<PAGE> 1
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, 1995
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or
( ) TRANSITION REPORT UNDER SECTION 13 or 15(d) OF THE EXCHANGE ACT
For the transition period from to
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Commission file number 0-17893
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TELTRONICS, INC.
(Exact name of small business issuer as specified in its charter)
Delaware 59-2937938
- - - - ---------------------------------- ------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2150 Whitfield Industrial Way, Sarasota, FL 34243-4046
- - - - --------------------------------------------------------------------------------
(Address or principal executive offices)
Issuer's telephone number (813) 753-5000
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Not Applicable
- - - - --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
year)
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
State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date: 2,484,668
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Exhibit index appears on page 11. Total pages 12.
<PAGE> 2
PART I - FINANCIAL INFORMATION
TELTRONICS, INC.
BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
March 31, 1995 December 31, 1994
-------------- -----------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 19,904 $ 19,824
Accounts receivable, net of allowance for
doubtful accounts of $150,607 at
March 31, 1995 and $135,607 at
December 31, 1994 2,630,149 2,355,047
Inventories 1,806,929 1,753,848
Income taxes receivable 680,272 668,780
Prepaid expenses and other current assets 277,230 288,410
---------- ----------
Total current assets 5,414,484 5,085,909
---------- ----------
PROPERTY AND EQUIPMENT, NET 1,138,852 1,207,196
---------- ----------
OTHER ASSETS:
Prepaid lease guarantee, net 291,681 298,680
Software development costs, net 134,322 156,822
Software licensing rights, net 886,755 886,755
Other 62,699 62,999
---------- ----------
Total other assets 1,375,457 1,405,256
---------- ----------
TOTAL ASSETS $7,928,793 $7,698,361
========== ==========
</TABLE>
See accompanying notes
2
<PAGE> 3
TELTRONICS, INC.
BALANCE SHEET
(Continued)
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
March 31, 1995 December 31, 1994
-------------- -----------------
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES:
Current portion of long-term debt $3,003,278 $ 2,491,679
Current portion of capital lease obligations 184,027 185,480
Accounts payable 909,699 960,421
Accrued expenses 601,809 763,959
Deferred income 146,982 146,982
Other current liabilities 64,932 65,195
---------- -----------
Total current liabilities 4,910,727 4,613,716
---------- -----------
LONG-TERM LIABILITIES:
Capital lease obligations, less current portion 223,169 271,898
Long-term debt, less current portion 1,214,901 1,267,454
---------- -----------
Total long-term liabilities 1,438,070 1,539,352
---------- -----------
SHAREHOLDERS' EQUITY:
Common stock, $.001 par, 50,000,000
shares authorized, 982,440 issued
and outstanding 983 983
Additional paid-in capital 10,293,223 10,293,223
Accumulated deficit (8,714,210) (8,748,913)
---------- -----------
Total shareholders' equity 1,579,996 1,545,293
---------- -----------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $7,928,793 $ 7,698,361
========== ===========
</TABLE>
See accompanying notes
3
<PAGE> 4
TELTRONICS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
3 MONTHS ENDED
----------------------------------------
March 31, 1995 March 31, 1994
-------------- --------------
<S> <C> <C>
SALES $5,670,705 $3,985,368
COST OF GOODS SOLD 3,857,402 2,044,650
---------- ----------
GROSS PROFIT 1,813,303 1,940,718
---------- ----------
OPERATING EXPENSES
General and administrative 375,589 578,293
Research and development 418,904 354,878
Selling and marketing expenses 899,487 845,332
---------- ----------
1,693,980 1,778,503
---------- ----------
OPERATING INCOME 119,323 162,215
OTHER INCOME (EXPENSES)
Interest (87,213) (32,882)
Gain on sale of investment 0 0
Miscellaneous 2,593 2,899
---------- ----------
INCOME (LOSS) BEFORE INCOME TAXES 34,703 132,232
PROVISION FOR INCOME TAXES 0 0
---------- ----------
NET PROFIT (LOSS) $ 34,703 $ 132,232
========== ==========
NET PROFIT (LOSS) PER SHARE $ 0.04 $ 0.23
========== ==========
AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 982,440 573,760
========== ==========
</TABLE>
See accompanying notes
4
<PAGE> 5
TELTRONICS, INC.
STATEMENT OF SHAREHOLDERS' EQUITY (UNAUDITED)
<TABLE>
<CAPTION>
Retained
COMMON STOCK Additional Earnings
--------------------------- Paid-In (Accumulated
Shares Amount Capital Deficit) Total
----------- -------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C>
BALANCE AT,
December 31, 1994 982,440 $983 $10,293,223 $(8,748,913) $1,545,293
Net Profit 0 0 0 34,703 34,703
------- ---- ----------- ----------- ----------
BALANCE AT,
March 31, 1995 982,440 $983 $10,293,223 $(8,714,210) $1,579,996
</TABLE>
See accompanying notes
5
<PAGE> 6
TELTRONICS, INC.
STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
3 MONTHS ENDED
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March 31, 1995 March 31, 1994
-------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 34,703 $ 132,232
Adjustments to reconcile net income
to net cash:
Depreciation and amortization 133,266 135,410
Changes in assets and liabilities:
Accounts receivable and other assets (263,922) (195,166)
Inventories (53,081) (758,561)
Income taxes receivable (11,492) 0
Decrease in other assets 300 0
Accounts payable and accrued liabilities (213,136) 346,889
----------- -----------
Net cash flows from operating activities (373,362) (339,196)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (35,422) (18,314)
Deferred charges and other noncurrent assets 0 24,998
----------- -----------
Net cash flows from investing activities (35,422) 6,684
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from line of credit 5,779,000 4,181,800
Repayment on line of credit (5,191,537) (3,825,934)
Repayment of notes payable and
other long-term debt (178,599) (23,187)
----------- -----------
Net cash flows from financing activities 408,864 332,679
----------- -----------
Net increase (decrease) in cash 80 167
Cash and cash equivalents, beginning of year 19,824 10,332
----------- -----------
Cash and cash equivalents, end of year $ 19,904 $ 10,499
=========== ===========
</TABLE>
See accompanying notes
6
<PAGE> 7
TELTRONICS, INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
NOTE A - GENERAL
The financial statements as of March 31, 1995 and for the three month period
then ended are unaudited and, in the opinion of the Company, reflect all
adjustments necessary for a fair presentation of such data and have been
prepared on a basis consistent with the December 31, 1994 Audited Financial
Statements. All such adjustments were of a normal recurring nature. The
Company's significant accounting policies are described in the notes to the
December 31, 1994 Audited Financial Statements and there have been no material
changes in significant accounting policies from those described therein.
The year-end condensed balance sheet data included in the condensed financial
statements was derived from audited financial statements, but does not include
all disclosures required by generally accepted accounting principles.
7
<PAGE> 8
NOTE B - COMMITMENTS AND CONTINGENCIES
The subject matter set forth on Page F-16 of the Company's Form 10-KSB for the
year ended December 31, 1994, under Financial Note 8 is hereby incorporated by
reference and there has been no signigicant change to such subject matter.
NOTE C - RELATED PARTY TRANSACTIONS
The subject matter set forth on Page F-22 of the Company's Form 10-KSB for the
year ended December 31, 1994, under Financial Note 11 is hereby incorporated by
reference and there has been no signigicant change to such subject matter.
8
<PAGE> 9
NOTE D - SUBSEQUENT EVENTS
On April 12, 1995 convertible promissory notes in the amount of $279,623 were
cancelled by issuance of 102,228 restricted shares of the Company's common
stock. In addition, these noteholders also received warrants entitling them to
purchase an aggregate of 51,114 shares of the Company's common stock. The
subject matter set forth on page F-15 of the Company's Form 10-KSB for the year
ended December 31, 1994 under Financial Note 6 (a) is hereby incorporated by
reference.
On May 11, 1995, W&D Consultants, Inc., ("W&D") acquired 1,400,000 restricted
shares of common stock from the Company upon exercise by W&D of a conditional
right to convert a $140,000 advance made by W&D in order for the Company to
close its $3,500,000 line of credit with The CIT Group/Credit Finance ("CIT")
in October, 1994. The shares were issued to W&D after performance by W&D of
certain conditions including: (a) cancellation of the $140,000 advance; (b)
payment of $14,000 to the Company; (c) delivery of a termination by H&N of the
management consulting and acquisition consulting agreements between the Company
and H&N; (d) delivery by W&D of a guarantee of H&N's obligations under the H&N
termination; and (e) other conditions necessary for conversion. The subject
matter set forth on Page F-15 of the Company's Form 10-KSB for the year ended
December 31, 1994 under Financial Note 6 (c) is hereby incorporated by
reference.
9
<PAGE> 10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
TELTRONICS, INC.
GENERAL OVERVIEW
In the first quarter of 1995, the Company's sales increased to $5,671,000
compared to sales of $3,985,000 for the corresponding quarter of 1994.
Although the Company succeeded in increasing its sales substantially over last
year, this increase was primarily the result of an aggressive marketing
approach in one of the product lines which resulted in lower margins on the
increased sales. Gross profit was $1,813,000 for the first quarter of 1995
compared to $1,941,000 for the same period last year. Overall operating
expenses were reduced by approximately $85,000 as compared to the first quarter
of last year. As a result of lower margins and increased interest expense the
first quarter of 1995 reflected a net profit of $35,000 compared to $132,000
for the first quarter of 1994.
RESULTS OF OPERATIONS
Total sales for the first quarter of 1995 increased by approximately $1,685,000
over the same period of 1994. This increase was primarily the result of
additional sales in the Long Distance Management ("LDM") product line. The
aggressiveness of the marketing program which produced the increased sales
resulted in a lower margin on those product sales.
Gross profit for the quarter decreased to $1,813,000 from $1,941,000 for the
same quarter of 1994. The decline in gross margin, 32% of sales for the first
quarter of 1995 compared to 49% for the same period of 1994, was directly
related to the LDM product line as well as reduced sales in other higher margin
products of the Company.
Total operating expense for the quarter ended March 31, 1995 were $1,694,000 as
compared to $1,779,000 for the same period of last year. This $85,000 savings
in total operating expense represents a 4.8% reduction in overall operating
expenses as compared to 1994.
Net profit for the quarter was $34,703, a decline of approximately $98,000 from
the same period last year, primarily as a result of lower margin sales and
increased interest expense.
FINANCIAL CONDITION
Total assets at March 31, 1995 were $7,928,793 compared to $7,698,361 at
December 31, 1994. The Company's current ratio at March 31, 1995 was 1.10:1,
compared to 1.10:1 at December 31, 1994.
10
<PAGE> 11
LIQUIDITY AND CAPITAL RESOURCES
Cash requirements were met with cash provided by borrowings from The CIT
Group/Credit Finance ("CIT"). The CIT facility provides for borrowing up to
$3.5 million. $296,700 of this was a term loan secured by fixed assets at an
interest rate of 3% above the prime rate to be repaid monthly until fully paid
on October 28, 1999. The remaining line facility is a revolving loan secured
by inventory and receivables at an interest rate of prime plus 3%.
The Company's working capital ratio at March 31, 1995 was 1.10:1. Net working
capital was $503,757 at March 31, 1995. Short term requirements are expected
to be met through cash flows from operations augmented by the credit line
facility.
However, the Company is investigating the possibility of other equity or debt
financing. In the event that the Company was successful in securing additional
funding, the Company should be in a position to grow its business more rapidly.
CURRENT OUTLOOK
In November of 1994 the Company secured a contract with Telsource, Inc., one of
the major distributors and installers of Mitel (a Canadian manufacturer of
telecommunication products) dialers in the U.S. marketplace. In order to
secure this substantial contract, Teltronics agreed to provide its own dialer
to Telsource at a competitive price to Mitel. The call off order which was
signed was to provide approximately $12 million worth of dialers during 1995,
$3 million worth of dialers have been shipped during the first quarter.
Although the Company has achieved much higher sales during the first
quarter, these have been of a lower margin due to the higher percentage of
product being dialers which have traditionally a lower margin than other
products of the Company. During the first quarter, the Telecommunication
Information Systems product sales ("TIS") which is responsible for sales of the
Telemanagement software and Remote Maintenance products had a slow start. The
Company believes however that the contracts signed last year with major
customers should result in increased sales of these product lines. The Company
enjoys higher margins on these products and feels confident that these should
contribute positively to the Company's profitability.
The Company feels that it is well positioned in its current markets to continue
to grow its sales during 1995. The Company continues to focus on ways to
become more efficient in supplying its products to the market.
11
<PAGE> 12
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Management of the Company currently is not aware of any
material litigation against the Company, nor to the knowledge
of management of the Company, is any material litigation
threatened against the Company.
ITEM 2. CHANGES IN SECURITIES - None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES - None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - None
ITEM 5. OTHER INFORMATION - None
ITEM 6A. EXHIBITS
<TABLE>
<S> <C> <C>
10.127 Amended and Restated Employment Agreement between
the Company and Ewen Cameron dated
January 1, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (a)
10.128 Employment Agreement between the Company and
Norman R. Dobiesz dated January 1, 1995 . . . . . . . . . . . . . . . . . . (a)
10.130 Specimen of Common Stock Purchase Warrant
issuable as a part of the Units to be issued pursuant to
the Conversion Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . (a)
10.137 Subscription Agreement between the Company and
W&D Consultants, Inc., dated May 11, 1995 . . . . . . . . . . . . . . . . . (b)
27 Financial Data Schedule (for SEC purposes only)
</TABLE>
ITEM 6B. REPORT ON FORM 8-K - None
________________________
(a) Filed as an Exhibit to Teltronics' Annual Report on Form 10-KSB
for the fiscal year ended December 31, 1994.
(b) Filed as an Exhibit to this Report on Form 10-QSB.
12
<PAGE> 13
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.
TELTRONICS, INC.
May 12, 1995 s/Ewen Cameron
-------------------------------------
President and Chief Executive Officer
13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS FOR THE THREE MONTH PERIOD ENDED MARCH 31, 1995 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FORM 10QSB FOR THE PERIOD ENDED MARCH 31,
1995.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-01-1995
<CASH> 19,904
<SECURITIES> 0
<RECEIVABLES> 2,630,149
<ALLOWANCES> 0
<INVENTORY> 1,806,929
<CURRENT-ASSETS> 5,414,484
<PP&E> 2,710,069
<DEPRECIATION> 1,571,217
<TOTAL-ASSETS> 7,928,793
<CURRENT-LIABILITIES> 4,910,727
<BONDS> 0
<COMMON> 983
0
0
<OTHER-SE> 1,579,013
<TOTAL-LIABILITY-AND-EQUITY> 7,928,793
<SALES> 5,670,705
<TOTAL-REVENUES> 5,670,705
<CGS> 3,857,402
<TOTAL-COSTS> 1,693,980
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 87,213
<INCOME-PRETAX> 34,703
<INCOME-TAX> 0
<INCOME-CONTINUING> 34,703
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 34,703
<EPS-PRIMARY> .04
<EPS-DILUTED> .04
</TABLE>
