (.04) $ (.09)
=========== =========== =========== ===========
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING:
Basic 3,037,657 2,790,990 3,037,657 2,788,547
=========== =========== =========== ===========
Diluted 3,037,657 2,790,990 3,037,657 2,788,547
=========== =========== =========== ===========
</TABLE>
See accompanying notes to condensed financial statements.
4
<PAGE>
TELIDENT, INC.
STATEMENT OF SHAREHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
Number of Amount of Number of Amount of Additional
Preferred Preferred Common Common Paid-in Accumulated
Shares Issued Stock Shares Issued Stock Capital Deficit
----------- ----------- ----------- ----------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, June 30, 1999 400,000 $ 32,000 3,037,657 $ 243,013 $15,490,517 $ (13,547,848)
Net (loss) -- -- -- -- -- (107,291)
----------- ----------- ----------- ----------- ----------- --------------
BALANCE, March 31, 2000 400,000 $ 32,000 3,037,657 $ 243,013 $15,490,517 $ (13,655,139)
=========== =========== =========== =========== =========== =============
</TABLE>
See accompanying notes to condensed financial statements.
5
<PAGE>
TELIDENT, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine months ended
December 31,
-------------------------------
2000 1999
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income $ (107,291) $ 19,695
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization expense 129,730 146,875
Common stock warrant issued for services -- 5,000
Common stock issued for services -- 2,500
Changes in assets and liabilities:
Trade accounts receivable (16,591) (93,832)
Inventories 3,516 (6,181)
Other assets 48,950 48,008
Trade accounts payable 43,586 (50,508)
Accrued expenses and deferred revenue (30,703) (19,918)
----------- -----------
Net cash provided by operating activities 71,197 51,639
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in restricted cash (12,204) --
Payments of patent and capitalized software costs (29,370) (10,575)
Purchase of equipment (19,899) (29,255)
----------- -----------
Net cash used in investing activities (61,473) (39,830)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings on notes payable 58,686 103,787
Payments of long-term debt (26,849) (89,329)
Proceeds from issuance of preferred stock, net -- 936,247
----------- -----------
Net cash provided by financing activities 31,837 950,705
----------- -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 41,561 962,514
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD 925,785 258,875
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 967,346 $ 1,221,389
=========== ===========
</TABLE>
See accompanying notes to condensed financial statements.
6
<PAGE>
TELIDENT, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The condensed financial statements included in this Form 10-QSB are
unaudited. However, in the opinion of Telident, Inc. (the "Company"), the
financial statements include all adjustments, consisting of normal recurring
adjustments, necessary for the fair presentation of the results of operations
and financial position for the interim periods.
The results of operations for the three-month and nine-month periods ended
March 31, 2000 do not necessarily indicate the results to be expected for the
full year. These statements should be read in conjunction with the Company's
consolidated financial statements and notes thereto, contained in the Company's
Annual Report on Form 10-KSB for the year ended June 30, 1999.
2. INVENTORIES
Inventories are stated at the lower of cost or market using the first in,
first out method, and consisted of the following:
March 31, June 30,
2000 1999
---- ----
Raw materials $ 231,610 $ 217,868
Work in progress 3,233 335
Finished goods 23,399 43,555
------------------ ------------------
$ 258,242 $ 261,758
================== ==================
3. NET (LOSS) INCOME PER COMMON SHARE
The increase in the weighted average number of shares outstanding for the
diluted earnings per share calculation was due to the requirement to assume
conversion of all of the Series III preferred stock into common stock as of the
beginning of the periods presented for which the Company had net income.
4. PROPOSED SALE OF COMPANY
The Company entered into a definitive agreement on December 31, 1999
pursuant to which Teltronics, Inc. plans to acquire substantially all of the
Company's assets in exchange for 637,500 shares of Teltronics, Inc. common
stock. Completion of the transaction is subject to customary closing conditions
and the approval of the Company's shareholders of the dissolution of the
Company. The transaction is expected to close in May 2000.
5. RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 133 (SFAS 133) "Accounting for
Derivative Instruments and Hedging Activities." SFAS No. 133 establishes
accounting and reporting standards for derivative instruments and for hedging
activities. In July 1999, the FASB issued SFAS No. 137 delaying the effective
date of SFAS No. 133 for one year to fiscal years beginning after June 15, 2000.
The Company has not yet determined the effect SFAS No. 133 will have on its
financial position or the results of its operations.
7
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
This discussion and analysis contains forward-looking statements within the
meaning of the Private Securities Litigation Act of 1995. Such forward-looking
statements may be identified by the use of 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 vary. One factor that could cause actual results to differ
materially is the consummation of Telidents' sale of assets to Teltronics, Inc.
In the event Telident does not consummate such sale, actual results could differ
materially from those expressed in the forward-looking statements. Potential
purchasers of Telident's securities are cautioned not to place undue reliance on
such forward-looking statements which are qualified in their entirety by the
cautions and risks described herein.
Telident (the "Company") 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.
RESULTS OF OPERATIONS
For the three month period ended March 31, 2000, the Company recorded a net
loss of $(137,651) compared to a net loss of $(89,103) for the same period in
fiscal year 1999. For the nine month period ended March 31, 2000, the Company
recorded a net loss of $(107,291) compared to net income of $19,695 for the same
period in fiscal year 1999. The three month and nine month periods ended March
31, 2000 included $111,975 in transaction costs related to the sale of the
Company's assets to Teltronics.
REVENUES
Revenues consist of equipment sales of the Company's hardware and software
systems for enhanced 911 service, mainly from Telident's Station Translation
System ("STS") for PBX systems and packages of hardware and software
applications providing "total PBX 9-1-1 solutions." The Company also generates
revenues from services and extended warranty contracts.
Revenues for the three month and nine month periods ended March 31, 2000
were $561,098 and $1,778,214 compared to $461,449 and $1,909,345 for the same
periods in fiscal year 1999, an increase of 22% for the three month period and a
decrease of 7% for the nine month period. The decline in year to date sales
compared to the same period last year may have been due to customers deciding
not to order new systems until they had addressed their internal Year 2000
issues. The August 1999 delay in the Illinois state law mandating enhanced 911
capability on existing PBX's from June 30, 1999 to June 30, 2000 may also have
delayed some sales in the current fiscal year.
GROSS MARGIN
Gross margin for the three month and nine month periods ended March 31,
2000 increased to 74% and 75% compared to 70% and 72% for the same periods in
fiscal year 1999. These increases resulted from changes in product mix due to
increased sales of packages of hardware, software and services, decreased sales
of single STS units and improved cost controls of resold products and
installation services.
8
<PAGE>
SALES AND MARKETING
Sales and marketing expenses for the three month period ended March 31,
2000 decreased to $104,796 from $113,479 for the same period in fiscal year
1999. For the nine months ended March 31, 2000 sales and marketing expenses
decreased to $325,432 compared to $367,434 for the same period in fiscal year
1999. This decrease was due to lower commission expenses due to the lower level
of sales in the nine month period ended March 31, 2000 and lower consulting
expenses.
PRODUCT DEVELOPMENT AND OPERATIONS
Product development and operations expenses for the three month and nine
month periods ended March 31, 2000 increased to $159,518 and $441,182 from
$118,697 and $328,185 during the same periods in fiscal year 1999. These
increases were due to increased consulting expenses for product development and
the hiring of an additional project manager.
GENERAL AND ADMINISTRATIVE
General and administrative expenses for the three month period ended March
31, 2000 increased to $191,763 from $187,073 during the same period in fiscal
year 1999. The increase for the three month period ended March 31, 2000 compared
to the same period in the prior year was due to increased consulting expenses
partially offset by lower salary expense. For the nine month period ended March
31, 2000 expenses decreased to $588,523 from $664,355 during the same period in
fiscal year 1999. The decrease for the nine month period ended March 31, 2000
was due to lower salary expense.
INTEREST INCOME AND OTHER, NET
Interest income and other income and expense for the three month and nine
month periods ended March 31, 2000 was $18,916 and $46,670 compared to $14,428
and $40,630 for the same periods in fiscal 1999. The increases were due to
higher interest income on invested funds due to higher interest rates during the
current year.
INTEREST EXPENSE
Total interest expense for the three month and nine month periods ended
March 31, 2000 was $4,844 and $12,318 compared to $7,367 and $29,668 for the
same periods in fiscal year 1999. The decreases were due to decreased average
outstanding borrowings.
DIVIDENDS
The Company has never paid a cash dividend on its common stock. The
payments of dividends, if any, in the future rest with the discretion of the
Board of Directors and will depend, among other things, upon the Company's
earnings, if any, capital requirements and financial condition. The Company has
paid a cash dividend on its preferred stock in the past. No such dividend was
paid during the nine months ended March 31, 2000, and currently the Company has
no intention to pay any such dividend. The Company plans to retain all earnings,
if any, to further the development of the business.
9
<PAGE>
INFLATION
Inflation has not had a material impact on the Company's net sales or
results of operations.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 2000, the Company had cash, cash equivalents and restricted
cash of $1,286,284 and accounts receivable of $650,351. During the nine month
period ended March 31, 2000, net cash provided by the Company's operating
activities was $71,197. The Company used $29,370 of cash for payment of patents
and capitalized software and $19,899 of cash to purchase capital equipment. The
Company received $58,686 of cash due to net borrowings on its bank line of
credit and used $26,849 to make payments on debt.
Based on the projected revenues and expenses, the Company believes that
cash generated from operations and existing cash balances will be adequate to
fund the Company's working capital requirements at least through March 31, 2001.
The Company had no material commitments for capital expenditures at March 31,
2000. The Company had shareholders' equity of $2,110,391 at March 31, 2000.
The Company, as previously disclosed, signed a definitive agreement on
December 31, 1999 pursuant to which Teltronics, Inc. plans to acquire
substantially all of the Company's assets. Completion of the transaction is
subject to customary closing conditions and the approval of the Company's
shareholders of the Company's dissolution. The transaction is expected to close
in May 2000.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities." This
Statement requires companies to record derivatives on the balance sheet as
assets and liabilities, measured at fair value. Gains or losses resulting from
changes in the values of those derivatives would be accounted for depending on
the use of the derivative and whether it qualifies for hedge accounting. In July
1999, the FASB issued SFAS No. 137 delaying the effective date of SFAS No.133
for one year to fiscal years beginning after June 15, 2000. The Company has not
yet determined the effects SFAS No. 133 will have on its financial position or
the result of its operations
10
<PAGE>
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
27 Financial Data Schedule
(b) Current Reports on Form 8-K
o The Company filed a Current Report on Form 8-K (File
No. 0-20887) on January 7, 2000 to report signing of
an agreement on December 31, 1999 to sell the
Company's assets to Teltronics, Inc.
o The Company filed a Current Report on Form 8-K (File
No. 0-20887) on February 29, 2000 to report signing of
an amendment to the agreement to sell the Company's
assets to Teltronics, Inc. and that the Company had
requested a hearing with the Nasdaq Stock Market
concerning the continued listing of the Company's
common stock on Nasdaq.
o The Company filed a Current Report on Form 8-K (File
No. 0-20887) on March 15, 2000 to report the Nasdaq
Stock Market had canceled the hearing concerning the
continued listing of the Company's common stock as the
Company was in compliance with the minimum bid price
requirement.
11
<PAGE>
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)
May 12, 2000 /s/ Bruce H. Senske
- ---------------------- -------------------
Date Bruce H. Senske, Interim Chief Executive
Officer
(Principal Executive, Financial and
Accounting Officer)
12
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
------ -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-END> MAR-31-2000
<CASH> 1,286
<SECURITIES> 0
<RECEIVABLES> 675
<ALLOWANCES> 25
<INVENTORY> 258
<CURRENT-ASSETS> 2,242
<PP&E> 468
<DEPRECIATION> 355
<TOTAL-ASSETS> 2,519
<CURRENT-LIABILITIES> 409
<BONDS> 0
0
32
<COMMON> 243
<OTHER-SE> 1,835
<TOTAL-LIABILITY-AND-EQUITY> 2,519
<SALES> 1,778
<TOTAL-REVENUES> 1,778
<CGS> 453
<TOTAL-COSTS> 1,355
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12
<INCOME-PRETAX> (107)
<INCOME-TAX> 0
<INCOME-CONTINUING> (107)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (107)
<EPS-BASIC> (0.04)
<EPS-DILUTED> (0.04)
</TABLE>
