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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 (Fee Required)
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 (No Fee Required)
For the transition period from to
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Commission File Number 0-17893
TELTRONICS, INC.
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(Name of small business issuer in its charter)
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Delaware 59-2937938
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(State or other jurisdiction of Incorporation or organization) (IRS Employer Identification Number)
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2150 Whitfield Industrial Way, Sarasota, Florida 34243
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (941)753-5000
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Securities registered pursuant to Section 12(g) of the Exchange Act:
Common stock, $.001 par value
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(Title of Class)
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 ---------
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Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB, [ X ].
Issuer's revenues for its most recent fiscal year. $21,603,491
The aggregate market value (closing bid price) of the Registrant's common stock
held by non-affiliates at March 15, 1996, was approximately $5,480,820. For
purposes of computing such market value, the Registrant has assumed that
affiliates include only its executive officers, directors and 5% stockholders.
This determination of affiliate status has been made solely for the purpose of
this Report, and the Registrant reserves the right to disclaim that any such
individual is an affiliate of the Registrant for any other purposes.
Note: If determining whether a person is an affiliate will involve an
unreasonable effort and expense, the issuer may calculate the aggregate market
value of the common equity held by non-affiliates on the basis of reasonable
assumptions, if expense, the issuer may calculate the aggregate the assumptions
are stated.
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
As of March 15, 1996, 2,610,168 shares of the Registrant's common stock, par
value $.001, were issued and outstanding.
Exhibit index appears on pages 28-30 .
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PART 1
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ITEM 1. BUSINESS
GENERAL
Teltronics, Inc. ("Teltronics" or "Company"), a Delaware corporation
incorporated on February 15, 1989, and successor to Comnet Systems, Inc.,
designs, develops, manufactures and markets telecommunication equipment and
application software products, and engages in contract manufacturing.
In 1990 the Company acquired substantially all of the assets of COM
DEV, Inc. ("Com Dev") and Com Dev's wholly-owned subsidiary, TC Telemanagement,
Inc. ("TC Telemanagement"). Com Dev and TC Telemanagement designed, developed,
manufactured and marketed telecommunication hardware and software products.
In August 1991, the Company through ComCentral Acquisition Corp., a
wholly-owned subsidiary of the Company, acquired 80% of the outstanding
securities of Catalyst Communications Corporation, a Utah corporation now known
as ComCentral Corp. ("ComCentral"). ComCentral, and its wholly-owned
subsidiary ComCentral, Inc. were providers of long distance telecommunication
services. During May through July 1993, the Company disposed of its interest
in the common stock of ComCentral. In November and December 1993 the Company
accepted 602,000 (pre-reverse split) shares of ComCentral's common stock in
satisfaction of approximately $852,000 of inter-company debt ComCentral owed to
the Company, and in December 1993 the Company disposed of 100,000 (pre-reverse
split) shares of ComCentral's common stock. At December 31, 1994, the Company
owned 502,000 (pre-reverse split) shares of ComCentral's common stock and
250,000 (pre-reverse split) shares of ComCentral's series A preferred stock.
As of December 31, 1994, the Company has written down its investment in
ComCentral's shares to zero. (See FINANCIAL STATEMENTS - Page F-12, Note 2).
ComCentral (File No. 33-42635) was and may still be is a separate reporting
company required to file periodic reports pursuant to Section 12(g) under
Securities Act of 1934 as amended.
In December, 1992 the Company entered into an exclusive licensing
agreement with Systems Reliability, Inc. ("SRI") of Sarasota, Florida to sell
and distribute SRI's ORBi-TEL line of Call Accounting products exclusively in
North and South America. The Agreement called for a payment of 30% of gross
sales up to a maximum of $1.6 million. During 1995, sales realized were going
to be 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 and is to receive an amount equal to 20% of all revenues
of the system software generated in the territory, exclusive of maintenance,
warranty, installation and any other ongoing service or support charges, as
adjusted in accordance with the agreement, from specific customers as detailed
in the agreement for a period of 12 months and an amount equal to 5% of all
revenues of the system software in the territory, exclusive of maintenance,
warranty, installation and any other ongoing service or support charges, as
adjusted in accordance with the agreement, from customers not specified in the
agreement for a period of 18 months. SRI was a wholly owned subsidiary of SR
Comms Ltd. of the UK. SR Comms Ltd. is a wholly owned subsidiary of TSB
International, a publicly traded company on the Toronto Stock Exchange.
In October 1995, the Company formed a subsidiary, AT Supply, Inc. ("AT
Supply"), to engage in sales and distribution of telecommunications hardware,
software and related products
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as Advantage Telcom Supply Company. The Company, through its wholly-owned
subsidiary TTG Acquisition Corp. ("TTG"), owns 80% of the outstanding common
stock of AT Supply. During the same period TTG made working capital loans in
the amount of $196,000 to AT Supply pursuant to two (2) Line of Credit Notes
payable upon demand on or before October 31, 1996. AT Supply is a co-obligor
of the Company's Line of Credit with The CIT Group/Credit Finance ("CIT"). See
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - General Overview.
In March 1996, the Company entered into a Memorandum of Agreement to
transfer to the Company's subsidiary, ISL, Inc. the technology for a small,
self-contained, voice-activated, portable, pentium(R) processor-driven,
multi-media computer ("Technology"). If consummated, the transfer of the
Technology could involve the issuance of up to 1,000,000 shares of the
Company's common stock, which, if issued, would be subject to several
conditions, including an escrow of the shares to secure indemnification
obligations of the current owners of the Technology, Board of Directors
approval of the company, and restrictions on the right to vote the shares until
satisfaction of certain conditions, including award of a significant contract
utilizing the Technology. There can be no assurance that numerous conditions
necessary to consummate the transfer of the Technology will be satisfied.
The Company and its subsidiaries employ 206 people as of February 29, 1996.
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INDUSTRY SEGMENTS
FINANCIAL INFORMATION RELATING TO INDUSTRY SEGMENT
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YEAR ENDED DECEMBER 31, 1995
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PRODUCT SOFTWARE CONSOLIDATED
SEGMENT SEGMENT TOTALS
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Total revenues $21,449,966 $153,525 $21,603,491
Operating income (loss) 716,863 41,002 757,865
Identifiable assets 8,767,129 66,822 8,833,951
Depreciation and
amortization 547,514 94,189 641,703
Capital expenditures 874,695 --- 874,695
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YEAR ENDED DECEMBER 31, 1994
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PRODUCT SOFTWARE CONSOLIDATED
SEGMENT SEGMENT TOTALS
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Total revenues $13,090,640 $1,671,704 $14,762,344
Operating income (loss) (1,611,114) (1,236,661) (2,847,775)
Identifiable assets 6,323,218 1,375,143 7,698,361
Depreciation and
amortization 566,656 1,898,427 2,465,083
Capital expenditures 396,367 --- 396,367
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DESCRIPTION OF BUSINESS
PRODUCTS PRODUCED AND SERVICES PROVIDED
The Company designs, develops, manufactures, and markets electronic
hardware and application software for the telecommunications marketplace, as
well as engaging in contract manufacturing.
During the year ended December 31, 1995, sales to the Company's four
largest customers (Telsource Corporation, Nielsen Media Research, C&L
Communications, and Wisconsin Wireless) accounted for approximately 56.4% of
the total sales revenue. One customer accounted for 37% of total sales
revenue.
In 1993, the Company reorganized, consolidating the businesses of TC
Telemanagement, Inc., and Teltronics into one company. This resulted in
reducing overhead and better focusing the Company on increasing sales through
major distributors. The Company's product development strategy continues to be
the enhancement of existing product lines.
The Company's key markets within the telecommunications industry
include: Long Distance Management, Remote Maintenance, Call Accounting and
Telecommunications Management. External to telecommunications, but also
considered a key market is Contract Manufacturing.
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LONG DISTANCE MANAGEMENT ("LDM")
In today's largely deregulated telecommunications industry, there are
many carriers. Some of the better known are AT&T, Sprint, and MCI, plus over
300 smaller companies who sell or re-sell long distance and intralata telephone
service. These carriers compete to provide their customers with lower priced
telephone call routing, and until recently, were known as Interexchange
Carriers ("IXCs").
The advent of intralata competition changed the definition of these
carriers, and added a new dimension to the market for the Company's LDM
products. Additional regulatory changes have taken place allowing these
carriers to compete in the area of local call traffic, further broadening the
market for the Company's products.
The Company's LDM products assist their owners in creating revenue.
These products are divided in two categories: the Network Manager products and
the Automatic Call Processor products. Both categories have evolved in great
part as a result of deregulation of the telecommunications industry in the
United States.
The first category consists of the Network Manager products, which are
purchased primarily by long distance and intralata telephone carriers. The
Network Manager products analyze the digits dialed by a caller and determine
which calls are best handled by the carrier. They translate the caller's
dialed digits as required to access the carrier's facilities in a way totally
transparent to the caller.
Automatic Call Processors, the second category of LDM products, are
designed to address vertical market niches such as the lodging industry and
correctional institutions, where resale of telephone services is permitted.
These products provide a transaction based revenue stream for the owner of the
product by producing a margin between what legally may be charged for calls and
the price the owner pays to process the call through the telephone network.
The Company continues to look at export markets both in Australia and Europe.
Each time regulations change, a niche may open for LDM products which
can, in general, translate the old way of doing things to the new. The Company
is now seeing continued regulatory changes in the United States, and an
accelerated rate of deregulation in other parts of the world. As deregulation
and competition increase, the Company is adapting its LDM products to take
advantage of these domestic and international opportunities.
Management of the Company believes the Company has established a
strong competitive position in the Long Distance Management market. The
Company's products competing in the Long Distance Management market include the
Network Manager, Network Manager +, ACP PLUS, and ACP+ONE. A brief description
of these products follows.
NETWORK MANAGER AND NETWORK MANAGER +. These two products are
functionally identical but are available in different physical configurations
to address varying market requirements.
The principle function of the Network Manager is to route calls from
their originating point to the desired carrier. This is accomplished by
analyzing the digits dialed by a caller and translating them to the necessary
digit patterns to be dialed on the public telephone network. The Network
Manager can route individual calls to the user's most cost-effective long
distance carrier based on the telephone number dialed.
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The Network Manager also provides cost-effective long distance calling
and toll restriction for all tone and rotary dial telephones. The Network
Manager screens calls and can block, a) calls without a proper authorization
code, b) all or certain local calls based on the number dialed, and c) all or
certain long distance calls based on the number dialed (including special
access phone numbers such as those beginning with 950 and 976).
The design of the Network Manager is modular and allows the customer
to purchase the exact number of lines required. This is often a competitive
advantage, both in very small and very large applications. The Network Manager
+ is a value engineered, four line product that addresses a specific high
volume application. It is designed for quick installation and simple
programming through automated tools provided by the Company.
The Network Manager and Network Manager + are used primarily in
businesses, schools, prisons and hospitals. The market for Network Managers
has been mature and stable.
AUTOMATED CALL PROCESSOR ("ACP") PRODUCTS. The ACP product family is
designed to automatically process calls that would normally require an
operator or would utilize the automated calling card functions provided by the
telephone company. Typical examples are calls charged to a telephone company
calling card or collect calls. In the industry, these calls are referred to as
0+ calls because they all start by dialing 0 plus the destination number.
ACP products process 0+ calls. When, for example, a caller dials 0+ a
destination number to make a call charged to a telephone company calling card,
the ACP intercepts the destination number before it is dialed onto the public
telephone network. The ACP then presents the industry standard "bong" tone,
and prompts the caller to enter the calling card number. Once completed, the
ACP dials a 1+, direct-distance-dialed call to the destination and connects the
caller. This 1+ call is placed over very low cost long distance facilities
that have been contracted for by the owner of the ACP.
The destination number and the calling card number are stored in the
ACP along with the duration of the call, and this transaction data is collected
automatically, via teleprocessing, by host software marketed by the Company.
The calls are priced at the permitted operator-assisted rates, sent to a
clearing house to be processed and ultimately are placed on the caller's home
telephone bill. Thus, by charging the permitted premium rates for these 0+
calls, but paying a lower charge to route the call via a low cost carrier, the
owner of the ACP realizes a profit on each call.
ACP PLUS. The first member of the ACP product family is ACP PLUS. It
provides the 0+ re-selling functions described previously.
ACP PLUS also provides a means of adhering to an industry regulation
which does not permit a re-seller to knowingly bill for an unanswered call.
Since the public telephone network does not provide any formal indication to
the caller that a call has been answered, a significant technical challenge is
presented to the ACP. The ACP PLUS uses sophisticated hardware and software to
"listen" for indications that a call has been answered.
ACP + ONE. For the reasons previously stated, a PABX in a hotel
cannot determine when a direct-distance-dialed call (i.e. 1+) from a guest room
is answered. This often leads to erroneous billing of unanswered calls, a
front desk argument, and an unhappy hotel guest. In addition, PABXs are often
configured to ignore calls of short duration, and such call records are
discarded as "probably not answered." This results in lost revenue for the
hotel which may be significant, even on local calls, since permitted per-call
surcharges are not collected.
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ACP + ONE provides a solution to these billing problems. It has all
of the features of ACP PLUS, but also detects when 1+ calls have been answered.
The record of these calls is corrected to show the proper duration and then
sent to the hotel's billing system. In this way, all answered calls may be
billed regardless of duration, and calls that were not answered will not be
billed.
REMOTE MAINTENANCE
Emphasis on service as a product (the maintenance and repair of
systems), caused a market for automated fault/alarms management systems to
emerge in the 1980's. The market is based on the need to monitor a population
of remotely located, computer based systems from a Technical Assistance Center
(TAC.) This capability is extremely important in the telecommunications
industry as well as in other service environments. To effectively address this
market, service providers need state of the art technology to manage and
maintain their equipment, and to project a proactive service image to their
customers.
Management of the Company believes that it has established a strong
competitive position in the Remote Maintenance market through sales of the
following products: Dispatcher, Site Event Buffer-II, and IRIS.
DISPATCHER. The Dispatcher is a microprocessor based monitoring system
that is co-located with the remote system to be monitored for faults. These
remote systems are often referred to as Network Elements.
Most Network Elements, such as PABXs or voice mail systems, generate
maintenance information as events occur; they may also be queried for this
information. The Dispatcher constantly evaluates the maintenance data stream
from the Network Element. Once a problem has been identified, the Dispatcher
automatically calls the Technical Assistance Center (TAC) responsible for
servicing the Network Elements and reports the specific location and the
associated problem. The Dispatcher also provides secure access to the Network
Element enabling the TAC to remotely perform scheduled or emergency maintenance
while hackers and other unauthorized users are blocked from access.
GTE, PacTel Meridian Systems, NYNEX Meridian Systems, Southwestern
Bell, and the Puerto Rican Telephone Company (PRTC) use the Dispatcher as part
of an integrated system to provide enhanced maintenance services to their
customer bases. As these customers demand more enhanced features, there will
be a gradual phase out of the Dispatcher product line, moving to the more
feature-rich SEB-II.
SITE EVEN BUFFER-II ("SEB-II"). Like the Dispatcher, the SEB-II
monitors remotely located Network Elements, but is a much more sophisticated
system.
The SEB-II may simultaneously monitor up to four Network Elements. In
addition to fault/alarm reporting and security functionality that exceeds that
of the Dispatcher, the SEB-II also has data storage and retrieval capabilities.
Its multi-port configuration allows the SEB-II to concurrently collect and
store various forms of data, such as Station Message Detail Records (SMDR),
Automatic Call Distribution (ACD) data, and PABX traffic information. By using
one of the Company's Management Information Systems (MIS), this data may be
retrieved and processed into useful reports.
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The SEB-II is a multi-application product whose architecture permits
its operational characteristics to be completely changed by remotely
downloading new software. Introduced in mid-1991, the SEB-II replaces the
original Site Event Buffer-I (SEB-I) with a product that offers increased
functionality, twice the data storage capacity, and support for additional
Network Elements.
In late 1993, development efforts were initiated which provided for
scripts, written in a high-level language, that may be used to create a
dialogue between the SEB-II and the Network Element. This dialogue will allow
the SEB-II to clear fault conditions present in the Network Element and to
perform more complex analysis of maintenance data. Included in these
development activities is the design of high speed internal modems required for
more demanding applications and for international markets. These developments
were completed in 1994.
BellSouth, GTE, PacTel Meridian Systems, NYNEX Meridian Systems, Bell
Atlantic Meridian Systems, British Columbia Telephone, Mitel, NEC, ROLM, and
Critical Services Management use SEBs and SEB-IIs as part of an integrated
system to provide enhanced maintenance services to their customer bases.
SEB jr.. Teltronics' latest entry in the Remote Maintenance
marketplace, SEB jr. was introduced to penetrate a new segment of the market.
SEB jr. is designed as an affordable remote monitor for smaller, less expensive
Network Elements, yet provide virtually all of the features of the SEB-II. SEB
jr. is positioned to allow service providers to offer complete end-to-end
monitoring of networks consisting of a wide variety of elements. With the
introduction of SEB jr., Teltronics Remote Maintenance product line now offers
one-stop capability of providing efficient, cost-effective monitoring to every
link in the chain of Network Elements, regardless of size or cost.
IRIS. The IRIS system is a UNIX-based software package that is used
by service providers in Technical Assistance Centers to monitor alarms and to
process data collected from the Network Elements.
In operation, Dispatchers and SEBs associated with remote Network
Elements report events to IRIS. These events may represent alarm conditions in
the Network Elements, or may simply be status information to indicate that
everything is working properly. Using IRIS, the service provider often
resolves problems before the customer is aware of them. IRIS is also used to
collect data stored in SEBs and direct the data to the proper software
application for processing. The software also provides the tools required to
manage remotely located SEBs and to access Network Elements for routine
maintenance.
The status of Network Element alarms is maintained in IRIS, and the
service provider may obtain reports on alarm status at any time. Comprehensive
reports that provide statistical analysis of received alarms are also
available. Service personnel use them to isolate faulty components, identify
trends, and track the historical performance of Network Elements.
IRIS is currently available on a personal computer platform for the
medium sized service provider, and on the IBM RS/6000 family of RISC-based
super-minicomputers for those customers with a large population of Network
Elements and associated Dispatchers or SEBs.
IRIS is used by BellSouth, GTE, PacTel Meridian Systems, NYNEX
Meridian Systems, Bell Atlantic Meridian Systems, British Columbia Telephone,
Mitel, NEC, ROLM, and Critical Services Management as the Management
Information System that is the heart of their service offerings.
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IRIS TRAFFIC. This optional IRIS software module is a traffic analysis
system that allows service providers to perform traffic studies on Northern
Telecom SL-1 and Meridian-1 PABX systems. The information created by this
application assists the service provider in "fine tuning" their customer's PABX
to operate at peak efficiency. The IRIS Traffic system has proven to be a very
effective revenue generator for service providers by allowing them to identify
PABX upgrades to sell to their customers and provide enhanced performance or
new features.
TELECOMMUNICATION MANAGEMENT
Telemanagement and Call Accounting are very competitive markets in
North America with over 150 companies battling for market share.
The Company negotiated a favorable distribution agreement with the
software developer (MDR Telemanagement Limited) for an OEM version of their
DOS/Windows product. The product is sold under the trade name of ORBi-TEL for
Windows. The Company has an agreement with Nortel to sell, install, and train
its customers on this product.
In 1994, the Company evaluated its product offering and discontinued
the CallQuest IV, call accounting product. In 1995, the Company sold its
rights for ORBi-TEL/UNIX to TSB International of Canada. The Company, however,
retained its rights to ORBi-TEL/CO, a central office based call accounting
system.
The products with which the Company competes in the Telemanagement and
Call Accounting markets are ORBi-TEL/DOS, ORBi-TEL/Windows, and ORBi-TEL/CO. A
brief description of these products follows.
ORBI-TEL/DOS AND ORBI-TEL/WINDOWS. ORBi-TEL/DOS and ORBi-TEL/Windows
are Telemanagement software packages that run on a personal computer under DOS
and Windows respectively. While functionally very similar, ORBi-TEL DOS and
ORBi-TEL Windows coexist because Windows, while popular, is not always the
customer's first choice for an operating system.
The ORBi-TEL family of products provides comprehensive Call Accounting
as well as several other Telemanagement modules: Inventory, Work Order, and
Directory Look-up. Both DOS and Windows versions support multiple PABX sites
by polling data from collection devices associated with remote PABXs.
ORBi-TEL/DOS and ORBi-TEL/Windows are targeted at users with PABXs
ranging in size from 100 stations to 10,000 stations and multiple sites are
supported. These products are marketed directly to end-users and through
distributors who sell and service PABXs and key systems.
ORBI-TEL/CO. A longstanding rivalry for the business telephone market
has existed between the operating telephone companies (Telcos) and interconnect
companies. In recent years, the Telcos have enhanced their central office based
offering (Centrex) to be very competitive in price and feature content with
PABX systems. Because the most requested value-added feature in the business
telephone market today is Call Accounting, the Telcos must be able to offer
PABX-like Call Accounting features to their Centrex customers. ORBi-TEL/CO
provides Telcos with a central office based platform for Call Accounting
services.
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ORBi-TEL/CO was derived from the standard ORBi-TEL/UNIX system, and
provides two different feature sets which may be selected on a per customer
basis. First, the system may be configured to deliver call detail records, or
SMDR, to the Centrex customer's location so that a Call Accounting system such
as ORBi-TEL/Windows may be used to further process the data. Alternatively,
the ORBi-TEL system may be configured to provide complete Call Accounting
processing and reporting to the Centrex customer. These reports are available
through teleprocessing or may be provided by the Telco on a service bureau
basis.
CONTRACT MANUFACTURING
The size of the Contract Manufacturing market is currently in excess
of $19 billion annually worldwide, and has been growing at approximately 20%
per year.
The Company's initial efforts to gain a foothold in the Contract
Manufacturing market were modest and limited to a few select customers.
Encouraged by acceptable profits and high quality results on smaller projects,
and in the belief that a relevant share of the market could be captured, the
Company entered the Contract Manufacturing market more aggressively in
mid-1993. The Company's revenues during 1994 were over $2.1 million, as
compared to $308,000 in 1993. During 1995 the Company's Contract Manufacturing
revenues increased by 42.8% from $2.1 million to $3 million.
The Company's current manufacturing capacity should allow for
considerable growth of existing product lines, and should also accommodate a
doubling of Contract Manufacturing activities. Contract Manufacturing should
enable the Company to profit from economies of scale through increased
purchasing power and utilization of excess plant capacity, thus reducing direct
material costs and overhead on the Company's baseline products. This should
make those products more profitable and competitive in their respective
markets.
PATENTS, COPYRIGHTS AND TRADEMARKS
The Company has no patents or copyright registrations. The following
trademarks have been registered: Site Event Buffer, SuperVizor, CallQuest,
IRIS, Dispatcher, Net-Path, and SEB InterAct. A trademark application for
ORBi-TEL has been filed. The Company also seeks to protect its confidential
and proprietary information through the enforcement of confidentiality
agreements presently being executed by key employees.
WARRANTY AND SERVICE
The Company provides a limited warranty on its products, for a period
of from 3 to 36 months (depending on the product), under which the Company
agrees to repair or replace, in the Company's sole discretion, units defective
in material or workmanship, provided the equipment has not been subjected to
alteration or abuse. The Company's technical service and engineering staff
provide support services over the telephone to customers with installation or
operational questions. Warranty and other repair services are provided by the
Company at its facility in Sarasota, Florida. To date, warranty expenses have
been insignificant in proportion to the Company's gross revenues.
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COMPONENT PROCUREMENT
The Company assembles all of its products at its facility in Sarasota,
Florida. All components used in the assembly of the Company's products are
purchased from distributors and component manufacturers.
Purchase orders for components are placed from one (1) month to six
(6) months in advance, depending on the supply sensitivity of a particular
component. All of the necessary components are available from one of several
sources, based upon current price quotations. The Company believes that
several suppliers for its product components are available. If these suppliers
should stop carrying our manufacturing components for the Company, the
Company's operations could, however, be adversely affected until alternative
sources are located and increased operating costs could result from product
re-engineering required to use such substitute components. Certain electronic
components used in the Company's products are purchased through American
distributors from sources outside of the United States. The costs of such
components increase as the value of the United States dollar decreases in
relation to foreign currencies. In addition, the availability of such
components may be affected by factors external to the United States, including
war, civil strife, embargo and export or import restrictions. Although there
can be no assurance, the Company has not experienced and does not anticipate
experiencing any significant difficulty in obtaining components.
BACKLOG
The Company's backlog at December 31, 1995 and 1994 was $3,766,800 and
$10,478,000 respectively. At February 29, 1996 and February 28, 1995 the
Company's backlog was $4,887,700 and $8,379,300 respectively.
COMPETITION
The Company has one significant competitor in its Long Distance
Management product group (Mitel). The Company has two significant competitors
in the Alarm Management marketplace, Microframe, Inc. and TSB International.
The Call Accounting Market is saturated with numerous competitors and no one
company dominates the market. While there is no dominant competitor in the
Company's Remote Maintenance market, one of the Company's customers, NCS, a
subsidiary of Northern Telecom, is consolidating its eastern and western
operations. One of the Company's Remote Maintenance market competitors,
Microframe, sells some Remote Maintenance products to NCS's western operation.
NCS has not yet announced which product will be utilized as standard for the
consolidated operations. Management of the Company believes that the Company's
products are competitive in price, product performance, warranty, technology
and service. The Company continues to spend significant funds to enhance
already technologically complex equipment and develop or acquire new products,
including new technology and/or products for its Call Accounting product group,
as well as development of application software for its products in the Remote
Maintenance Markets.
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RESEARCH AND PRODUCT DEVELOPMENT
The Company maintains a continuing research and development program
directed toward enhancement of its existing product lines and development of
new products. The Company's research and development expenditures during the
fiscal years ended December 31, 1995, and 1994 were $1,449,000 and $2,158,000
(after capitalization of software development costs), respectively. The amount
of software development costs capitalized in fiscal 1995 and 1994 was $-0- and
$776,232 respectively.
Due to the shorter development cycles and speed at which products
become technology stale, for both hardware and software, the Company believes
that a more conservative approach to software capitalization should be taken.
To this end, it decided to write-down the net realizable value of capitalized
software during 1994 by $1.2 million. (See Page F-11, Note 2.)
REGULATION
Part 68 of the Federal Communications Commission ("FCC") Rules ("Part
68") contains the majority of the technical requirements with which telephone
systems must comply to qualify for FCC registration for interconnection to the
public telephone network. Part 68 registration represents a determination by
the FCC that telecommunication equipment interfacing with the public telephone
network complies with certain interference parameters and other technical
specifications. FCC registration for the Company's products has been granted
and the Company intends to apply for FCC registration for all of its new
products.
Certain of the Company's products are also subject to and comply with
regulation under Part 15 of the FCC Rules ("Part 15") which requires equipment
classified as containing a Class A computing device to meet certain radio and
television signal interference requirement. Notwithstanding this minimum
compliance, however, Part 15 provides that operators of equipment containing
Class A computing devices may be required to take whatever steps are necessary
to correct radio and television interference caused by operation of such
equipment in a residential area.
ITEM 2. PROPERTIES
TELTRONICS - HEADQUARTERS AND PLANT
The Company's main facility consists of approximately 72,000 square
feet, located in a two story concrete and steel building leased from ARE
Sarasota Limited Partnership ("ARE"), a limited partnership ("ARE Lease").
Approximately 36,000 square feet are used for laboratories and offices. The
plant is located at 2150 Whitfield Industrial Way, Sarasota, Florida.
The monthly ARE Lease payment is $45,555. The ARE Lease expires in
August 2005, and may be extended by the Company for two additional five year
periods .
The Company also leases from ARE approximately 7,500 square feet of
warehouse space at 2240 Whitfield Industrial Way, Sarasota, Florida. This
space is sub-leased to a non-affiliated company at $1,225 per month. The
monthly lease payment and terms are included as a part of the ARE Lease.
12
<PAGE> 13
The Company formerly maintained an office facility consisting of 8,500
square feet located at 13830 58th Street N., Suite 404, Clearwater, Florida
34620.
The monthly ICOT lease payment was $8,500 and increased to $9,270 on
May 1, 1995. The ICOT lease expires on June 30, 1996. These premises have
been sublet to Florida Software Systems, Inc., a company owned by a director
and principal shareholder of the Company under a month to month sublease.
ITEM 3. LEGAL PROCEEDINGS
On or about September 12, 1995, Commstar, Ltd., a Canadian
corporation, commenced an action in the Circuit Court of the Thirteenth
Judicial District, Hillsborough County, Florida, against the Company, a
director of the Company, and ComCentral, seeking damages in connection with a
sale of shares of ComCentral in 1993. The complaint seeks rescission, damages
in excess of $15,000, as well as costs and attorneys fees. The Company and its
director moved to dismiss the complaint on numerous grounds, which was granted
on February 9, 1996 without prejudice. If the complaint is refiled the Company
believes that it has meritorious defenses to the allegations and will
vigorously defend any refiled complaint.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the annual meeting of shareholders on August 8, 1995, the
shareholders of the Company:
(1) Elected Norman R. Dobiesz, Ewen R. Cameron and Carl S. Levine
directors to serve until the next annual meeting of shareholders;
(2) Ratified the appointment of Millward & Company as the
Company's independent auditors for the 1995 fiscal year; and
(3) Ratified the adoption of the Company's 1995 Incentive Stock
Option Plan.
13
<PAGE> 14
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCK HOLDER MATTERS
As of August 1, 1989, the Company listed its Common Stock for trading
on the National Association of Securities Dealers, Inc. Automated Quotation
System ("Nasdaq"). The Company's common stock trades on The Nasdaq Small Cap
Market(SM) tier of The Nasdaq Stock Market(SM) under the symbol: TELT. The
following table sets forth for the fiscal periods indicated the high and low
closing bid quotations in the over-the-counter market for the Company's common
stock as reported on Nasdaq. These quotations represent inter-dealer prices,
without adjustment for retail markups, markdowns or commissions, and may not
represent actual transactions.
COMMON STOCK
------------
<TABLE>
<CAPTION>
1995 1994
Closing Bid Closing Bid
High Low High Low
---- --- ---- ---
<S> <C> <C> <C> <C>
PERIOD
------
1st Quarter 4.19 3.06 1.00 (1) .44 (1)
2nd Quarter 3.56 1.50 24.25 .34 (1)
3rd Quarter 6.25 2.06 8.88 2 .75
4th Quarter 6.00 4.50 6.44 3 .16
</TABLE>
On June 13, 1994, the Company effected a 1 for 25 reverse stock split,
reducing the number of issued and outstanding shares from 14,344,000 to 573,760
on such date.
On March 15, 1996, the closing bid quotation for the Company's common
stock as reported on Nasdaq was $5.00. As of March 15, 1996, there were
approximately 1,276 shareholders of the Company's common stock. The Company
has not paid cash dividends to holders of its common stock and does not plan to
pay such dividends in the foreseeable future.
- ---------------------
(1) Does not reflect the Company's 1:25 reverse stock split effected in June,
1994.
ITEM 6 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL OVERVIEW
During 1993 the Company replaced virtually all senior management and
consolidated the business of TC Telemanagement, Inc. within the Company, moving
all of its personnel from a separate location into the main facility in
Sarasota. This resulted in economies in sales and marketing, and development.
Having analyzed the business of ComCentral which was a public operator service
provider, the management did not believe it fit into its longer term strategy
for the Company. The Company therefore decided to divest itself of its
majority ownership of
14
<PAGE> 15
ComCentral. The Company has written down its remaining investment in
ComCentral to zero. (See Page F-12, Note 2.) ComCentral became inactive and
its stock stopped trading on June 22, 1995.
1994 saw the first full operational year under the new management
team. The Company was refocused under one sales and marketing team selling
into four distinct markets. The Long Distance Management, Remote Maintenance,
Call Accounting and Telemanagement, and the Contract Manufacturing market. The
Company focused its sales team on major resellers of its equipment, for
example, the Regional Bell Operating Companies ("RBOC"). The Company
introduced new products into those organizations, for example, the ORBi-TEL
Call Accounting product. The RBOCs traditionally take a substantial time
evaluating products before they officially roll them out to their customers.
This can typically be up to twelve to eighteen months.
During 1994 the Company's line of credit with Barnett of some $2
million was called for repayment. As of the middle of 1994 this was severely
hampering the growth of the Company. The Company replaced Barnett with The CIT
Group/Credit Finance ("CIT") and also managed to negotiate a higher line of
credit of $3.5 million, at the end of October 1994, which has allowed the
Company to fund its expansion through growth in sales.
In 1995 the revenue of the Company increased from $14.8 million to
$21.6 million, an increase of 46%. Cost of goods sold in 1995 were $13.2
million or 61% of sales as compared to $8.7 million or 58.7% of sales in 1994.
The Company experienced increases in all of its markets with the
exception of Telemanagement, which decreased from $2.8 million to $1.2 million.
The primary reason for the decrease in sales in Telemanagement was the ever
increasing marketing pressure on the ORBi-TEL Unix products. This product was
originally developed in 1984 and has been extensively modified over the years,
however, the newer graphical user interfaces and additional new products that
have come to market, have made it increasingly difficult to obtain sales.
Furthermore, the ongoing cost of supporting this product was extremely high.
ORBi-TEL Unix was in fact a licensed product from TSB International with
minimum sales requirements that were not going to be met during 1995. The
Company therefore decided to sell the product range back to TSB for $165,000.
(See Page F-11, Note 2.) TSB also agreed to take on all of the maintenance and
support of the installed base, therefore reducing the ongoing costs to the
Company. The Telemanagement products now consist of ORBi-TEL for Windows and
ORBi-TEL Central Office. The ORBi-TEL for Windows product is a modern, windows
driven graphical product, which fits better in the marketplace. The cost of
supporting this product is less and it is easier for the user to utilize. NCS,
a wholly-owned subsidiary of Northern Telecom agreed that the Company and NCS
would promote the ORBi-TEL for Windows products to its customers. The Company
currently provides marketing, sales, installation, and training to NCS's
customers for its ORBi-TEL for Windows product. ORBi-TEL for Windows is also
distributed by Ericsson, Fujitsu and Southwestern Bell.
The Company's Remote Maintenance market increased from $4.5 million to
$5.9 million, resulting predominantly from sales to the Company's major
customers of NCS, GTE, Wisconsin Wireless and a number of the RBOCs. The
Company currently enjoys a strong position in this marketplace. NCS is
consolidating its east and west operations. One of our competitors,
Microframe, sells some products to the western operation. The decision of
which product to standardize on, has not been announced by NCS.
15
<PAGE> 16
Contract Manufacturing grew from $2.1 million to $3 million. The
Company had entered contract manufacturing as a business in 1994 and has
continued to see increased sales. The Company had extensive "through-hole"
capability which is utilized primarily for the Company's own products and some
Contract customers. However, this technology, due to its physical size is
beginning to move away and being replaced by what is termed "surface mount".
All modern computers and modern electronics now utilize surface mount
technology which are much smaller physical packages and provides the ability to
put components on both sides of the boards. To that end, the Company acquired
two Amistar Surface Mount machines with rating of over 12,000 placements per
hour. The Company is already running both these machines, two shifts, and is
looking at investing in a third machine to supplement this capability. The
Company continues to find business in the niche market of $1 to $5 million per
annum with acceptable margins. Typically the margins on contract manufacturing
are better than our Long Distance Management product, but less than Remote
Maintenance and Telemanagement.
The largest growth was experienced in the Long Distance Management
arena, growing from $4.9 million to $10.4 million. This increase was a direct
result of AT&T's aggressive entry into the intralata business in California.
Telsource, the main distributor for the Company during 1995 successfully
installed over 60,000 dialers. However, this intralata business is beginning
to disappear due to technology for equal access. Therefore the Company does
not anticipate the same type of revenue coming from the long distance
marketplace for 1996. The Company intends to replace this revenue stream with
contract manufacturing at better margins.
In October 1995, the Company formed AT Supply, Inc. ("AT Supply"), in
which the Company's wholly-owned subsidiary TTG owns an 80% controlling
interest. AT Supply is engaged in sales and distribution of
telecommunications hardware, software and related products as Advantage Telcom
Supply Company.
RESULTS OF OPERATIONS
Operating income increased to $766,990 in 1995 from an operating loss
of $(2,847,775) in 1994. The write-off of non-recurring charges during 1994
was the primary reason for the loss.
Cost of sales increased to $13.2 million for 1995 on sales of $21.6
million as compared to costs of $8.7 million on sales of $14.8 million during
1994. The cost of sales for 1995 was 61.1% of sales as compared to costs of
58.7% during 1994 primarily as a result of changes in product mix.
General and administrative expenses for 1995 were $2.9 million as
compared to $3.4 million during 1994 a reduction of 14.7% 1994 administrative
expense included non-recurring charges of approximately $305,000, consisting of
a $214,800 adjustment to a capitalized license agreement and an increase of
$90,000 to bad debt reserve.
Selling expense decreased to $3.3 million or 15.3% of sales in 1995,
as compared to $3.4 million or 23.3% of sales in 1994. Selling expenses were
charged with a non-recurring amount of $151,000 in 1994.
R&D expense decreased 36.4% to $1.4 million in 1995 compared to $2.2
million in 1994. In 1994 the Company wrote down the net realizable value of
its capitalized software by $1.2 million.
16
<PAGE> 17
Other income (expense) of $(506,000) for 1995 was primarily comprised
of $(382,000) in interest charges related to the Company's line of credit,
$(287,000) for financing costs and $165,000 income item related to the sale of
software rights. See FINANCIAL STATEMENTS - Page F-11, Note 2.
Other Income (Expense) of $(4.5) million for 1994 was comprised of
$(278,000) in interest charges primarily related to the Company's line of
credit, $(421,000) for financing costs which was non-recurring, $(898,000) loss
on ComCentral transactions (including $652,000 of unrealized losses on
securities) which was non-recurring, $(804,000) as a result of cancelling
consulting agreements which was also non-recurring and $(2,058,000) related to
the cost of a conversion right which was non-recurring. See FINANCIAL
STATEMENTS - Page F-18, Note 11(a) - Common Stock.
1995 reflected a net income of $222,879 compared to a net loss in 1994
of $(6,783,433) which included non-recurring charges of $6,832,800.
1994 NON-RECURRING CHARGES
--------------------------
<TABLE>
<S> <C>
Cost of Sales Adjustments $ 996,000
Increased Bad Debt Reserve 90,000
Adjustment to Capitalized License Agreement 214,800
Write-down of Net Realizable Value of Capitalized Software 1,200,000
Financing Expenses 421,000
Loss on ComCentral Transactions 898,000
Cost of Conversion Right 2,058,000
Increased Consulting Costs 151,000
Settlement of Consulting Agreements 804,000
----------
$6,832,800
==========
</TABLE>
CAPITAL RESOURCES AND LIQUIDITY
1995 cash requirements were met with cash generated from operations
supplemented by borrowings from CIT under its credit facility. On October 28,
1994 CIT replaced the Barnett Bank of Manatee County, N.A. facility with a new
increased facility of up to $3.5 million. $296,700 of this was a term loan
secured by fixed assets at an interest rate of prime plus 3% 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% and continues in full force for a term of three years and is
renewable for successive terms of two years thereafter.
Net cash provided by (used in) operations was $822,897 in 1995
compared to $102,308 in 1994. Investing activities, which included fixed asset
acquisitions used $(279,289) in cash compared to using $(805,891) in 1994.
Cash used in financing activities during 1995 was the result of payments on
long term debt.
During 1994 the various note holders with whom the Company had
privately placed the convertible promissory notes were partially repaid and the
balance outstanding was converted into restricted shares of the Company's
common stock. $217,302 was converted and $132,698 was repaid.
17
<PAGE> 18
The Company's working capital ratio at December 31, 1995 was 1.15:1 as
compared to 1.10:1 for 1994. Net working capital was $887,000 and $472,000 for
1995 and 1994 respectively.
During 1994 the Company augmented its cash flow through bridge lenders
and private placements, however, with the increased sales and the associated
cash flow the Company satisfied its cash requirements with the CIT facility
during 1995.
The Company continues to investigate other equity or debt financing.
CURRENT OUTLOOK
During 1995 the Company continued to focus on its core businesses and
customers as well as explore new opportunities such as AT Supply, a subsidiary
formed in 1995. This has resulted in good growth of its core businesses and
some new business. The Company recorded a loss of $(128,000) for AT Supply at
December 31, 1995, primarily associated with its start-up. AT Supply was
profitable through February, 1996.
The highest growth business during 1995 was in the Long Distance
Management market, particularity through AT&T. However, it is unlikely that
this business will continue to grow for 1996. The Company has orders for some
$2 million of LDM for 1996, and does not anticipate substantial additional
orders. The Company continues to sell into the Australia/Asia market, through
Telematic, its distributor in Australia.
Although a large number of sales for 1995 came from LDM, this product
line is a very low margin product. The Company therefore intends to increase
Contract Manufacturing for 1996 to replace the revenue line from LDM. Although
Contract Manufacturing is also a lower margin business, it is anticipated in
the niche market that the Company is active in, the $1 to $5 million per annum
runs, that acceptable margins can be realized.
The Company continues to see growth in its Remote Maintenance business
and anticipates an upswing in its Telemanagement business for 1996. The
Company is currently looking for suitable distributors in the European
marketplace to promote its Remote Maintenance business.
In March 1996, the Company signed a Memorandum of Agreement relating
to the possible transfer to the Company of the technology for a small,
self-contained, voice activated, portable pentium(R) processor multi-media
computer. This technology has potential in a number of different businesses.
See BUSINESS - GENERAL.
In summary, the Company has established a profitable business during
1995 and will continue to look at new opportunities to increase its product
lines to its Fortune 500 customers as well as investigate opportunities
overseas for its current product lines.
18
<PAGE> 19
ITEM 7. FINANCIAL STATEMENTS
INDEX TO FINANCIAL STATEMENTS
FINANCIAL STATEMENTS:
Page
<TABLE>
<S> <C>
Independent Auditor's Report F-2
Consolidated Balance Sheet - December 31, 1995 F-3/4
Consolidated Statements of Operations for
Years Ended December 31, 1995 and 1994 F-5
Consolidated Statements of Shareholders' Equity for the
Years Ended December 31, 1995 and 1994 F-6
Consolidated Statements of Cash Flows for the
Years Ended December 31, 1995 and 1994 F-7/8
Notes to Consolidated Financial Statements F-9/27
</TABLE>
Financial statement schedules not included in this Annual
Report on Form 10-KSB have been omitted, because they are not applicable or the
required information is shown in the financial statements or notes thereto.
ITEM 8. CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS IN ACCOUNTING AND FINANCIAL
DISCLOSURE
No disagreements with accountants in any accounting and financial
disclosures occurred during the fiscal years ended December 31, 1994 and
December 31, 1995. While there was no change in accountants during the fiscal
year ended December 31, 1994, there were changes in accountants for the Company
during the 1995 fiscal year as previously disclosed and more fully described in
the Form 8-K reports respectively filed with the Securities and Exchange
Commission on January 4, 1995 and March 2, 1995.
19
<PAGE> 20
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the names, ages and positions of all
directors and executive officers of the Company.
<TABLE>
<CAPTION>
NAME (1) AGE POSITION
- ---- --- --------
<S> <C> <C>
Ewen R. Cameron 43 Director, President and
Chief Executive Officer
Paul D. Shrader 48 Vice President Finance,
Secretary & Treasurer
Gregory L. Deringer 42 Senior Vice President
Sales and Marketing
Peter G. Tuckerman 49 Vice President Remote Maintenance
Business Unit
Charles S. Englehardt 39 Vice President ComManagement
Business Unit
Robert B. Ramey 38 Vice President
Manufacturing Operations
Norman R. Dobiesz 48 Director and Vice President
Mergers and Acquisitions
Carl S. Levine 49 Director
- --------------------
</TABLE>
(1) Pierre P. Forestier served as Vice President Technical Services until
November 9, 1995.
The Company's Directors will serve until the annual meeting of
stockholders or until their successors are elected and qualified.
EWEN R. CAMERON has served as President and Chief Executive Officer
since July 1993 and a Director since June 1994. Prior to that, Mr. Cameron
served as Managing Director of SRH plc, a European telecommunications and
computer maintenance company from 1989 to 1992. From January 1978 to December
1989 Mr. Cameron served as Managing Director of Systems Reliability Europe
SA/NV, a wholly owned subsidiary of SRH plc based in Brussels, Belgium. Mr.
Cameron has spent the last 23 years in the computer and telecommunications
industry.
20
<PAGE> 21
PAUL D. SHRADER, Vice President of Finance, Secretary and Treasurer
joined the Company in June 1993 as Accounting Manager. Prior to this, Mr.
Shrader was with Mote Marine Laboratory, Inc., a Marine research laboratory,
from 1989 as Business Manager and Director of Administration. He was
Controller for TrailMate, Inc. from 1984 to 1989. Prior to this, Mr. Shrader
held Controller positions with other local firms including the Ophthalmic Group
of Milton Roy Company for seven years. Mr. Shrader earned his B.S. degree with
a major in Accounting in 1970 from Concord College, Athens, West Virginia.
GREGORY L. DERINGER joined the Company in March 1993, as Vice
President, Sales. Prior to this, Mr. Deringer was with Boole & Babbage Network
Systems, a software development and sales company, from May 1991 to March 1993
as Vice President, Sales; he was Vice President of Sales and Marketing with
Westinghouse Communications Software, Inc., a communications software
development and sales company, from March 1990 to April 1991; served in the
positions of Director/Systems Integration and Regional Sales Manager from
January 1988 to February 1990; and had various Area to National Sales functions
with Teltone Corporation from June 1981 to December 1987. Mr. Deringer earned
his BS in 1978 from the University of Wisconsin.
PETER G. TUCKERMAN became Vice President, Remote Maintenance Business
Unit in July of 1995. Prior to serving as Vice President, Remote Maintenance
Business Unit, Mr. Tuckerman served as Vice President Business Development for
the Company commencing in January 1994 and as Vice President of Product
Management from March 1993. Mr. Tuckerman has also served Vice President of
Engineering from March 1991 to March 1992 and as Vice President of Product
Management for TCT from August 1990 to March 1991. Prior to this, Mr.
Tuckerman has held various management positions at Com Dev including Vice
President of Product Development (1986-1990), Director of Product Management
(1982-1986) and Product Manager (1978-1985).
CHARLES S. ENGLEHARDT joined the Company in February 1996 as Vice
President, ComManagement Business Unit. Prior to this Mr. Englehardt spent 7
years at AT&T Paradyne, the data communications business unit of AT&T. He
served as Product Line Manager for hardware and software products serving
consumer and corporate markets worldwide and held management positions in
Business Planning and Finance. Prior to this Mr. Englehardt spent 8 years as a
management consultant for Andersen Consulting. Mr. Englehardt has been in the
computer and data communications industry for over 15 years. Mr. Englehardt
earned his B.S. from the Pennsylvania State University and his MBA from the
University of Pittsburgh.
ROBERT B. RAMEY joined the Company as Vice President, Manufacturing
Operations in January 1995. Prior to joining the Company Mr. Ramey served
twelve years with Loral Data Systems, a Defense and Commercial electronic
equipment manufacturer. Mr. Ramey has held diverse management positions
including, Manufacturing Engineering, Industrial Engineering, Program
Management, Telecommunications Production, Surface Mount Assembly and Total
Quality Management. Mr. Ramey has been in the electronics industry over 15
years.
NORMAN R. DOBIESZ has served as a Director of the Company since
October 25, 1991. On November 28, 1994, Mr. Dobiesz was appointed Vice
President, Mergers and Acquisitions. Effective January 1, 1995 Mr. Dobiesz
entered into a five (5) year employment agreement with the Company. Mr.
Dobiesz has developed substantial financial and general management experience
as a principal stockholder and executive of a group of privately held companies
controlled by Mr. Dobiesz including W&D Consultants, Inc. which acquired
1,400,000 shares of the common stock of the Company on May 11, 1995. See
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. Mr. Dobiesz also owns and
operates Florida Software Systems,
21
<PAGE> 22
Inc., a software development and medical billing company. Mr. Dobiesz is a
principal shareholder of the Company.
CARL S. LEVINE has served as a Director of the Company since July 27,
1988. Mr. Levine is an attorney who has been engaged in private practice in
New York, New York from 1977 to 1981, and in Garden City, New York from 1981 to
June 1985. Mr.. Levine is presently the senior partner in the law firm of Carl
S. Levine & Associates, Roslyn, New York. He specializes primarily in the
practice of energy, environmental and tax law. Prior to entering private
practice, Mr. Levine was employed as counsel for New York Regional Office of
the United States Department of Energy.
ITEM 10. EXECUTIVE COMPENSATION
The following table sets forth certain information relating to the
compensation received and to be received by certain persons who are presently,
or were executive officers of the Company during the fiscal year ended December
31, 1995. As indicated below, no executive officers of the Company other than
Ewen Cameron, Gregory L. Deringer, and Norman R. Dobiesz, received total salary
and bonus in excess of $100,000 during the fiscal year ended December 31, 1995.
SUMMARY COMPENSATION
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
---------------------------- ---------------------------------
Awards Payouts
-------------------- ---------
Other Securities All
Annual Restricted Underlying Other
Name and Compen- Stock Options/ LTIP Compen-
Principal Position Year Salary Bonus sation Awards SARs(#) Payouts sation
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Ewen R. Cameron 1995 $226,551 $ --- --- --- 30,000 --- ---
President & CEO 1994 178,340 37,530 (1) --- --- --- ---
1993 168,940 --- --- --- --- --- ---
Gregory L. Deringer 1995 $161,271 $ --- --- --- 20,000 --- ---
Senior Vice President 1994 143,000 --- (1) --- --- --- ---
Sales & Marketing 1993 80,000 --- --- --- --- --- ---
Norman R. Dobiesz (2) 1995 $232,674 $ --- --- --- 30,000 --- ---
Vice President 1994 160,299 --- (1) --- --- --- ---
Mergers & Acquisitions 1993 --- --- --- --- --- --- ---
- -----------------------------
</TABLE>
(1) Certain personal benefits that aggregate less than the lesser of
$50,000 or ten percent (10%) of the total cash compensation of any of the
executive officers or which cannot be readily ascertained are not included.
(2) Mr. Dobiesz was appointed Vice President Mergers and Acquisitions of
the Company on November 28, 1994.
22
<PAGE> 23
EMPLOYMENT AGREEMENTS
The Company entered into five (5) year employment agreements with Ewen
Cameron, President and CEO, and Norman R. Dobiesz, Vice President Mergers and
Acquisitions commencing January 1, 1995. Mr. Cameron's agreement was an
amendment and restatement of a prior agreement which he entered into with the
Company in July 1993. Each employment agreement provides for a base annual
salary of $225,000 subject to annual increases of $25,000 per year. Either of
the Company or the employee may terminate the employment agreements upon the
occurrence of certain events. Mr. Cameron's employment agreement contains a
covenant restricting him from competing for a period of two years after
termination. If the Company terminates the employment of Mr. Cameron or Mr.
Dobiesz, the terminated employee will be entitled to severance equal to one
years base salary.
1995 INCENTIVE STOCK OPTION PLAN
The Company has adopted an Incentive Stock Option Plan ("Plan") to
enhance the Company's ability to retain the services of outstanding personnel
and encourage such employees to have a greater financial investment in the
Company. The Plan authorizes the Board of Directors to grant incentive stock
options under the Internal Revenue Code of 1986, as amended, to key employees
of the Company or its subsidiaries. At the date of this Form 10-KSB there are
approximately 15 employees eligible to participate in the Plan. The Plan is
administered by the Board of Directors which has full power and authority to
designate Participants, to determine the terms and provisions of respective
option agreements (which need not be identical) and to interpret the provisions
of the Plan. The Plan became effective May 16, 1995 and will terminate August
8, 2005 unless earlier terminated by the Board of Directors or extended by the
Board with approval of the stockholders.
An aggregate of 250,000 shares of the Company's Common Stock may be
issued or transferred to grantees under the Plan. If there is a stock split,
stock dividend or other relevant change affecting the Company's shares,
appropriate adjustments will be made in the number of shares that may be issued
or transferred in the future and in the number of shares and price in all
outstanding grants made before such event. The option price shall not be less
than the fair market value of the Company's Common Stock on the date of grant,
unless the grantee is the holder of more than 10% of the voting power of all
classes of stock of the Company, in which case the option price shall not be
less than 110% of the fair market value of the stock on the date of grant.
Options may be exercised solely by the Participant or his or her legal
representative during his or her employment with the Company, or any
subsidiary, or after his or her death by the person or persons entitled thereto
under his or her will or the laws of descent and distribution. In the event of
termination of employment for any reason other than death, permanent disability
as determined by the Board, or retirement with the consent of the Company,
Options may not be exercised by the Participant or his or her legal
representative and shall lapse effective upon the earlier to occur of (i)
notice of employment termination or (ii) last day of employment with the
Company or any Subsidiary.
Effective May 16, 1995, the Company granted options to employees to
purchase an aggregate of 210,000 shares pursuant to the Company's 1995
Incentive Stock Option Plan. Options to purchase 160,000 shares were granted
to executive officers and options to purchase 50,000 shares were granted to
non-executive officer employees. On May 16, 1995 the fair
23
<PAGE> 24
market value of the Company's common stock, and thus the exercise price for the
options granted (other than options granted to holders of more than 10% of the
voting power of the Company's common stock), was $1.625.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
Number of % of Total
securities Options/SARs
Underlying Granted to Exercise
Options/SARs Employees or Base
Name Granted (#) (1) in Fiscal Year (1) Price ($/Sh) Expiration Date
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Ewen R. Cameron 30,000 14.28% $1.625 June 1, 2000
Gregory L. Deringer 20,000 9.52% $1.625 June 1, 2000
Norman R. Dobiesz 30,000 14.28% $1.785 June 1, 2000
- --------------------------------------
</TABLE>
(1) Represents options only. No SARs have been granted.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs at Options/SARs
FY-Ended(#) at FY-End($)
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise(#) Realized ($) Unexercisable (1) Unexercisable (1)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Ewen R. Cameron 0 0 30,000 $86,250
Gregory L. Deringer 0 0 20,000 $57,500
Norman R. Dobiesz 0 0 30,000 $81,450
- -----------------------------------
</TABLE>
(1) None of these options are exercisable prior to June 1, 1996.
DIRECTOR COMPENSATION
The Company does not compensate members of its Board of Directors for
attending Board Meetings or participating on committees of the Board of
Directors.
24
<PAGE> 25
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information with respect to the
beneficial ownership of all of the Company's outstanding Common Stock by each
person owning five percent (5%) or more of such shares, by each director, by
each executive officer listed in Item 10 of this Report on Form 10-KSB, and by
all directors and officers as a group as of March 15, 1996. Unless otherwise
indicated, it is assumed that all shares are directly owned and that the
holders thereof have sole voting and investment power with respect thereto.
<TABLE>
<CAPTION>
NAME OF BENEFICIAL OWNER AMOUNT AND NATURE OF PERCENTAGE
AND ADDRESS BENEFICIAL OWNERSHIP (1) OF CLASS (1)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Norman R. Dobiesz (2) (3) (4) 1,507,967 57.8%
2150 Whitfield Industrial Way
Sarasota, Florida 34243
Carl S. Levine (2) 2,240 (5)
1800 Northern Blvd.
Roslyn, New York 11576
Ewen Cameron (2) (4) 3,360 (5)
2150 Whitfield Industrial Way
Sarasota, Florida 34243
Gregory L. Deringer (4) 211 (5)
2150 Whitfield Industrial Way
Sarasota, Florida 34243
All Directors and Officers 1,514,004 58.0%
as a Group (8 persons)
- --------------------------------
</TABLE>
(1) Does not include (i) 51,114 shares of common stock which may be issued
in connection with the future exercise of warrants included in the 51,114 units
("Units"), which the Company issued in April, 1995 to certain former holders of
the Company's 8.0% Convertible Promissory Notes due October 31, 1994, each Unit
consisting of 2 shares of common stock and one warrant to purchase one share of
common stock; (ii) an aggregate of 210,000 shares of common stock which may be
issued upon exercise of incentive stock options granted under the Company's
1995 Incentive Stock Option Plan; or (iii) possible issuance of up to 1,000,000
shares of common stock in connection with the possible transfer to the Company
of certain technology. See BUSINESS - GENERAL.
(2) Director of the Company.
(3) Includes 28,000 shares owned by virtue of 50% ownership of H & N
Management Co., Inc. ("H&N"), 1,400,000 shares acquired on May 11, 1995 by W&D
Consultants, Inc., a corporation of which Mr. Dobiesz is a 100% stockholder and
3,325 shares owned by virtue of 33% ownership of Whitfield Capital of Sarasota,
Inc.
(4) Executive Officer of the Company named in Item 10 of this Report on
Form 10-KSB.
(5) Beneficially owns less than 1% of the Company's outstanding common
stock.
25
<PAGE> 26
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In November 1993, Ewen Cameron, the Company's President and CEO,
loaned the Company an aggregate of $113,228 pursuant to two promissory notes.
Each note is payable upon demand with interest accruing at 8% per annum. The
entire principal balance and all accrued interest on the two (2) notes was
outstanding at February 29, 1996.
In July 1994 the Company sublet the ICOT office space under a month to
month sublease to Florida Software Systems, Inc., a company owned by Norman R.
Dobiesz, a director and principal shareholder of the Company. See PROPERTIES.
In October 1994, the Company refinanced its line of credit with a
$3,500,000 line of credit with CIT. As part of the financing, $350,000
principal amount of the Company's convertible promissory notes due February 1,
1994 were cancelled by payment of $132,698.91 and issuance of 77,780 (post
split) restricted shares of the Company's common stock subject to the Company's
right to reacquire the shares under certain conditions. In addition on May 23,
1995 these note holders were issued approximately 65,497 additional (post
split) shares under the terms of a Conversion Agreement dated October 25, 1994.
The note holders returned 8,000 (post split) shares formerly securing these
notes which have been returned to the Company's Transfer Agent for
cancellation. W&D Consultants, Inc. ("W&D"), a financial consulting company
owned and controlled by Norman R. Dobiesz, a director and principal shareholder
of the Company, advanced $140,000 which was utilized for the partial payment to
the note holders and closing costs. Mr. Dobiesz also agreed to personally
guarantee a portion of the CIT line of credit.
Effective January 1, 1995 the Company entered into five (5) year
employment agreements with Ewen Cameron, President & CEO, and Norman R.
Dobiesz, Vice President Mergers and Acquisitions. See EXECUTIVE COMPENSATION -
Employment Agreements.
The Company entered into management consulting and acquisition
consulting agreements with H&N in March 1989 and October 1990, respectively.
The initial term of the management agreement was for ten years, and the initial
term of the acquisition consulting agreement was for five years, each subject
to certain renewal options. During 1994, H&N waived all fees but not expenses
required to be paid by the Company to H&N under the management consulting
agreement for the quarters ended March 31, June 30, September 30, and December
31, 1994. Effective December 31, 1994, the Company with the assistance of W&D,
negotiated and entered into an agreement with H&N, terminating the management
and acquisition consulting agreements. As a result, the Company incurred a
charge to operations for a loss on termination of these agreements of
approximately $804,000. See FINANCIAL STATEMENTS - Page F-23, Note 12 -
Management, Acquisition and Consulting Agreements. In addition, the Company
and Mr. Dobiesz rescinded the issuance of and cancelled 10,000 (post split)
shares of common stock as part of the termination and effectively terminated
warrants dated August 14, 1989 to purchase 9,600 (post split) shares of common
stock originally issued to BC Financial Corporation. See FINANCIAL STATEMENTS
- - Page F-23, Note 12 - Management, Acquisition and Consulting Agreements.
On May 11, 1995, 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 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
26
<PAGE> 27
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. See FINANCIAL STATEMENTS - Page F-19, Note 11 - Common Stock.
27
<PAGE> 28
ITEM 13. EXHIBITS, FINANCIAL STATEMENTS, AND REPORTS ON FORM 8-K
(a) The following documents are filed as a part of this report:
<TABLE>
<CAPTION>
Page
<S> <C> <C>
(1) Financial Statements:
Independent Auditor's Report F-2
Consolidated Balance Sheet - December 31, 1995 F-3/4
Consolidated Statements of Operations for
Years Ended December 31, 1995 and 1994 F-5
Consolidated Statements of Shareholders' Equity for the
Years Ended December 31, 1995 and 1994 F-6
Consolidated Statements of Cash Flows for the
Years Ended December 31, 1995 and 1994 F-7/8
Notes to Consolidated Financial Statements F-9/27
</TABLE>
(b) Reports on Form 8-K: No Reports on Form 8-K were filed during the
Fourth Quarter of the fiscal year ended December 31, 1994.
(c) Exhibits:
<TABLE>
<S> <C> <C>
3.1 Restated Certificate of Incorporation of the Registrant . . . . . . . . . . . . . . . . . (a)
3.2 By-Laws of the Registrant as presently in effect . . . . . . . . . . . . . . . . . . . . . (a)
10.114 July 1993 Employee/Consultant Benefit Plan . . . . . . . . . . . . . . . . . . . . . . . . (b)
10.118 Divestiture Management Agreement between the Company
and H&N Management Co., Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (c)
10.119 Equipment Leases with Eastman Kodak dated May 28, 1993 . . . . . . . . . . . . . . . . . . (c)
10.120 Private Placement Memorandum, $360,000 Principal Amount,
due March 31, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (c)
10.121 Private Placement Memorandum, $500,000 Principal Amount,
due October 31, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (c)
10.122 Conversion Agreements dated October 25, 1994 between the Company
and certain Note Holders of an aggregate of $350,000 of 8%
convertible notes due February 1, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . (d)
10.123 Letter acknowledging W&D Consultants , Inc. loan of $140,000
to the Company dated October 25, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . (d)
10.124 Loan and Security Agreement between the Company and The CIT
Group/Credit Finance, Inc. dated October 28, 1994 . . . . . . . . . . . . . . . . . . . . (d)
10.125 Termination between the Company and H&N Management Co., Inc.
dated December 1, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (e)
10.126 S-8 Rescission Letter between the Company and Norman R. Dobiesz
dated December 15, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (e)
10.127 Amended and Restated Employment Agreement between the Company
and Ewen Cameron dated January 1, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . (e)
10.128 Employment Agreement between the Company and Norman R. Dobiesz
dated January 1, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (e)
</TABLE>
28
<PAGE> 29
<TABLE>
<S> <C> <C>
10.129 Specimen of Conversion Agreement between the Company and
certain Note Holders of an aggregate of $500,000 of 8% convertible
notes due October 31, 1994. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (e)
10.130 Specimen of Common Stock Purchase Warrant issuable as a part of
the Units to be issued pursuant to the Conversion Agreement filed
as Exhibit 10.129 to this Report on Form 10-KSB . . . . . . . . . . . . . . . . . . . . . (e)
10.131 Debenture Underwriting Agreement between the Company and
CFO Capital, S.A. dated December 12, 1994 . . . . . . . . . . . . . . . . . . . . . . . . (e)
10.132 Teltronics Employee Stock Payment Plan, as amended
dated November 12, 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (e)
10.133 Client Services Agreement between the Company and Future Financial
dated November 12, 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (e)
10.134 Marketing Agreement between the Company and Michael Zambouros
dated June 20, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (e)
10.135 Subscription Agreement between the Company and W&D Consultants,
Inc. dated May 11, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (e)
10.136 Specimen of Stock Option Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . (f)
10.137 Teltronics, Inc. 1995 Incentive Stock Option Plan . . . . . . . . . . . . . . . . . . . . (g)
10.138 Promissory Note between Barnett Bank of Manatee County, N.A. and
Teltronics, Inc. dated July 7, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . (h)
10.139 Purchase Agreement between SR Comms Management Ltd., and
Teltronics, Inc. dated October 2, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . (h)
10.140 Purchase Order from Nielsen Media Research dated December 6, 1995 . . . . . . . . . . . . (i)
10.141 Purchase Order from Nielsen Media Research dated December 7, 1995 . . . . . . . . . . . . (i)
10.142 Memorandum of Agreement covering Technology Transfer dated
March 11, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (i)
10.143 Line Note #1 dated November 7, 1995 payable in the maximum
aggregate amount of $100,000 by AT Supply, Inc. to TTG Acquisition Corp. . . . . . . . . . (i)
10.144 Line Note #2 dated November 29, 1995 payable in the maximum
aggregate amount of $100,000 by AT Supply, Inc. to TTG Acquisition Corp. . . . . . . . . . (i)
10.145 Amended Loan and Security Agreement dated December 29, 1995 by and
among The CIT Group/Credit Finance, the Company and AT Supply, Inc. . . . . . . . . . . . (i)
16.1 Letter regarding change in certifying accountant from James Moore
& Company to the SEC dated January 3, 1995 . . . . . . . . . . . . . . . . . . . . . . . . (e)
16.2 Letter regarding change in certifying accountant from KPMG Peat
Marwick LLP to the SEC dated February 28, 1995 . . . . . . . . . . . . . . . . . . . . . . (e)
21.1 List of Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (i)
23.1 Consent and Report of Independent Public Accountants . . . . . . . . . . . . . . . . . . . (j)
27 Financial Date Schedule (for SEC use only) . . . . . . . . . . . . . . . . . . . . . . . . (i)
- --------------------
</TABLE>
(a) Filed as an Exhibit to Teltronics' Registration Statement No.
33-27975-A on Form S-18.
(b) Filed as an Exhibit to Teltronics' Registration Statement No.
33-66668 dated July 23, 1993 on Form S-8. (c) Filed as an Exhibit
to Teltronics' Annual Report on Form 10-KSB for the fiscal year
ended December 31, 1993.
(d) Filed as an Exhibit to Teltronics' Quarterly Report on Form 10-QSB
for the three month period ended September 30, 1994.
(e) Filed as an Exhibit to Teltronics' Annual Report on Form 10-KSB
for the fiscal year ended December 31, 1994.
(f) Filed as an Exhibit to Teltronics' Report on Form 10-QSB for the
three month period ended June 30, 1995.
29
<PAGE> 30
(g) Filed as an Exhibit to Teltronics' Definitive Proxy Statement
filed July 12, 1995.
(h) Filed as an Exhibit to Teltronics' Report on Form 10-QSB for the
three month period ended September 30, 1995.
(i) Filed as an Exhibit to this Annual Report on Form 10-KSB for the
fiscal year ended December 31, 1995.
(j) Filed at Page F-2 of the Financial Statements filed pursuant to
Item 7 of this Annual Report on Form 10-KSB for the fiscal year
ended December 31, 1995.
30
<PAGE> 31
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly cause this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
TELTRONICS, INC.
By: /s/Ewen Cameron March 25, 1996
---------------
Ewen Cameron
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed below by the following persons on behalf of the
Registrant in the capacities on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<S> <C> <C>
/s/ Ewen Cameron Director, President and March 25, 1996
- -------------------------------------
Ewen Cameron Chief Executive Officer
/s/ Paul D. Shrader Vice President Finance, March 25, 1996
- ---------------------------------------
Paul D. Shrader Secretary & Treasurer
/s/ Norman R. Dobiesz Director March 25, 1996
- ------------------------------------
Norman R. Dobiesz
/s/ Carl S. Levine Director March 25, 1996
- ----------------------------------------
Carl S. Levine
</TABLE>
<PAGE> 32
TELTRONICS, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
For the Year Ended December 31, 1995
F-1
<PAGE> 33
To the Board of Directors and Shareholders of
Teltronics, Inc.
INDEPENDENT AUDITORS' REPORT
We have audited the accompanying consolidated balance sheet of Teltronics, Inc.
and Subsidiaries as of December 31, 1995 and the related consolidated
statements of operations, shareholders' equity and cash flows for each of the
two years in the period ended December 31, 1995. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall consolidated financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Teltronics, Inc. and Subsidiaries as of December 31, 1995, and the results of
its consolidated operations and its consolidated cash flows for each of the two
years in the period ended December 31, 1995 in conformity with generally
accepted accounting principles.
/s/ Millward & Co.
- -------------------
Millward & Co. CPAs
Fort Lauderdale, Florida
February 1, 1996 (March 22, 1996 as to Note 17)
F-2
<PAGE> 34
TELTRONICS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
December 31, 1995
ASSETS
<TABLE>
<S> <C>
CURRENT ASSETS:
Cash $ 264,379
Accounts receivable, net of allowance
for doubtful accounts of $65,239 3,207,556
Inventories 3,239,658
Prepaid expenses and other current assets 167,948
----------
Total current assets 6,879,541
----------
PROPERTY AND EQUIPMENT, net 1,636,067
----------
OTHER ASSETS:
Prepaid lease guarantee, net 270,684
Software development costs, net 66,822
Other 60,837
----------
Total other assets 398,343
----------
TOTAL ASSETS $8,913,951
==========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-3
<PAGE> 35
TELTRONICS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
December 31, 1995
(Continued)
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<S> <C>
CURRENT LIABILITIES:
Current portion of long-term debt $2,565,070
Current portion of capital lease obligations 152,646
Accounts payable 2,388,231
Accrued expenses 730,122
Deferred income 87,169
Other current liabilities 68,870
----------
Total current liabilities 5,992,108
----------
LONG-TERM LIABILITIES:
Long-term debt, Net of current portion 364,808
Capital lease obligations, Net of current portion 218,865
----------
Total long-term liabilities 583,673
----------
COMMITMENTS AND CONTINGENCIES (Notes 6, 9, 10 and 12)
SHAREHOLDERS' EQUITY:
Common stock, $.001 par, 50,000,000 shares
authorized, 2,610,168 issued and outstanding 2,611
Additional paid-in capital 10,861,593
Accumulated deficit (8,526,034)
----------
2,338,170
----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $8,913,951
==========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-4
<PAGE> 36
TELTRONICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended December 31,
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
NET SALES $21,603,491 $14,762,344
----------- -----------
COSTS AND EXPENSES
Cost of goods sold 13,224,984 8,663,524
General and administrative 2,901,816 3,356,536
Selling 3,261,037 3,432,411
Research and development 1,448,664 2,157,648
----------- -----------
20,836,501 17,610,119
----------- -----------
Income (loss) from operations 766,990 (2,847,775)
----------- -----------
OTHER INCOME (EXPENSE)
Interest expense, net of interest
income of $9,239 in 1995 and
$13,448 in 1994 (381,645) (264,615)
Financing expenses (287,275) (413,841)
Loss from ComCentral transactions - (897,781)
Gain on sale of software rights 165,000 -
Cost of conversion right - (2,058,000)
Settlement of consulting agreements - (803,894)
Miscellaneous (2,466) (14,077)
----------- -----------
(506,386) (4,452,208)
----------- -----------
Income (loss) before Provision
(Benefit) for income taxes 260,604 (7,299,983)
Provision (Benefit) for income taxes 37,725 (516,550)
----------- -----------
NET INCOME (LOSS) $ 222,879 $(6,783,433)
=========== ===========
NET INCOME (LOSS) PER SHARE $ .09 $ (11.08)
=========== ===========
Average number of common shares outstanding 2,528,018 612,177
=========== ===========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-5
<PAGE> 37
TELTRONICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
For the Years Ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
Common Stock Additional Shares Issued
--------------------------- Paid-In for Future
Shares Amount Capital Services
------------ -------------- ----------- --------------
<S> <C> <C> <C> <C>
Balance, December 31, 1993 573,760 $ 574 $ 7,900,119 $(1,605,873)
Adjustments for return of shares to the Company
and for unissued shares (40,000) (40) (885,323) 885,363
Shares issued pursuant to employee stock payment
plan at an average price of $5.70 per share 110,900 111 631,888 -
Shares issued for services pursuant to an
international marketing agreement at $1.24
per share 235,000 235 291,165 -
Proceeds of private placement at $2.57 per share 25,000 25 64,118 -
Amortization ($555,531) of the value of shares
issued for services in 1993 and proceeds
($164,979) received for the shares - - - 720,510
Stock issued for conversion of notes 77,780 78 233,256 -
Valuation of note conversion rights given
to Mr. Dobiesz - - 2,058,000 -
Net loss - - - -
---------- --------- ----------- ----------
Balance, December 31, 1994 982,440 983 10,293,223 -
Stock issued for conversion of notes 167,728 168 344,955 -
Stock issued pursuant to exercise of
note conversion rights to Mr. Dobiesz 1,400,000 1,400 152,600 -
Shares issued for services pursuant to an
international marketing agreement at
$1.18 per share 60,000 60 70,815 -
Net profit - - - -
---------- --------- ----------- ----------
Balance, December 31, 1995 2,610,168 $ 2,611 $10,861,593 $ -
========== ========= =========== ==========
<CAPTION>
(Accumulated)
Deficit Total
----------- -----------
<S> <C> <C>
Balance, December 31, 1993 $(1,965,480) $4,329,340
Adjustments for return of shares to the Company
and for unissued shares - -
Shares issued pursuant to employee stock payment
plan at an average price of $5.70 per share - 631,999
Shares issued for services pursuant to an
international marketing agreement at $1.24
per share - 291,400
Proceeds of private placement at $2.57 per share - 64,143
Amortization ($555,531) of the value of shares
issued for services in 1993 and proceeds
($164,979) received for the shares - 720,510
Stock issued for conversion of notes - 233,334
Valuation of note conversion rights given
to Mr. Dobiesz - 2,058,000
Net loss (6,783,433) (6,783,433)
----------- ----------
Balance, December 31, 1994 (8,748,913) 1,545,293
Stock issued for conversion of notes - 345,123
Stock issued pursuant to exercise of
note conversion rights to Mr. Dobiesz - 154,000
Shares issued for services pursuant to an
international marketing agreement at
$1.18 per share - 70,875
Net profit 222,879 222,879
----------- ----------
Balance, December 31, 1995 $(8,526,034) $2,338,170
=========== ==========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-6
<PAGE> 38
TELTRONICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31,
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 222,879 $ (6,783,433)
Adjustments to reconcile net income (loss) to net cash
flows from (used in) operating activities:
Depreciation 462,831 418,281
Amortization of intangibles 178,872 2,046,802
Cost of conversion right - 2,058,000
Deferred income taxes - (226,550)
(Gain)/loss on ComCentral stock transactions - 652,000
Reduction of shares issued for future services - 555,531
Issuance of debt for services rendered - 70,784
Issuance of common stock for consulting services rendered 70,875 291,400
Settlement of consulting agreements - 803,894
Provision (credit) for uncollectible accounts (17,073) 89,705
Provision for losses on Receivable Dynamics, Inc. - 44,879
Change in assets and liabilities:
Accounts receivable and other assets (852,509) (316,660)
Inventories (1,485,810) 676,436
Due to affiliates - 212,000
Income tax receivable 668,780 (290,000)
Other assets 240,620 (146,471)
Accounts payable and accrued liabilities 1,397,648 (118,506)
Deferred revenue (64,216) 64,216
------------ ------------
Net cash flows from operating activities 822,897 102,308
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (279,289) (116,191)
Capitalized software development costs - (689,700)
------------ ------------
Net cash flows used in investing activities (279,289) (805,891)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from line of credit 20,871,470 11,585,146
Repayments on line of credit (20,562,286) (13,196,135)
Proceeds from term loan - 289,182
Proceeds from line of credit - 1,689,277
Proceeds from notes payable - 125,000
Advances from related party - 140,000
Repayment of notes payable and other long-term debt (608,237) (542,716)
Cash paid for future offering costs - (150,000)
Proceeds from stock offering - 861,121
Net change in bank overdraft - (87,800)
------------ ------------
Net cash flows from (used in) financing activities (299,053) 713,075
------------ ------------
Net increase in cash and cash equivalents 244,555 9,492
Cash and cash equivalents, beginning of year 19,824 10,332
------------ ------------
Cash and cash equivalents, end of year $ 264,379 $ 19,824
============ ============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-7
<PAGE> 39
TELTRONICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)
For the Years Ended December 31,
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Purchase of equipment under capital lease $ 595,406 $ 280,176
============ ============
Issuance of common stock for conversion on notes $ 345,123 $ 233,334
============ ============
Issuance of common stock pursuant to exercise of conversion rights $ 154,000 $ -
============ ============
Amortization of shares issued for future services $ - $ 555,531
============ ============
Adjustment for return of shares to the Company for
for unissued shares $ - $ 885,363
============ ============
Issuance of common stock for consulting services rendered $ 70,875 $ 291,400
============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ 346,245 $ 237,412
============ ============
Income taxes $ - $ -
============ ============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-8
<PAGE> 40
TELTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995 and 1994
NOTE 1 - BASIS OF PRESENTATION
Teltronics, Inc. (the Company) was incorporated in Delaware in February 1989.
The Company is engaged in product research, design and manufacturing of
electrical components, equipment and software, primarily relating to the
telecommunications industry.
Teltronics, Inc. is comprised of its wholly-owned subsidiary TTG Acquisition
Corp. and its newly formed 80% owned subsidiary At Supply, Inc. All
significant intercompany transactions and balances have been eliminated in
consolidation. At Supply, Inc. is engaged in the distribution of various
products relating to the telecommunications industry. For the year ended
December 31, 1995 losses applicable to the 20% minority interest of At Supply,
Inc. exceeded the minority interest in the equity capital of such company and
the losses accordingly, are included in the determination of net income.
However, if future earnings do materialize, the Company shall be credited to
the extent of such losses that were previously absorbed.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INVENTORIES - Inventories are stated at the lower of cost or market. Cost is
determined principally on the weighted average method.
PROPERTY AND EQUIPMENT - Property and equipment are stated at cost.
Depreciation is provided over the estimated useful lives of the respective
assets using the straight-line method for financial reporting purposes and
accelerated methods for income tax purposes. Maintenance, repairs and minor
renewals are charged to expense as incurred while expenditures that materially
increase values, change capacities, or extend useful lives are capitalized.
Upon sale or retirement of property and equipment, the cost and the related
accumulated depreciation are eliminated from the respective accounts and the
resulting gain or loss is included in operations.
INCOME TAXES - Income taxes are accounted for under the asset and liability
method of Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes" ("SFAS 109"). Deferred tax assets and liabilities are recognized
for the future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases and operating loss and tax credit carryforwards.
Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. Under SFAS 109, the
effect on deferred tax assets and liabilities or a change in tax rate is
recognized in income in the period that includes the enactment date. Deferred
tax assets are reduced to estimated amounts to be realized by use of a
valuation allowance.
F-9
<PAGE> 41
TELTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1995 and 1994
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
The principal types of temporary differences between assets and liabilities for
financial statement and tax return purposes are accumulated depreciation
resulting from use of accelerated methods for tax purposes, the timing of
recognition of accrued compensated absences and capitalization of software
development costs and certain inventory costs.
CASH AND CASH EQUIVALENTS - For the purpose of the consolidated Statements of
Cash Flows, the Company considers all highly liquid investments purchased with
an original maturity of three months or less to be cash equivalents. As of
December 31, 1995 the Company did not have any cash equivalents.
INCOME (LOSS) PER SHARE - Net income (loss) per share is computed by dividing
net income (loss) by the weighted average number of common shares outstanding
during each period presented. Common stock equivalents outstanding during each
period presented were either anti-dilutive or not materially dilutive to be
included in the computation of income (loss) per share.
REVENUE RECOGNITION - Revenues from product sales are recognized when the
product is shipped. Revenue from software development contracts are recognized
upon delivery of software product to customer. Revenue from software
maintenance contracts is recognized ratably over the contract period and other
service revenues are recognized upon performance.
SOFTWARE DEVELOPMENT COSTS - The Company may, from time to time, capitalize
internal software development costs in accordance with Statement of Financial
Accounting Standards No. 86 (SFAS 86). As of December 31, 1995 and 1994,
capitalized software costs, net of amortization, were $66,822 and $156,822,
respectively. The capitalization of these costs begins when a product's
technological feasibility has been established and ends when the product is
available for general release to customers.
Amortization is computed on a product-by-product basis once the product is
available for general release to customers, using the greater of the amount
computed using (a) the ratio that current gross revenues for a product bear to
the total current and anticipated future gross revenues for that product or (b)
the straight-line method over the remaining estimated economic life of the
product which ranges from 18 months to 7 years.
The amount of software development costs capitalized in fiscal 1995 and 1994
was $0 and $776,232, respectively. The related amortization expense was
$90,000 and $554,750 for 1995 and 1994, respectively.
F-10
<PAGE> 42
TELTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1995 and 1994
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
At December 31, 1995 and 1994, the Company reviewed the unamortized capitalized
costs of each computer software product in order to assess the net realizable
value of that product. The amount of capitalized software costs reduced to net
realizable value aggregated $0 and $1,165,934, respectively, at such dates.
SOFTWARE LICENSING RIGHTS - The Company had entered into a software license
agreement to develop and market certain software in North and South America.
The Company was required to pay royalties equal to 30% of the gross sales of
the software up to $1,600,000 in royalties. Upon payment of the $1,600,000 in
royalties, the software would have become the property of the Company for the
markets specified. The Company had capitalized $1,422,782 under this agreement
and amortized the costs in relationship to the Company's liability as it
pertained to gross software sales, which was the estimated economic life of the
rights. Amortization expense for the years ended December 31, 1995 and 1994
was $4,189 and $393,749, respectively.
On October 2, 1995, the Company entered into an agreement to sell its exclusive
right to market, use and otherwise commercialize the Orbitel Unix System
software (the "system software") in North and South America (the "territory")
with the entity from which the Company originally acquired such exclusive
rights. In consideration, the Company received $165,000 and is to receive an
amount equal to 20% of all revenues of the system software generated in the
territory, exclusive of maintenance, warranty, installation and any other
ongoing service or support charges, as adjusted in accordance with the
agreement, from specific customers as detailed in the agreement for a period of
12 months and an amount equal to 5% of all revenues of the system software in
the territory, exclusive of maintenance, warranty, installation and any other
ongoing service or support charges, as adjusted in accordance with the
agreement, from customers not specified in the agreement for a period of 18
months.
The Company recorded a gain on sale of software licensing rights of $165,000 as
part of other income in the December 31, 1995 consolidated statements of
operations.
WARRANTY EXPENSE - The Company provides currently for the estimated cost which
may be incurred under product warranties.
F-11
<PAGE> 43
TELTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1995 and 1994
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
INVESTMENTS - The Company adopted Statement of Financial Accounting Standards
(FAS) No. 115, "Accounting for Certain Investments in Debt and Equity
Securities, on December 31, 1994. This statement requires classification of
securities into three categories: held-to-maturity, trading securities, and
available for sale. At December 31, 1994, the Company had categorized certain
investments in equity securities as available for sale. The Company may
classify securities as available for sale when the intent of the Company does
not categorize such securities as either held to maturity or trading
securities.
The adoption of FAS 115 had no effect on net income. The carrying values of
the Company's investments in equity securities are reviewed on an ongoing basis
and at December 31, 1994, the Company identified unrealized holding losses to
be other than temporary and the entire investment in equity securities of
$652,000 was written down to zero with an unrealized loss of $652,000 included
in net securities loss at that date. At December 31, 1995, the Company did not
have any investments in debt or equity securities.
RECENT PRONOUNCEMENTS - In March 1995, the FASB issued Statement No. 121,
"Accounting for the Impairment of Long-Lived Assets and For Long-Lived Assets
to be Disposed of". SFAS 121 becomes effective for fiscal years beginning
after December 15, 1995 and addresses the accounting for the impairment of
long-lived assets, certain identifiable intangibles, and goodwill related to
those assets to be held and used and for long-lived assets and certain
identifiable intangibles to be disposed of. The Company believes this
pronouncement will not have a significant impact on the Company's consolidated
financial statements.
In October 1995, the FASB issued Statement No. 123, "Accounting for Stock-Based
Compensation". The accounting requirements of SFAS 123 are effective for
transactions entered into in fiscal years that begin after December 15, 1995.
The disclosure requirements of SFAS 123 are effective for financial statements
for fiscal years beginning after December 15, 1995, or for an earlier fiscal
year for which this statement is initially adopted for recognizing compensation
costs. The Company believes this pronouncement will not have a significant
impact on the Company's consolidated financial statements.
NOTE 3 - INVESTMENT IN COMCENTRAL CORP.
At December 31, 1993, the Company owned 502,000 shares of ComCentral common
stock (representing approximately 3% of the outstanding common stock) which are
restricted for two years under Rule 144 of the Securities and Exchange
Commission and were recorded at the amount of intercompany debt forgiven, which
approximates the fair market value for the stock on the date of issuance. At
December 31, 1994, the Company, in accordance with FAS 115 (see Note 2),
charged operations
F-12
<PAGE> 44
TELTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1995 and 1994
NOTE 3 - INVESTMENT IN COMCENTRAL CORP. (Continued)
for unrealized holding losses of $652,000. Such unrealized holding loss was
deemed to be by the Company as other than temporary. At December 31, 1994,
included in net securities gain/loss from ComCentral stock is $245,781 of
amounts resulting from the ComCentral transaction.
NOTE 4 - PROPERTY AND EQUIPMENT
The major classifications of property and equipment at December 31, 1995, are
as follows:
<TABLE>
<S> <C>
Machinery and equipment $ 1,296,378
Furniture and fixtures 773,478
Equipment under capital lease 1,361,515
Leasehold improvements 139,991
-----------
3,571,362
Accumulated depreciation (1,935,295)
-----------
$ 1,636,067
===========
</TABLE>
Depreciation expense was approximately $463,000 and $418,000 in 1995 and 1994,
respectively.
NOTE 5 - INVENTORIES
The major classes of inventories at December 31, 1995, are as follows:
<TABLE>
<S> <C>
Raw materials $ 957,646
Work-in-progress 610,301
Finished goods 1,671,711
-----------
$ 3,239,658
===========
</TABLE>
NOTE 6 - DEBT
Debt at December 31, 1995 consists of the following:
Bank line of credit - In October 1994, the Company entered into a credit line
facility with a lender which provides for aggregate cash borrowings of
$3,500,000 including an initial term loan of $296,700 with an interest rate
equal to the prime rate plus three (3) percent per annum. The facility, except
the term loan portion, continues in full force for a term of 3 years and
renews for successive terms of 2 years thereafter. The term loan expires
October 1999. At December 31, 1995, the prime interest rate was 8 1/2%.
Under this facility, substantially all of the Company's present and future
assets are pledged as collateral with borrowings limited to certain gross
F-13
<PAGE> 45
TELTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1995 and 1994
NOTE 6 - DEBT (Continued)
<TABLE>
<S> <C>
availability formulas on accounts receivable and inventory as defined in the
agreement. The facility provides for minimum loan fees, unused line fees and
renewal term fees. The outstanding borrowings are classified as a current
liability. During 1995, the Company incurred minimum and unused loan fees of
$71,775 and $30,000, respectively. A director of the Company has personally
guaranteed a portion of the facility. At December 31, 1995, the Company had
$1,080,816 of unused credit available pursuant to this facility. $2,227,729
Term loan agreement, as described above, payable in monthly principal
installments of $7,517 through November 1996 and $3,230 from December 1996
through October 1999 with a final payment equal to the unpaid principal
balance. Interest is payable monthly at 3% above the prime rate;
collateralized by substantially all the assets of the Company. At December
31, 1995, the prime interest rate was 8 1/2%. 191,455
Notes payable officer, payable upon demand with interest accruing at 8% per
annum. (See Notes 9(a) and 12 for additional related party transactions.) 122,286
Note payable - bank, due in monthly installments of $6,760 including interest
at 14% per annum to July 1998. Collateralized by production equipment with a
book value of $233,916 at December 31, 1995. 174,394
Note payable - bank, due in monthly installments of $7,323 including interest
at 10.5% per annum to October, 1998. Collateralized by production equipment
with a book value of $219,448 at December 31, 1995. 214,014
----------
2,929,878
Less current portion 2,565,070
----------
Long-term portion $ 364,808
==========
Future maturities of note principal are as follows:
Year Ending
December 31,
------------
1996 $2,565,070
1997 184,497
1998 152,293
1999 28,018
2000 -
----------
$2,929,878
==========
</TABLE>
F-14
<PAGE> 46
TELTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1995 and 1994
NOTE 7 - CAPITAL LEASE OBLIGATIONS
Leased assets include office equipment and machinery and equipment. The present
value of future minimum lease payments pursuant to the leases and the
corresponding liability have been recorded in the financial statements as
property and equipment under capital lease obligations. Interest on these
obligations range from 2.36% to 11.23%.
At December 31, 1995, leased property under capital leases consists of the
following:
<TABLE>
<S> <C>
Office Equipment $ 115,650
Machinery and Equipment 1,245,865
----------
1,361,515
Less: Accumulated Depreciation (469,014)
----------
$ 892,501
==========
</TABLE>
The future minimum lease payments under capital leases together with the
present value of the net minimum lease payments as of December 31, 1995 are as
follows:
<TABLE>
<CAPTION>
Fiscal Year Amount
----------- ------
<S> <C>
1996 $ 176,439
1997 136,367
1998 87,005
1999 12,527
----------
Total Minimum Lease Payments 412,338
Less: Amount Representing Interest (40,827)
----------
Present Value of Minimum Lease Payments 371,511
Less: Current Portion (152,646)
----------
Long-Term Capital Lease Obligations $ 218,865
==========
</TABLE>
NOTE 8 - FINANCIAL INSTRUMENTS
The estimated fair values of the Company's financial instruments at December
31, 1995 are as follows:
<TABLE>
<CAPTION>
Carrying Fair
Amount Value
---------- ----------
<S> <C> <C>
Cash $ 264,379 $ 264,379
========== ==========
Receivables $3,152,556 $3,152,556
========== ==========
Other investments $ - $ -
========== ==========
Long term debt (including current
maturities of $2,717,716) $3,301,389 $3,301,389
========== ==========
</TABLE>
F-15
<PAGE> 47
TELTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1995 and 1994
NOTE 8 - FINANCIAL INSTRUMENTS (Continued)
The following methods and assumptions were used to estimate the fair value of
financial instruments:
Cash - Fair value was considered to be the same as the carrying amount.
Receivables - The Company believes that in the aggregate, the carrying value of
the receivables was not materially different from the fair value.
Other investments - At December 31, 1995, the other investments were comprised
of 502,000 shares of common stock and 250,000 shares of preferred stock of
ComCentral Corp. Because of the nature of the investment, it was not
practicable to estimate their fair value.
Long-term debt - The carrying amount of floating-rate long-term debt was
assumed to approximate its fair value.
NOTE 9 - COMMITMENTS AND CONTINGENCIES
(A) EMPLOYMENT AGREEMENTS - The Company entered into five (5) year
employment agreements with the Company's President and CEO and its Vice
President/Mergers and Acquisitions commencing January 1, 1995. The president's
agreement was an amendment and restatement of a prior agreement which he
entered into with the Company in July 1993. Each employment agreement
established a base annual salary of $225,000 subject to annual increases of
$25,000 per year. Either the Company or the employee may terminate the
employment agreements upon the occurrence of certain events. The President's
employment agreement contains covenants restricting the employee from competing
for a period of two years after termination of the agreement. If the Company
terminated either of the president or vice president, the terminated employee
will be entitled to severance equal to one year's base salary. In addition,
the employees are eligible to participate in any stock option plan that may be
adopted by the Company.
The Company's 80% owned subsidiary entered into two (2) employment agreements
with the subsidiary's President and Vice President of sales and marketing
commencing October 23, 1995. Each employment agreement established a base
annual salary of $80,000 and issuance of the subsidiaries voting common stock
which at the time represents ten percent (10%) of the outstanding common stock
of the subsidiary. Either the subsidiary or the employee may terminate the
employment agreement upon the occurrence of certain events. In addition, the
employees are eligible to participate in any incentive compensation plan
established for key salaried employees of the subsidiary based upon net profits
of the subsidiary.
(B) OPERATING LEASES - The Company leases its manufacturing facilities
including land and building under the terms of a 15 year operating lease
expiring August 31, 2005.
F-16
<PAGE> 48
TELTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1995 and 1994
NOTE 9 - COMMITMENTS AND CONTINGENCIES (Continued)
The terms of the operating lease for manufacturing facilities provide the
Company with an option at any time during the lease term to purchase the
property at the greater of its fair market value or $4,320,000. The Company
also has the option at the end of the lease to renew the lease for up to two
additional five-year periods. In addition, the Company is responsible for
paying all taxes, insurance and maintenance cost relating to the leased
property. The lease also provides for an adjustment in the annual rent
beginning in 1993 based on changes in the Consumer Price Index. However, the
lease provides that, in no event shall the annual rents payable during the
adjustment period be less than the previous year's rent or increase annually by
more that 6%.
The Company also leases various equipment under operating leases expiring in
one to two years.
Future minimum lease payments for all noncancelable operating leases are as
follows:
<TABLE>
<CAPTION>
Year Ending
December 31,
------------
<S> <C>
1996 $ 531,176
1997 496,193
1998 492,913
1999 476,513
2000 476,513
Thereafter 2,382,565
----------
$4,855,873
==========
</TABLE>
Rental expense for operating leases totaled approximately $561,000 and $606,000
in 1995 and 1994, respectively.
(C) LEGAL PROCEEDINGS - On or about September 12, 1995, Commstar, Ltd., a
Canadian corporation, commenced an action in the Circuit Court of the
Thirteenth Judicial District, Hillsborough County, Florida, alleging that the
Company, a director of the Company, and ComCentral Corp., a former majority
owned subsidiary of the Company, seeking damages in connection with a sale of
the securities of ComCentral Corp., in 1993. The complaint alleges two causes
of action against the Company, a director, and ComCentral, including violations
of the Florida Securities and Investor Protection Act and common law fraud.
The complaint seeks rescission, damages, as well as costs and attorneys fees.
The complaint does not set forth an amount of damages sought by Commstar,
although the complaint alleges that Commstar agreed to pay $600,000 for
ComCentral securities. The complaint also acknowledges that at the time of the
purchase, Commstar owed the Company approximately $98,700. The Company and a
director moved to dismiss the complaint on numerous grounds, including the
inapplicability of the Florida Securities and Investor Protection Act to the
alleged transaction, which was granted on February 9, 1996 without prejudice.
The Company believes that it has meritorious defenses to the allegations and
will vigorously defend any refiled complaint.
F-17
<PAGE> 49
TELTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1995 and 1994
NOTE 9 - COMMITMENTS AND CONTINGENCIES (Continued)
On or about January 10, 1996, Elite Metal Fabricators, Inc. commenced an action
against the Company in the Circuit Court of the Ninth Judicial Circuit, Orange
County, Florida. The complaint sets forth three causes of action, alleging
that Elite and the Company entered into one or more contracts pursuant to which
Elite was to manufacture goods for the Company. The complaint seeks $15,423.99
for each cause of action. The Company believes that it has meritorious
defenses to the allegations of the complaint and intends to vigorously defend.
NOTE 10 - UNDERWRITING AGREEMENT
On December 12, 1994, the Company entered into an Underwriting Agreement with
respect to the issuance of a maximum of $25,000,000 and a minimum of $8,125,000
of Senior Subordinated Debentures ("Debentures"). The proposed interest rate
on the Debentures will be a floating rate equal to 3.5% over the London
Interbank Offering Rate ("LIBOR"), subject to a minimum interest rate of 7.75%
per annum. While the Company had executed the Underwriting Agreement, there
was no assurance that the proposed financing would be consummated or that the
Company would realize the full amount of anticipated net proceeds from the
proposed financing. The Company had paid a $150,000 deposit towards the
aggregate $350,000 non-accountable expense allowance of the Underwriter. At
December 31, 1995, due to the fact that the proposed financing has not
materialized, the Company has elected to write off the $150,000 deposit which
is included as part of financing expenses in the consolidated statements of
operations.
NOTE 11 - COMMON STOCK
(A) SHARES FOR CONVERSION - In October, 1994, the holders of an aggregate
$350,000 of the Company's convertible promissory notes delivered in 1993
converted the principal and interest due under the notes for cash and an
aggregate of 77,780 restricted shares of the Company's common stock.
The former noteholders were also granted the right to receive an
additional 65,497 restricted shares of the Company's common stock if the
original shares were not registered on April 1, 1995. On May 23, 1995
such noteholders were issued 65,497 shares of the Company's common stock
under the terms of the conversion agreement dated October 25, 1994 which
provided for registration rights. Accordingly, $65,500 representing the
fair market value of the shares was charged to financing costs for the
year ended December 31, 1995.
F-18
<PAGE> 50
TELTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1995 and 1994
NOTE 11 - COMMON STOCK (Continued)
During 1994 a related party advanced the Company $140,000 in return for
a conditional conversion right under which the advance could be
converted into 1,400,000 shares of the Company's common stock at $.11
per share. In May 1995 the conversion right was exercised and the
shares were issued after certain conditions were met including
cancellation of the debt, receipt of $14,000 and the performance of
other conditions necessary for conversion. A value of $1.58 per share,
which represents a 60% discount from the quoted market price on November
16, 1994 which had been determined by the Company based upon
consideration given for the large number of shares (1,400,000), compared
to the shares outstanding prior to the conversion feature in the
$140,000 loan, (approximately 980,000 shares), and the dilutive effect
this has had upon conversion. The Company also considered the trading
restrictions on the shares, the public float, the financial condition of
the Company during the period the conversion was negotiated and the
extreme need on that date for the infusion of the $140,000. The Company
charged 1994 operations in the amount of $2,058,000 (1,400,000 shares at
$1.58 less the conversion price of $.11 or $1.47 per share).
At May 11, 1995 the Company accounted for the issuance of the 1,400,000
shares of common stock as a credit to equity in the amount of $154,000
which includes the $140,000 advance and the receipt of the remaining
$14,000.
(B) WARRANTS - At December 31, 1994 the Company reserved 102,228 shares of
common stock for issuance to former holders of convertible promissory
notes of the Company delivered in 1993. Certain of the former
noteholders converted the notes into an aggregate of 102,228 shares and
an aggregate of 51,114 warrants entitling the holder to receive one
share of common stock at a price of $6.00 exercisable at any time prior
to June 30, 1995. Under the terms of the Warrant Agreement the warrant
price was subsequently reduced to $3.00 per share. The aggregate
102,228 shares were issued in 1995.
(C) INCENTIVE STOCK OPTION PLAN - The Company has adopted an Incentive Stock
Option Plan ("Plan") to enhance the Company's ability to retain the
services of outstanding personnel and encourage such employees to have a
greater financial investment in the Company. The Plan authorizes the
Board of Directors to grant incentive stock options under the Internal
Revenue Code of 1986, as amended, to key employees of the Company or its
subsidiaries. The Plan became effective May 16, 1995 and will terminate
August 8, 2005 unless earlier terminated by the Board of Directors or
extended by the Board with approval of the stockholders.
F-19
<PAGE> 51
TELTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1995 and 1994
NOTE 11 - COMMON STOCK (Continued)
250,000 shares of the Company's Common Stock, of which 210,000 shares
are preserved for issuance or transfer to grantees may be issued or
transferred to grantees under the Plan of outstanding options. The
stock options the Plan authorizes the Board to grant are intended to
qualify as incentive stock options under the Internal Revenue Code of
1986, as amended. The term of an option shall be fixed by the Board.
The option price shall not be less than the fair market value of the
Company's Common Stock on the date of grant, unless the grantee is the
holder of more than 10% of the voting power of all classes of stock of
the Company, in which case the option price shall not be less than 110%
of the fair market value of the stock on the date of grant.
Effective May 16, 1995, the Company granted options to employees to
purchase an aggregate of 210,000 shares pursuant to the Company's 1995
Incentive Stock Option Plan. Options to purchase 30,000 shares, at an
option price of $1.785 per share, were granted to an executive officer
and options to purchase 180,000 shares, at an option price of $1.625 per
share, were granted to executive officers and non-executive officer
employees. The fair market value of the Company's common stock on May
16, 1995 was $1.625.
(D) STOCKHOLDERS' EQUITY - On June 20, 1994, the Company's Board of
Directors approved a one-for-twenty five reverse stock split of the
Company's common stock. A total of 13,770,240 issued and outstanding
shares were reduced leaving 573,760 shares outstanding. A total of
$13,770 was classified from the Company's common stock account to the
Company's additional paid-in capital account. The stated par value of
each share was not changed from $.001.
F-20
<PAGE> 52
TELTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1995 and 1994
NOTE 11 - COMMON STOCK (Continued)
(E) UNAMORTIZED EQUITY DEFERRALS - The following represents the activity
relating to shares issued for services and other consideration.
<TABLE>
<CAPTION>
Costs Attributable
1994 Transactions Number of Shares for Future Services
- ----------------- ---------------- -------------------
<S> <C> <C>
Balance December 31, 1993 110,000 $ 1,605,873
Adjustment for shares returned
by Norman Dobiesz (10,000) (190,000)
Adjustment of unissued shares
relating to employee stock
payment plan (a) (22,000) (520,363)
Return of shares issued as
collateral (8,000) (175,000)
-------- -----------
(40,000) (885,363)
-------- -----------
Amortization of Williams and
officer shares (295,963)
Amortization of marketing
consultant shares (172,068)
Proceeds of shares sold to
consultant provided for
in 1993 $164,979 and
amortization of the balance,
$87,500 (b) (252,479)
-----------
(720,510)
-----------
Balance, December 31, 1994 $ -
===========
</TABLE>
F-21
<PAGE> 53
TELTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1995 and 1994
NOTE 11 - COMMON STOCK (Continued)
(a) EMPLOYEE STOCK PAYMENT PLAN - The Employee Stock Payment Plan was
established for the purpose of issuance of shares to participants in
full satisfaction of wages and/or benefits for services rendered or
to be rendered as employees of the Company. Such Employee Stock
Payment Plan has been registered on Form S-8. In 1994, 110,900
shares were issued pursuant to the Employee Plan in an aggregate
amount of $631,999. At December 31, 1995, 211,100 shares were
reserved for possible future issuance under the Employee Plan.
(b) CONSULTANT STOCK PAYMENT PLAN - During 1994 and 1993, the Company
reserved an aggregate of 440,000 shares of its common stock for
possible issuance under a Consultant Stock Payment Plan ("Consultant
Plan") established for the purpose of issuance of shares to
consultants in full satisfaction of compensation and/or expenses for
services rendered or to be rendered as consultants to the Company.
Such Plan has registered its shares pursuant to a Form S-8. In 1994
and 1993, 235,000 shares with proceeds received in the amount of
$291,400 and 12,000 shares with proceeds received in the amount of
$252,479, respectively, were issued. The aggregate proceeds of the
issuance of the shares in 1994 ($291,499) were placed in escrow
pending the receipt of services from the international marketing
consultant engaged by the Company. As services are performed or
sales commissions are earned, the funds received from the sale of the
shares are to be released from escrow to the consultant. On May 17,
1995, 60,000 additional shares were issued by the escrow agent to the
international marketing consultant as compensation for services
rendered to the Company. At December 31, 1995, the Company has
105,000 reserved shares remaining for possible future issuance to the
international marketing consultant. In 1995 and 1994, $78,750 and
$291,400, respectively, were charged to operations for consulting
services rendered. The escrow agent is a company controlled by
Norman Dobiesz, a director of the Company.
(c) EMPLOYEE STOCK - The Company had reserved 11,200 shares for possible
future issuance to key personnel and an additional 11,200 shares for
possible future issuance if and when the Company has established an
employee stock option plan. In November, 1990, the Company granted
an option to purchase 2,000 shares of common stock at an option price
of $8.60 per share exercisable for a term of ten years to the
Company's former Chairman and CEO under the terms of an employment
contract. At December 31, 1994, 2,000 shares of common stock were
reserved for possible issuance under the option. During 1995, the
aggregate of 22,400 shares were terminated.
F-22
<PAGE> 54
TELTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1995 and 1994
NOTE 12 - RELATED PARTY TRANSACTIONS
The following is a summary of transactions with related parties:
MANAGEMENT, ACQUISITION, AND CONSULTING AGREEMENTS - The Company entered into
management consulting and acquisition consulting agreements with H&N Management
Co., Inc. (H&N) in March 1989 and October 1990, respectively. H&N is jointly
owned by two shareholders (Messers. Dobiesz and Williams) of the Company.
Effective December 31, 1994, the Company and H&N entered into termination
agreements and a charge to operations of approximately $804,000 including the
value of $190,000 attributable to 10,000 shares issued to Mr. Williams was
made. In addition, 10,000 shares of common stock were returned by Mr. Dobiesz
as part of the agreement and effectively terminated warrants dated August 14,
1989 to purchase 9,600 shares of common stock originally issued to BC Financial
Corporation.
ADVANCES TO H&N - The agreements referred to above previously granted H&N the
right to receive advances from the Company from time to time, in amounts to be
determined by the Board of Directors of the Company based upon the Company's
financial needs and financial condition at the time. As part of the
termination agreement detailed above, advances of approximately $614,000 were
charged to operations in 1994, which are included as part of the aforementioned
$804,000 charge to operations.
PREPAID LEASE GUARANTEE - In connection with the lease of its manufacturing
facilities discussed in Note 7, the Company's two shareholders (Messers.
Dobiesz and Williams) personally guaranteed the Company's obligations to the
lessor over the term of the lease. The Company agreed to pay each of the two
shareholders 3% of the total future value of the lease payments, excluding
executory costs, as consideration for the personal guarantee. This amount was
paid during 1991. The cost of the guarantee to the Company, 6% of $7,000,000,
or $420,000 has been deferred as a financing cost (prepaid lease guarantee) in
the accompanying financial statements and is amortized on a straight line basis
over the term of the lease. Accumulated amortization of this amount at
December 31, 1995, was $149,316.
RECEIVABLE DYNAMICS, INC. - Through September 30, 1994, the Company had
subleased building space to Receivable Dynamics, Inc. (RDI) which is owned by a
major shareholder. Rental income aggregated $46,687 for 1994.
SUBLEASE AGREEMENT - The Company has entered into a sublease agreement for its
Clearwater office facility with a company owned by a director and principal
shareholder of the Company. Rental expense aggregated $108,319 and $102,749
for 1995 and 1994, respectively.
F-23
<PAGE> 55
TELTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1995 and 1994
NOTE 12 - RELATED PARTY TRANSACTIONS (Continued)
OFFICER TRANSACTIONS - The Company's President and Vice President of mergers
and acquisitions received 10,000 shares of the Company's stock in 1993. During
1994, the vice president and the Company rescinded his 10,000 shares originally
issued for future services valued at $190,000 which were returned by the
Company for cancellation. Based on the valuation of the shares issued in 1993
to the Company president, $105,963 and $84,037, respectively, were charged to
operations in 1995 and 1994. In addition, during 1995 and 1994, Mr. Dobiesz
received a salary of $233,000 and $160,299 respectively.
See Notes 6, 9A, 11A, and 11B regarding additional related party transactions.
NOTE 13 - INDUSTRY SEGMENT INFORMATION
The Company operated principally in two industry segments during 1995 and 1994,
telecommunications products and telecommunications software development.
Teltronics operates in the telecommunications products segment ("product
segment") which includes design, manufacture and sale of telecommunications
related hardware and software products including long distance management,
remote maintenance, ACD information management and call accounting products and
the development of telecommunications software ("software segment"). Business
segment information is as follows:
<TABLE>
<CAPTION>
Year Ended December 31, 1995
----------------------------------------
Product Software
Segment Segment Totals
------------ ------------ ------------
<S> <C> <C> <C>
Total revenues $ 21,449,966 $ 153,525 $ 21,603,491
Operating income 716,863 41,002 757,865
Identifiable assets 8,767,129 66,822 8,833,951
Depreciation and amortization 547,514 94,189 641,703
Capital expenditures 874,695 - 874,695
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31, 1994
----------------------------------------
Product Software
Segment Segment Totals
------------ ------------ ------------
<S> <C> <C> <C>
Total revenues $13,090,640 $ 1,671,704 $14,762,344
Operating loss (1,611,114) (1,236,661) (2,847,775)
Identifiable assets 6,323,218 1,375,143 7,698,361
Depreciation and amortization 566,656 1,898,427 2,465,083
Capital expenditures 396,367 - 396,367
</TABLE>
F-24
<PAGE> 56
TELTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1995 and 1994
NOTE 13 - INDUSTRY SEGMENT INFORMATION (Continued)
For the year ended December 31, 1995, sales to the Company's four largest
customers accounted for approximately 56% of total sales revenue with one such
customer having accounted for 37% of the total.
Sales to one customer representing more than 10% of net sales were as follows:
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
Customer #1 $ 7,944,610 $ 1,721,000
</TABLE>
All of these sales were to customers within the product segment.
NOTE 14 - INCOME TAXES
At December 31, 1995, the Company has net operating loss carryforwards of
approximately $5.0 million that will expire in the years 2008 through 2010.
Such net operating losses are available to offset future table income, if any.
As the utilization of such operating losses for tax purposes is not assured,
the deferred tax asset has been fully reserved through the recording of a 100%
valuation allowance. Should a cumulative change in the ownership of more than
50% occur within a three-year period, there could be an annual limitation on
the use of the net operating loss carryforward.
The provision (benefit) for income taxes consists of the following:
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
Current federal tax expense $ 37,725 $ (290,000)
Deferred federal tax expense - (226,550)
------------ ------------
Total federal income tax expense $ 37,725 $ (516,550)
============ ============
Deferred income tax components at December 31, 1995, are as follows:
Deferred Tax Liabilities:
Depreciation $ (125,694)
Software Costs (23,888)
-----------
Total Deferred Tax Liabilities (149,582)
-----------
</TABLE>
F-25
<PAGE> 57
TELTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1995 and 1994
NOTE 14 - INCOME TAXES (Continued)
<TABLE>
<S> <C>
Deferred tax Assets:
Net Operating Loss Carryforwards $ 1,317,200
Accrued vacation 114,241
Inventory 55,541
Deferred Revenue 29,566
Bad Debt Reserve 22,800
-----------
Total Deferred Tax Assets 1,539,348
-----------
Net Deferred Tax Asset 1,389,766
Valuation Allowance for Deferred Tax Assets (1,389,766)
-----------
Deferred Income Taxes, Net $ 0
===========
</TABLE>
A reconciliation of the provision for income taxes to the amount calculated
using the statutory federal rate (35%) in 1995 and 1994, respectively, is as
follows:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C>
Income Tax Provision (Benefit) at
Federal Statutory Rates $ 88,018 $(2,554,994)
State Taxes 5,453 -
Accounting Losses for Which Deferred Tax
Benefit Cannot Be Currently Recognized - 1,775,528
Adjustment Attributable to Financing
Expenses incurred due to Valuation
of Note Conversion Right, Not Tax
Deductible - 720,300
Over (Under) accrual of NOL Carryback Claims 26,365 (290,000)
Utilization of Net Operating Loss Carryforward (88,018) -
Deferred Tax Liability Rate Change - (17,230)
Excess Deferred Taxes - (226,550)
Other, Net 5,907 76,396
Equity Accounting Adjustments - -
Elimination of Related Party Sale - -
----------- -----------
Income Tax Provision (Benefit) $ 37,725 $ (516,550)
=========== ===========
</TABLE>
F-26
<PAGE> 58
TELTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1995 and 1994
NOTE 15 - ACCRUED LIABILITIES
At December 31, 1995, the balance in accrued expenses of $730,122 is comprised
of the following:
<TABLE>
<S> <C>
Accrued Compensated Absences $ 326,501
Accrued Payroll 231,176
Accrued Commissions 112,145
Accrued Warranty Expenses 55,500
Accrued Promotion Expense 4,800
----------
$ 730,122
==========
</TABLE>
NOTE 16 - CONCENTRATIONS OF CREDIT RISK
The Company extends credit to its customers resulting in a significant
concentration of credit risk from groups of counter-parties engaged in similar
activities or having similar economic characteristics. The Company's principal
customers include regional Bell operating companies, independent telephone
companies and alternate operator service providers located throughout the U.S.
The Company has no policy requiring collateral or other security to support
accounts receivable from these customers which are subject to credit risk.
NOTE 17 - SUBSEQUENT EVENT
On March 11, 1996, the Company entered into a Memorandum of Agreement to
acquire through the Company's newly formed subsidiary, ISL, Inc., certain
technology, including the technology for a small, self-contained,
voice-activated, portable, pentium(R) processor-driven, multi-media computer
("Technology"). If consummated, the transfer of the Technology could involve
the issuance of up to 1,000,000 shares of the Company's common stock, which, if
issued, would be subject to several conditions, including an escrow of the
shares to secure indemnification obligations of the current owners of the
Technology, and restrictions on the right to vote the shares until satisfaction
of certain conditions including award of a significant contract utilizing the
Technology. There can be no assurance that numerous conditions necessary to
consummate the transfer of the Technology will be satisfied.
F-27
<PAGE> 1
<TABLE>
<CAPTION>
EXHIBIT 10.140
- ------------------------------------------------------------------------------------------------------------------------------
PURCHASE ORDER * REVISION *
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
DATE OF ORDER PAGE This Number Must Appear on
12/06/95 1 OF 8 All Invoices, Packing Lists,
Shipping Instructions, Etc.
-------------------------------------------------------------------
(NIELSEN LOGO) REQUIRED DELIVERY DATE PURCHASE
06/30/96 ORDER NO. 20A001836
-------------------------------------------------------------------
REQUESTED BY RELEASE NO. REVISION NO.
HAW 000 001
- ------------------------------------------------------------------------------------------------------------------------------
VENDOR: 202715401 BILL TO: NIEL SHIP TO: FRED
- ------------------------------------------------------------------------------------------------------------------------------
TELTRONICS INC NIELSEN MEDIA RESEARCH NIELSEN MEDIA RESEARCH
P.O. BOX 31077 375 PATRICIA AVE. 564 FREDERICA LANE
TAMPA, FL 33631-3077 DUNEDIN, FLORIDA 34698-8190 DUNEDIN, FL 34698-8190
ATTN: ACCOUNTS PAYABLE ATTN: SELESS EMANUELS
ATTN: PURCHASING DEPARTMENT
- ------------------------------------------------------------------------------------------------------------------------------
F.O.B.: SHIP VIA: TERMS:
DESTINATION POINT BEST WAY NET 30
- ------------------------------------------------------------------------------------------------------------------------------
VENDOR'S ACCEPTANCE IS LIMITED TO THE TERMS OF THIS PURCHASE ORDER, INCLUDING THOSE ATTACHED HEREOF; IF DEEMED AN
ACCEPTANCE, THIS PURCHASE ORDER IS CONDITIONED UPON VENDOR'S ACCEPTANCE OF ALL TERMS HEREOF ADDITIONAL TO AND/OR
DIFFERENT FROM VENDOR'S OFFERED TERMS.
- ------------------------------------------------------------------------------------------------------------------------------
UNIT
ITEM QUANTITY OF DESCRIPTION/SPECIFICATIONS UNIT TOTAL/AMOUNT
NO. MEASURE PRICE
- ------------------------------------------------------------------------------------------------------------------------------
** THIS IS A REVISION **
NOTE: THIS PURCHASE ORDER REPLACES PURCHASE ORDER #0006078, DATED 10/03/95.
PLEASE REFERENCE THIS NEW PURCHASE ORDER #20A001836 ON ALL FUTURE CORRESPONDENCE,
ACKNOWLEDGEMENTS, PACKING SLIPS, AND INVOICES.
REVISION #001 - 1/09/96
RECEIVED FIRM PRICING FOR ITEMS #4, #5, #6, & #7
ADDED ITEM #7
DETERMINED DELIVERY SCHEDULE FOR ITEMS #4, #5, & #6
REFERENCE AI #96-04, #96-06, AND #96-07
NOTE: FIRM PRICING RECEIVED FOR THE FOLLOWING ITEMS PER REFERENCED QUOTE NUMBER:
ITEM #01 - REFERENCE QUOTE #105151
ITEM #02 - REFERENCE QUOTE #105151
- ----------------------------------------------------------------------------------------------------------------------------------
FREIGHT STATE/LOCAL TAX
TOTAL
- ----------------------------------------------------------------------------------------------------------------------------------
BY
-----------------------------------------------
(NIELSEN MEDIA RESEARCH LOGO) AUTHORIZED SIGNATURE
ORIGINAL
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
PURCHASE ORDER * REVISION *
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
DATE OF ORDER PAGE This Number Must Appear on
12/06/95 2 OF 8 All Invoices, Packing Lists,
Shipping Instructions, Etc.
-------------------------------------------------------------------
(NIELSEN LOGO) REQUIRED DELIVERY DATE PURCHASE
06/30/96 ORDER NO. 20A001836
-------------------------------------------------------------------
REQUESTED BY RELEASE NO. REVISION NO.
HAW 000 001
- ------------------------------------------------------------------------------------------------------------------------------
VENDOR: 202715401 BILL TO: NIEL SHIP TO: FRED
- ------------------------------------------------------------------------------------------------------------------------------
TELTRONICS INC NIELSEN MEDIA RESEARCH NIELSEN MEDIA RESEARCH
P.O. BOX 31077 375 PATRICIA AVE. 564 FREDERICA LANE
TAMPA, FL 33631-3077 DUNEDIN, FLORIDA 34698-8190 DUNEDIN, FL 34698-8190
ATTN: ACCOUNTS PAYABLE ATTN: SELESS EMANUELS
ATTN: PURCHASING DEPARTMENT
- ------------------------------------------------------------------------------------------------------------------------------
F.O.B.: SHIP VIA: TERMS:
DESTINATION POINT BEST WAY NET 30
- ------------------------------------------------------------------------------------------------------------------------------
VENDOR'S ACCEPTANCE IS LIMITED TO THE TERMS OF THIS PURCHASE ORDER, INCLUDING THOSE ATTACHED HEREOF; IF DEEMED AN
ACCEPTANCE, THIS PURCHASE ORDER IS CONDITIONED UPON VENDOR'S ACCEPTANCE OF ALL TERMS HEREOF ADDITIONAL TO AND/OR
DIFFERENT FROM VENDOR'S OFFERED TERMS.
- ------------------------------------------------------------------------------------------------------------------------------
UNIT
ITEM QUANTITY OF DESCRIPTION/SPECIFICATIONS UNIT TOTAL/AMOUNT
NO. MEASURE PRICE
- ------------------------------------------------------------------------------------------------------------------------------
** THIS IS A REVISION **
ITEM #03 - REFERENCE QUOTE #105151
ITEM #04 - REFERENCE CHANGE ORDER CHANGE #10-55-28000
ITEM #05 - REFERENCE CHANGE ORDER CHANGE #10-55-28000
ITEM #06 - REFERENCE CHANGE ORDER CHANGE #10-55-28000
ITEM #07 - REFERENCE CHANGE ORDER CHANGE #10-55-28000
NOTE: FIRM PRICING IS REQUIRED IN WRITING BEFORE ANY PRODUCT(S)
MAY BE SHIPPED. FAILURE TO SUPPLY FIRM PRICING CAN RESULT IN DELAYED
PAYMENTS.
1 1150 EA 501-1075-000 273.38 314387.00
PEOPLEMETER 8
1 200 EA 501-1088-000 273.38 54676.00
8-POSITION PEOPLE METER, HISPANIC
3 600 EA 501-1180-000 288.47 173082.00
PEOPLEMETER 16
- ----------------------------------------------------------------------------------------------------------------------------------
FREIGHT STATE/LOCAL TAX
TOTAL
- ----------------------------------------------------------------------------------------------------------------------------------
BY
-----------------------------------------------
(NIELSEN MEDIA RESEARCH LOGO) AUTHORIZED SIGNATURE
ORIGINAL
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
PURCHASE ORDER * REVISION *
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
DATE OF ORDER PAGE This Number Must Appear on
12/06/95 3 OF 8 All Invoices, Packing Lists,
Shipping Instructions, Etc.
-------------------------------------------------------------------
(NIELSEN LOGO) REQUIRED DELIVERY DATE PURCHASE
06/30/96 ORDER NO. 20A001836
-------------------------------------------------------------------
REQUESTED BY RELEASE NO. REVISION NO.
HAW 000 001
- ------------------------------------------------------------------------------------------------------------------------------
VENDOR: 202715401 BILL TO: NIEL SHIP TO: FRED
- ------------------------------------------------------------------------------------------------------------------------------
TELTRONICS INC NIELSEN MEDIA RESEARCH NIELSEN MEDIA RESEARCH
P.O. BOX 31077 375 PATRICIA AVE. 564 FREDERICA LANE
TAMPA, FL 33631-3077 DUNEDIN, FLORIDA 34698-8190 DUNEDIN, FL 34698-8190
ATTN: ACCOUNTS PAYABLE ATTN: SELESS EMANUELS
ATTN: PURCHASING DEPARTMENT
- ------------------------------------------------------------------------------------------------------------------------------
F.O.B.: SHIP VIA: TERMS:
DESTINATION POINT BEST WAY NET 30
- ------------------------------------------------------------------------------------------------------------------------------
VENDOR'S ACCEPTANCE IS LIMITED TO THE TERMS OF THIS PURCHASE ORDER, INCLUDING THOSE ATTACHED HEREOF; IF DEEMED AN
ACCEPTANCE, THIS PURCHASE ORDER IS CONDITIONED UPON VENDOR'S ACCEPTANCE OF ALL TERMS HEREOF ADDITIONAL TO AND/OR
DIFFERENT FROM VENDOR'S OFFERED TERMS.
- ------------------------------------------------------------------------------------------------------------------------------
UNIT
ITEM QUANTITY OF DESCRIPTION/SPECIFICATIONS UNIT TOTAL/AMOUNT
NO. MEASURE PRICE
- ------------------------------------------------------------------------------------------------------------------------------
** THIS IS A REVISION **
4 100 EA 501-1223-000 52.54 5254.00
PRIMESTAR DISPLAY ATTACHMENT FINAL ASSY.
5 2000 EA 501-1124-000 55.14 110280.00
VRA With Lightning Protection Assembly
6 550 EA 501-1165-000 257.38 141559.00
SDA UNIT
SERIAL DATA ATTACHMENT FINAL ASSEMBLY
7 1 EA TOOLING CHARGE 300.00 300.00
FOR 501-1223-000 PRIMESTAR DISPLAY
ATTACHMENT FINAL ASSEMBLY
SERIAL NUMBER SEQUENCE:
P/N #501-1075-000 -- SERIAL NUMBERS FROM 7781 THRU 8930
P/N #501-1088-000 -- SERIAL NUMBERS FROM 1818 THRU 2017
P/N #501-1180-000 -- SERIAL NUMBERS FROM 2151 THRU 2750
P/N #501-1223-000 -- SERIAL NUMBERS FROM 111 THRU 210
- ----------------------------------------------------------------------------------------------------------------------------------
FREIGHT STATE/LOCAL TAX
TOTAL
- ----------------------------------------------------------------------------------------------------------------------------------
BY
-----------------------------------------------
(NIELSEN MEDIA RESEARCH LOGO) AUTHORIZED SIGNATURE
ORIGINAL
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
PURCHASE ORDER * REVISION *
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
DATE OF ORDER PAGE This Number Must Appear on
12/06/95 4 OF 8 All Invoices, Packing Lists,
Shipping Instructions, Etc.
-------------------------------------------------------------------
(NIELSEN LOGO) REQUIRED DELIVERY DATE PURCHASE
06/30/96 ORDER NO. 20A001836
-------------------------------------------------------------------
REQUESTED BY RELEASE NO. REVISION NO.
HAW 000 001
- ------------------------------------------------------------------------------------------------------------------------------
VENDOR: 202715401 BILL TO: NIEL SHIP TO: FRED
- ------------------------------------------------------------------------------------------------------------------------------
TELTRONICS INC NIELSEN MEDIA RESEARCH NIELSEN MEDIA RESEARCH
P.O. BOX 31077 375 PATRICIA AVE. 564 FREDERICA LANE
TAMPA, FL 33631-3077 DUNEDIN, FLORIDA 34698-8190 DUNEDIN, FL 34698-8190
ATTN: ACCOUNTS PAYABLE ATTN: SELESS EMANUELS
ATTN: PURCHASING DEPARTMENT
- ------------------------------------------------------------------------------------------------------------------------------
F.O.B.: SHIP VIA: TERMS:
DESTINATION POINT BEST WAY NET 30
- ------------------------------------------------------------------------------------------------------------------------------
VENDOR'S ACCEPTANCE IS LIMITED TO THE TERMS OF THIS PURCHASE ORDER, INCLUDING THOSE ATTACHED HEREOF; IF DEEMED AN
ACCEPTANCE, THIS PURCHASE ORDER IS CONDITIONED UPON VENDOR'S ACCEPTANCE OF ALL TERMS HEREOF ADDITIONAL TO AND/OR
DIFFERENT FROM VENDOR'S OFFERED TERMS.
- ------------------------------------------------------------------------------------------------------------------------------
UNIT
ITEM QUANTITY OF DESCRIPTION/SPECIFICATIONS UNIT TOTAL/AMOUNT
NO. MEASURE PRICE
- ------------------------------------------------------------------------------------------------------------------------------
** THIS IS A REVISION **
P/N #501-1124-000 -- SERIAL NUMBERS FROM 21781 THRU 23780
P/N #501-1165-000 -- SERIAL NUMBERS FROM 294 THRU 843
DELIVERY SCHEDULE:
ITEM NUMBER QUANITY DELIVERY DATE
501-1075-000 200 1/02/96
200 2/01/96
150 3/01/96
200 4/01/96
200 5/01/96
200 6/01/96
501-1088-000 100 1/02/96
100 2/01/96
501-1180-000 150 1/02/96
150 2/01/96
150 3/01/96
150 4/01/96
- ----------------------------------------------------------------------------------------------------------------------------------
FREIGHT STATE/LOCAL TAX
TOTAL
- ----------------------------------------------------------------------------------------------------------------------------------
BY
-----------------------------------------------
(NIELSEN MEDIA RESEARCH LOGO) AUTHORIZED SIGNATURE
ORIGINAL
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 5
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
PURCHASE ORDER * REVISION *
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
DATE OF ORDER PAGE This Number Must Appear on
12/06/95 5 OF 8 All Invoices, Packing Lists,
Shipping Instructions, Etc.
-------------------------------------------------------------------
(NIELSEN LOGO) REQUIRED DELIVERY DATE PURCHASE
06/30/96 ORDER NO. 20A001836
-------------------------------------------------------------------
REQUESTED BY RELEASE NO. REVISION NO.
HAW 000 001
- ------------------------------------------------------------------------------------------------------------------------------
VENDOR: 202715401 BILL TO: NIEL SHIP TO: FRED
- ------------------------------------------------------------------------------------------------------------------------------
TELTRONICS INC NIELSEN MEDIA RESEARCH NIELSEN MEDIA RESEARCH
P.O. BOX 31077 375 PATRICIA AVE. 564 FREDERICA LANE
TAMPA, FL 33631-3077 DUNEDIN, FLORIDA 34698-8190 DUNEDIN, FL 34698-8190
ATTN: ACCOUNTS PAYABLE ATTN: SELESS EMANUELS
ATTN: PURCHASING DEPARTMENT
- ------------------------------------------------------------------------------------------------------------------------------
F.O.B.: SHIP VIA: TERMS:
DESTINATION POINT BEST WAY NET 30
- ------------------------------------------------------------------------------------------------------------------------------
VENDOR'S ACCEPTANCE IS LIMITED TO THE TERMS OF THIS PURCHASE ORDER, INCLUDING THOSE ATTACHED HEREOF; IF DEEMED AN
ACCEPTANCE, THIS PURCHASE ORDER IS CONDITIONED UPON VENDOR'S ACCEPTANCE OF ALL TERMS HEREOF ADDITIONAL TO AND/OR
DIFFERENT FROM VENDOR'S OFFERED TERMS.
- ------------------------------------------------------------------------------------------------------------------------------
UNIT
ITEM QUANTITY OF DESCRIPTION/SPECIFICATIONS UNIT TOTAL/AMOUNT
NO. MEASURE PRICE
- ------------------------------------------------------------------------------------------------------------------------------
** THIS IS A REVISION **
501-1223-000 100 2/01/96
501-1124-000 400 3/01/96
600 4/01/96
500 5/01/96
500 6/01/96
501-1165-000 100 3/01/96
150 4/01/96
150 5/01/96
150 6/01/96
DELIVERY SCHEDULE REQUIREMENT
THE VENDOR MUST NOTIFY NIELSON MEDIA RESEARCH AT EXT. 3070 OR EXT. 2961 PRIOR TO SHIPPING
ANY PRODUCTS THAT DO NOT MEET A MINIMUM INVOICE TOTAL OF $1,500.00. ANY DEVIATIONS FROM
THIS PROCEDURE COULD RESULT IN THE REFUSAL OF SUCH DELIVERIES OR A DELAY IN PAYMENT
ASSOCIATED WITH SUCH
- ----------------------------------------------------------------------------------------------------------------------------------
FREIGHT STATE/LOCAL TAX
TOTAL
- ----------------------------------------------------------------------------------------------------------------------------------
BY
-----------------------------------------------
(NIELSEN MEDIA RESEARCH LOGO) AUTHORIZED SIGNATURE
ORIGINAL
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 6
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
PURCHASE ORDER * REVISION *
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
DATE OF ORDER PAGE This Number Must Appear on
12/06/95 6 OF 8 All Invoices, Packing Lists,
Shipping Instructions, Etc.
-------------------------------------------------------------------
(NIELSEN LOGO) REQUIRED DELIVERY DATE PURCHASE
06/30/96 ORDER NO. 20A001836
-------------------------------------------------------------------
REQUESTED BY RELEASE NO. REVISION NO.
HAW 000 001
- ------------------------------------------------------------------------------------------------------------------------------
VENDOR: 202715401 BILL TO: NIEL SHIP TO: FRED
- ------------------------------------------------------------------------------------------------------------------------------
TELTRONICS INC NIELSEN MEDIA RESEARCH NIELSEN MEDIA RESEARCH
P.O. BOX 31077 375 PATRICIA AVE. 564 FREDERICA LANE
TAMPA, FL 33631-3077 DUNEDIN, FLORIDA 34698-8190 DUNEDIN, FL 34698-8190
ATTN: ACCOUNTS PAYABLE ATTN: SELESS EMANUELS
ATTN: PURCHASING DEPARTMENT
- ------------------------------------------------------------------------------------------------------------------------------
F.O.B.: SHIP VIA: TERMS:
DESTINATION POINT BEST WAY NET 30
- ------------------------------------------------------------------------------------------------------------------------------
VENDOR'S ACCEPTANCE IS LIMITED TO THE TERMS OF THIS PURCHASE ORDER, INCLUDING THOSE ATTACHED HEREOF; IF DEEMED AN
ACCEPTANCE, THIS PURCHASE ORDER IS CONDITIONED UPON VENDOR'S ACCEPTANCE OF ALL TERMS HEREOF ADDITIONAL TO AND/OR
DIFFERENT FROM VENDOR'S OFFERED TERMS.
- ------------------------------------------------------------------------------------------------------------------------------
UNIT
ITEM QUANTITY OF DESCRIPTION/SPECIFICATIONS UNIT TOTAL/AMOUNT
NO. MEASURE PRICE
- ------------------------------------------------------------------------------------------------------------------------------
** THIS IS A REVISION **
DELIVERIES.
NOTE:
THIS ORDER IS 100% TOTAL TURNKEY. WORKMANSHIP PER 011-0043-000 NIELSEN
WORKMANSHIP STANDARDS.
FIRST ARTICLE REQUIRED SELLER SHALL NOT FORWARD QUANTITY
SHIPMENTS UNTIL BUYER HAS APPROVED IN WRITING. SELLERS FIRST
ARTICLE PROCESSED OR FABRICATED BY MEANS OF THE TOOLING AND
PROCESS METHOD TO BE USED IN SUCH QUANTITY PRODUCTION.
SELLER SHALL SUBMIT ALL REQUESTS FOR FIRST ARTICLE EITHER BY
FAX OR MAIL. ABSOLUTELY NO PRODUCTION SHALL BEGIN WITHOUT
AN APPROVAL OF SAID FIRST ARTICLE BY NIELSEN. ALL PC WORK
SUBMITTED FOR FABRICATION SHALL HAVE A FIRST ARTICLE
PERFORMED ON THE ART WORK ONLY. THIS SHALL BE RETURNED TO
NIELSEN BY WAY OF A FAX TRANSMITTAL OR BY MAIL. COMPLETE
PRINT PACKAGE ENCLOSED WITH PO IF APPLICABLE WHICH INCLUDES:
ASSEMBLY DRAWINGS AND BILL OF MATERIALS.
CONTACT EITHER RON WIEDLER AT EXT. 7179 OR ALAN WHEELER AT
- ----------------------------------------------------------------------------------------------------------------------------------
FREIGHT STATE/LOCAL TAX
TOTAL
- ----------------------------------------------------------------------------------------------------------------------------------
BY
-----------------------------------------------
(NIELSEN MEDIA RESEARCH LOGO) AUTHORIZED SIGNATURE
ORIGINAL
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 7
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
PURCHASE ORDER * REVISION *
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
DATE OF ORDER PAGE This Number Must Appear on
12/06/95 7 OF 8 All Invoices, Packing Lists,
Shipping Instructions, Etc.
-------------------------------------------------------------------
(NIELSEN LOGO) REQUIRED DELIVERY DATE PURCHASE
06/30/96 ORDER NO. 20A001836
-------------------------------------------------------------------
REQUESTED BY RELEASE NO. REVISION NO.
HAW 000 001
- ------------------------------------------------------------------------------------------------------------------------------
VENDOR: 202715401 BILL TO: NIEL SHIP TO: FRED
- ------------------------------------------------------------------------------------------------------------------------------
TELTRONICS INC NIELSEN MEDIA RESEARCH NIELSEN MEDIA RESEARCH
P.O. BOX 31077 375 PATRICIA AVE. 564 FREDERICA LANE
TAMPA, FL 33631-3077 DUNEDIN, FLORIDA 34698-8190 DUNEDIN, FL 34698-8190
ATTN: ACCOUNTS PAYABLE ATTN: SELESS EMANUELS
ATTN: PURCHASING DEPARTMENT
- ------------------------------------------------------------------------------------------------------------------------------
F.O.B.: SHIP VIA: TERMS:
DESTINATION POINT BEST WAY NET 30
- ------------------------------------------------------------------------------------------------------------------------------
VENDOR'S ACCEPTANCE IS LIMITED TO THE TERMS OF THIS PURCHASE ORDER, INCLUDING THOSE ATTACHED HEREOF; IF DEEMED AN
ACCEPTANCE, THIS PURCHASE ORDER IS CONDITIONED UPON VENDOR'S ACCEPTANCE OF ALL TERMS HEREOF ADDITIONAL TO AND/OR
DIFFERENT FROM VENDOR'S OFFERED TERMS.
- ------------------------------------------------------------------------------------------------------------------------------
UNIT
ITEM QUANTITY OF DESCRIPTION/SPECIFICATIONS UNIT TOTAL/AMOUNT
NO. MEASURE PRICE
- ------------------------------------------------------------------------------------------------------------------------------
** THIS IS A REVISION **
EXT. 7142 AND ARRANGE FOR THE ABOVE FIRST ARTICLE INSPECTION.
NIELSEN MEDIA RESEARCH REQUIRES YOUR ACKNOWLEDGEMENT OF RECEIPT OF THIS PURCHASE
ORDER. PLEASE NOTE DEVIATIONS I.E.: DESCRIPTION, QUANTITY, PRICE, TERMS OF PAYMENT,
FOB, DELIVERY PROMISE DATE(S) AND RETURN PROMPTLY TO THE ATTN OF PENNY HASELOFF
(EXT. 3070) OR ROBERTA MURGO (EXT. 3076). TIME IS OF THE ESSENCE!!!
TERMS: NET 30-DAYS TO ALLOW FOR PURCHASER'S RIGHT OF INSPECTION. THE CREDIT PERIOD
SHALL NOT BEGIN TO RUN UNTIL PURCHASER HAS RECEIVED VENDOR'S INVOICE OR UNTIL 5-DAYS
AFTER PURCHASER'S RECEIPT OF THE GOODS, WHICHEVER IS LATER. IF PURCHASER PARTIALLY
REJECTS A SHIPMENT BECAUSE PART OF THE GOODS ARE NON-CONFORMING THE CREDIT PERIOD AS TO
THE PART SO REJECTED SHALL NOT BEGIN TO RUN UNTIL 5-DAYS AFTER PURCHASER'S RECEIPT OF
CONFORMING GOODS.
NOTE: THIS PURCHASE ORDER IS TAX EXEMPT. NIELSEN MEDIA
- ----------------------------------------------------------------------------------------------------------------------------------
FREIGHT STATE/LOCAL TAX
TOTAL
- ----------------------------------------------------------------------------------------------------------------------------------
BY
-----------------------------------------------
(NIELSEN MEDIA RESEARCH LOGO) AUTHORIZED SIGNATURE
ORIGINAL
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 8
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
PURCHASE ORDER * REVISION *
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
DATE OF ORDER PAGE This Number Must Appear on
12/06/95 8 OF 8 All Invoices, Packing Lists,
Shipping Instructions, Etc.
-------------------------------------------------------------------
(NIELSEN LOGO) REQUIRED DELIVERY DATE PURCHASE
06/30/96 ORDER NO. 20A001836
-------------------------------------------------------------------
REQUESTED BY RELEASE NO. REVISION NO.
HAW 000 001
- ------------------------------------------------------------------------------------------------------------------------------
VENDOR: 202715401 BILL TO: NIEL SHIP TO: FRED
- ------------------------------------------------------------------------------------------------------------------------------
TELTRONICS INC NIELSEN MEDIA RESEARCH NIELSEN MEDIA RESEARCH
P.O. BOX 31077 375 PATRICIA AVE. 564 FREDERICA LANE
TAMPA, FL 33631-3077 DUNEDIN, FLORIDA 34698-8190 DUNEDIN, FL 34698-8190
ATTN: ACCOUNTS PAYABLE ATTN: SELESS EMANUELS
ATTN: PURCHASING DEPARTMENT
- ------------------------------------------------------------------------------------------------------------------------------
F.O.B.: SHIP VIA: TERMS:
DESTINATION POINT BEST WAY NET 30
- ------------------------------------------------------------------------------------------------------------------------------
VENDOR'S ACCEPTANCE IS LIMITED TO THE TERMS OF THIS PURCHASE ORDER, INCLUDING THOSE ATTACHED HEREOF; IF DEEMED AN
ACCEPTANCE, THIS PURCHASE ORDER IS CONDITIONED UPON VENDOR'S ACCEPTANCE OF ALL TERMS HEREOF ADDITIONAL TO AND/OR
DIFFERENT FROM VENDOR'S OFFERED TERMS.
- ------------------------------------------------------------------------------------------------------------------------------
UNIT
ITEM QUANTITY OF DESCRIPTION/SPECIFICATIONS UNIT TOTAL/AMOUNT
NO. MEASURE PRICE
- ------------------------------------------------------------------------------------------------------------------------------
** THIS IS A REVISION **
RESEARCH'S TAX ID NUMBER: 78-11-015003-69.
- ----------------------------------------------------------------------------------------------------------------------------------
FREIGHT STATE/LOCAL TAX
TOTAL $799538.00
- ----------------------------------------------------------------------------------------------------------------------------------
BY /s/ TIMOTHY L. RUSSELL
-----------------------------------------------
(NIELSEN MEDIA RESEARCH LOGO) AUTHORIZED SIGNATURE
ORIGINAL
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 1
<TABLE>
<CAPTION>
EXHIBIT 10.141
- ------------------------------------------------------------------------------------------------------------------------------
PURCHASE ORDER
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
DATE OF ORDER PAGE This Number Must Appear on
12/07/95 1 OF 5 All Invoices, Packing Lists,
Shipping Instructions, Etc.
-------------------------------------------------------------------
(NIELSEN LOGO) REQUIRED DELIVERY DATE PURCHASE
06/30/96 ORDER NO. 20A001847
-------------------------------------------------------------------
REQUESTED BY RELEASE NO. REVISION NO.
HAW 000 000
- ------------------------------------------------------------------------------------------------------------------------------
VENDOR: 202715401 BILL TO: NIEL SHIP TO: FRED
- ------------------------------------------------------------------------------------------------------------------------------
TELTRONICS INC NIELSEN MEDIA RESEARCH NIELSEN MEDIA RESEARCH
P.O. BOX 31077 375 PATRICIA AVE. 564 FREDERICA LANE
TAMPA, FL 33631-3077 DUNEDIN, FLORIDA 34698-8190 DUNEDIN, FL 34698-8190
ATTN: ACCOUNTS PAYABLE ATTN: SELESS EMANUELS
ATTN: PURCHASING DEPARTMENT
- ------------------------------------------------------------------------------------------------------------------------------
F.O.B.: SHIP VIA: TERMS:
DESTINATION POINT BEST WAY NET 30
- ------------------------------------------------------------------------------------------------------------------------------
VENDOR'S ACCEPTANCE IS LIMITED TO THE TERMS OF THIS PURCHASE ORDER, INCLUDING THOSE ATTACHED HEREOF; IF DEEMED AN
ACCEPTANCE, THIS PURCHASE ORDER IS CONDITIONED UPON VENDOR'S ACCEPTANCE OF ALL TERMS HEREOF ADDITIONAL TO AND/OR
DIFFERENT FROM VENDOR'S OFFERED TERMS.
- ------------------------------------------------------------------------------------------------------------------------------
UNIT
ITEM QUANTITY OF DESCRIPTION/SPECIFICATIONS UNIT TOTAL/AMOUNT
NO. MEASURE PRICE
- ------------------------------------------------------------------------------------------------------------------------------
NOTE: THIS PURCHASE ORDER REPLACES PURCHASE ORDER #0006083, DATED 10/05/96.
PLEASE REFERENCE THIS NEW PURCHASE ORDER #20A001847 ON ALL FUTURE CORRESPONDENCE,
ACKNOWLEDGEMENTS, PACKING SLIPS, AND INVOICES.
REFERENCE AI #96-2
NOTE: FIRM PRICING RECEIVED FOR THE FOLLOWING ITEMS PER REFERENCED QUOTE NUMBER:
ITEM #1 - REFERENCE QUOTE #105147
NOTE: FIRM PRICING IS REQUIRED IN WRITING BEFORE ANY PRODUCT(S) MAY BE SHIPPED.
FAILURE TO SUPPLY FIRM PRICING CAN RESULT IN DELAYED PAYMENTS.
1 2800 EA 501-1215-000 313.01 876428.00
S2000 Home Unit w/Tone Dial Assembly,
Version II, Canada, Field
- ----------------------------------------------------------------------------------------------------------------------------------
FREIGHT STATE/LOCAL TAX
TOTAL
- ----------------------------------------------------------------------------------------------------------------------------------
BY
-----------------------------------------------
(NIELSEN MEDIA RESEARCH LOGO) AUTHORIZED SIGNATURE
ORIGINAL
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
PURCHASE ORDER
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
DATE OF ORDER PAGE This Number Must Appear on
12/07/95 2 OF 5 All Invoices, Packing Lists,
Shipping Instructions, Etc.
-------------------------------------------------------------------
(NIELSEN LOGO) REQUIRED DELIVERY DATE PURCHASE
06/30/96 ORDER NO. 20A001847
-------------------------------------------------------------------
REQUESTED BY RELEASE NO. REVISION NO.
HAW 000 000
- ------------------------------------------------------------------------------------------------------------------------------
VENDOR: 202715401 BILL TO: NIEL SHIP TO: FRED
- ------------------------------------------------------------------------------------------------------------------------------
TELTRONICS INC NIELSEN MEDIA RESEARCH NIELSEN MEDIA RESEARCH
P.O. BOX 31077 375 PATRICIA AVE. 564 FREDERICA LANE
TAMPA, FL 33631-3077 DUNEDIN, FLORIDA 34698-8190 DUNEDIN, FL 34698-8190
ATTN: ACCOUNTS PAYABLE ATTN: SELESS EMANUELS
ATTN: PURCHASING DEPARTMENT
- ------------------------------------------------------------------------------------------------------------------------------
F.O.B.: SHIP VIA: TERMS:
DESTINATION POINT BEST WAY NET 30
- ------------------------------------------------------------------------------------------------------------------------------
VENDOR'S ACCEPTANCE IS LIMITED TO THE TERMS OF THIS PURCHASE ORDER, INCLUDING THOSE ATTACHED HEREOF; IF DEEMED AN
ACCEPTANCE, THIS PURCHASE ORDER IS CONDITIONED UPON VENDOR'S ACCEPTANCE OF ALL TERMS HEREOF ADDITIONAL TO AND/OR
DIFFERENT FROM VENDOR'S OFFERED TERMS.
- ------------------------------------------------------------------------------------------------------------------------------
UNIT
ITEM QUANTITY OF DESCRIPTION/SPECIFICATIONS UNIT TOTAL/AMOUNT
NO. MEASURE PRICE
- ------------------------------------------------------------------------------------------------------------------------------
Revision C
SERIAL NUMBER SEQUENCE:
P/N #501-1215-000 -- SERIAL NUMBERS FROM 52157 THRU 54956
DELIVERY SCHEDULE:
ITEM NUMBER QUANITY DELIVERY DATE
501-1215-000 400 1/02/96
450 2/01/96
450 3/01/96
500 4/01/96
500 5/01/96
500 6/01/96
DELIVERY SCHEDULE REQUIREMENT
THE VENDOR MUST NOTIFY NIELSEN MEDIA RESEARCH AT EXT. 3070 OR EXT. 2961 PRIOR TO SHIPPING
ANY PRODUCTS THAT DO NOT MEET A MINIMUM INVOICE TOTAL OF $1,500.00 ANY DEVIATIONS
- ----------------------------------------------------------------------------------------------------------------------------------
FREIGHT STATE/LOCAL TAX
TOTAL
- ----------------------------------------------------------------------------------------------------------------------------------
BY
-----------------------------------------------
(NIELSEN MEDIA RESEARCH LOGO) AUTHORIZED SIGNATURE
ORIGINAL
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
PURCHASE ORDER
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
DATE OF ORDER PAGE This Number Must Appear on
12/07/95 3 OF 5 All Invoices, Packing Lists,
Shipping Instructions, Etc.
-------------------------------------------------------------------
(NIELSEN LOGO) REQUIRED DELIVERY DATE PURCHASE
06/30/96 ORDER NO. 20A001847
-------------------------------------------------------------------
REQUESTED BY RELEASE NO. REVISION NO.
HAW 000 000
- ------------------------------------------------------------------------------------------------------------------------------
VENDOR: 202715401 BILL TO: NIEL SHIP TO: FRED
- ------------------------------------------------------------------------------------------------------------------------------
TELTRONICS INC NIELSEN MEDIA RESEARCH NIELSEN MEDIA RESEARCH
P.O. BOX 31077 375 PATRICIA AVE. 564 FREDERICA LANE
TAMPA, FL 33631-3077 DUNEDIN, FLORIDA 34698-8190 DUNEDIN, FL 34698-8190
ATTN: ACCOUNTS PAYABLE ATTN: SELESS EMANUELS
ATTN: PURCHASING DEPARTMENT
- ------------------------------------------------------------------------------------------------------------------------------
F.O.B.: SHIP VIA: TERMS:
DESTINATION POINT BEST WAY NET 30
- ------------------------------------------------------------------------------------------------------------------------------
VENDOR'S ACCEPTANCE IS LIMITED TO THE TERMS OF THIS PURCHASE ORDER, INCLUDING THOSE ATTACHED HEREOF; IF DEEMED AN
ACCEPTANCE, THIS PURCHASE ORDER IS CONDITIONED UPON VENDOR'S ACCEPTANCE OF ALL TERMS HEREOF ADDITIONAL TO AND/OR
DIFFERENT FROM VENDOR'S OFFERED TERMS.
- ------------------------------------------------------------------------------------------------------------------------------
UNIT
ITEM QUANTITY OF DESCRIPTION/SPECIFICATIONS UNIT TOTAL/AMOUNT
NO. MEASURE PRICE
- ------------------------------------------------------------------------------------------------------------------------------
FROM THIS PROCEDURE COULD RESULT IN THE REFUSAL OF SUCH DELIVERIES OR A DELAY
IN PAYMENT ASSOCIATED WITH SUCH DELIVERIES.
NOTE:
THIS ORDER IS 100% TOTAL TURNKEY. WORKMANSHIP PER 011-0043-000 NIELSEN
WORKMANSHIP STANDARDS.
FIRST ARTICLE REQUIRED SELLER SHALL NOT FORWARD QUANTITY
SHIPMENTS UNTIL BUYER HAS APPROVED IN WRITING. SELLERS FIRST
ARTICLE PROCESSED OR FABRICATED BY MEANS OF THE TOOLING AND
PROCESS METHOD TO BE USED IN SUCH QUANTITY PRODUCTION.
SELLER SHALL SUBMIT ALL REQUESTS FOR FIRST ARTICLE EITHER BY
FAX OR MAIL. ABSOLUTELY NO PRODUCTION SHALL BEGIN WITHOUT
AN APPROVAL OF SAID FIRST ARTICLE BY NIELSEN. ALL PC WORK
SUBMITTED FOR FABRICATION SHALL HAVE A FIRST ARTICLE
PERFORMED ON THE ART WORK ONLY. THIS SHALL BE RETURNED TO
NIELSEN BY WAY OF A FAX TRANSMITTAL OR BY MAIL. COMPLETE
PRINT PACKAGE ENCLOSED WITH PO IF APPLICABLE WHICH INCLUDES:
ASSEMBLY DRAWINGS AND BILL OF MATERIALS.
CONTACT EITHER RON WIEDLER AT EXT. 7179 OR ALAN WHEELER AT
- ----------------------------------------------------------------------------------------------------------------------------------
FREIGHT STATE/LOCAL TAX
TOTAL
- ----------------------------------------------------------------------------------------------------------------------------------
BY
-----------------------------------------------
(NIELSEN MEDIA RESEARCH LOGO) AUTHORIZED SIGNATURE
ORIGINAL
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
PURCHASE ORDER
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
DATE OF ORDER PAGE This Number Must Appear on
12/07/95 4 OF 5 All Invoices, Packing Lists,
Shipping Instructions, Etc.
-------------------------------------------------------------------
(NIELSEN LOGO) REQUIRED DELIVERY DATE PURCHASE
06/30/96 ORDER NO. 20A001847
-------------------------------------------------------------------
REQUESTED BY RELEASE NO. REVISION NO.
HAW 000 000
- ------------------------------------------------------------------------------------------------------------------------------
VENDOR: 202715401 BILL TO: NIEL SHIP TO: FRED
- ------------------------------------------------------------------------------------------------------------------------------
TELTRONICS INC NIELSEN MEDIA RESEARCH NIELSEN MEDIA RESEARCH
P.O. BOX 31077 375 PATRICIA AVE. 564 FREDERICA LANE
TAMPA, FL 33631-3077 DUNEDIN, FLORIDA 34698-8190 DUNEDIN, FL 34698-8190
ATTN: ACCOUNTS PAYABLE ATTN: SELESS EMANUELS
ATTN: PURCHASING DEPARTMENT
- ------------------------------------------------------------------------------------------------------------------------------
F.O.B.: SHIP VIA: TERMS:
DESTINATION POINT BEST WAY NET 30
- ------------------------------------------------------------------------------------------------------------------------------
VENDOR'S ACCEPTANCE IS LIMITED TO THE TERMS OF THIS PURCHASE ORDER, INCLUDING THOSE ATTACHED HEREOF; IF DEEMED AN
ACCEPTANCE, THIS PURCHASE ORDER IS CONDITIONED UPON VENDOR'S ACCEPTANCE OF ALL TERMS HEREOF ADDITIONAL TO AND/OR
DIFFERENT FROM VENDOR'S OFFERED TERMS.
- ------------------------------------------------------------------------------------------------------------------------------
UNIT
ITEM QUANTITY OF DESCRIPTION/SPECIFICATIONS UNIT TOTAL/AMOUNT
NO. MEASURE PRICE
- ------------------------------------------------------------------------------------------------------------------------------
EXT. 7142 AND ARRANGE FOR THE ABOVE FIRST ARTICLE INSPECTION.
NIELSEN MEDIA RESEARCH REQUIRES YOUR ACKNOWLEDGEMENT OF RECEIPT OF THIS PURCHASE
ORDER. PLEASE NOTE DEVIATIONS I.E.: DESCRIPTION, QUANTITY, PRICE, TERMS OF PAYMENT, FOB,
DELIVERY PROMISE DATE(S) AND RETURN PROMPTLY TO THE ATTN OF PENNY HASELOFF (EXT. 3070)
OR ROBERTA MURGO (EXT. 3076). TIME IS OF THE ESSENCE!!!
TERMS: NET 30-DAYS TO ALLOW FOR PURCHASER'S RIGHT OF INSPECTION. THE CREDIT PERIOD
SHALL NOT BEGIN TO RUN UNTIL PURCHASER HAS RECEIVED VENDOR'S INVOICE OR UNTIL 5-DAYS
AFTER PURCHASER'S RECEIPT OF THE GOODS, WHICHEVER IS LATER. IF PURCHASER PARTIALLY
REJECTS A SHIPMENT BECAUSE PART OF THE GOODS ARE NON-CONFORMING THE CREDIT PERIOD AS TO
THE PART SO REJECTED SHALL NOT BEGIN TO RUN UNTIL 5-DAYS AFTER PURCHASER'S RECEIPT OF
CONFORMING GOODS.
NOTE: THIS PURCHASE ORDER IS TAX EXEMPT. NIELSEN MEDIA RESEARCH'S TAX ID NUMBER:
78-11-015003-69.
- ----------------------------------------------------------------------------------------------------------------------------------
FREIGHT STATE/LOCAL TAX
TOTAL
- ----------------------------------------------------------------------------------------------------------------------------------
BY
-----------------------------------------------
(NIELSEN MEDIA RESEARCH LOGO) AUTHORIZED SIGNATURE
ORIGINAL
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 5
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
PURCHASE ORDER
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
DATE OF ORDER PAGE This Number Must Appear on
12/07/95 5 OF 5 All Invoices, Packing Lists,
Shipping Instructions, Etc.
-------------------------------------------------------------------
(NIELSEN LOGO) REQUIRED DELIVERY DATE PURCHASE
06/30/96 ORDER NO. 20A001847
-------------------------------------------------------------------
REQUESTED BY RELEASE NO. REVISION NO.
HAW 000 000
- ------------------------------------------------------------------------------------------------------------------------------
VENDOR: 202715401 BILL TO: NIEL SHIP TO: FRED
- ------------------------------------------------------------------------------------------------------------------------------
TELTRONICS INC NIELSEN MEDIA RESEARCH NIELSEN MEDIA RESEARCH
P.O. BOX 31077 375 PATRICIA AVE. 564 FREDERICA LANE
TAMPA, FL 33631-3077 DUNEDIN, FLORIDA 34698-8190 DUNEDIN, FL 34698-8190
ATTN: ACCOUNTS PAYABLE ATTN: SELESS EMANUELS
ATTN: PURCHASING DEPARTMENT
- ------------------------------------------------------------------------------------------------------------------------------
F.O.B.: SHIP VIA: TERMS:
DESTINATION POINT BEST WAY NET 30
- ------------------------------------------------------------------------------------------------------------------------------
VENDOR'S ACCEPTANCE IS LIMITED TO THE TERMS OF THIS PURCHASE ORDER, INCLUDING THOSE ATTACHED HEREOF; IF DEEMED AN
ACCEPTANCE, THIS PURCHASE ORDER IS CONDITIONED UPON VENDOR'S ACCEPTANCE OF ALL TERMS HEREOF ADDITIONAL TO AND/OR
DIFFERENT FROM VENDOR'S OFFERED TERMS.
- ------------------------------------------------------------------------------------------------------------------------------
UNIT
ITEM QUANTITY OF DESCRIPTION/SPECIFICATIONS UNIT TOTAL/AMOUNT
NO. MEASURE PRICE
- ------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
FREIGHT STATE/LOCAL TAX
TOTAL $876428.00
- ----------------------------------------------------------------------------------------------------------------------------------
BY /s/ TIMOTHY L. RUSSELL
-----------------------------------------------
(NIELSEN MEDIA RESEARCH LOGO) AUTHORIZED SIGNATURE
ORIGINAL
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 6
ADDITIONAL TERMS AND CONDITIONS
1. CONTRACT: This purchase order together with any documents incorporated
herein by reference, constitutes the complete and exclusive statement of the
agreement between the parties. Any proposals for modification of this
agreement made by Vendor in accepting or acknowledging this order are
rejected by Purchaser. Purchaser objects to all Vendor communications
preceding this Purchase Order purporting to confirm any agreement between
Purchaser and Vendor as to the subject matter hereof. Performance of this
order by Vendor shall be deemed acceptance by Vendor of all the terms and
conditions of this agreement. Any contract resulting herefrom shall be
governed, construed and enforced by and under the laws of the State of
Illinois.
2. CHANGES: Purchaser shall have the right at any time prior to the delivery
date of the product to make changes in drawings, designs, specifications,
packaging, time and place of delivery and method of transportation. If any
such changes cause an increase or decrease in the cost, or the time required
for the performance, or other wise effect any other provision of this
agreement, an equitable adjustment shall be made promptly and this
agreement shall be modified in writing accordingly.
3. WARRANTY: Vendor warrants that the product will be merchantable, be free
from all defects of material and workmanship and conform to the description,
that Vendor will convey good title thereto, and that the product will be
delivered free from any security interest or any other lien or encumbrance.
When the product is made according to Vendor's design, Vendor warrants that
the product will be fit for the purposes intended by Purchaser. These
warranties shall survive and shall not be deemed waived by acceptance
and/or payment and shall run to Purchaser and its successors, assigns,
employees and customers. Vendor shall be liable for all damages resulting
from a breach of any of these warranties or any other term or condition of
this agreement.
4. PATENTS: Vendor shall indemnify and save Purchaser harmless from any
liability, loss, damage, judgement or award, including costs and expense,
arising out of any claims or suits for infringement of patents or other
rights purporting to cover the product itself, its method of manufacture or
its normal intended use. Vendor shall at his own expense defend Purchaser
in such claims or suits provided Purchaser shall give Vendor prompt notice
in writing of such claims or suits and shall supply at Vendor's expense all
needed information.
5. CONFIDENTIALITY: If, in the fulfillment of this contract, confidential
information is disclosed to Vendor, Vendor agrees to hold it in the
strictest confidence and not to use or disclose it for any purpose except
as necessary to Vendor's performance under this agreement.
6. FORCE MAJEURE: Neither party shall be liable for failure or delay in the
shipment or acceptance of the product if prevented by the occurrence of a
contingency the non-occurrence of which was a basic assumption on which this
agreement was made or by compliance in good faith with any applicable
governmental regulation, whether valid or invalid. Each party shall
promptly notify the other of any such occurrence. In such an event,
Purchaser may require Vendor to allocate the available supply of product to
Purchaser on a nondiscriminatory basis with other customers of Vendor. At
the option of Purchaser any quantity not shipped as scheduled shall be
deducted from the total quantity purchased by Purchaser or rescheduled for
late delivery. Risk of loss is upon Vendor until actual delivery of the
product at point of destination.
7. PRICE: If price is not stated in this order, the product shall be billed
at the price last quoted or paid, or the prevailing market price, whichever
is lower. If any amount is subsequently found to exceed such applicable
maximum, the excess paid shall be refunded. The cash discount period, if
any, shall be computed as commencing with receipt of the invoice or the
product, whichever is later. Unless expressly provided on the reverse side
hereof, all taxes on the production, delivery, or sale of the product shall
be paid by Vendor and no extra charges shall be paid by Purchaser for any
packaging, packing material or other similar or dissimilar items.
8. CANCELLATION: Without prejudice to any rights or remedies, Purchaser may
cancel this agreement in whole or in part if the product is defective or not
delivered to Purchaser as scheduled, or if Vendor fails to comply with any
of the terms or conditions of this agreement. Purchaser may cancel this
agreement in whole or in part at any time prior to acceptance without cause
by paying Vendor those actual out-of-pocket expenses which it demonstrates
were necessary and incurred specifically for performance under this
Purchase Order; cannot be recovered from third party suppliers; and
pertain to work product, goods or services which cannot be applied to
performance of Vendor's other business.
9. COMPLIANCE WITH LAWS: Vendor shall comply with all federal, state and
local laws and regulations applicable to the production, sale and delivery
of the product. Vendor warrants that the product is produced in compliance
with the applicable requirements of the Fair Labor Standards Act of 1938, as
amended, and all regulations and orders of the U.S. Department of Labor
issued thereunder. Vendor also warrants that the product is produced in
compliance with the President's Executive Order 11246, Part 11, Sub part B,
Section 202, relating to Equal Employment Opportunity, which section is
incorporated herein by reference. Upon request of Purchaser, Vendor shall
supply written certificates as to the foregoing. We are an equal
Employment Opportunity Employer; in compliance with Title 7, Civil Rights
Act 1964, Executive Order 11246 and Revised Order 4; Section 402 of the
Vietnam Era Veterans Readjustment Assistance Act of 1974 and Section 503 of
the Rehabilitation Act of 1973.
10. NON-ASSIGNMENT: Any assignment or delegation by Vendor of this agreement
or any payment due hereunder without the prior written consent of Purchaser
shall be void.
11. DELIVERY: If delivery date is unspecified, Purchaser may cancel this
agreement in whole or in part if Vendor fails to deliver the product within
thirty (30) days from the date of this order. If specified on the reverse
side hereof, time, rate and manner of delivery are essential to this order,
Purchaser reserves the right to cancel this order and reject the goods upon
default by Vendor in such time, rate or manner of delivery. Purchaser also
reserves the right to refuse shipments made in advance of the delivery
schedule appearing on the reverse side hereof.
12. INSPECTION: The product is subject to Purchaser's inspection and approval
within a reasonable time after delivery notwithstanding any prior payment.
Purchaser, without prejudice to any other rights or remedies, shall have the
right to reject defective product and, at Vendor's risk and expense, return
it to Vendor or dispose of it according to Vendor's instructions. No
product returned as defective shall be replaced with the written consent of
Purchaser.
13. REMEDIES CUMULATIVE: Purchaser's remedies shall be cumulative and any
remedies herein specified do not exclude any remedies allowed by law.
Waiver of any breach shall not constitute waiver of any other breach of the
same or any other provision. Acceptance of any items of payment therefore
shall not waive any breach.
<PAGE> 1
EXHIBIT 10.142
MEMORANDUM OF AGREEMENT
The Memorandum of Agreement ("MOA") made this 11th day of
March, 1996 by and among Teltronics, Inc., a Delaware corporation with offices
located at 2150 Whitfield Industrial Way, Sarasota, Florida 34243
("Teltronics"), as agent and on behalf of ISL, Inc., a Delaware corporation to
be formed ("ISL"), Interactive Solutions Limited, a Kentucky limited liability
company ("Interactive") and its members, Kevin Rogers residing at
______________, ______________, ____________ _______, Bruce Hanks residing at
______________, ______________, ____________ _______, Mike Jonas residing at
______________, ______________, ____________ _______, (the three members
hereinafter referred to as the "Group").
WHEREAS, certain technology was developed by the Group and
Interactive together with any and all rights associated therewith, including,
but not limited to the ideas, designs, patents, trademarks and proprietary
information related to the business of Interactive ("Technology"); and
WHEREAS, the Group owns 68.91% of the outstanding securities
of Wesco Capital Holding Corp. ("Wesco")(the "Shares"); and
WHEREAS, on the terms and subject to the conditions described
herein ISL desires to purchase from Interactive and the Group and Interactive
and the Group desire to sell to ISL all of their rights, title and interest in
and to the Shares of Wesco and all of their rights, title and interest in and
to the Technology.
NOW THEREFORE, in consideration of the foregoing premises and
the mutual agreements hereinafter set forth, the parties hereto agree as
follows:
1. ORGANIZATION, CAPITALIZATION OF ISL.
(a) Certificate of Incorporation. As soon
practicable after signing of this MOA, Teltronics shall cause ISL to be
incorporated under the State of Delaware by executing and signing with the
Delaware Secretary a Certificate of Incorporation.
<PAGE> 2
2. PURPOSE. ISL shall be formed to acquire the Shares and
Technology in order to research and develop hardware and software technologies
for the telecommunications and computer industry and to engage in any lawful
act or activity for which corporations may be organized pursuant to the
Delaware Corporation Law.
3. CORPORATE MANAGEMENT.
(a) Directors. The following individuals will be the
initial members of the Board of Directors of ISL upon the Closing as defined in
paragraph 6 of the MOA ("Closing"):
<TABLE>
<S> <C>
Ewen R. Cameron CEO
Kevin Rogers President
Paul Shrader CFO
</TABLE>
(b) Officers. The following individuals will be the
initial officers of ISL and will hold the office set forth below opposite their
name upon the Closing:
<TABLE>
<S> <C>
Ewen R. Cameron Chief Executive Officer
Paul Shrader Chief Financial Officer
Kevin Rogers President
Bruce Hanks Vice President
</TABLE>
(c) Employment Agreement. On or at the Closing, ISL
shall take any and all appropriate action to enter into separate Employment
Agreements with each of Kevin Rogers and Bruce Hanks providing for a term of
five (5) years. The Employment Agreement shall allow each employee to be
eligible to participate in any benefit plans offered to salaried employees of
Teltronics. The Employment Agreement may be terminated at any time for cause,
and will provide for ninety (90) days severance pay if terminated without cause
and shall contain such other terms deemed necessary or appropriate by the
mutual agreement of ISL and the employee.
(d) Administrative Services Agreement. At the Closing,
ISL shall enter into an Administrative Services Agreement with Teltronics
pursuant to which Teltronics shall provide management and administrative
services to ISL at a level to be mutually determined for which Teltronics shall
be compensated for providing such management and administrative services.
4. PURCHASE OF AND SALES OF SHARES AND TECHNOLOGY. At the
Closing and subject to the terms and conditions of this MOA:
2
<PAGE> 3
(a) Group shall sell, assign, transfer and deliver to
ISL and ISL shall purchase from the Group all of the Shares of Wesco, held by
them, free and clear of all liens, claims, charges, restrictions, equities or
encumbrances of any kind.
(b) Group shall sell, assign, transfer and deliver to
ISL and ISL shall purchase from Group all of their rights, title and interest
in and to the Technology.
(c) Interactive shall sell to ISL and ISL shall purchase
from Interactive all of its rights, title and interest in and to the
Technology.
(d) As consideration for the Shares and all interest of
the Group and Interactive in and to the Technology, ISL shall deliver
1,000,000 Non-Voting Convertible Common Shares of Teltronics par value of
$.001/share (the "Convertible Common") which shall contain and be issued
subject to the terms described in Exhibit A to this MOA.
(e) Group and Interactive shall enter into an
Indemnification Agreement under which Group and Interactive shall agree that
the Convertible Common shall be held in escrow to indemnify and hold harmless
ISL and/or Teltronics, from and against:
(i) any breach of the representations and
warranties made by Group in this MOA; and
(ii) any claim made or threatened to be made by or
on behalf of Wesco and/or any party other than Group relating to this MOA, the
transactions contemplated hereunder and/or the Technology.
5. REPRESENTATIONS AND WARRANTIES.
Group jointly and severally represent and warrant to ISL and
Teltronics, as follows:
(a) Group owns and holds legal title to the Shares free
and clear of all liens, claims, equities or encumbrances of any kind.
(b) Group has all of the necessary authority to enter
into and is not prohibited from entering into, this MOA and perform and
complete the transactions contemplated hereunder.
3
<PAGE> 4
(c) The execution and delivery of this MOA does not and
the performance of this MOA will not conflict with or result in a breach or
violation under, the terms of any agreement, indenture, mortgage or other
instrument to which Group or their interest in the Technology or Shares are
subject.
6. CLOSING. Except as may be otherwise agreed to by the parties,
the closing of the purchase and sale ("Closing") of the Shares and Technology
shall take place at ISL offices, 2150 Whitfield Industrial Way, Sarasota,
Florida on or before the 15th day of April, 1996 ("Closing Date") at 10:00 a.m.
7. CONDITIONS PRECEDENT TO TELTRONICS' OBLIGATIONS. All of the
obligations of ISL and/or Teltronics under this MOA are subject to fulfillment
prior to or at the Closing of the following to the satisfaction of Teltronics:
(a) Interactive and/or Group have good and marketable
title to the Technology, free and clear of all liens, security interests,
licenses, encumbrances of any kind or nature whether recorded or resulting by
operation of law.
(b) Each of the representations and warranties of the
Group contained in the MOA shall be true at the Closing as though such
representations and warranties were made at the Closing.
(c) There shall have occurred no change in, damage to or
claims against the Technology.
(d) Interactive shall have acquired, on terms and
conditions satisfactory to Teltronics, a release by Wesco of any and all
claims by Wesco for an aggregate payment of $100,000.
8. MISCELLANEOUS PROVISIONS.
(a) Entire Agreement. This instrument contains the
entire agreement of the parties with respect to its subject matter and
supersedes and replaces any prior agreement or understanding (oral and written)
including specifically but not exclusively the Memorandum of Agreement dated
March 8, 1996, and no amendment, modification or waiver of any provision hereof
shall be valid unless it be in writing and signed by all the parties hereto.
4
<PAGE> 5
(b) Non-Waiver. The waiver of or failure to take action
with regard to any breach of any term or condition of this MOA shall not be
deemed to constitute a continuing waiver or a waiver of any other breach of the
same or any other term or condition.
(c) Paragraph and Other Headings. The paragraph and
other headings contained in this MOA are for reference purposes only and shall
not in any way affect the meaning or interpretation of this Agreement.
(d) Counterparts. This MOA may be executed
simultaneously in two (2) or more counterparts, any of which shall be deemed an
original, and all of which together shall constitute one and the same
instrument, notwithstanding that all of the parties are not signatory to the
original or the same counterparts.
(e) Persons Bound. This MOA and all of the provisions
hereof shall be binding upon and inure to the benefit of the parties and their
respective legal representatives, heirs, distributees, successors and assigns.
(f) Choice of Law. This MOA shall be construed and
enforced in accordance with and governed by the laws of the State of Florida.
(g) Gender and Number. The masculine gender as used in
this MOA shall be deemed to refer to and include the feminine and neuter
genders and the singular and plural when required by the context shall be
deemed to include the plural or singular, as the case may be; the word "person"
shall include corporation, firm, partnership or other form of association.
(h) Severability. If any provision of this MOA or the
application thereof to any person or circumstances is held invalid, the
remainder of this MOA and the application of that provision to other persons
and circumstances shall not be affected thereby.
(i) Inconsistent Provisions. If any provisions of this
MOA is inconsistent with any provision of any other document requirement or
executed pursuant to this MOA, the provisions of this MOA shall be controlling
and supersede such other document.
IN WITNESS WHEREOF, the parties have caused this MOA to be executed
and delivered the date and year first above written.
Interactive Solutions Limited
5
<PAGE> 6
a Kentucky Limited Liability Company
By: /s/ Kevin Rogers
-------------------------------------
Its:
President
------------------------------------
Teltronics, Inc., as agent for and
on behalf of a corporation to be formed
By: /s/ Ewen R. Cameron
-------------------------------------
Its:
President & CEO
------------------------------------
/s/ Kevin Rogers
----------------------------------------
Kevin Rogers
/s/ Bruce Hanks
----------------------------------------
Bruce Hanks
/s/ Mike Jonas
----------------------------------------
Mike Jonas
6
<PAGE> 7
EXHIBIT A
TELTRONICS, INC.
SUMMARY OF PROPOSED TERMS
ISSUER: Teltronics, Inc. ("Issuer")
SECURITIES: 1,000,000 shares of non-voting common stock,
$.001 par value ("Convertible Common").
DIVIDENDS: Shares will have dividends only if,
when and as declared by the Board of
Directors.
VOTING: Will have no voting rights except with respect
to any attempted amendment, repeal or
modification of the Certificate of
Incorporation or Designations by Issuer
changing the rights of the Convertible Common.
CONVERSION: Provided the Group is not in default of its
obligations under the MOU, the Group will
have the option to convert the Convertible
Common to Common stock of the Issuer on a
one share for one share basis thirty days
after demonstration of each of the following
to the satisfaction of the Issuer ("Conversion
Date"):
(i) ISL enters into and receives a fully executed
contract from the U.S. Department of Defense,
Department of the Army, utilizing the
Technology, with contract revenues of no less
than $50,000,000 or ISL enters into and
receives a fully executed major contract
utilizing the Technology, with contract
revenues of $50,000,000 or more on terms and
conditions acceptable to the Board of
Directors; and
(ii) Issuer completes due diligence and
investigation of the Group, Wesco and the
Partnership with respect to ownership of the
Technology and authorization of its transfer.
REDEMPTION: Issuer will have the right to redeem, in whole
or in part, the Convertible Common not
previously converted at any time commencing
six months subsequent to the Conversion Date
by payment of a redemption price equal to
$500,000 ("Conversion Price") plus 15% of the
Conversion Price for each year the Convertible
Common are oustanding prior to conversion.
RESTRICTED SECURITIES: The Shares will be restricted securities
within the meaning of Rule 144 promulgated
under the Securities Act of 1933, as amended.
<PAGE> 8
SHAREHOLDER
AGREEMENT: The Group and Issuer will enter into a
Shareholder Agreement which will provide that:
(i) The holder of the Convertible Common will not
acquire any additional Common Shares of Issuer
from any party nor grant to or receive from
any other party any voting rights with respect
to the Common Shares for a period of five
years without the approval of two thirds of
the members of the Board of Directors of the
Issuer.
(ii) The holder will not sell, transfer or dispose
any of the Convertible Common and/or the
Common without offering Issuer a right of
first refusal to acquire such Convertible
Common and/or Common on the same terms and
conditions proposed by any third party.
CERTIFICATE OF
INCORPORATION: Issuance of the Convertible Common requires
amendments to the Issuer's Certificate of
Incorporation to be approved at the next
meeting by the stockholders of the Issuer.
2
<PAGE> 1
EXHIBIT 10.143
LINE NOTE #1 Sarasota, Florida
November 7, 1995
$100,000.00
FOR VALUE RECEIVED, the undersigned, AT Supply, Inc., a Texas corporation
("Company") having an office at 4703 Shavano Oak, San Antonio, Texas 78249,
hereby promises to pay to the order of TTG ACQUISITION, INC., a Delaware
corporation ("TTG") at its offices at 2150 Whitfield Industrial Way, Sarasota,
Florida 34243, or at TTG's option, at such other place as may be designated
from time to time by TTG, on or before October 31, 1996, in lawful money of the
United States of America, a principal amount equal to the lesser of (a) ONE
HUNDRED THOUSAND DOLLARS ($100,000.00) or (b) the aggregate amount of all
Advances made to Company, together with interest thereon as provided
below. Notwithstanding anything in this Line Note to the contrary, this Line
Note shall be payable upon demand by TTG, together with interest thereon as
provided below.
The date and the amount of each Advance, each payment and prepayment
thereof, and the outstanding unpaid principal balance of this Line Note shall be
inscribed by TTG on the schedule attached hereto and made a part hereof and any
subsequent continuation thereof ("Schedule"). Each entry on the Schedule shall
be prima facie evidence of the facts so set forth. No failure by TTG to make,
and no error by TTG in making any inscription on the Schedule shall affect
Company's obligation to repay the full principal amount advanced by TTG to or
for the account of Company or Company's obligation to pay interest thereon at
the agreed upon rate.
This Line Note shall bear interest from the date hereof until maturity
(whether by acceleration or otherwise) on the principal balance of Advances
from time to time unpaid plus one and one-half percent (1-1/2%). Interest
shall be payable on this Line Note on the first day of each month in arrears
and on the date that this Line Note is paid in full. "Prime Rate" means the
rate of interest publicly announced by Barnett Bank from time to time as its
prime rate for calculating interest on certain loans.
<PAGE> 2
After maturity, whether by acceleration or otherwise, this Line Note shall
bear interest at the rate of three percent (3%) plus the rate otherwise
applicable on this Line Note until this Line Note is paid in full; provided,
however, in no event shall the rate of interest on this Line Note exceed the
maximum rate authorized by applicable law.
If any installment of this Line Note is not paid when due, whether because
such installment becomes due on a day other than a Business Day, or for any
other reason, Company will pay interest thereon at the applicable rate until
the date of actual receipt of such installment by TTG of this Line Note.
This Line Note is secured under a Security Agreement, and related
instruments, as more particularly described and provided therein, and is
entitled to the benefits thereof.
No failure by TTG to exercise, and no delay in exercising, any right or
remedy hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise by TTG of any right to remedy hereunder preclude any other or
further exercise thereof or the exercise of any other right or remedy. The
rights and remedies of TTG as herein specified as cumulative and not exclusive
of any other rights or remedies which TTG may otherwise have, including,
without limitation, any rights or remedies TTG may have under any security
agreements.
No modification, rescission, waiver, forbearance, release or amendment of
any provision of this Line Note shall be made except by a written agreement
duly executed by Company and TTG.
Company hereby waives diligence, presentment, protest and demand, and also
notice of protest, demand, dishonor and nonpayment of this Line Note.
Company agrees to pay all costs and expenses incurred by TTG in enforcing
this Line Note or in collecting the indebtedness evidenced hereby, including,
without limitation, actual attorneys' fees and expenses.
This Line Note shall be construed under, and governed by, the internal
laws of the State of Florida without regard to principles of conflicts of laws.
<PAGE> 3
Company agrees that any action or proceeding to enforce or arising out of
this Line Note may be commenced in the Circuit Court of Florida in Manatee
County and Company waives personal service of process and agrees that a summons
and complaint commencing an action or proceeding in any such court shall be
properly served and shall confer personal jurisdiction if served by registered
mail to Company at the address specified above, or as otherwise provided by the
laws of the State of Florida.
Company and TTG hereby knowingly, voluntarily, and intentionally waive any
right to trial by jury Company and TTG may have in any action or proceeding, in
law or in equity, in connection with this Line Note or the transactions related
hereto. Company represents and warrants that no representative or agent of TTG
has represented, expressly or otherwise, that TTG will not, in the event of
litigation, seek to enforce this jury trial waiver. Company acknowledges that
TTG has been induced to enter into this Line Note by, among other things, the
provisions of this Section.
AT Supply, Inc.
By: /s/ John S. Stephenson
----------------------
John S. Stephenson, President
WITNESS:
By: /s/ Michael Godowns
-------------------
Michael Godowns
<PAGE> 4
SCHEDULE
LINE NOTE #1
NOVEMBER 7, 1995
<TABLE>
<CAPTION>
=================================================================================
AGGREGATE
AMOUNT OF OUTSTANDING
AMOUNT OF ADVANCE PAID PRINCIPAL NOTATION
DATE ADVANCE OR PREPAID BALANCE MADE BY
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
10-26-95 $ 19,000.00 $ 19,000.00 P. D. Shrader
- ---------------------------------------------------------------------------------
11-07-95 $ 20,000.00 $ 39,000.00 P. D. Shrader
- ---------------------------------------------------------------------------------
11-14-95 $ 40,000.00 $ 79,000.00 P. D. Shrader
- ---------------------------------------------------------------------------------
11-17-95 $ 10,000.00 $ 89,000.00 P. D. Shrader
- ---------------------------------------------------------------------------------
11-29-95 $ 11,000.00 $100,000.00 P. D. Shrader
from total of
$ 40,000.00
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
=================================================================================
</TABLE>
<PAGE> 1
EXHIBIT 10.144
LINE NOTE -#2 Sarasota, Florida
November 29, 1995
$100,000.00
FOR VALUE RECEIVED, the undersigned, AT Supply, Inc., a Texas corporation
("Company") having an office at 4703 Shavano Oak, San Antonio, Texas 78249,
hereby promises to pay to the order of TTG ACQUISITION, INC., a Delaware
corporation ("TTG") at its offices at 2150 Whitfield Industrial Way, Sarasota,
Florida 34243, or at TTG's option, at such other place as may be designated
from time to time by TTG, on or before October 31, 1996, in lawful money of the
United States of America, a principal amount equal to the lesser of (a) ONE
HUNDRED THOUSAND DOLLARS ($100,000.00) or (b) the aggregate amount of all
Advances made to Company, together with interest thereon as provided below.
Notwithstanding anything in this Line Note to the contrary, this Line Note
shall be payable upon demand by TTG, together with interest thereon as provided
below.
The date and the amount of each Advance, each payment and prepayment
thereof, and the outstanding unpaid principal balance of this Line Note shall
be inscribed by TTG on the schedule attached hereto and made a part hereof and
any subsequent continuation thereof ("Schedule"). Each entry on the Schedule
shall be prima facie evidence of the facts so set forth. No failure by TTG to
make, and no error by TTG in making any inscription on the Schedule shall
affect Company's obligation to repay the full principal amount advanced by TTG
to or for the account of Company or Company's obligation to pay interest
thereon at the agreed upon rate.
This Line Note shall bear interest from the date hereof until maturity
(whether by acceleration or otherwise) on the principal balance of Advances
from time to time unpaid plus one and one-half percent (1-1/2%). Interest
shall be payable on this Line Note on the first day of each month in arrears
and on the date that this Line Note is paid in full. "Prime Rate" means the
rate of interest publicly announced by Barnett Bank from time to time as its
prime rate for calculating interest on certain loans.
<PAGE> 2
After maturity, whether by acceleration or otherwise, this Line Note
shall bear interest at the rate of three percent (3%) plus the rate otherwise
applicable on this Line Note until this Line Note is paid in full; provided,
however, in no event shall the rate of interest on this Line Note exceed the
maximum rate authorized by applicable law.
If any installment of this Line Note is not paid when due, whether
because such installment becomes due on a day other than a Business Day, or for
any other reason, Company will pay interest thereon at the applicable rate
until the date of actual receipt of such installment by TTG of this Line Note.
This Line Note is secured under a Security Agreement, and related
instruments, as more particularly described and provided therein, and is
entitled to the benefits thereof.
No failure by TTG to exercise, and no delay in exercising, any right or
remedy hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise by TTG of any right to remedy hereunder preclude any other or
further exercise thereof or the exercise of any other right or remedy. The
rights and remedies of TTG as herein specified are cumulative and not exclusive
of any other rights or remedies which TTG may otherwise have, including,
without limitation, any rights or remedies TTG may have under any security
agreements.
No modification, rescission, waiver, forbearance, release or amendment
of any provision of this Line Note shall be made except by a written agreement
duly executed by Company and TTG.
Company hereby waives diligence presentment, protest and demand, and
also notice of protest, demand, dishonor and nonpayment of this Line Note.
Company agrees to pay all costs and expenses incurred by TTG in
enforcing this Line Note or in collecting the indebtedness evidenced hereby,
including, without limitation, actual attorneys' fees and expenses.
This Line Note shall be construed under, and governed by, the internal
laws of the State of Florida without regard to principles of conflicts of laws.
<PAGE> 3
Company agrees that any action or proceeding to enforce or arising out
of this Line Note may be commenced in the Circuit Court of Florida in Manatee
County and Company waives personal service of process and agrees that a summons
and complaint commencing an action or proceeding in any such court shall be
properly served and shall confer personal jurisdiction if served by registered
mail to Company at the address specified above, or as otherwise provided by the
laws of the State of Florida.
Company and TTG hereby knowingly, voluntarily, and intentionally waive
any right to trial by jury Company and TTG may have in any action or
proceeding, in law or in equity, in connection with this Line Note or the
transactions related hereto. Company represents and warrants that no
representative or agent of TTG has represented, expressly or otherwise, that
TTG will not, in the event of litigation, seek to enforce this jury trial
waiver. Company acknowledges that TTG has been induced to enter into this Line
Note by, among other things, the provisions of this Section.
AT Supply, Inc.
By: /s/ John P. Stephenson
-----------------------------
John P. Stephenson, President
WITNESS:
By: /s/ Michael Godowns
--------------------
Michael Godowns
<PAGE> 4
SCHEDULE
LINE NOTE #2
NOVEMBER 29, 1995
<TABLE>
<CAPTION>
=============================================================================================================
AGGREGATE
AMOUNT OF OUTSTANDING
AMOUNT OF ADVANCE PAID PRINCIPAL NOTATION
DATE ADVANCE OR PREPAID BALANCE MADE BY
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
11-29-95 $ 29,000.00 $ 29,000.00 P. D. Shrader
remaining from
total of $ 40,000.00
- -------------------------------------------------------------------------------------------------------------
12-01-95 $ 15,000.00 $ 44,000.00 P. D. Shrader
- -------------------------------------------------------------------------------------------------------------
12-14-95 $ 32,000.00 $ 76,000.00 P. D. Shrader
- -------------------------------------------------------------------------------------------------------------
12-29-95 $ 20,000.00 $ 96,000.00 P. D. Shrader
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
=============================================================================================================
</TABLE>
<PAGE> 1
EXHIBIT 10.145
SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT
THIS SECOND AMENDMENT TO LOAN SECURITY AGREEMENT (this "Amendment") is
made and entered into as of December 29, 1995, by and among TELTRONICS, INC., a
Delaware corporation (hereinafter referred to as "Teltronics") with its chief
executive office and principal place of business at 2150 Whitfield Industrial
Way, Sarasota, Florida 34243; AT SUPPLY, INC., a Texas corporation (hereinafter
referred to "ATS"; Teltronics and ATS are collectively referred to hereinafter
as "Borrowers" and individually as a "Borrower"); and THE CIT GROUP/CREDIT
FINANCE, INC., a Delaware corporation (hereinafter referred to as "Lender")
with an office at 135 West 50th Street, New York, New York 10020.
RECITALS:
Lender and Teltronics are parties to a certain Loan and Security
Agreement dated October 28, 1994, as amended by that certain letter agreement
dated December 27, 1994 (as at any time amended, the "Loan Agreement"),
pursuant to which Lender has made certain revolving credit and term loans to
Teltronics.
TTG Acquisition Corp. ("TTG") is a wholly-owned subsidiary of
Teltronics, and TTG owns eighty percent (80%) of the issued and outstanding
capital stock of ATS.
In order to utilize the financial powers of Borrowers in the most
efficient and economic manner and as a matter of administrative convenience,
Teltronics and ATS desire that ATS become a party to the Loan Agreement and
that Lender make revolving loans thereunder to Borrowers based upon the value
of the assets of Borrowers.
Borrowers' business is a mutual and collective enterprise and
Borrowers believe that the consolidation of all loans and other financial
accommodations under the Loan Agreement will enhance the aggregate borrowing
powers of Borrowers and ease the administration of their loan relationships
with Lender, all to the mutual advantage of Borrowers.
As an accommodation to Borrowers and at Borrowers' request in
furtherance of Borrowers' mutual and collective enterprise, Lender is willing
to extend credit to Borrowers and to administer Borrowers' collateral security
therefor on a combined basis in accordance with the terms of the Loan Agreement
as amended hereby.
The parties desire to amend the Loan Agreement as hereinafter set
forth.
NOW, THEREFORE, for and in consideration of TEN DOLLARS ($10.00), in
hand paid and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the
<PAGE> 2
parties hereto, intending to be legally bound hereby, agree as follows:
1. DEFINITIONS. All capitalized terms used in this Amendment,
unless otherwise defined herein, shall have the meaning ascribed to such terms
in the Loan Agreement.
2. ASSUMPTION OF LOANS. In consideration of Lender's consent to
ATS becoming a party to the Loan Agreement, ATS assumes and agrees to be
jointly and severally liable with Teltronics for all Revolving Loans and the
Term Loan outstanding on the date of this Agreement and hereafter outstanding
from time to time under the Loan Agreement, together with all fees, expenses
and other charges payable in the collection thereof or otherwise in connection
therewith.
3. CO-BORROWING ARRANGEMENT. Borrowers acknowledge that they have
requested Lender to extend financial accommodations to them, on a combined
basis, in accordance with the provisions of the Loan Agreement as hereby
amended. Borrowers shall be jointly and severally liable for the payment of
the Term Loan and all Revolving Loans heretofore or hereafter made by Lender
under the Loan Agreement and all interest, fees and other charges payable in
connection with the Term Loan and the Revolving Loans. A request by
Teltronics for a Revolving Loan shall be deemed to be a request for a Revolving
Loan by both of them, and each shall be an agent for the other for such
purposes, and Revolving Loan made by Lender under the Loan Agreement, whether
or not advanced to a bank account in the name of only one of them, shall be
deemed to be for the account and mutual benefit of both of them; provided,
however, that in no event shall Revolving Loans made by Lender based on the
value of the Eligible Inventory and Eligible Accounts of ATS exceed $500,000 in
the aggregate. ATS hereby appoints Teltronics as, and Teltronics shall act
under this Agreement as, the representative of ATS for all purposes, including
requesting borrowings and receiving account statements and other notices and
communications to Borrowers (or either of them) from Lender. Lender may rely,
and shall be fully protected in relying on any request for borrowing,
disbursement instructions, reports, information or any other notice or
communication made or given by Teltronics, whether in its own name, on behalf of
ATS or on behalf of the "Borrowers" and Lender shall have no obligation to make
any inquiry or request any confirmation from or on behalf of ATS as to the
binding effect on ATS of any such request, instruction, report, information,
notice or communication, nor shall the joint and several character of
Borrowers' liability for the Obligations be affected. Each loan made by Lender
shall be disbursed to the loan account of the Borrower for whom such loan was
requested, and each Borrower confirms that such arrangement shall have no
effect on the joint and several character of their liability for the
Obligations to the extent provided herein and in the Loan Agreement.
-2-
<PAGE> 3
4. Conforming Global Amendments. The Loan Agreement is hereby amended to
effect the following conforming global amendments:
(a) All references to "Borrower" shall mean both Teltronics and ATS,
or either of them;
(b) All references to Eligible Accounts or Eligible Inventory shall be
understood to mean and include any accounts of Teltronics or ATS that meet
the criteria for Eligible Accounts pursuant to subsection 2.1(d) of the
Loan Agreement and any inventory of Teltronics or ATS that meets the
criteria for Eligible Inventory under subsection 2.1(e) of the Loan
Agreement; and
(c) Any requirement for the giving by Lender of any notice to
Borrowers shall be deemed fully complied with and discharged by the giving
of such notice to either Teltronics or ATS, and notice to either shall be
deemed to constitute an effective notice to both.
5. Specific Amendments to Loan Agreement. The Loan Agreement is hereby
amended as follows:
(a) By adding the following new Sections 1.3 and 1.4 to the Loan
Agreement:
1.3. "TELTRONICS" means Teltronics, Inc., a Delaware corporation,
and its successors and assigns.
1.4. "ATS" means AT Supply, Inc., a Texas corporation, and its
successors and assigns.
(b) By adding the following sentence to the end of Section 2.3(e) of
the Loan Agreement:
THIS PARAGRAPH INCLUDES INDEMNIFICATION AGAINST LIABILITY, LOSSES,
DAMAGES, SUITS, ACTIONS OR PROCEEDINGS CAUSED IN WHOLE OR IN PART BY THE
NEGLIGENCE OF LENDER OR ITS DIRECTORS, OFFICERS, AGENTS, EMPLOYEES,
PARTICIPANTS AND/OR ASSIGNS.
(c) By deleting Section 9.9 of the Loan Agreement in its entirety and
by substituting the following in lieu thereof:
9.9 THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE IN WHICH THE OFFICE OF LENDER SET FORTH IN
SECTION 10.6(a)BELOW IS LOCATED, PROVIDED, THAT THE CREATION, PERFECTION
AND PRIORITY OF ANY SECURITY INTEREST IN OR LIEN ON ANY COLLATERAL AND
THE EXERCISE OF ANY RIGHT OR REMEDY WITH RESPECT TO ANY COLLATERAL SHALL
BE GOVERNED BY THE SUBSTANTIVE LAWS OF THE STATE IN WHICH SUCH
COLLATERAL IS LOCATED.
3
<PAGE> 4
(d) By adding the following new sections to Section 9 of the Loan
Agreement:
9.11. THIS AGREEMENT IS INTENDED BY THE BORROWERS AND THE LENDER TO
BE THE FINAL COMPLETE AND EXCLUSIVE EXPRESSION OF THE AGREEMENT AMONG
THEM WITH RESPECT TO THE SUBJECT MATTER HEREOF. THIS AGREEMENT
SUPERSEDES ANY AND ALL PRIOR ORAL OR WRITTEN AGREEMENTS RELATING TO THE
SUBJECT MATTER HEREOF AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. NO
MODIFICATION, RESCISSION, WAIVER, RELEASE OR AMENDMENT OF ANY PROVISION
OF THIS AGREEMENT SHALL BE MADE, EXCEPT BY A WRITTEN AGREEMENT SIGNED BY
THE BORROWERS AND A DULY AUTHORIZED OFFICER OF LENDER.
9.12. Joint and Several Liability.
(a) Joint and Several Liability. All of the Obligations shall
constitute the joint and several, direct and general obligation of
both Borrowers, and Borrowers shall be jointly and severally,
directly and unconditionally liable to Lender for all of the
Obligations, it being agreed that the advances to either Teltronics
or ATS inure to the benefit of both Borrowers, and that the
Lender is relying on the joint and several liability of Borrowers in
extending Revolving Loans and other financial accommodations
hereunder. Teltronics and ATS each hereby unconditionally and
irrevocably agrees that upon default in the payment when due
(whether at stated maturity, by acceleration or otherwise) of any
principal of, or interest owed on, any Revolving Loan or Other
Obligation payable to Lender, it will forthwith pay the same,
without notice or demand.
(b) No Reduction in Obligations. No payment or payments made by
Teltronics or ATS or any other Person or received or collected by
Lender from Teltronics or ATS or any other Person by virtue of any
action or proceeding or any setoff or appropriation or application at
any time or from time to time in reduction of or in payment of the
Obligations shall be deemed to modify, reduce, release or otherwise
affect the liability of Teltronics or ATS under this Agreement, each
of whom shall remain jointly and severally liable for the payment of
all of the Obligations until paid in full and this Agreement is
terminated.
9.13. Waiver of Suretyship Defenses. Teltronics and ATS agree that
the joint and several liability of Borrowers provided for in subsection
9.12 of this Agreement shall not be impaired or affected by any
4
<PAGE> 5
modification, supplement, extension or amendment or any contract or
agreement to which Teltronics or ATS may hereafter agree (other than an
agreement signed by the Lender specifically releasing such liability),
nor by any delay, extension of time for the payment of, renewal,
compromise or other indulgence granted by Lender with respect to any of
the Obligations, nor by any release of subordination of any Lien with
respect to any or all of the Collateral other agreements or arrangements
whatever with the other or with anyone else, each hereby waiving all
notices of such delay, extension, release, substitution, renewal,
compromise or other indulgence, and hereby consenting to be bound
thereby as fully and effectually as if it had expressly agreed thereto
in advance. The liability of Teltronics and ATS is direct and
unconditional as to all of the Obligations, and may be enforced without
requiring Lender first to resort to any other right, remedy or security.
Teltronics and ATS each expressly waives promptness, diligence, notice
of acceptance and any other notice with respect to any of the
Obligations, this Agreement or any other loan documents and any
requirement that Lender protect, secure, perfect or insure any Lien or
any property subject thereto or exhaust any right or take any action
against Teltronics, ATS or any Person or any Collateral.
(e) By deleting Section 10.6(c) in its entirety and by substituting
the following new Section 10.6(c) in lieu thereof:
(c) Borrowers:
Teltronics, Inc.
AT Supply, Inc.
(f) By deleting Section 10.6(d) in its entirety and by substituting
the following new Section 10.6(d) in lieu thereof:
(d) Borrowers' Chief Executive Offices and Telecopier Numbers:
Teltronics, Inc.:
2150 Whitfield Industrial Way
Sarasota, Florida 34243
Telecopier: (813) 751-7724
AT Supply, Inc.
4706 Shavano Oak
Suite 104
San Antonio, Texas 78249
Telecopier: (210) 493-6510
5
<PAGE> 6
(g) By adding the following additional location to Section 10.6(f):
AT Supply, Inc.
4706 Shavano Oak
Suite 104
San Antonio, Texas 78249
(h) By deleting the reference to "Not Applicable" that is contained in
Section 10.6(g) of the Loan Agreement and by substituting in lieu thereof a
reference to "Advantage Telcom Supply Company."
(i) By adding the following new Section 11 to the Loan Agreement that
reads as follows:
SECTION 11. CROSS-CORPORATE GUARANTIES.
11.1 Guaranty. In consideration of the execution and delivery by
Lender of this Agreement and the making of loans to Borrowers hereunder,
Borrowers hereby jointly and severally guarantee absolutely and
unconditionally to Lender the due and punctual payment, when and as due
(whether upon demand, at maturity, by reason of acceleration or
otherwise), of all the Obligations and agree to pay any and all expenses
(including, but not limited to, legal fees and disbursements) which may
be incurred by Lender in enforcing its rights under this guaranty. The
liability of Borrowers under this guaranty shall be joint and several,
unlimited and unconditional, and this guaranty shall be a continuing
guaranty of any and all notes given as evidence of or in extension or
renewal of any of the Obligations.
11.2 Waivers. Each Borrower, to the fullest extent permitted by
applicable law, hereby waives (i) diligence, presentment, demand and
protest with respect to any instrument at any time evidencing any of the
Obligations, (ii) any requirement that Lender exhaust any right or take
any action against any other Person or any of the Collateral or other
property at any time securing any of the Obligations, (iii) the benefit
of all principles or provisions of applicable law which are or might be
in conflict with the terms of this guaranty, (iv) notice of acceptance
hereof (v) notice of the occurrence of a Default or Event of Default,
(vi) notice of any and all favorable and unfavorable information,
financial or other, about any other Borrower, heretofore, now or
hereafter learned or acquired by a Borrower, (vii) notice of the
existence or creation of any of the Obligations, (viii) notice of any
alterations, amendments, increase, extension or exchange of any of the
Obligations, (ix) notice of any amendments, modifications
6
<PAGE> 7
or supplements of or to this Agreement or any of the other loan
documents, (x) all diligence in collection or protection of or
realization upon the Obligations or the Collateral and (xi) the right
to require Lender to proceed against the Borrowers or any Borrower on
any of the Obligations. Each Borrower hereby further consents that the
time of payment of any of the Obligations may be extended or any
provisions of this Agreement or any of the other loan documents may be
amended, waived or modified without notice to or further assent from
the Borrowers and the Borrowers will remain bound under this guaranty
notwithstanding such changes, extensions, amendments, waivers or
modifications or any of its circumstances, whether or not referred to
above, which might otherwise constitute a legal or equitable discharge
of a guaranty.
11.3 Subordination. No Borrower shall have any right of
contribution, reimbursement or indemnity whatsoever, nor any right of
recourse to security for any of the Obligations, and nothing shall
discharge or satisfy the liability of any Borrower hereunder, until the
termination of this Agreement and the irrevocable satisfaction in full
of, or provision for, the Obligations; and any and all present and
future debts and obligations of each Borrower to the other are hereby
postponed in favor of and subordinated to the full payment and
performance of all present and future Obligations.
11.4 Release of Collateral. The joint and several liability of
Borrowers shall continue notwithstanding and shall not be impaired and
affected by any release of any Collateral or by the release of any one
or more Persons liable for any of the Obligations, whether as principal,
surety, guarantor, indemnitor or otherwise.
(j) By adding the following new Sections 12 and 13 to the Loan
Agreement that read as follows:
SECTION 12. WAIVER OF CONSUMER RIGHTS.
EACH BORROWER HEREBY WAIVES ALL OF ITS RIGHTS UNDER THE DECEPTIVE
TRADE PRACTICES-CONSUMER PROTECTION ACT, SECTION 17.41 ET SEQ., BUSINESS
& COMMERCE CODE, A LAW THAT GIVES CONSUMERS SPECIAL RIGHTS AND
PROTECTIONS. AFTER CONSULTATION WITH AN ATTORNEY OF ITS OWN SELECTION,
EACH BORROWER VOLUNTARILY CONSENTS TO THIS WAIVER. EACH BORROWER
EXPRESSLY WARRANTS AND REPRESENTS THAT IT (A) IS NOT IN A SIGNIFICANTLY
DISPARATE BARGAINING POSITION RELATIVE TO LENDER, AND (B) HAS BEEN
REPRESENTED BY LEGAL COUNSEL IN CONNECTION WITH THE TRANSACTIONS
CONTEMPLATED
7
<PAGE> 8
BY THIS AGREEMENT. EACH BORROWER HAS READ AND UNDERSTANDS
SECTION 12. (Initials) (Initials)
SECTION 13. INAPPLICABILITY OF CERTAIN TEXAS LAW PROVISIONS.
The provisions of Chapter 15 of the Texas Credit Code (Vernon's
Texas Civil Statutes) Article 5069-15 are specifically declared by
Lender and Borrowers not to be applicable to this Agreement or the
transactions contemplated hereby.
6. Grant of Security Interest by ATS. To secure the payment and
performance in full of all Obligations, ATS hereby grants to Lender a continuing
security interest in and lien upon, and a right of setoff against, and ATS
hereby assigns and pledges to Lender, all of the following:
(a) All now owned and hereafter acquired right, title and interest of
ATS in, to and in respect of all: accounts, interests in goods represented
by accounts, returned, reclaimed or repossessed goods with respect thereto
and rights as an unpaid vendor; contract rights; chattel paper; general
intangibles (including, but not limited to, tax and duty refunds,
registered and unregistered patents, trademarks, service marks, copyrights,
trade names, applications for the foregoing, trade secrets, goodwill,
processes, drawings, blueprints, customer lists, licenses, whether as
licensor or licensee, choses in action and other claims, and existing and
future leasehold interests in equipment, real estate and fixtures);
documents; instruments; letters of credit, bankers' acceptances or
guaranties; cash monies, deposits, securities, bank accounts, deposit
accounts, credits and other property now or hereafter held in any capacity
by Lender, its affiliates or any entity which, at any time, participates in
Lender's financing of ATS or at any other depository or other institution;
agreements or property securing or relating to any of the items referred to
above;
(b) All now owned and hereafter acquired right, title and interest of
ATS in, to and in respect of goods, including, but not limited to:
(i) All inventory, wherever located, whether now owned or hereafter
acquired, of whatever kind, nature or description, including all raw
materials, work-in-process, finished goods, and materials to be used or
consumed in ATS' business; and all names or marks affixed to or to be
affixed thereto for purposes of selling same by the seller,
manufacturer, lessor or licensor thereof;
8
<PAGE> 9
(ii) All equipment and fixtures, wherever located, whether now
owned or hereafter acquired, including, without limitation, all
machinery, equipment, motor vehicles, furniture and fixtures, and any
and all additions, substitutions, replacements (including spare parts),
and accessions thereof and thereto;
(iii) All consumer goods, farm products, crops, timber, minerals or
the like (including oil and gas), wherever located, whether now owned or
hereafter acquired, of whatever kind, nature or description;
(c) All now owned and hereafter acquired right, title and interests of
ATS in, to and in respect of any real or other personal property in or upon
which Lender has or may hereafter have a security interest, lien or right
of setoff;
(d) All present and future books and records relating to any of the
above including, without limitation, all computer programs, printed output
and computer readable data in the possession or control of the ATS, any
computer service bureau or other third party;
(e) All products and proceeds of the foregoing in whatever form and
wherever located, including, without limitation, all insurance proceeds and
all claims against third parties for loss or destruction of or damage to
any of the foregoing.
7. Ratification and Reaffirmation. Each Borrower hereby ratifies and
reaffirms the Loan Agreement and each of the loan documents executed in
connection therewith (collectively with the Loan Agreement, the "Loan
Documents") and all of such Borrower's covenants, duties and liabilities
thereunder.
8. Acknowledgements and Stipulations. Each Borrower acknowledges and
stipulates that the Loan Agreement and the other Loan Documents executed by
either or both of Teltronics and ATS are legal, valid and binding, joint and
several obligations of Borrowers that are enforceable against each Borrower in
accordance with the terms thereof; all of the Obligations are owing and payable
without defense, offset or counterclaim (and to the extent there exists any such
defense, offset or counterclaim on the date hereof, the same is hereby waived by
each Borrower); the security interests and liens granted by Borrowers in favor
of Lender are duly perfected, first priority security interests and liens; and
the unpaid principal amount of the Revolving Loans on and as of January 3, 1996,
totalled $2,227,728.62 and the unpaid principal amount of the Term Loan on and
as of December 31, 1995, is $191,455.00. Each Borrower hereby acknowledges that
this Amendment supersedes and replaces that certain Second Amendment to Loan and
9
<PAGE> 10
Security Agreement dated of even date herewith among Borrowers and Lender.
9. Representations and Warranties. Each Borrower represents and warrants
to Lender, to induce Lender to enter into this Amendment, that no default or
Event of Default exists on the date hereof; the execution, delivery and
performance of this Amendment have been duly authorized by all requisite
corporate action on the part of each Borrower and this Amendment has been duly
executed and delivered by each Borrower; and all of the representations and
warranties made by Borrowers in the Loan Agreement are true and correct on and
as of the date hereof.
10. Expenses of Lender. Borrowers jointly and severally agree to pay, on
demand, all costs and expenses incurred by Lender in connection with the
preparation, negotiation and execution of this Amendment and any other Loan
Documents executed pursuant hereto and any and all amendments, modifications,
and supplements thereto, including, without limitation, the costs and fees of
Lender's legal counsel.
11. Governing Law. This Amendment shall be effective upon acceptance by
Lender in New York, New York, whereupon the same shall be governed by and
construed in accordance with the internal laws of the State of New York.
12. Successors and Assigns. This Amendment shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
assigns.
13. No Novation, etc. Except as otherwise expressly provided in this
Amendment, nothing herein shall be deemed to amend or modify any provision of
the Loan Agreement or any of the other Loan Documents, each of which shall
remain in full force and effect. This Amendment is not intended to be, nor shall
it be construed to create, a novation or accord and satisfaction, and the Loan
Agreement as herein modified shall continue in full force and effect.
Notwithstanding any prior mutual temporary disregard of any of the terms of any
of the Loan Documents, the parties agree that the terms of each of the Loan
Documents shall be strictly adhered to on and after the date hereof.
14. Counterparts; Telecopied Signatures. This Amendment may be executed in
any number of counterparts and by different parties to this Agreement on
separate counterparts, each of which, when so executed, shall be deemed an
original, but all such counterparts shall constitute one and the same agreement.
Any signature delivered by a party by facsimile transmission shall be deemed to
be an original signature hereto.
10
<PAGE> 11
15. Release of Claims. To induce Lender to enter into this Amendment, each
Borrower hereby releases, acquits and forever discharges Lender, and all
officers, directors, agents, employees, successors and assigns of Lender, from
any and all liabilities, claims, demands, actions or causes or actions of any
kind or nature (if there be any), whether absolute or contingent, disputed or
undisputed, at law or in equity, or known or unknown, that such Borrower now has
or ever had against Lender arising under or in connection with any of the Loan
Documents or otherwise.
16. Waiver of Jury Trial. The parties hereto each hereby waives the right
to trial by jury in any action, suit, counterclaim or proceeding arising out of
or related to this Amendment.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed under seal in and delivered by their respective duly authorized
officers on the date first written above.
<TABLE>
<S> <C>
ATTEST: TELTRONICS, INC.
("Borrower")
- --------------------------------------------- By:
Paul D. Shrader, Secretary ---------------------------------------------
Ewen R. Cameron, President
[CORPORATE SEAL]
ATTEST: AT SUPPLY, INC.
("Borrower")
- --------------------------------------------- By:
Paul D. Shrader, Secretary ---------------------------------------------
John P. Stephenson,
President
[CORPORATE SEAL]
Accepted in New York, New York:
THE CIT GROUP/CREDIT FINANCE, INC.
By:
---------------------------------------------
Title:
---------------------------------------------
</TABLE>
[Signatures continued on next page]
11
<PAGE> 12
CONSENT AND REAFFIRMATION
The undersigned guarantors of the Obligations of Borrowers at any time
owing to Lender hereby (i) acknowledge receipt of a copy of the foregoing Second
Amendment to Loan and Security Agreement; (ii) consent to Borrowers' execution
and delivery thereof and of the other documents, instruments or agreements
Borrowers agree to execute and deliver pursuant thereto; (iii) agree to be bound
thereby; and (iv) affirm that nothing contained therein shall modify in any
respect whatsoever its respective guaranty of the Obligations and reaffirm that
such guaranty is and shall remain in full force and effect.
IN WITNESS WHEREOF, the undersigned has executed this Consent and
Reaffirmation on and as of the date of such Second Amendment to Loan and
Security Agreement.
<TABLE>
<S> <C>
ATTEST: TTG ACQUISITION CORP.
- -------------------------------------------- By:
Secretary --------------------------------------------
[CORPORATE SEAL] Ewen R. Cameron, President
------------------------------------------- (SEAL)
Norman R. Dobiesz
</TABLE>
The undersigned, legal counsel to Borrowers, executes this Agreement solely
to acknowledge the waiver of the Texas Deceptive Trade Practices-Consumer
Protection Act contained in Section 12 of the foregoing Amendment.
BORROWERS' COUNSEL
BLAIR & ROACH
By:
------------------------------------
12
<PAGE> 1
EXHIBIT NO. 21.1
TELTRONICS, INC.
SUBSIDIARIES
TTG ACQUISITION CORP.
2150 Whitfield Industrial Way
Sarasota, Florida 34243
(100%)
AT SUPPLY, INC.
4703 Shavano Oak Drive, Suite 104
San Antonio, Texas 78249
(80%)
ISL, INC.
2150 Whitfield Industrial Way
Sarasota, Florida 34243
(100%)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF TELTRONICS, INC. FOR THE YEAR ENDED DECEMBER 31, 1995,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10KSB FOR THE PERIOD
ENDED DECEMBER 31, 1995.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 264,379
<SECURITIES> 0
<RECEIVABLES> 3,207,556
<ALLOWANCES> 0
<INVENTORY> 3,239,658
<CURRENT-ASSETS> 6,879,541
<PP&E> 3,571,362
<DEPRECIATION> 1,935,295
<TOTAL-ASSETS> 8,913,951
<CURRENT-LIABILITIES> 5,992,108
<BONDS> 0
0
0
<COMMON> 2,611
<OTHER-SE> 2,335,559
<TOTAL-LIABILITY-AND-EQUITY> 8,913,951
<SALES> 21,603,491
<TOTAL-REVENUES> 21,603,491
<CGS> 13,224,984
<TOTAL-COSTS> 7,611,517
<OTHER-EXPENSES> 124,741
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 381,645
<INCOME-PRETAX> 260,604
<INCOME-TAX> 37,725
<INCOME-CONTINUING> 222,879
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 222,879
<EPS-PRIMARY> 0.09
<EPS-DILUTED> 0.09
</TABLE>
