<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 SEPTEMBER 30, 1995
------------------------------------------
or
( ) TRANSITION REPORT UNDER SECTION 13 or 15(d) OF THE EXCHANGE ACT
For the transition period from to
--------------- -------------------
Commission file number 0-17893
---------------------------------------------------------
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 (941) 753-5000
------------------------------------------------------
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: 2,550,168 .
------------
<PAGE> 2
PART I - FINANCIAL INFORMATION
TELTRONICS, INC.
BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
----------------- -----------------
(unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 582,732 $ 19,824
Accounts receivable, net of allowance for
doubtful accounts of $80,843 at
September 30, 1995 and $135,607 at
December 31, 1994 3,310,266 2,355,047
Inventories 1,826,316 1,753,848
Income taxes receivable 30,700 668,780
Prepaid expenses and other current assets 336,925 288,410
----------------- -----------------
Total current assets 6,086,939 5,085,909
----------------- -----------------
PROPERTY AND EQUIPMENT, NET 1,627,735 1,207,196
----------------- -----------------
OTHER ASSETS:
Prepaid lease guarantee, net 277,683 298,680
Software development costs, net 89,322 156,822
Software licensing rights, net 882,566 886,755
Other 62,099 62,999
----------------- -----------------
Total other assets 1,311,670 1,405,256
----------------- -----------------
TOTAL ASSETS $ 9,026,344 $ 7,698,361
================= =================
</TABLE>
See accompanying notes
2
<PAGE> 3
TELTRONICS, INC.
BALANCE SHEET
(Continued)
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
----------------- -----------------
(unaudited)
<S> <C> <C>
CURRENT LIABILITIES:
Current portion of long term debt $ 3,010,212 $ 2,491,679
Current portion of long term lease obligations 230,348 185,480
Accounts payable 1,209,688 960,421
Accrued liabilities 663,739 763,959
Deferred income 207,559 146,982
Other current liabilities 81,431 65,195
----------------- -----------------
Total current liabilities 5,402,977 4,613,716
----------------- -----------------
LONG-TERM LIABILITIES:
Capital lease obligations, less current portion 378,334 271,898
Long-term debt, less current portion 678,184 1,267,454
----------------- -----------------
Total long-term liabilities 1,056,518 1,539,352
----------------- -----------------
SHAREHOLDERS' EQUITY:
Common stock, $.001 par, 50,000,000
shares authorized, 2,550,168 issued and
outstanding at September 30, 1995 and
982,440 at December 31, 1994 2,551 983
Additional paid-in capital 10,790,778 10,293,223
Accumulated deficit (8,226,480) (8,748,913)
----------------- -----------------
Total shareholders' equity 2,566,849 1,545,293
----------------- -----------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 9,026,344 $ 7,698,361
================= =================
</TABLE>
See accompanying notes
3
<PAGE> 4
TELTRONICS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
3 MONTHS ENDED 9 MONTHS ENDED
------------------------------ -----------------------------
SEPTEMBER 30, SEPTEMBER 30,
1995 1994 1995 1994
------------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
SALES $ 5,461,479 $ 3,417,146 $ 16,811,973 $ 11,040,409
COST OF GOODS SOLD 3,190,689 1,670,136 10,687,728 5,511,666
------------- ------------- ------------ -------------
GROSS PROFIT 2,270,790 1,747,010 6,124,245 5,528,743
------------- ------------- ------------ -------------
OPERATING EXPENSES
General and administrative 480,423 790,580 1,249,591 2,064,397
Research and development 352,022 218,254 1,150,583 805,846
Selling and marketing expenses 1,035,438 1,029,159 2,853,764 2,678,574
------------- ------------- ------------ -------------
1,867,883 2,037,993 5,253,938 5,548,817
------------- ------------- ------------ -------------
OPERATING INCOME (LOSS) 402,907 (290,983) 870,307 (20,074)
OTHER INCOME (EXPENSES)
Interest (102,633) (67,129) (280,921) (173,215)
Gain/Loss on ComCentral transactions --- (897,781) --- (897,781)
Miscellaneous 1,161 (298) (1,453) 6,497
Financing expense --- (165,344) (65,500) (165,344)
------------- ------------- ------------ -------------
(101,472) (1,130,552) (347,874) (1,229,843)
------------- ------------- ------------ -------------
INCOME (LOSS) BEFORE
INCOME TAXES 301,435 (1,421,535) 522,433 (1,249,917)
PROVISION (BENEFIT) FOR
INCOME TAXES --- (560,470) --- (560,470)
------------- ------------- ------------ -------------
NET INCOME (LOSS) $ 301,435 $ (861,065) $ 522,433 $ (689,447)
============= ============= ============ =============
NET INCOME (LOSS) PER SHARE $ 0.12 $ (1.17) $ 0.29 $ (1.10)
============= ============= ============ =============
AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 2,550,168 737,238 1,811,611 628,852
============= ============= ============ =============
</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
Shares issued for conversion
of notes 167,728 168 344,955 --- 345,123
Shares issued pursuant to
conversion rights 1,400,000 1,400 152,600 --- 154,000
Net Profit --- --- 522,433 522,433
--------- ------ ----------- ----------- ----------
BALANCE AT,
September 30, 1995 2,550,168 $2,551 $10,790,778 $(8,226,480) $2,566,849
</TABLE>
See accompanying notes
5
<PAGE> 6
TELTRONICS, INC.
STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
9 MONTHS ENDED
-------------------------------------------
September 30,
-------------------------------------------
1995 1994
---------------- ----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 522,433 $ (689,447)
Adjustments to reconcile net income to net cash:
Depreciation and amortization 412,592 898,251
Cost of conversion rights 65,500 581,520
Changes in assets and liabilities:
Loss on ComCentral transactions --- 652,000
Accounts receivable and other assets (1,003,734) (102,799)
Income tax receivable 638,080 (289,920)
Inventories (72,468) (716,030)
Due from affiliates --- 209,363
Deferred income taxes --- (270,550)
Accounts payable and accrued liabilities 149,047 289,213
Deferred income 60,577 ---
Other current liabilities 16,236 ---
---------------- ----------------
Net cash flows from operating activities 788,263 561,601
---------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (765,630) (97,571)
Capitalized software development costs --- (767,000)
---------------- ----------------
Net cash flows from investing activities (765,630) (864,571)
---------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from line of credit 16,460,667 10,322,500
Repayment on line of credit (15,704,829) (10,063,284)
Repayment of notes payable and
other long-term debt (671,386) (77,898)
Advance from related party 14,000 ---
Proceeds from notes/leases payable 441,823 125,000
---------------- ----------------
Net cash flows from financing activities 540,275 306,318
---------------- ----------------
Net increase (decrease) in cash 562,908 3,348
Cash and cash equivalents, beginning of year 19,824 10,332
---------------- ----------------
Cash and cash equivalents, end of period $ 582,732 $ 13,680
================ ================
</TABLE>
See accompanying notes
6
<PAGE> 7
TELTRONICS, INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
NOTE A - GENERAL
The financial statements as of September 30, 1995 and for the nine 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
unaudited results of operations for the interim periods reported are not
necessarily indicative of results to be expected for the year.
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. The
statements therefore should be read in conjunction with the financial
statements and related notes included in the Company's Form 10-KSB for the year
ended December 31, 1994.
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 significant 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 111 is hereby incorporated
by reference and there has been no significant change to such subject matter.
NOTE D - SUBSEQUENT EVENTS
The Company entered into a Software License Agreement effective January 1, 1993
to market and sell certain software in North and South America. During 1995,
sales realized were less than the minimum required under the agreement to
retain the rights. Therefore the Company sold its rights under the agreement
to the Licensor in October for $165,000.
The $882,566 recorded as an asset approximates the corresponding liability and
accordingly, the sale will result in a net gain of $165,000 which will be
included as a component of other income in the 4th quarter.
7
<PAGE> 8
TELTRONICS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL OVERVIEW
The first nine months of 1995 reflected sales of $16,812,000 compared to
$11,040,000 for the first nine months of 1994. Gross profit increased to
$6,124,000 from $5,529,000 for the same period last year. Total operating
expenses reflected a reduction of $295,000 from the first nine months of the
prior year. As a direct result of increased sales and reduced expenditures,
the first nine months of 1995 reflected a net profit of $522,000 as compared to
a net loss of $(689,000) for the first nine months of 1994.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
For the three months ended September 30, 1995 the Company's total sales and
gross margin percentage were $5,461,479 and 41.6% respectively, compared to
$3,417,146 and 51.5% for the same period of 1994. This increase was primarily
the result of additional sales in the Long Distance Management ("LDM") product
line. The three months ended September 30, 1995 reflected an improvement in
gross margin over the first six months of 1995 which produced total sales of
$11,350,494 and a gross margin of 34.0%.
Total operating expenses for the three months ended September 30, 1995 were
$1,867,883, a reduction of approximately $170,000 from the same period of 1994.
The sales increase of approximately 60% over the comparable period of 1994 in
conjunction with controlled expenditures resulted in operating income of
$402,907 for the three months ended September 30, 1995 as compared to an
operating loss of $(290,983) for the same period of 1994.
Other income and expenses for the three months ended September 30, 1995
reflected expenses totaling $101,472.
Net profit for the three months ended September 30, 1995 was $301,435 as
compared to a net loss of $(861,065) for the comparable period of 1994.
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
Total sales for the nine months ended September 30, 1995 increased by 52.3% to
$16,811,973 as compared to $11,040,409 for the first nine months of 1994. This
increase was primarily the result of additional sales in the Long Distance
Management ("LDM") product line.
Gross profit for the first nine months increased to $6,124,245 from $5,528,743
for the same period of 1994. Gross profit reflected at 36.4% of sales for the
first nine months of 1995 as compared to 50.1% for the same period of 1994.
The aggressive marketing program for the LDM product line resulted in lower
margin on those product sales.
8
<PAGE> 9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
CONTINUED
Total operating expenses for the first nine months of 1995 were $5,253,938, a
reduction of $294,879 from the same period of last year.
Other income and expenses reflected expenses of $347,874 comprised primarily of
interest expense and non-recurring financing expense charge of $65,500.
Net profit for the first nine months of 1995 was $522,433, an increase of
$1,211,880 above the 1994 loss of $(689,447) for the first nine months.
FINANCIAL CONDITION
Total assets at September 30, 1995 were $9,026,344 compared to $7,698,361 at
December 31, 1994. The Company's current ratio at September 30, 1995 was
1.13:1, compared to 1.10:1 at December 31, 1994.
LIQUIDITY AND CAPITAL RESOURCES
Cash requirements were met with cash provided by bank borrowings and borrowings
from The CIT Group/Credit Finance ("CIT"). The CIT facility provides for
borrowing up to $3.5 million. At September 30, 1995, $214,008 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 September 30, 1995 was 1.13:1. Net
working capital was $683,962 at September 30, 1995. Short term requirements
are expected to be met through cash flows from operations augmented by the
credit line facility.
However, the Company is continuing its efforts to secure possible 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
OUTLOOK
Although the Company has achieved higher sales during the first nine months of
1995 compared to the same period of 1994, 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. There are indications that
the market for dialers is slowing down, which could have an affect on fourth
quarter sales. During the first quarter sales of the Telecommunication
Information Systems products ("TIS") which is responsible for sales of the
Telemanagement software and Remote Maintenance products experienced a slow
start. However, the second and third quarters reflect improved sales of these
products. The Company enjoys higher margins on these products and expects
these products to contribute positively to the Company's profitability.
The Company continues to focus on ways to become more efficient in supplying
its products to the market.
9
<PAGE> 10
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In September, 1995, Commstar, Ltd., a Canadian corporation,
commenced litigation against the Company, a Director of the
Company and a former subsidiary of the Company in the Circuit
Court of the Thirteenth Judicial Circuit of Florida,
Hillsborough County, seeking damages in connection with the
sale of shares of its former subsidiary in 1993. The Plaintiff
seeks rescission and damages in excess of $15,000. The Company
filed a Motion to Dismiss which is scheduled to be heard in
January, 1996. The Company has meritorious defenses to the
claims.
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>
10.138 Promissory Note between Barnett Bank of Manatee
County, N.A. and Teltronics, Inc. dated July 7,
1995 . . . . . . . . . . . . . . . . . . . . . . . . . . (a)
10.139 Purchase Agreement between SR Comms Management
Ltd., and Teltronics dated October 2, 1995 . . . . . . . . (a)
27 Financial Data Schedule (for SEC use only) . . . . . . . . (a)
</TABLE>
ITEM 6B. REPORT ON FORM 8-K - None
- -----------------
(a) Filed as an Exhibit to this Report on Form 10-QSB.
10
<PAGE> 11
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.
November 13, 1995 /s/ Ewen Cameron
-------------------------------------
President and Chief Executive Officer
11
<PAGE> 1
EXHIBIT 10.138
(Barnett Bank Logo)
Florida documentary stamp tax required by law
in the amount of $690.20 has been paid or
will be paid directly to the Department of
Revenue. Certificate of Registration
#_____________.
PROMISSORY NOTE
<TABLE>
<CAPTION>
Principal Loan Date Maturity Loan No. Call Collateral Amount Officer Initials
<C> <C> <C> <C> <C> <C> <C> <C> <C>
$197,142.00 07-07-1995 07-07-1998 06900005775 A100 40 494
References in the shaded area are for Lander's use only and do not limit the applicability of this document to any particular loan
or item.
</TABLE>
<TABLE>
<S> <C> <C> <C>
Borrower: Teltronics, Inc. Lender: BARNETT BANK OF MANATEE COUNTY, N.A.
2150 Whitfield Industrial Way 1001 3rd AVENUE WEST
Sarasota, FL 34243-4046 P.O. BOX 9390
BRADENTON, FL 34206
</TABLE>
- -------------------------------------------------------------------------------
Principal Amount: $197,142.00 Interest Rate: 14.000% Date of Note: July 7, 1995
PROMISE TO PAY. Teltronics, Inc., jointly and severally if more than one
("Borrower"), promises to pay to BARNETT BANK OF MANATEE COUNTY, N.A.
("Lender"), or order, in lawfully obtained money of the United States of
America, the principal amount of One Hundred Ninety Seven Thousand One Hundred
Forty Two & 00/100 Dollars ($197,142.00), together with interest at the rate of
14.000% per annum on the unpaid principal balance from date(s) of disbursement,
until paid in full as set forth herein.
PAYMENT. Borrower will pay this loan in 36 payments of $6,760.35 each payment.
Borrower's first payment is due August 7, 1995, and all subsequent payments are
due on the same day of each month after that. Borrower's final payment will be
due on July 7, 1998, and will be for all principal and all accrued interest not
yet paid. Payments include principal and interest. Interest on this Note is
computed on a 365/360 simple interest basis; that is, by applying the ratio of
the annual interest rate over a year of 360 days, multiplied by the outstanding
principal balance, multiplied by the actual number of days the principal
balance is outstanding. Borrower will pay Lender at Lender's address shown
above or at such other place as Lender may designate in writing. Payments
shall be allocated between principal, interest, costs, fees, if any, in the
discretion of Lender. Any payment to be debited from Borrower's designated
account will be debited on the scheduled due date; however, if the scheduled
due date is on a weekend or holiday, the payment will be debited on the next
non-weekend/holiday day.
PREPAYMENT. Borrower may pay all or a portion of the amount owed earlier than
it is due. Early payments will not, unless agreed to by Lender in writing,
relieve Borrower of Borrower's obligation to continue to make payments under
the payment schedule. Rather, they will reduce the principal balance due and
may result in Borrower making fewer payments.
LATE CHARGE. If a payment is 10 days or more late, Borrower will be charged
6.000% of the unpaid portion of the regularly scheduled payment or $100.00,
whichever is greater.
DEFAULT. Borrower will be in default if any of the following happens: (a)
Borrower fails to make any payment when due; (b) Borrower breaks any written
promise Borrower has made to Lender, or Borrower fails to perform promptly at
the time and strictly in the manner provided in this Note or in any written
agreement related to this Note, or in any other written agreement or loan
Borrower has with Lender, contingent or absolute, due or to become due, now or
hereafter existing; (c) A breach of any term or condition of any security
agreement, pledge agreement, mortgage loan agreement or any other agreement
related to or securing this Note regardless if said document is executed by
Borrower, any guarantor or a third-party not liable for this Note, upon which a
cure period, if any, contained in said agreement has expired; (d) suspension,
liquidation, sale or transfer of Borrower's business or assets; (e) Any
representation, warranty, statement or report made or furnished to Lender by
Borrower or on Borrower's behalf is false, or misleading in any material
respect; (f) Borrower becomes insolvent, a receiver is appointed for any part
of Borrower's property, Borrower makes an assignment for the benefit of
creditors, or any proceeding is commenced either by Borrower or against
Borrower under any bankruptcy or insolvency laws; (g) Any creditor tries to
take any of Borrower' property on or in which Lender has a lien or security
interest. This includes a garnishment of any of Borrower's accounts with
Lender; (h) Failure of Borrower to furnish Lender within thirty (30) days after
written request by Lender, current financial statements, including income tax
returns, in form satisfactory to Lender or to permit inspection of any of
Borrower's books or records; (i) The issuance of any tax levy or lien against
Borrower or Borrower's failure to pay, withhold, collect or remit any tax when
assessed or due; (j) The filing of formal charges under any federal or state
law against Borrower's assets which forfeiture is a potential penalty; (k) Any
of the events described in this default section occurs with respect to any
guarantor of this Note; (l) Lender in good faith deems itself insecure.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance on this Note and all accrued unpaid interest, costs and fees
immediately due, without notice, and then Borrower will pay that amount. Upon
default, or if this Note is not paid at final maturity, Lender, at its option,
may add any unpaid accrued interest, costs and fees to principal and such sum
will bear interest therefrom until paid, at the rate provided in this Note but
in no event at an effective total interest rate on this Note greater than the
rate permitted by applicable law. Lender may hire or pay someone else to help
collect this Note if Borrower does not pay. Borrower also will pay Lender the
amount of these costs and expenses, which includes, subject to any limits under
applicable law, Lender's reasonable attorneys' fees and Lender's legal expenses
whether or not there is a lawsuit, including reasonable attorney's fees and
legal expenses for bankruptcy proceedings, (including efforts to modify or
vacate any automatic stay or injunction), appeals, and any anticipated
post-judgment collection services. If not prohibited by applicable law,
Borrower also will pay any court costs, in addition to all other sums provided
by law. This Note shall be governed by and construed in accordance with the
laws of the State of Florida.
DISHONORED ITEM FEE. Borrower will pay a fee to Lender of $15.00 if Borrower
makes a payment on Borrower's loan and the check or preauthorized charge with
which Borrower pays is later dishonored.
RIGHT OF SETOFF. Borrower authorizes Lender, to the extent permitted by
applicable law, to charge, withdraw or setoff all sums owing on this Note
against any and all the accounts set forth below in the Accounts section
without prior demand or notice to Borrower.
ACCOUNTS. Borrower grants to Lender a contractual possessory security interest
in, and hereby assigns, conveys, delivers, pledges, and transfers to Lender all
of Borrower's right, title and interest in and to, Borrower's deposits,
accounts (whether checking, savings, or some other account), or securities now
or hereafter in the possession of or on deposit with Lender or with any Barnett
Banks, Inc. affiliates or subsidiary including without limitation all accounts
held jointly with someone else and all accounts Borrower may open in the
future, excluding however all IRA, Keogh, and trust accounts.
GARNISHMENT. Borrower consents to the issuance of a continuing writ of
garnishment or attachment against Borrower's disposable earnings, in accordance
with Section 222.11, Florida Statutes, in order to satisfy, in whole or in
part, any money judgment entered in favor of Lender.
<PAGE> 2
07-07-1995 PROMISSORY NOTE Page 2
Loan No 06900005775 (Continued)
- --------------------------------------------------------------------------------
GENERAL PROVISIONS. If any part of this Note cannot be enforced, this fact
will not affect the rest of the Note. Borrower does not agree or intend to
pay, and Lender does not agree or intend to contract for, charge, collect,
take, reserve or receive (collectively referred to herein as "charge or
collect"), any amount in the nature of interest or in the nature of a fee for
this loan, which would in any way or event (including demand, prepayment, or
acceleration) cause Lender to charge or collect more for this loan than the
maximum Lender would be permitted to charge or collect by federal law or the
law of the State of Florida (as applicable). Any such excess interest or
unauthorized fee shall, instead of anything stated to the contrary, be applied
first to reduce the principal balance of this loan, and when the principal has
been paid in full, be refunded to Borrower. Lender may delay or forgo
enforcing any of its rights or remedies under this Note without losing them.
Borrower and any other person who signs, guarantees or endorses this Note, to
the extent allowed by law, waive presentment, demand for payment, protest and
notice of dishonor and all other demands and notices in connection with the
delivery, acceptance, performance, default or enforcement of this Note. Upon
any change in the terms of this Note, and unless otherwise expressly stated in
writing, no party who signs this Note, whether as maker, guarantor,
accommodation maker or endorser, shall be released from liability. All rights,
power, privileges and immunities herein granted to Lender shall extend to its
successors and assigns and any other legal holder of this Note. All rights,
powers, privileges and immunities of Borrower hereunder may not in any way be
assigned, transferred or sold. Lender at any time is authorized to correct
patent errors herein. All such parties agree that Lender may renew, modify,
substitute, consolidate or extend (repeatedly and for any length of time) this
loan, or release any party or guarantor or collateral; or impair, fail to
realize upon or perfect Lender's security interest in the collateral; and take
any other action deemed necessary by Lender without the consent of or notice
to, acknowledgment or agreement by anyone. All such parties also agree that
Lender may modify this loan without the consent of or notice to anyone other
than the party with whom the modification is made. This Note constitutes the
entire understanding and agreement of the parties as to the matters set forth
in this Note and supersedes all prior understandings and correspondence, oral,
or written, with respect to the subject matter hereof. No iteration of or
amendment to this Note shall be effective unless given in writing and signed by
Lender. Borrower acknowledges that this Note evidences a loan made primarily
for business, commercial or agricultural purposes and not primarily for
personal, family or household purposes. When this Note becomes due, by
default, demand or maturity, Lender may, at its option, demand, sue for,
collect, or make any compromise or settlement it deems desirable with reference
to any collateral pledged or granted for this Note. Lender shall not be bound
to take any steps necessary to preserve any rights in any such collateral
against prior parties. Lender shall have no duty with respect to collection or
protection of any such collateral or of any income or any such on the
collateral as to the preservation of any rights pertaining to any such
collateral beyond safe custody. Borrower authorizes Lender to exchange
Lender's deposit, credit and borrowing information about Borrower with third
parties. Borrower agrees to indemnify and hold Lender harmless against
liability for the payment for documentary stamp and intangible taxes (including
interest and penalties) (if applicable), which may be determined to be payable
with respect to this transaction. If this Note is renewed, modified, extended,
substituted or consolidated, although Lender is under no duty to do so, Lender
may, without Borrower's or any guarantor's consent: (a) advance the maximum
amount of principal then available the day prior to said occurrence, (b)
deposit said amount in Borrower's account with Lender the day prior to said
occurrence, (c) withdraw said amount from Borrower's account with Lender the
day after said occurrence, and (d) apply said amount to the principal amount
then outstanding. Said procedures are intended to minimize Borrower's
documentary stamp tax and/or intangible tax liabilities (if applicable)
although Borrower will be fully responsible for accrued interest on the amount
of principal advanced for said procedure. If this Note represents a renewal,
modification, extension, substitution or consolidation of a Note owed to
Lender, then Borrower acknowledges and agrees that there are no claims,
setoffs, avoidances, counterclaims, or defenses or rights to claims, setoffs,
avoidances, counterclaims or defenses to enforcement of this Note.
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF
THIS NOTE. BORROWER AGREES TO THE TERMS OF THE NOTE AND ACKNOWLEDGES RECEIPT OF
A COMPLETED COPY OF THE NOTE.
BORROWER:
Teltronics, Inc.
By: /s/ Ewen R. Cameron
--------------------------
Ewen R. Cameron, President
- --------------------------------------------------------------------------------
Fixed Rate, Installment.
<PAGE> 1
EXHIBIT 10.139
PURCHASE AGREEMENT
THIS AGREEMENT ("Agreement") made and entered into this 2nd day of
October, 1995 by and between Teltronics, Inc. ("Seller"), a Delaware
corporation with its principal office at 2150 Whitfield Industrial Way,
Sarasota, Florida 34243, and SR Comms Management Ltd., a United Kingdom
corporation with its principal office at 1 The Herculean, Porz Avenue, Houghton
Regis, Dunstable, Bedfordshire, UK LU5 5XE ("Buyer").
W I T N E S S E T H:
WHEREAS, Seller and Buyer's subsidiary entered into a Software License
Agreement dated as of December 3, 1992 ("License Agreement") pursuant to which
Buyer granted Seller the exclusive right to market, use and otherwise
commercialize Buyer's Unix-based telemanagement system software ("Orbitel Unix
System") in North and South America ("Territory"); and
WHEREAS, Seller desires to sell to Buyer and Buyer desires to acquire
from Seller (i) Seller's right to market, use and otherwise commercialize the
Orbitel Unix System in the Territory ("Territorial Rights"), (ii) all of
Seller's right, title and interest in and to the maintenance agreements listed
on Schedule 5(a)(iii) attached to this Agreement ("Maintenance Agreements"),
and (iii) all of Seller's right, title and interest in any modifications made
by Seller in the Orbitel Unix System ("Modifications"). The Territorial
Rights, Maintenance Agreements and Modifications are hereinafter collectively
referred to as the "Assigned Rights".
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained in this Agreement, and other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, Seller and Buyer
mutually covenant and agree as follows:
1. Sale and Purchase of Assigned Rights.
(a) Upon the terms and subject to the conditions
contained in this Agreement, on the Closing Date (as defined in paragraph 3 of
this Agreement), Seller will sell, assign, transfer and convey to Buyer and
Buyer will accept, acquire and purchase from Seller, the Assigned Rights. The
sale of the Assigned Rights under this Agreement does not include or affect in
any way Seller's right to market, use, commercialize and otherwise deal in any
of Seller's products, including specifically but not exclusively Seller's
Orbitel Windows and Orbitel DOS products, and otherwise to compete within the
Territory or elsewhere.
1
<PAGE> 2
(b) Seller confirms that upon the consummation of the
transactions contemplated by this Agreement and the full and complete
performance by Buyer of its obligations under this Agreement, Seller will have
no further proprietary rights in the Orbitel Unix System. The sale of the
Assigned Rights does not include any other assets of Seller, including without
limitation funds Seller may hereafter receive pursuant to invoices sent by
Seller prior to the Closing Date for services under the Maintenance Agreements.
Seller will notify Buyer of any amounts due under a Maintenance Agreement which
is not received within 90 days of the due date and Buyer shall have the right
but not the obligation to terminate that Maintenance Agreement.
2. Consideration. As full and adequate consideration for sale
of the Assigned Rights under this Agreement:
(a) Buyer shall pay to Seller:
(i) One Hundred Sixty-Five Thousand and No/100
United States Dollars ($165,000.00 U.S.) by certified, cashiers or bank check
at or prior to the Closing;
(ii) an amount equal to twenty percent (20%) of
all revenues of the Orbitel Unix System software in the Territory, exclusive of
maintenance, warranty, installation and any other ongoing service or support
charges and after deduction of all freight or transportation charges or
allowances or tax included in the price, from sales to customers listed on
Schedule 2(a)(ii) attached to this Agreement during the twelve (12) month
period immediately following the Closing Date;
(iii) an amount equal to five percent (5%) of
all revenues of the Orbitel Unix System software in the Territory, exclusive of
maintenance, warranty, installation and any other ongoing service or support
charges and after deduction of all freight or transportation charges or
allowances or tax included in the price, from sales to customers that are not
listed on Schedule 2(a)(ii) attached to this Agreement during the eighteen (18)
month period immediately following the Closing Date; and
(b) Buyer shall execute and deliver to Seller the
Assumption and Indemnity Agreement attached as Exhibit A to this Agreement
3. Closing Date. The closing of the sale of the Assigned
Rights shall take place at the offices of Seller at 10:00 a.m. on October 2,
1995 or on such later date as Buyer and Seller shall mutually agree to
("Closing Date" or "Closing").
4. Instruments of Transfer; Payment of Purchase Price and
Assumption of Liabilities; Further Assurances.
2
<PAGE> 3
(a) Seller's Deliveries. At the Closing, the Seller
shall deliver to the Buyer:
(i) Assignment Instrument for the Assigned
Rights, in form reasonably satisfactory to the Buyer;
(ii) Source code for the Modifications
(programs as listed on Schedule 4(a)(ii)) in machine readable form and all
documentation including object and source code listings and the printed
summaries thereof in human readable form;
(iii) The Assumption and Indemnity Agreement
described in paragraph 2(b) of this Agreement;
(iv) The Mutual Release and Termination
Agreement described in paragraph 7(e) of this Agreement;
(v) Such other instrument or instruments of
transfer, in such form, as shall be reasonably necessary or appropriate to vest
in the Buyer good and valid title to the Assigned Rights free and clear of all
liens, charges, encumbrances, security interests or any other third party
rights.
(b) Buyer's Deliveries. At the Closing, the Buyer
shall deliver to the Seller:
(i) Certified, cashiers or bank check for an
aggregate amount of One Hundred Sixty-Five Thousand and NO/100 United States
Dollars ($165,000.00 U.S.).
(ii) The Assumption and Indemnity Agreement
described in paragraph 2(b) of this Agreement.
(iii) The Mutual Release and Termination
Agreement described in paragraph 7(e) of this Agreement.
5. Representations and Warranties.
(a) Seller's Representations and Warranties. Seller
represents and warrants at the date of this Agreement and as of the Closing
that:
(i) Organization; Good Standing. The Seller
is a corporation duly organized, validly existing and in good standing under
the laws of the State of Delaware, and has all requisite power and authority to
own, operate and lease its properties and assets and to enter into and perform
its obligations under this Agreement; and
(ii) Authority. At or prior to Closing, this
Agreement and all other instruments in connection with this Agreement will have
been duly executed and delivered by Seller,
3
<PAGE> 4
will have been authorized by all necessary action, corporate or otherwise, and
will constitute legal, binding obligations of the Seller enforceable against
Seller in accordance with their terms.
(iii) Maintenance Agreements, etc. Set forth in
Schedule 5(a)(iii) attached to this Agreement is a complete and accurate list
of the Maintenance Agreements currently in effect with all invoiced amounts
paid in full and a complete and accurate list of the Maintenance Agreements
currently in force with invoiced amounts which have not been paid in full. The
form of the Maintenance Agreement is also attached as Schedule 5(a)(iii) to
this Agreement.
(iv) Warranties, etc. The form of warranty
Seller provides to customers purchasing the Orbitel Unix System, together with
a list of all customers to which Seller currently owes outstanding Orbitel Unix
warranty obligations, is set forth on Schedule 5(a)(iv) attached to this
Agreement.
(v) Modifications. Except to the extent that
the license by Buyer to Seller of the Orbitel Unix System under the License
Agreement contravened the copyrights or the rights of others, the Modifications
are original software and Seller has the right, power and authority to sell the
Modifications, which do not contravene copyrights and rights of others.
(vi) Ownership. Except to the extent that the
license by Buyer to Seller of the Orbitel Unix System under the License
Agreement contravened copyrights or the rights of others, Seller has good and
valid title to the Assigned Rights, free and clear of all liens, charges,
encumbrances or rights of others.
(vii) Litigation. There are no actions, suits
or proceedings, either at law or in equity, of any kind now pending against or
affecting the Assigned Rights, and Seller is not aware of any facts upon which
any such action, suit or proceeding might be commenced.
(viii) Notice of Infringement. The Seller has
not received any written notice claiming that the Orbitel Unix System or any of
the Modifications infringes upon the copyrights, or any other intellectual
property rights of any other person, firm or corporation.
(b) Buyer's Representations and Warranties. Buyer
represents and warrants at the date of this Agreement and as of the Closing
that:
(i) Organization; Good Standing. The Buyer is
a corporation duly organized, validly existing and in good standing under the
laws of the United Kingdom, and has all requisite power and authority to own,
operate and lease its properties and assets and to enter into and perform its
obligations under this Agreement;
4
<PAGE> 5
(ii) Authority. At or prior to Closing, this
Agreement and all other instruments in connection with this Agreement will
have been duly executed and delivered by Buyer, will have been authorized by
all necessary action, corporate or otherwise, and will constitute legal,
binding obligations of the Buyer enforceable against Buyer in accordance with
their terms; and
6. Covenants.
(a) Seller covenants and agrees with Buyer as follows:
(i) Conduct of Business Pending Closing.
Prior to the Closing Date:
a) Seller will use its best efforts to
preserve Seller's Orbitel Unix System business
intact and preserve for the Buyer the goodwill of the Seller's Orbitel Unix
System customers; and
b) Seller will not sell, assign,
transfer, encumber, pledge, hypothecate or otherwise dispose of any of the
Assigned Rights.
(b) Buyer covenants and agrees with Seller as follows:
(i) Within 30 days after each calendar
quarter during the term of the payments described in paragraphs 2(a)(ii) and
2(a)(iii) of this Agreement, the Buyer shall report to the Seller all Orbitel
Unix System sales and payments in the Territory incurred during the preceding
calendar quarter. Such quarterly reports shall indicate for each period the
number of Orbitel Unix Systems shipped in the Territory by the Buyer, its
affiliates and sublicensees and the corresponding amount of such payments. The
Buyer shall keep, and it shall cause its affiliates and sublicensees to keep,
accurate records in sufficient detail to enable the payments due to be
verified. The records from which the payment reports are prepared need not be
retained by the Buyer, its affiliates and sublicensees longer than two (2)
years. Seller shall have the right to review and audit Buyer's books relating
to sales of the Orbitel Unix Systems to verify the amounts payable under
paragraphs 2(a)(ii) and 2(a)(iii) of this Agreement.
(ii) The payments accrued, as reflected on the
quarterly reports provided for under paragraph 6(b)(i) above, shall be due and
payable on the due date of each such quarterly report.
7. Conditions Precedent to Buyer's Obligations. All of the
obligations of Buyer under this Agreement are subject to fulfillment prior to
or at the Closing Date, of the following conditions:
5
<PAGE> 6
(a) Representations and Warranties True at Closing
Date. The Seller's representations and warranties contained in this Agreement
shall be true at the Closing Date as though such representations and warranties
were made on the Closing Date;
(b) Seller's Performance. Seller shall have performed
and complied with all the terms, provisions, conditions and covenants of this
Agreement to be complied with and performed by Seller at or prior to the
Closing;
(c) Ownership of Assigned Rights. Except to the
extent that the license of the Orbitel Unix System to Seller by Buyer under the
License Agreement contravened copyrights or the rights of others, Seller will
have good and valid title to the Assigned Rights;
(d) Assumption and Indemnity Agreement. Seller shall
have executed and delivered to Buyer the Assumption and Indemnity Agreement
attached as Exhibit A to this Agreement;
(e) Release and Termination. Seller shall have
executed and delivered the Mutual Release and Termination of the License
Agreement attached as Exhibit B to this Agreement.
8. Conditions Precedent to Seller's Obligations. All of the
obligations of Seller under this Agreement are subject to fulfillment prior to
or at the Closing Date, of the following conditions:
(a) Representations and Warranties True at Closing
Date. The Buyer's representations and warranties contained in this Agreement
shall be true at the Closing Date as though such representations and warranties
were made on the Closing Date;
(b) Buyer's Performance. Buyer shall have performed
and complied with all the terms, provisions, conditions and covenants of this
Agreement to be complied with and performed by Buyer at or prior to the
Closing;
(c) Assumption and Indemnity Agreement. Buyer shall
have executed and delivered to Seller the Assumption and Indemnity Agreement
attached as Exhibit A to this Agreement;
(d) Release and Termination. Buyer shall have
executed and delivered to Seller the Release and Termination of the License
Agreement attached as Exhibit B to this Agreement;
9. Expenses. Each of Seller and Buyer will pay their own legal
fees and other expenses in connection with the sale, and Buyer shall pay all
sales, transfer and documentary taxes payable in connection with the sale, it
being intended that Seller shall not assume any liability with respect to same.
6
<PAGE> 7
10. Survival of Representations. All representations and
warranties of Seller and Buyer shall survive and remain in effect for a period
of eighteen (18) months from and after the Closing.
11. General.
(a) This Agreement embodies the entire agreement of
Seller and Buyer, supersedes any other agreement, whether written or oral,
relating to the subject matter of this Agreement, and may not be modified or
changed, in whole or in part, nor may any of its provisions be waived, except
by a written instrument signed by Seller and Buyer.
(b) This Agreement shall bind and inure to the benefit
of Seller, Buyer and their respective successors and assigns, but shall not be
assignable by any party without the prior written consent of the other.
(c) All notices or other communications required or
permitted to be given pursuant to this Agreement shall be in writing and shall
be considered as properly given or made if hand delivered, mailed from within
the United States by certified or registered mail, or sent by prepaid telegram
to the applicable address(es) appearing in the preamble to this Agreement, or
to such other address as a party may have designated by like notice forwarded
to the other parties hereto. All notices, except notices of change of address,
shall be deemed given when mailed or hand delivered and notices of change of
address shall be deemed given when received.
(d) This Agreement shall be governed by laws of the
State of Florida.
(e) This Agreement may be executed in any number of
counterparts, each of which shall be an original, but which together
constitute one and the same instrument.
IN WITNESS WHEREOF, Buyer and Seller have duly executed this Agreement
on the date first above written.
SELLER:
Teltronics, Inc.
By: /s/ Ewen Cameron
-----------------------------
Ewen Cameron, President & CEO
BUYER:
SR Comms Management Ltd.
By: /s/ Stuart Robins
-----------------------------
Stuart Robins, Director
7
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS FOR NINE MONTHS PERIOD ENDED SEPTEMBER 30, 1995, AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-QSB FOR THE PERIOD ENDED SEPTEMBER 30,
1995.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 582,732
<SECURITIES> 0
<RECEIVABLES> 3,310,266
<ALLOWANCES> 0
<INVENTORY> 1,826,316
<CURRENT-ASSETS> 6,086,939
<PP&E> 3,440,277
<DEPRECIATION> 1,812,542
<TOTAL-ASSETS> 9,026,344
<CURRENT-LIABILITIES> 5,402,977
<BONDS> 0
<COMMON> 2,551
0
0
<OTHER-SE> 2,564,298
<TOTAL-LIABILITY-AND-EQUITY> 9,026,344
<SALES> 16,811,973
<TOTAL-REVENUES> 16,811,973
<CGS> 10,687,728
<TOTAL-COSTS> 5,253,938
<OTHER-EXPENSES> 66,953
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 280,921
<INCOME-PRETAX> 522,433
<INCOME-TAX> 0
<INCOME-CONTINUING> 522,433
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 522,433
<EPS-PRIMARY> 0.29
<EPS-DILUTED> 0.29
</TABLE>
